By Melanie Zanona, CQ Roll Call

July 22, 2015 -- The continued slow growth of Medicare hospital costs is positive news for federal spending, but rising costs in outpatient care and especially prescription drug costs are a growing threat to the system's financial health, according to an annual report by the health program's trustees.

Medicare's benchmark Hospital Insurance Trust Fund will be depleted in 2030, the trustees' report stated Wednesday, echoing the projection they made last year but saying it was more certain with Congress' decision to change the way physicians are reimbursed. Trustees project that enough dedicated revenues will flow into the program to fund 86 percent of obligations in 2030, a share that will decline to 80 percent in 2050 and will rise gradually to 84 percent in 2089. Hospital insurance, or Medicare Part A, is a partial measure of the program's financial health.

But while outpatient and prescription drug program costs have both grown on average slightly more than 5 percent per year over the last five years, the trustees project that outpatient Part B costs will rise 6.7 percent over the next five years and Part D prescription drug costs will rise 10.9 percent over the next five years. Factors include the slowing growth in generic drug use and the recent federal approval of a number of high-cost drugs.

Medicare Part B, which pays for doctor office visits and other outpatient expenses, is expected to remain adequately financed. But trustees predict that Part B costs will grow steadily from 2 percent of the gross domestic product (GDP) in 2014 to 3.4 percent of GDP in 2035 and 3.8 percent by 2089, due to the aging population and rising health care costs.

Medicare spending levels could trigger a cost-cutting board mandated by the health overhaul, known as the Independent Payment Advisory Board (IPAB), as early as 2017, according to the report. Last year, the per capita growth rate wasn't projected to exceed the per capita target growth rate until closer to 2023.

IPAB has been a top target for the GOP in its efforts to gut the health care law, although the board has yet to be triggered. Democrats had argued that scenario is far off, but the recent data could ramp up calls for its repeal.

"This underscores the importance of repealing the IPAB provisions of the Affordable Care Act before that date arrives," said Mary R. Grealy, president of the Healthcare Leadership Council, in a statement. “IPAB, as structured, would result in arbitrary cuts to what Medicare pays for healthcare services instead of pursuing far-sighted reforms that strengthen the program's value.”

Health and Human Services Secretary Sylvia Mathews Burwell noted that 70 percent of enrollees will see no change in their Part B outpatient premiums for 2016. For the remainder, the "final decision will be made in the coming months based on the preliminary projections today, additional data and the administration's considerations," she said. The decision, expected in October, affects people including those who enroll in Part B for the first time in 2016; those who don't get Social Security benefits; and higher-income beneficiaries.

Total Medicare costs will grow from 3.5 percent of GDP in 2014 to 5.4 percent of GDP by 2035 and to 6 percent of GDP by 2089. Although projections for Medicare's total costs are little changed over the next 20 years, trustees said they are substantially lower over the long range.

One big difference from last year's report is that Congress has replaced the so-called sustainable growth rate, a formula that dictated how Medicare physicians get paid.

Treasury Secretary Jacob Lew said the repeal of the SGR—which prompted Congress to enact years of temporary "doc fix" funding patches in order to avert scheduled fee cuts—has helped improve Medicare's long term outlook, along with the 2010 health care overhaul and payment models geared to the quality of health services over quantity.

A permanent doc fix is something "that has eluded Washington for 13 years," Lew said. "We must and can achieve this progress again."

Trustees issuing their annual report also noted that the estimate of the trust fund's solvency is 13 years longer than the one released prior to the passage of the Affordable Care Act. This year's report marks the 50th anniversary of the federal health insurance program for the elderly and disabled.

But trustees warned that the program still faces challenges and a major financial shortfall, especially as the baby boomer population grows older, which they said will need to be addressed with legislation.

"The sooner policymakers address these issues, the less disruptive it will be and the economy as a whole will have an easier time adjusting," said trustee Robert Reischauer.

Melanie Zanona can be reached at [email protected].

By Jad Chamseddine, CQ Roll Call

July 24, 2015 -- An increase in Anthem Inc.'s offer to buy Cigna Corp. and create the country’s largest health insurer, with 53.2 million subscribers, won the tentative approval of Cigna's board in the latest deal among an escalating trend of health care mergers.

Last week's announcement follows pending deals such as Aetna Inc.’s acquisition of Humana Inc. and Centene Corp.’s acquisition of Health Net Inc.

These deals will face scrutiny by federal and state regulators over fears they will raise costs for consumers and hurt innovation in the medical field.

The concerns were underscored in a letter from Sen. Richard Blumenthal, D-Conn., following the announcement of Anthem’s acquisition in which he urged the Justice Department’s antitrust division to review all health insurance mergers together.

"I urge that you scrutinize them together as part of the single national health market, with the goal of maintaining competition and protecting consumers," wrote Blumenthal. "I urge that this scrutiny be exacting and demanding because your decisions will be enduring in market effect."

Mergers traditionally are not evaluated as part of a larger trend. Antitrust agencies view each merger separately and the effect it would have on competition and whether it would substantially reduce competition.

Blumenthal argues the merger frenzy will reduce the five largest health insurers to three and increase the number of counties where only one health insurer exists, leading to rate hikes.

"Having only one insurer in a state marketplace could drive down the quality of plans offered to consumers," said Blumenthal, a member of the Senate Judiciary subcommittee on antitrust issues. Both Aetna and Cigna are headquartered in Connecticut.

It remains to be seen whether the Justice Department or the Federal Trade Commission (FTC) will tackle the health insurance mergers. The agencies typically divide oversight of mergers based on expertise and previous exposure to certain industries in a process called clearance. The FTC has previously overseen acquisitions involving Cigna and Anthem, including Anthem’s $16.4 billion acquisition of WellPoint Networks in 2004.

Under the deal’s terms, Cigna shareholders would receive $188 per share in stock and cash, representing a 21 percent premium to Cigna’s June 19 closing price of $155.26, the last trading day before Anthem’s first offer became public.

Anthem sees no antitrust problem.

Despite earlier misgivings, the merging parties are now both confident that antitrust problems will not derail the deal, Anthem CEO Joseph Swedish said in a call late last week. But the parties did include a reverse break-up fee in the merger agreement, generally a hedge against such an antitrust lawsuit. 

Opponents' Concerns

Opponents are expected to flood regulators with calls to block these deals. Last month, the American Academy of Family Physicians, with over 100,000 members, urged FTC Chairwoman Edith Ramirez to scrutinize any deal that combines the country’s top 10 health insurers.

"Bigger insurance companies mean increased leverage and unfair power over negotiating rates with hospitals and physicians," the letter said. It also warned that consolidated companies do not necessarily translate to more efficiencies and lower costs to consumers.

The merger is further complicated by Anthem’s membership in the Blue Cross/Blue Shield Association (BCBSA), which generally limits a health insurance company to specific states. Cigna noted this problem in its initial rejection of the deal in June, when Cigna CEO David Cordani expressed concerns over BCBSA’s "intricate rules and constraints."

Swedish recently told investors the combined company would "remain Blue" without further addressing other complications brought up by its membership.

Following the announcement of the Aetna-Humana deal, Senate Majority leader Mitch McConnell, R-Ky., said the sale was the result of the Affordable Care Act and its "push toward consolidation as doctors, hospitals, and insurers merge in response to an ever-growing government." 

His concerns were shared by Rep. Marsha Blackburn, R-Tenn., who said the merger was a direct result of the law and would lead to "higher costs, fewer options, and less access."

By Rebecca Adams, CQ Roll Call

July 22, 2015 -- Only 10 percent, or 300,000 people, who obtained health law marketplace subsidies initially received the correct amount, IRS Commissioner John A. Koskinen told lawmakers in a letter and briefing last week.

The remainder are supposed to return the extra amount or can get refunds from the IRS.

The Affordable Care Act provides federal tax credit subsidies to people whose income is up to four times the federal poverty limit. But it's paid to health insurers in advance, based on what people who get the subsidies guess that they will earn in the coming year. 

Republicans have said the payments are vulnerable to fraud and errors because the money goes out in advance as discounts to reduce insurance costs.

About half of the people who got subsidies and later filed new IRS paperwork received more money than they were entitled to receive, said Koskinen. The average overpayment that taxpayers had to repay was $800.

Another 40 percent did not get as deep a discount on their coverage as they could have through the subsidies, so they received refunds when they filed taxes. The average amount the IRS sent back was about $600.

The agency chief also said that about 7.5 million people had to pay a penalty under the law's individual mandate for not getting health insurance. Another 12 million people escaped the fine by claiming an exemption. Koskinen noted that about 300,000 people who paid the penalty could have gotten a health care coverage exemption, and the IRS is sending them letters hinting that they should take another look at their returns and consider amending them.

Almost 1.2 million of the estimated 4.8 million people who were supposed to file a form to either get back money that the IRS owes them or to pay back the federal government still haven’t sent in a tax return, Koskinen said. About 360,000 of them got an extension that gives them until Oct. 15 to file their tax returns.

Separately, another 760,000 people that got subsidies did file their tax returns but did not send in a new form that taxpayers are supposed to complete to check to make sure their subsidies are correct.

"We are committed to learning from this experience so that we can improve our processes," Koskinen wrote.

By Melissa Attias, CQ Roll Call

July 21, 2015 -- A strong lobbying push by medical providers to delay minimum government standards for using electronic health records could influence a Senate panel's work to address widespread concerns about the effectiveness of the information systems.

The American Medical Association (AMA), American Hospital Association, and others want the Centers for Medicare and Medicaid Services (CMS) to hold off on finalizing a March proposal outlining criteria that providers must meet to receive payments and avoid penalties under what are known as "meaningful use" programs. The proposed rule would require providers serving Medicare and Medicaid recipients to begin the third and final stage of the effort in 2018.

The Alliance of Specialty Medicine, a coalition of groups representing specialty physicians, brought the issue to Capitol Hill last week. Its members asked lawmakers to push the agency for a delay. Spokesman Alex Valadka, a neurosurgeon, said in an emailed statement that the Alliance met with members and staff of the Senate Health, Education, Labor, and Pensions Committee and found them sympathetic to the concerns.

The panel has made electronic medical records a focus of hearings—another is scheduled for this week—and convened a working group earlier this year to identify problems that can be addressed legislatively or administratively. Recommendations could move as part of a medical innovation package that Chairman Lamar Alexander, R-Tenn., plans to release in the fall.

Asked if a delay of stage three is being considered in the working group, an Alexander aide wrote in an email that the committee is listening to input as it works to find solutions "that help make the failed promise of electronic health records something that physicians and providers look forward to instead of something they endure."

The House’s so-called 21st Century Cures bill (HR 6), which may ultimately be combined with the Senate innovation package, included language that aims to improve the interoperability of electronic health records rather than delay the meaningful use requirements. The measure passed the House earlier this month in a 344-77 vote.

Some House members still want to respond to concerns about the incentive programs. Rep. Renee Ellmers, R-N.C., is expected to introduce legislation next week that would delay the release of the final rule governing the third stage of the program until at least 2017, according to an aide. The bill is also anticipated to prescribe a 90-day reporting period regardless of the stage, expand a hardship exemption for providers that do not routinely interact with patients and address reporting requirements and the interoperability of state vendor products.

Provider Complaints

Although providers typically say they support the broad goals of the meaningful use programs, which were created in the 2009 stimulus package (PL 111-5), they maintain the efforts are being implemented in an unworkable fashion.

In an issue brief, the Alliance of Specialty Medicine said many members are struggling to meet the requirements because the measures aren’t relevant to specialists and their unique patient populations. The requirements in the stage three proposal include measures and thresholds that will be "virtually impossible" for specialists to meet, the coalitions says, adding that it should be delayed until a majority of providers are successful in earlier stages and CMS has studied participation barriers.

Only about half of eligible doctors participate in the incentive programs, and a small fraction have satisfied stage two, according to the Alliance brief.

At a town hall meeting last week in Atlanta, AMA President Steven J. Stack said the influential doctors' lobby would use anecdotes about doctors' experiences with the programs to communicate with the legislative and executive branches. Physicians at the event said their electronic health records systems have slowed down their productivity while requiring extra hours of work.

House Budget Chairman Tom Price, an orthopedic surgeon, attended the meeting and spoke briefly about the meaningful use requirements, maintaining that he thinks "we’re on the path to an unmeaningful and oftentimes useless product." But he also pointed to the successful replacement of Medicare’s physician payment formula in April (PL 114-10) as a reason for hope, noting that no one in the room—not even Price himself—initially believed it would be repealed this year.

"That happened because of your engagement, your involvement, the participation of state medical societies across this country and the participation of the AMA," said the Georgia Republican. "I want you to always remember that there is a light at the end of the tunnel and it isn’t necessarily an oncoming train."

Stack said the AMA thinks the administration should "pause" stage three of the meaningful use program so that it lines up with new payment delivery models and rulemaking can occur as other rules for a new performance-based incentive program are set up under the physician payment law.

Shawn Martin, vice president of advocacy and practice advancement at the American Academy of Family Physicians (AAFP), said in a blog post earlier this month that his organization has called for a delay in stage three to align the requirements with those in the new law. He also said the AAFP will be launching an advocacy campaign to delay the penalties for the second and third stages so that improvements can be achieved at a time when providers are not facing cuts.

In a letter responding to the stage three proposal, American Hospital Association Executive Vice President Rick Pollack urged CMS to hold off on finalizing the rule, citing insufficient experience with stage two of meaningful use. "Instead, the agency should evaluate the experience in Stage 2 while accelerating the availability of mature standards and the infrastructure needed for efficient and effective health information exchange," he wrote.

By Melanie Zanona, CQ Staff

July 20, 2015 -- Winning overwhelming support for a medical innovation package in the House this month was no simple feat.

After resolving fights over offsets, mandatory funding for the National Institutes of Health (NIH) and abortion policy riders, the House passed the 350-page "21st Century Cures" bill (HR 6) on July 10 in a 344–77 vote. Now the bill faces new challenges in the Senate.

Senate Health, Education, Labor and Pensions Chairman Lamar Alexander, a Tennessee Republican, plans to release a draft in the fall and mark it up before the end of the year. Bipartisan working groups have been meeting weekly on a variety of Food and Drug Administration and NIH topics related to drug and device innovation.

But coming up with legislation that is palatable to Republicans and Democrats in both chambers won’t be easy.

Three potential hurdles:

• Narrower bill. The House-passed Cures bill was a vast piece of legislation that incorporated nearly 50 different ideas from lawmakers. The Senate version is likely to be more targeted, according to committee aides. Any provisions that get cut could upset House members who pushed for them. The bill is also expected to largely focus on electronic health records. The House measure addresses interoperability issues, but the Senate is eyeing whether to also alter a $30 billion federal program to encourage the adoption of electronic medical records, which could be contentious.
• Timing. If the Senate doesn’t make progress on a bill before the end of the year, it could be an uphill battle to advance any bipartisan health priorities. The rest of this year will already be occupied by funding the government and the Highway Trust Fund and weighing in on the Iran nuclear deal. "Support for the legislation in the House was overwhelmingly bipartisan. But as we get closer to the end of the year, that bipartisan spirit is apt to wane because of the presidential campaign season," says Marc Boutin, chief executive officer of the National Health Council, who has lobbied for the bill.
• Going to conference. A conference on the House and Senate measures—which lawmakers say is the goal—could prove tricky, especially if the two bills are far apart. But if they don’t go to conference, it puts the Senate in the undesirable position of just passing the House version without weighing in. The chamber already experienced a similar situation when it cleared legislation drafted by the House to change the oft-criticized sustainable growth rate formula, a major victory where credit went largely to House lawmakers.

By Melissa Attias, CQ Roll Call

July 24, 2015 -- While the Republican budget agreement was geared toward using reconciliation for repealing the health care overhaul, another approach under consideration would involve surgically striking portions of the law—including the mandate that individuals obtain coverage or pay a fine. Such a selective repeal package could more easily comply with the restrictions of the special budget mechanism.

Texas Republican Kevin Brady, chairman of the House Ways and Means Health Subcommittee, said the discussion about how to proceed is occurring at a "higher level," but that one approach is to identify specific provisions and move them to the Senate using reconciliation. Targets could include repealing the individual mandate, a similar requirement that employers offer coverage or pay penalties and "some of the worst parts of the taxation," he said.

The other route would be to repeal as much of the 2010 law as possible under the complicated rules governing reconciliation, including a requirement in this year’s instructions that the legislation decrease the deficit over the next decade. The expedited reconciliation procedure allows legislation to move through the Senate with a simple majority, sidestepping the usual 60-vote requirement for consideration.

Under the fiscal 2016 budget resolution (S Con Res 11), five authorizing committees across both chambers were charged with reporting their reconciliation proposals to the Budget committees by the end of last week, but action has been put off until at least after the August recess. Although the House is in for a limited time in September, the Budget Committee is hoping to receive and assemble reconciliation submissions from its three authorizing committees.

"I hope so," Budget Chairman Tom Price, R-Ga., said when asked if he expects to report out a reconciliation bill in September.

In the end, House lawmakers said the direction Republicans take with reconciliation will come down to the Senate.

While the House already sent a repeal bill (HR 596) to the Senate this year, Brady said the chamber could do it again through reconciliation if the Senate is eager to send something to President Barack Obama's desk. Charles Boustany Jr. of Louisiana, another Ways and Means Republican, said whatever moves through reconciliation has to pass muster with the Senate parliamentarian and that the House is working to understand what the Senate wants to accomplish.

"Is it a symbolic vote or a real vote that can get through to the president’s desk?" Boustany asked. "We're trying to get an understanding."

Earlier this month, Senate Majority Leader Mitch McConnell , R-Ky., said Senate Republicans are going to consider using reconciliation "for repealing as much of Obamacare as is reconcilable" but did not provide a timeline for action.

A selective repeal could make it easier to meet the deficit reduction requirement in the reconciliation instructions. The individual mandate is expected to provide substantial savings if it’s repealed.

The Congressional Budget Office (CBO) estimated in March 2014 that putting off the mandate's penalties until 2019 would have decreased the deficit more than $159 billion over 11 years. In comparison, CBO projected in June that full repeal of the law would increase the federal deficit by $137 billion from fiscal 2016 to 2025 using a dynamic score, and by $353 billion under traditional scoring practices.

Boustany said Republicans are "certainly aware" of the savings associated with a repeal of the individual mandate and that there is talk about packaging something, but he’s unsure what it will be. Brady also maintained that it’s easier to understand a repeal of specific provisions, though he said he doesn’t have a preference about which approach Republicans take.

Tennessee Republican Phil Roe, co-chairman of the GOP Doctors Caucus, opts for using reconciliation to move a replacement to the 2010 overhaul. But his fellow caucus chairman John Fleming, R-La., cautioned that targeting the law will leave Republicans with a big battle at the end of the year that GOP leadership may not have the stomach for, even though he would like to repeal as much the law as possible.

"I'm pretty much in the dark," Fleming said. "I just haven’t heard any discussion about it at all in several weeks."