By Marissa Evans, CQ Roll Call

July 7, 2016 -- Several Republican-controlled states are appealing to the Obama administration for permission to revise planned expansions of their Medicaid programs—a long-shot bid at a time when officials are typically turning down such requests.

Arkansas, Kentucky, and Ohio are preparing for negotiations in the coming months with the Centers for Medicare and Medicaid Services on the terms of program expansions that allowed them to expand program eligibility to thousands of residents. Medicaid is the federal-state health program for the poor and disabled; states administer the programs and determine eligibility in consultation with program administrators, who can grant waivers.

Republican Kentucky Gov. Matt Bevin's administration wrapped up a set of public hearings on Wednesday on a request to revamp how the state offers coverage for 400,000 low-income residents. Bevin for months has tried to put a conservative spin on the widely praised program he inherited from Democrat Steve Beshear and still avoid political backlash from scaling back eligibility for thousands of Kentuckians.

Bevin's waiver proposal calls for giving recipients health savings accounts, imposing work requirements and offering dental and vision care for those who practice healthy habits and improved access to substance abuse and mental health treatment. He also would deny benefits for six months to those beneficiaries who don't pay their health bills or file eligibility determination paperwork on time.

Though the Bevin administration knows the Obama administration will likely not approve the work requirements or the lock-out periods, it is forging ahead. Bevin said in a press conference on June 22 that he would dismantle Kentucky's expansion altogether if the waiver negotiations don't go well.

That prospect could increase the rolls of the uninsured and deny health providers a revenue stream, said Matt Salo, executive director for the National Association of Medicaid Directors, in an interview. It is a dilemma that the Obama administration is hoping to use to keep the state on its original course.

"The administration now has all of the leverage," Salo said. "The only thing the state can do if it is unhappy with the deal they got is to drop [expansion] and pull out of the entire thing and the administration is relatively confident that that is not going to happen."

Under the 2010 federal health law states can expand Medicaid eligibility to individuals with incomes up to 138 percent of the poverty level. By 2020, states will have to cover 10 percent of the cost. Thirty-one states and the District of Columbia have taken up the offer.

States are backtracking on their original Medicaid waivers in the wake of Indiana and Arkansas taking their expansions beyond the scope of what the health law required. Indiana is a particular inspiration for conservative lawmakers. Under Republican Gov. Mike Pence, the state secured federal approval to charge premiums to beneficiaries and deny re-enrollment if the individuals do not pay.

Arkansas' redone Medicaid waiver, prompted by GOP Gov. Asa Hutchinson's efforts to control costs, would create a voluntary work and job training referral system for unemployed beneficiaries and require those with jobs to enroll in employer-sponsored plans. However, the program would not provide coverage for services provided up to 90 days prior to enrollment. Meanwhile, in Ohio, the administration of Republican Gov. John Kasich submitted its own waiver proposal on June 30 that would create health savings accounts for beneficiaries, provide a voluntary work referral program and a point system to give an incentive for healthy habits.

Cost-Sharing Pressure

Charles Hughes, a research associate with the libertarian Cato Institute, said in an interview that the requirement that expansion states cover 5 percent of the share of expansion costs in 2017 is driving efforts to retool the program.

Hughes said some states are seeing a "woodwork effect," with thousands of new beneficiaries signing up. 

"At the same time, they are trying to figure out a way to incentivize people to transition out of those programs to something like an employer-sponsored insurance plan or individual market plan," he said.

The requests have a political element in an election year but could also be part of a broader strategy to pressure federal officials to make accommodations, said Adam Searing, an associate professor of practice for the Georgetown University Center for Children and Families, in an interview. Threatening to end Medicaid expansion would be a last ditch effort to force concessions or blame coverage losses on an intractable administration.

"There is clearly some conservative ideology at work," Searing said. "With them saying 'we would like to have the Medicaid program look like private insurance' or 'we would like people to have more skin in the game' or 'be more responsible for their care' I think it is deemed rationale for these waivers but I do not know if [Republicans] go very far in doing that."

By Erin Mershon, CQ Roll Call

July 6, 2016 -- Several smaller, newer health plans are considering asking state regulators for relief after learning last week they owe hundreds of millions of dollars under a provision of the 2010 health law designed to stabilize fledgling insurance markets. More may follow Illinois's Department of Insurance, which ordered the state's co-op not to make its $31.8 million payment by the federal government's deadline.

Nearly every nonprofit co-op—which were themselves created by the law—owes the government money according to a report released last week; several owe as much as $24 to $46 million. Already the Connecticut co-op has been forced to shutter its doors after state regulators said the payment request compromised the plan's solvency.

Now that the numbers are out, however, they're searching for other forms of relief. Late last week, Illinois' insurance commissioner ordered the state's co-op, Land of Lincoln Health, not to make its payment until the co-op receives the full funds it is owed under the more controversial stabilization program known as "risk corridors." That money, hamstrung by an amendment in several recent budget deals, is unlikely to materialize in full for years.

Several insurance regulators and industry experts said other states are considering and discussing a similar route, and at least one co-op has requested more information from the administration about how it should handle risk corridor accounting in the wake of the payments the government is requesting under risk adjustment, according to a document shared with CQ HealthBeat.

Other states are looking to Maryland's co-op, Evergreen Health, which last month sued the government in anticipation of a crippling payment of more than $22 million. Executives there say other states have already asked for more information about their lawsuit.

"It's going to be a little bit of a legal showdown, or a regulator showdown, if you will," said Kelly Crowe, CEO of the National Alliance of State Health Co-Ops. "You're talking about a group of undercapitalized insurers that were really hammered in this risk adjustment formula....The problem seems to be magnifying, rather than getting better, despite all of the focus we've put on the problems we see with the formula."

The co-ops have long been arguing that the risk adjustment formula unfairly penalizes plans that lack the relationships with providers that can help improve results on the formula, as well as the years of claims data that older plans have and can provide better estimates of the program's charges or payouts. The risk adjustment program was designed to reallocate funds from insurers with unusually sick customers to those with unusually healthy ones.

But the sheer size of the payment requests has them frantically casting about for a solution, whether it comes from state regulators or even the Centers for Medicare and Medicaid Services (CMS), which oversees the program.

"Look at how many states now are coming on board, willing to confront CMS," said John G. Franchini, New Mexico's Insurance Superintendent. "We all see that it's wrong and even CMS is starting to see it. We just need to push them to act quicker."

Franchini isn't willing to go as far as Illinois' did, especially because the co-op in his state is still solvent, even as it faces a $13.36 million payment. But he agrees that federal regulators should consider letting the plans delay their payments until they receive what they're owed under risk corridors.

He says he's optimistic about getting relief before the payments are due in mid-August, in part because more states are grasping the magnitude of the issue.

CMS has said it wants to improve the formula—but not until 2018, which may be too late for some of the co-ops facing large payments.

"We continue to work with companies and states to refine the program so that risk adjustment works for both insurance companies and consumers shopping for affordable coverage," said Aaron Albright, a CMS spokesman, in a statement.

In Illinois, both regulators and the co-op are bracing for a response from CMS, which has not yet come, according to Jason Montrie, president of the Land of Lincoln co-op.

Illinois's regulators say they had the authority to put the brakes on the co-op's payment under state law. They also point to a federal regulation in which CMS said states should look for their own solutions to the issues raised with risk adjustment, including considering a change in the timing of the payments.

"Our department is looking to do everything in their authority to protect the marketplace, to protect consumers, and we're obviously supportive of the decision they've made to do that," Montrie said.

One industry expert pointed out that if CMS allows insurers' to delay their risk adjustment payments, the agency might be unable to fulfill the payouts it has promised to other insurance companies—which could open the administration up to still more lawsuits.

By Marissa Evans, CQ Roll Call

July 6, 2016 -- Emergency room death rates dropped 48 percent between 1997 and 2011, but researchers were unable to draw specific conclusions on how or why this happened, according to a Health Affairs study.

The report released last week found that while researchers could not give conclusive reasons for the sharp drop, it could be linked to factors such as increased use of palliative care, better management of patients with potential heart issues, as well as reduced smoking rates and improved car safety features and policies.

Researchers studied 1.3 billion emergency room visits from the National Center for Health Statistics' Hospital Ambulatory Medical Care Survey. The survey includes emergency room visits in nonfederal, general, and short-stay hospitals alongside patient demographics, reasons for the visit and if the patient survived. Researchers noted the data may have limitations due to industry changes in medical coding and other factors.

Hemal Kanzaria, assistant professor in the Department of Emergency Medicine at the University of California San Francisco and the lead author of the study, said in an interview that the subject will be an area of continued interest.

"It's nice that we're seeing these trends in reduced mortality," Kanzaria said. "We've made tremendous improvements in longevity of life...with that though, is making sure [patients] are living a high quality of life."

The study found 62.7 percent of emergency room deaths logged involved patients with cardiopulmonary arrest, unconsciousness or were dead on arrival. Meanwhile, 8.3 percent fatalities stemmed from shortness of breath, another 5.1 percent from an injury and 3.9 percent from chest pains.

Researchers pointed to an increase in palliative care as a potential reason for the reduced deaths due to "more patients dying in hospice settings outside acute care hospitals and emergency departments than in the past."

The study referenced research showing a significant increase in the proportion of home deaths and more policies requiring medical professionals to follow do not resuscitate orders.

"One of the main reasons we did the study was there's been tremendous increases in palliative care part of which is focused on patients and patient wishes," Kanzaria said. "It would be reasonable to think patients would prefer to be at home than an emergency room setting."

By Erin Mershon, CQ Roll Call

July 5, 2016 -- A new draft of legislation aimed at improving care coordination for children with complex medical conditions simplifies changes to Medicaid that were included in earlier bills, outside groups said.

The discussion draft, released late last week, will be a central focus of a House Energy and Commerce Health Subcommittee hearing Thursday. It would allow states to opt in to a care coordination model for some of the sickest children on Medicaid, modeled on home health demonstrations currently in place in several states. Unlike an earlier bipartisan bill (HR 546) from Rep. Joe Barton, R-Texas, the new draft does not set up new, regional, or national Medicaid rules for eligible children.

The changes, in part, address concerns raised by Medicaid insurers that the earlier legislation would have inappropriately preempted state efforts to improve care coordination by using the private managed care organizations they represent. They also raised concerns about how much the program would cost both states and the federal government.

Children's hospitals, however, say the new draft won't set up as effective a network of care as the earlier drafts would.

Health Subcommittee Chairman Joe Pitts, R-Pa., said in a statement the changes enhance states' ability "to improve care coordination for these children, address access challenges and collect better data to help Medicaid programs."

The proposal and hearing come as Republicans in the House have increasingly focused on large scale changes to the Medicaid program. A white paper released by Speaker Paul D. Ryan, R-Wis., last month included dramatic changes to the program, and Rep. Brett Guthrie, R-Ky., is leading a separate task force aimed at overhauling Medicaid in the next several years.

The Medicaid Health Plans of America, which represents managed care organizations and other plans that operate within 39 states, argues that the financial solvency concerns that underpin those conversations should also help shape the discussion. While the plans contend the new draft is an improvement, they are still advocating for changes to the payment structure and the quality measures included in the bill.

In essence, the group believes Medicaid managed care plans will be better at coordinating the care needs of these complex patients than providers. The bill, they argue, should better align incentives between the new program for children and the managed care program, both through federal funding amounts and through quality measure requirements. Managed care plans should be allowed to participate in the coordination, they said.

"The new bill still has some pretty significant shortcomings, and really ignores the way in which Medicaid is evolving care for these complex care kids," said Jeff Myers, the group's president. Under this draft, "you have a system with no real measurement of quality and a possibility of an uncoordinated system of [fee-for-service] payments which won't drive incentives in the same direction. From that perspective, we have a pretty serious concern."

The hospitals, meanwhile, believe the care coordination efforts should be provider-led. They say the new proposal may prompt state-by-state variations that could complicate efforts to let children travel out of state to get care—an opportunity they say is especially crucial because there are fewer hospitals that specialize in pediatrics or rare childhood diseases.

The hospitals also take issues with the way the new draft defines the eligible population, the services that will be provided and the quality measures to which providers will be held accountable.

"It's a simplified version of what was out there, in many dimensions," said Mark Wietecha, president of the Children's Hospital Association. "The more we can make it about specialized pediatrics, the better it will be. It will work better, it will get to the right population, it will have a stronger result. ... The more we can get consistency, the more effective the network will be, and the current draft does leave more authority for the states."

Managed care plans are more adept at dealing with healthier populations, Wietecha said, not complex needs of patients the legislation is designed to help.

Both groups say congressional drafters have recognized a real issue and that they are committed to continuing to work with the committee on the legislation.

By Kerry Young, CQ Roll Call

July 5, 2016 -- Specialty medical centers are pressuring Medicare administrators to factor the socioeconomic status of patients into judgments about the quality of care provided to people recovering from serious illnesses and injuries.

The Centers for Medicare and Medicaid Services (CMS) is shaping a framework intended to allow better comparisons of post-acute care provided in four different settings. A roughly $60 billion annual expense for Medicare, the field involves the work of home health agencies, long-term care hospitals, skilled nursing centers and specialty inpatient rehabilitation facilities. 

The IMPACT Act (PL 113-185) of 2014 ordered CMS to do the groundwork for eventually moving to a unified payment system. The agency is handling the initial steps through the four annual payment rules that cover post-acute care. CMS in April released the draft rules for skilled nursing centers, inpatient rehabilitation facilities and long-term care hospitals that are updated each fiscal year. Last month, it released the proposed rule for home health agencies, for which payment policies are changed each calendar year.

Many post-acute care organizations are asking CMS to account for differences in patient populations. For example, one measure CMS proposed in assessing if a hospital readmission could have been avoided would weigh medical risks that increase the odds of a patient in a skilled nursing facility (SNF) having to return to the hospital. But it would not make an adjustment for socioeconomic factors, according to Vickie R. Kunz, senior director for health finance for the Michigan Health and Hospital Association.

"This is vital for ensuring that SNFs caring for large numbers of poor, vulnerable patients are not disproportionately penalized," Kunz wrote in a June 26 comment to CMS.

Without an adjustment for socioeconomic status, the data collected from the new measures will not offer a valid comparison of the results provided by different organizations, wrote Patty Haggen, executive director of rehabilitation services at the John Muir Medical Center in Walnut Creek, Calif., in a June 20 comment on the inpatient rehabilitation facilities (IRFs) draft rule.

"IRFs that serve individuals with limited resources will be unfairly penalized for factors beyond their control," Haggen and colleagues wrote.

CMS said in the draft home health rule that Medicare officials understand the role that "sociodemographic status, beyond age, plays in the care of patients," but said they have concerns about creating different standards for the outcomes due to patients' socioeconomic status.

We "do not want to mask potential disparities or minimize incentives to improve the outcomes of disadvantaged populations," CMS officials wrote, echoing a phrase repeated in other rules regarding requests for factoring patients' incomes into quality measures.

In the draft home health rule, CMS also noted that the nonprofit National Quality Forum is in the midst of a trial period of new measures to determine if adjusting for so-called sociodemographic factors is appropriate. In addition, the Office of the Assistant Secretary for Planning and Evaluation at the Department of Health and Human Services is conducting research to examine the effect of socioeconomic status on quality measures for Medicare, CMS said. This work will factor into the agencies' deliberations on socioeconomic factors, the agency said.

Medicare officials and lawmakers have been wrestling broadly with the question of how to measure the quality of hospitals and specialty clinics that have many poor patients. The House on June 7 passed by voice vote a package of relatively small changes to Medicare policy (HR 5273) that includes a provision meant to address concerns about how hospitals that serve many poor customers are hit by readmission penalties. 

Rep. Charles B. Rangel, D-N.Y., questioned at a May markup whether this provision would have the effect of lowering the standards for hospitals that serve the poor. He argued that the priority should be to make sure that hospitals serving low-income communities have the resources they need to prevent admissions of their patients, rather than rejiggering the penalty. Still, Rangel agreed with a need to preserve the funding for medical centers serving the poor.

"I don't want these hospitals to be put out of business just because we don't provide the funds for them to do the right thing," Rangel said.

July 8, 2016 -- Insurers are ramping up lobbying to defeat legislation that would limit their payments under one of the 2010 health law's stabilization programs, according to congressional staff and outside experts.

The bill (S 2803), from Sen. Ben Sasse, R-Neb., would slash in half the Department of Health and Human Services (HHS) general management budget, unless the agency pays certain funds from the so-called reinsurance program to the Treasury Department. Until now, the agency has prioritized its payments to insurance companies and not yet paid into the Treasury, a practice it has justified under the health law.

It's something of a deja vu moment for insurers, who saw their payments under the so-called "risk corridor" program—another of three risk stabilization programs under the health law—stymied by riders in two recent budget deals that were sponsored by Sen. Marco Rubio, R-Fla. In the first year of that program, insurance companies got just 12.6 percent of what they were due under the program's rules—a shortfall that led to the bankruptcy of several plans.

The Sasse legislation is unlikely to move through either chamber on its own, several sources on and off the Hill said. But like the Rubio provision, the language could be attached to a broader spending package that moves later this year. That prospect has insurance companies ramping up their outreach to members on both sides of the Capitol. Rubio is co-sponsoring Sasse's bill, along with Sen. Mike Lee, R-Utah.

"There's concern about the Sasse language because Rubio already won against risk corridors," a Republican Senate aide said.

The ihealth plan lobbying comes in the wake of a recent report from the Obama administration that details the payouts insurers will get under the reinsurance program and another stabilization effort called risk adjustment. Both were intended to help minimize disruptions in insurance markets created by the health law, albeit in different ways.

Insurers that received substantial payments under the reinsurance program aren't keen on seeing those payouts dwindle next year, several outside experts said. Some are already warning that a change in the program will create uncertainty that could drive up consumers' premiums.

"They are concerned about it for the same reason that they were concerned about the risk corridors: this was part of the calculus, and the rules of the game are being changed. They've already set the 2016 premiums, they can't change those premiums," said Edwin Park, vice president for health policy at the Center on Budget and Policy Priorities. "To change the rules retrospectively will hurt their bottom line and also have some other effects on the stability of the marketplace."

One industry source said there is a sense the bill is another attempt to undermine the 2010 health law, and is timely because the reinsurance program is set to expire at the end of 2016. The source also highlighted that the efforts to undermine the risk corridor program were all determined on party lines—and said industry expects similar partisan differences to surround this legislation.

The one person that the lobbying isn't swaying? Sasse.

"This is a textbook case of Washington cronyism: HHS is sending billions of dollars to insurance companies with teams of lobbyists but families who are already suffering Obamacare's consequences haven't seen a dime go to the Treasury," the first-term senator said in a statement.

Under the reinsurance program, HHS was supposed to collect $12 billion in 2014, $8 billion in 2015 and $5 billion in 2016 from plans both on and off the exchanges, including self-funded plans. Insurers would get back $10 billion, $6 billion and $4 billion, respectively, in each of those years, to help cover unusually high medical expenses they might not have predicted in the new markets. The remaining funds would go to the Treasury each year.

But HHS didn't collect enough under the program, and decided through rulemaking to prioritize its payments to insurers. The agency collected about $9.7 billion in 2014 and another $6.5 billion in 2015, paying out $7.9 billion and $7.7 billion to insurers in those years. About $500 million dollars has gone to the Treasury under the program so far.

Final payments under the reinsurance program will be issued next year.