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February 1, 2016

Washington Health Policy Week in Review Archive ac24115e-5c26-4b5e-b91c-8c0b826a872d

Newsletter Article


Medicaid Expansion Poses a Challenge for New Governor

By Marissa Evans, CQ Roll Call

January 26, 2016 -- While tackling a $1.9 billion budget deficit, Louisiana’s new governor will also have to juggle bringing 350,000 low-income residents into the state’s health insurance program for the poor — and he’s determined to get it done fast.

On Jan. 12, his second day in office, Democratic Gov. John Bel Edwards signed an executive order to expand Medicaid. The order is a first step toward fulfilling a campaign promise and marks a turning point for a Southern state whose previous governor, Republican Bobby Jindal, staunchly opposed the 2010 federal health care law better known as Obamacare.

"Louisiana’s tax dollars should not be going to the 30 other states that have expanded Medicaid when working families here at home need access to health care," Bel Edwards said in a news release.

A 2014 Urban Institute study found that Louisiana would spend $1.2 million between 2013 and 2022 on expansion. However, in that same time period, if Louisiana were to not expand Medicaid, it would have lost out on $15.8 billion in federal Medicaid funding and $8 billion in hospital reimbursements.

As the Bel Edwards administration prepares to hand Medicaid cards to eligible residents by July 1, there’s lots of work to do and little money to do it with.

"I won’t say I’m worried about it but I want to make sure we’re ready to do this administratively," says Republican state Sen. Fred Mills, chairman of the Health and Welfare Committee.

Republicans in the Louisiana Legislature have warmed up to Medicaid expansion since Jindal left office, according to Mills. Still, Mills says Bel Edwards’ July deadline will require planning.

On the bright side, the governor’s expansion plan is a basic version that will not require policy waivers from the federal Centers for Medicare and Medicaid Services, says Matt Salo, executive director of the National Association of Medicaid Directors.

Even so, Salo says, there could be difficulties determining Medicaid eligibility and getting providers and insurers to buy in.

"It’s not like turning on a light .... You can’t just flick a switch and say magically we have expansion," Salo says.

Jeff Drozda, CEO for the Louisiana Association of Health Plans, says the biggest issue is how the enrollment process will work and how the state plans to reach potential beneficiaries.

Some providers, who stand to pick up new revenues to offset the uncompensated care they now deliver, are doling out cash to make sure expansion happens without a hiccup. The health department has secured more than $3 million in pledges from providers and health plans to fund expansion startup costs for enrollment and eligibility determination efforts, according to the governor’s office.

"This effort will save Louisiana money on administrative costs and place enrollment staff on-site in health care facilities where they can reach more uninsured patients," Paul Salles, president of the Louisiana Hospital Association, said in a Jan. 12 news release.

State officials say they’ll need nearly 250 additional employees to help with enrollment efforts.

Doctors in the state will feel better about taking on more Medicaid patients if the Bel Edwards administration "reduces the hassle factor" of the program, says Jennifer Marusak, vice president of government affairs for the Louisiana State Medical Society. "It’s not that any of these folks are trying to make money, they’re trying to break even," Marusak says.

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Medicare Unveils Plan for Private Sales of Claims Data

By Kerry Young, CQ Roll Call

January 29, 2016 -- The Centers for Medicare and Medicaid Services (CMS) on Friday unveiled a plan for broadening access to its rich trove of health data, a move intended to eventually help doctors and purchasers of medical care make better decisions.

CMS posted a draft rule showing how it intends to carry out a mandate established as part of  last year's overhaul of Medicare's payments to physicians (PL 114-10). Lawmakers and CMS officials intend to build on efforts already underway to unlock valuable information long buried within the agency's records.

The 2010 health law established a process for the limited dissemination of Medicare claims data for the purpose of evaluating the performance of doctors and other health care providers. A provision in the 2015 physician overhaul will let so-called qualified organizations, which need to secure special CMS approval, conduct private analyses and sell them to authorized users for certain purposes. Steps will be added to the protocols already in place regarding oversight of the use of this data, CMS said.

So far, 13 organizations have made successful applications for access to data under the terms set by the 2010 health law. Two have completed some form of public reporting, while the other 11 are in various stages of preparing to do so, CMS said.

The changes made by Congress last year "will drive renewed interest in the qualified entity program, leading to more transparency regarding provider and supplier performance and innovative uses of data that will result in improvements to the healthcare delivery system while still ensuring appropriate privacy and security protections for beneficiary-identifiable data," CMS said.

Comments are due on the CMS draft rule by March 29.

Medicare claims data are considered a key resource for researchers seeking to understand what approaches and treatment to care work best. The program is the nation's largest single purchaser of health care, with average annual spending of about $600 billion. It also represents the populations typically most in need of health care, covering the elderly and disabled.

Kerry Young can be reached at [email protected].

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CBO Lowers Projected Growth in Obamacare Enrollment

By Kerry Young, CQ Roll Call

January 25, 2016 -- The Congressional Budget Office (CBO) on Monday cut by more than a third its estimate for how many people will buy health insurance this year through government exchanges, dropping the projection to 13 million from 21 million.

In a new outlook report on the federal budget and greater economic landscape, CBO noted it earlier had projected that an average of about 15 million people would receive subsidies to discount their coverage in 2016 and that an additional 6 million people would purchase unsubsidized coverage through an exchange.

The new estimates predict that 11 million more people on average would get subsidized coverage and two million would buy unsubsidized coverage.

Before the CBO report was issued, federal officials had already tamped down expectations of growth in this year's sign-up period, which ends Jan. 31. Last fall, U.S. Health and Human Services Secretary Sylvia Mathews Burwell said her agency’s goal was to have 10 million people paying for marketplace coverage by the end of 2016, up from a projected 9.1 million by the close of 2015.

CBO noted that although it is reducing estimates for purchases through the exchanges, some people will buy insurance in other ways.

"Most of the unsubsidized people who are no longer expected to purchase insurance through an exchange are expected to purchase insurance directly from an insurer instead," the agency said in the Monday report.

CBO estimated that about 8 million people received subsidies in 2015. Subsidies and related spending are expected to increase by $18 billion in 2016, reaching a total of $56 billion.

The report also found that for the first time, federal spending for major health care programs—Medicare, Medicaid, the Children’s Health Insurance Program, and subsidies for marketplace insurance plans—were higher than Social Security payments. Federal health spending was $936 billion in 2015, a 13 percent increase.

The projections also showed the federal budget deficit increasing in 2016 to $544 billion, or $130 billion higher than CBO projected last August. A summary of the report was issued Jan. 19.

The increase was largely attributed to legislation Congress passed in the second half of 2015, especially a tax extenders package wrapped into the year-end spending deal (PL 114-113). Federal outlays are projected to rise 6 percent, to $3.9 trillion, or about 21 percent of gross domestic product.

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Combined Company Could Serve One-Fourth of Medicare Advantage Market

By Jad Chamseddine, CQ Roll Call

January 28, 2016 -- Aetna Inc.’s proposed acquisition of Humana Inc. would reduce competition so much among Medicare Advantage providers that divestitures might not remedy increased premiums, according to a recent Center for American Progress study.

The report focuses on Aetna and Humana because of their dominance within Medicare Advantage, a part of the government-run health insurance program for the elderly and disabled that involves private insurers. The progressive think tank found that the Medicare Advantage market is already highly concentrated and the combined company would serve as much as 25 percent of all Medicare Advantage consumers.

The study argues that the Justice Department, in its analysis of the merger, should consider Medicare Advantage separately from the traditional Medicare market because of senior citizens’ inability to easily switch between the two.

"Medicare Advantage is an attractive insurance market for insurers because of the country’s aging population and increasing percentage of seniors choosing these plans," the study said, pointing to statistics that show a 7 percent increase in Medicare Advantage enrollees in the past five years. There are currently 16.8 million Americans enrolled in a Medicare Advantage Plan, which is about 31 percent of all Medicare-eligible citizens.

The paper states that Aetna and Humana compete vigorously with each other in markets where they overlap, leading to a decrease in premiums. "Specifically, in counties where Humana offers a plan to compete with Aetna, Aetna’s average annual premiums are $302 lower than in counties where Humana does not offer a plan," according to the report.

Instead of Aetna entering markets were Humana is already established and driving the price down, acquiring Humana would instead maintain the status quo and keep prices high, the study said.

But Aetna CEO Mark T. Bertolini told lawmakers in hearings held in September that the merger would help the combined company create synergies and cut costs, which could flow to consumers. But Bertolini, after being pressed during a Senate Judiciary hearing, could not guarantee that consumers would experience those savings.

He also rejected the notion that the health insurance market should be scrutinized on a national level, saying "all health care is local, just like politics" after lawmakers and merger critics said Aetna’s acquisition of Humana would reduce the number of health insurers nationally.

Bertolini reluctantly agreed during a hearing held by the House Judiciary committee that the acquisition of Humana could lead to excessive concentration in a couple of markets, but assured lawmakers that these assets would be divested if the Justice Department deems it necessary.

"Concentration is one measure of whether or not there is a problem from a competitive standpoint," Bertolini said. "We will cooperate with the Department of Justice in reviewing that opportunity and those issues."

The Center for American Progress does not want the Justice Department to accept divestitures as a form of remedy. The organization argues that an already high concentration in the Medicare Advantage market and high barriers to entry mean that "the competitors to which Aetna and Humana could divest may not exist."

It added that "these barriers include building provider networks, negotiating competitive rates with providers, establishing a reputation with customers in the local market, and creating economies of scale in areas such as information technology," making it almost impossible for a start-up to compete with an already established multi-billion dollar company.

The Justice Department is reviewing Aetna’s proposed acquisition of Humana along with a larger proposed merger between Anthem Inc. and Cigna Corp. The government agency has not given any insight when it will give its verdict regarding either deal, but late last year Bill Baer, the head of the Justice Department's antitrust section, indicated in a speech at Yale Law School that the agency will work hard to keep the health care industry competitive.

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Congress Taps Brakes on Medicare but Health Spending Speeds On

By Kerry Young, CQ Roll Call

January 27, 2016 --Though Congress has taken steps to control Medicare spending, more sweeping efforts will be needed to keep government health programs from consuming ever-larger shares of the economy, according to the Congressional Budget Office (CBO).

The latest overview of the nation's economy notes Medicare spending on each beneficiary is expected to grow at an average annual rate of 1.6 percent from fiscal 2016 to 2026, a significant drop from the 4 percent annual gains seen routinely between 1985 and 2007, CBO said in the report released Monday. But spending by federal health programs will consume about 6.6 percent of the gross domestic product in 2026, up from an estimated 5.5 percent this year.

"It's at least a step in the right direction," Loren Adler, research director for the nonprofit Committee for a Responsible Federal Budget, said of the Medicare cost controls. "That being said, it's very difficult to continually have health care spending outpacing our economy."

Medicare, the federal health program for the elderly and disabled, could itself account for 4.7 percent of GDP in 2026 when factoring in federal spending and beneficiaries' out-of-pocket expenses. That will make it more difficult to pay for other priorities: Discretionary spending on non-entitlement programs may shrink from 6.5 percent of the economy to 5.2 percent in the 2016–2026 period, according to the report.

CBO estimates that payments for Medicare, Medicaid and other major health programs will nearly double to $2 trillion by fiscal 2026. The aging of the baby boom generation is an important driver, with Medicare enrollment expected to swell by about 20 million people over the next decade to 75 million. The 2010 health law also expanded Medicaid, originally designed for Americans living in or near poverty. Medicaid enrollment may rise by 8 million, to 85 million over the next decade. Other expenses are for the Children's Health Insurance Program and insurance exchanges created by the health law.

"Health care pretty much is the fiscal problem at this point. We have been throwing darts at the board on health care for the last 50 years trying to figure out how to control costs," Adler said. "In our defense, we are doing better than we previously did with tamping down growth in Medicare costs."

CBO on Monday said Medicare payments for many services, excluding doctors' reimbursement, currently are set to lag the expected growth in the costs for the individuals and organizations that provide them. Calculations, or inputs, used to set payments may not fully reflect the expenses involving in paying for staffing and utilities and equipment, according to the budget office.

Under CBO's economic projections, those payment rates are expected to increase by about 2 percent per year on average, roughly 1 percentage point lower than the rate at which prices of inputs to Medicare services are projected to increase.

Another approach to controlling Medicare costs has been to seek more contributions from those enrolled in the program. Spending for Medicare, excluding premiums and other offsetting receipts and adjusted for shifts in the timing of certain payments, will rise by $28 billion, or 5.2 percent, a drop from last year's 6.8 percent increase, CBO said. This was partly due to provisions regarding contributions in last year's budget deal (PL 114-75), CBO said.

Medicare costs also are being contained in part by an influx of younger enrollees, who tend to be in better health. As the baby boomers age, though, their medical bills are expected to add significantly to the nation's fiscal health burdens. Even the near-term picture for Medicare finances concerns policy advisers and lawmakers alike.

CBO remains more pessimistic about tax dollars collected for Medicare hospital payments, a key benchmark of Medicare finances, than the program's trustees. The scorekeeping agency last year said the pool of tax dollars collected for the program's hospital trust fund would have a balance of only $57 billion at the end of fiscal 2025. Given Medicare's rate of spending, the fund appeared unlikely to remain solvent through fiscal 2030, the latest estimate in the annual trustees report. While not predicting an exact year, CBO in its 2015 outlook said the trust fund would probably be exhausted "early in the decade after 2025."

On Monday, CBO more than halved its estimate for the trust fund's remaining balance in fiscal 2025, to $25 billion. That amount wouldn't be enough to cover the expected $68 billion shortfall in the following year. Senate Health, Education, Labor and Pensions Chairman Lamar Alexander, R-Tenn., said that President Obama should seize on the CBO projections and work with Democrats and Republicans to help rescue seniors facing a bankrupt Medicare program.

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Medicaid Policies Cited as Hurdle to Results-Based Drug Pricing

By Kerry Young, CQ Roll Call

January 29, 2016 -- Medicaid’s purchasing rules would be an obstacle to future potential bids to tie the costs of medicines to the results they produce for patients, according to a joint publication from Eli Lilly & Co. and Anthem Inc.

Medicaid rebates could complicate efforts to base drug payments on the outcomes for patients, wrote the two Indianapolis-based health care powerhouses in a Health Affairs website blog post Friday as part of their larger collaboration examining the outlook for medicines.

Rising concerns about drug costs in the United States are fostering growing discussion of so-called valued-based pricing for drugs. In such a system, drugmakers would agree on measures for judging how much their medicines helped insurers' customers and allow this to determine how much they ultimately would be paid for their products.

A version of this approach has been used in Europe in connection with costly new cancer medicines that may work for only a small population of patients, such as Johnson & Johnson’s Velcade.

In the blog post and papers linked to it, representatives of drugmaker Lilly and insurer Anthem delved into the details of how such a switch could be made in the United States. The Medicaid program’s "best price" rules stand out as an immediate hitch to value-based payments, argued Samuel R. Nussbaum, Anthem’s former chief medical officer and current adviser on alternate forms of payment, and Dave Ricks, president of Lilly Bio-Medicines business.

Medicaid, the state-federal health program for those living in or near poverty, demands that pharmaceuticals companies in many cases offer officials the lowest prices for which they have offered other purchasers of medicines.

It could prove costly if a drugmaker entered an arrangement, for example, to offer a 40 percent rebate to an insurer for every person who didn’t respond to a specific medicine, while charging full price for those who did.

"That same drug company might then be required to offer certain government programs a 40 percent rebate across the board," Nussbaum and Ricks wrote. "This lack of flexibility makes it very difficult for drug developers to enter into more innovative partnerships focused on creating value."

The federal government likely will need to update laws and regulations to accommodate a future shift to value-based pricing, Lilly and Anthem said in a paper accompanying the Health Affairs post. One needed step may be developing a template memorandum of understanding or sample agreement for insurers and drugmakers to use to appropriately exclude value-based pricing concessions from rebate reporting requirements.

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