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February 29, 2016

Washington Health Policy Week in Review Archive 95ff1365-572d-465b-8f4b-872a4d29f889

Newsletter Article


Employer Health Plans Fight Potential Medicare Advantage Cuts

By Rebecca Adams, CQ Roll Call

February 26, 2016 -- Health insurers that help unions provide retiree benefits through Medicare Advantage plans are lobbying hard against a Feb. 19 rate proposal that could reduce their payments.

The proposed Medicare Advantage call letter from the Centers for Medicare and Medicaid Services (CMS) offered generally positive news to health insurers. But a provision in the proposal troubles the plans that partner with unions to offer coverage to retired workers. Those plans, known as employer group waiver plans, cover almost one-fifth of the more than 17 million seniors in private Medicare Advantage plans.

The provision does not spell out by precisely how much the payments would decline, but Wall Street analysts who picked up on the issue estimated that funding could fall by 2 to 4.5 percent in 2017. The language essentially proposes to tie payments from union plans to payment bids from non-group plans that serve seniors who sign up individually. The non-union plans tend to discount their coverage more deeply than union plans.

Bruce Josten, executive vice president for government affairs for the U.S.  Chamber of Commerce, said that coverage in the plans is often more generous than in other types of plans and that if payments decline, seniors could suffer. He warned that if Medicare officials don't change the provision, some plans may have to narrow the number of hospitals or physicians in networks or increase out-of-pocket costs such as deductibles. Low-income people especially depend on generous health benefits, he noted.

"You start to squeeze the people that this program is designed to benefit the most," said Josten.

The changes are similar to a proposal put forward by the Medicare Payment Advisory Commission (MedPAC), which analyzes Medicare policies for Congress, in March 2014. MedPAC noted in its report that employer plans, which are not open to other Medicare beneficiaries, typically ask CMS in their bids to pay close to the maximum Medicare payment, or benchmark, in a geographic area. Union plan bids in 2014 were about 5 percent lower than the maximum payment.

Unlike the plans that are open only to union retirees, the health plans that are open to any Medicare beneficiary often submit bids that are about 14 percent on average below their maximum payments. Those plans have an incentive to bid lower because they are competing for customers. If they bid lower than the caps, the plans can get rebates that they can use to pay for extra benefits that will entice seniors to enroll in their coverage.

MedPAC proposed that payments for employer group plans fall by using a national average ratio of the bids that the nonunion plans submit to the maximum payments. Linking the bids of the union plans to the other plans was expected to decrease Medicare spending between $250 million and $750 million over a year. MedPAC said the insurers could make up for the losses by charging employers more, offering fewer benefits, accepting lower profits and lowering their costs.

Another effect that MedPAC predicted was that some union retirees might switch to a plan with unrestricted membership or to traditional fee-for-service Medicare.

Wells Fargo analysts predicted that the proposed change would hurt Aetna Inc. the most.

Other companies such as UnitedHealthGroup and Kaiser Permanente also would be affected.

Lawmakers in states such as Michigan and New York are paying attention to the issue. Comments from the public are due March 4 and CMS is scheduled to release the final plan on April 4. 

"This was not expected," Wells Fargo Securities LLC analysts Peter Costa, Polly Sung, and Brian Fitzgerald wrote in a note to investors. "We believe it will be lobbied hard against by employers and insurers and could be overturned in the final notice."

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CMS Doesn't Know How Much It May Recover From Failed CO-OPs

By Melanie Zanona, CQ Roll Call

February 25, 2016 -- Officials for the Centers for Medicare and Medicaid Services (CMS) told House lawmakers it's too early to predict how much money may be recovered from failed nonprofit insurance cooperatives (CO-OPs) that sprung from the 2010 health care overhaul but assured lawmakers that the agency intends to use all available tools to recoup the losses.

More than $1 billion was loaned to the 13 of 24 CO-OPs that were funded by the health law and later failed. CMS Chief Operating Officer and Chief of Staff Mandy Cohen said the agency is currently working through the process of recovering the taxpayer money.

"The co-ops that wound down at the end of last year are now going through a process of doing their claims run out, understanding what revenue has come in. Some of them are taking action with their vendors," Cohen said at a House Oversight and Government Reform Subcommittee on Health Care, Benefits, and Administrative Rules hearing Thursday. "We go through a process based on the loan agreements and the state law to use all of the tools at our disposal to get the funding back."

But when pressed by lawmakers, she was unable to estimate how much money or what percentage will likely be recouped. "It's a case by case basis," Cohen said. "It's too early to speculate...but certainly as much as we can."

The CO-OPs were meant to lower prices in the health insurance market by challenging the dominance of giants in the industry. Their struggles have been blasted by Republicans as proof that the health care law is not working.

"We can pretend Obamacare is popular, but it's not," said Scott DesJarlais, R-Tenn. "Today's hearing is a great example of one of the reasons it's failing."

Democrats, meanwhile, have largely pinned the failures on repeated obstacles from Congress. Funding for the co-op program was dramatically whittled from the $6 billion initially designated for the program, and restrictions were put in place that led to the shortfall in so-called risk corridor payments designed to limit insurers' losses, Democrats say.

"Congress has gutted about $4 billion of the $6 billion originally appropriated for the program, and now we're here to criticize how they did after we cut their legs off at the knees," said Pennsylvania Democrat Matt Cartwright, ranking member on the subcommittee. "This is getting tiresome."

However, DesJarlais shot back that there were originally supposed to be CO-OPs in every state, "so we did save the taxpayer a fair amount of money by cutting that."

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Slavitt: Seeing Medicare and Medicaid from Both Sides

By Kerry Young, CQ Roll Call

February 26, 2016 -- Self-described "private sector guy" Andy Slavitt picked a challenging spot for a foray into government service.

He left a top post at insurance giant UnitedHealth Group in 2014 to join the Centers for Medicare and Medicaid Services (CMS), recruited to help get the federal health insurance marketplace on track after a troubled start.

Within six months he was named interim head of CMS, the nation's largest purchaser of health care with oversight of more than $1 trillion in annual spending. He was nominated last year as administrator and remains on the job in an acting role awaiting Senate confirmation.

He says he's tried to improve the agency's rapport with the health care firms it regulates. "From my not-so-distant past, I remember how CMS often felt opaque to me, and I probably said more than once how helpful it would be to know CMS's agenda rather than divining them by poring through an often intricate set of regulations," he told attendees of an industry conference last month.

One of Slavitt's top priorities is fixing CMS regulations on electronic health records. They are supposed to improve the quality of care by better tracking of patients' conditions, but doctors complain that compliance takes time and disrupts relationships with patients.

Slavitt appealed for help at last month's conference: "We have to get the hearts and minds of the physicians back because these are the people that our beneficiaries and consumers count on every day," he said.

Slavitt has extra credibility with people running health-tech startups because he's done that himself. 

"His years of experience give him a broad and thoughtful perspective on our challenges and how to work together to fix them," says venture capitalist John Doerr of Kleiner Perkins Caufield & Byers, one of Google's and Amazon's early backers.

A former Goldman Sachs banker and McKinsey & Co. consultant, Slavitt says he had focused on financial services before seeing a close friend die of a brain tumor in his early 30s. That experience put Slavitt on a path to found Health Allies, a firm that negotiates discounts for medical services. UnitedHealth bought the company in 2003.

"I was planning on staying and running this little health company, but one thing led to another and I ended up running a series of businesses" for UnitedHealth, he recalls. "That's the perch where I was at when I put in a call over here to the government and offered to come help with the turnaround" of the site.

At the time, Senate Judiciary Chairman Charles E. Grassley raised concerns about Slavitt's hire, given his ties to UnitedHealth. The company does a lot of business with CMS and was one of the contractors involved in building the federal marketplace.

A spokeswoman for the Iowa Republican says he is still vetting Slavitt's nomination, which remains in limbo. Whatever the Senate does, Slavitt will likely remain at CMS's helm through the end of 2016.

And CMS will be busy during the remaining months of the Obama administration. It's still completing work on rules implementing the 2010 health care law while embarking on an overhaul of the Medicare physician payment system enacted by Congress last year.

The so-called doc fix law that upended that system aims to trigger broad changes in American medical practice by raising or lowering reimbursements based on judgments about the quality of care delivered.

"Everything we are doing in health care right now is really at the implementation stage," Slavitt says. "That's where a lot of the excitement is."

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Burwell Challenged by House GOP on Payments to Health Insurers

By Kellie Mejdrich, CQ Roll Call

February 24, 2016 -- At a budget hearing on Wednesday, Health and Human Services Secretary Sylvia Mathews Burwell came under fire from House Republicans for disputed payments to insurers.

Rep. Joe Pitts, R-Pa., who chairs the Energy and Commerce Health Subcommittee, dropped a memo in front of Burwell from the Congressional Research Service (CRS) that he said suggested the agency's implementation of a reinsurance payment program required under the health care law was illegal.

"CRS has concluded that your action to divert billions to insurance companies appears to be unlawful. Did your department receive any pressure from insurance companies to divert billions from taxpayers to pay off insurers?" Pitts said.

He also asked Burwell whether former Centers for Medicare and Medicaid Services (CMS) administrator Marilyn Tavenner, who left the federal agency to work for the health insurance lobby, pressured her or other officials on the issue. Tavenner is now the head of America's Health Insurance Plans, which represents insurers.

Burwell fired back that the program was designed to create downward pressure on health care costs, given that the president's health care overhaul provided insurance to new and potentially expensive individuals. She said she hadn't seen the memo and would need to read it to respond to it.

"We believe we do have the statutory authority with this issue," Burwell said, adding that "the consumer, and the citizen, is what we put at the center."

The transitional reinsurance program is a temporary program designed to mitigate the risk for insurers of taking on especially expensive health care enrollees in order to keep prices down, according to the Congressional Research Service report. At dispute is a health care law requirement for certain payments to the Treasury. The CRS report examined the legal authority of CMS to prioritize reinsurance claimants over payments to the Treasury. 

The reinsurance program is funded by a tax on health insurance premiums. According to CRS, the amount was $63 per person in 2014, $44 for 2015, and $27 for 2016. 

Attacks on Burwell from Republicans weren't limited to the Energy and Commerce Committee, which scrutinized the agency's fiscal 2017 request that includes $82.8 billion in discretionary budget authority.

As Burwell took the hot seat, House Ways and Means Chairman Kevin Brady in a news release also launched criticism at the administration's top health official for not providing timely documentation on the agency's decision to, as the committee characterized it, divert Treasury payments to fund the transitional reinsurance program.

"HHS's flagrant violations were part of a concerted effort to keep insurers from exiting the Obamacare exchanges and the American people deserve answers," the Texas Republican said. "Secretary Burwell had until February 23rd to explain her department's decision to misuse billions of taxpayer dollars, but she failed to meet the deadline. The Secretary should promptly provide the information we requested."

At Energy and Commerce, Rep. Edward Whitfield, R-Ky., asked Burwell to respond to the tax-writing committee, as well as his panel.

"After a year of asking for these documents, Ways and Means still has not received them and Energy and Commerce still has not received them," Whitfield said.

But Burwell countered that the agency had "been responsive," and had worked closely with staff on both committees. 

The dispute on the reinsurance program comes as the House is engaged in a lawsuit against the Obama administration for another dispute related to paying insurance companies.

In that case, legal counsel with the House of Representatives shook loose new ammunition for their case in the president's fiscal 2017 budget request, after the administration included updated dollar figures from the Treasury on those payments that House lawmakers consider unconstitutional.

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