By CQ Staff

July 27, 2006 -- The Centers for Medicare and Medicaid Services announced a proposal Thursday to increase payment rates to home health agencies 3.1 percent in 2007. To obtain the payment increase, which would bring $460 million in added payments next year, agencies must submit data on the quality of care they provide, CMS said in a press release. Agencies that fail to submit the data would receive an increase of only 1.1 percent. The proposal pays slightly different amounts to rural and urban agencies that provide quality data. Rural agencies would get 3.3 percent more, urban agencies would get 3.1 percent more.

The proposed rule also revises payment for two categories of medical products: oxygen equipment and certain types of durable medical equipment that are rented. "We want to make sure that our payments for oxygen are appropriate to ensure beneficiary access to the latest technologies and that we are not paying rental amounts that exceed the cost of purchasing oxygen equipment many times over," McClellan said.

Medicare skilled nursing facility payments will increase $560 million in 2007, CMS also announced Thursday. The 3.1 percent increase will go to the care and rehabilitation of Medicare beneficiaries recovering in nursing facilities from serious health problems. The new payment rates include a special adjustment to cover nursing home residents with HIV/AIDS.

The proposal also includes a plan to make payments for post-acute care consistent regardless of the type of where the service is delivered. Other initiatives in the proposal aim to foster use of health information technology and the availability to consumers of more information on the price and quality of skilled nursing facility services.

By Sarah Abruzzese, CQ Staff

July 25, 2006 -- Two disparate bills aimed at expanding the number of Americans with health care insurance were introduced Tuesday, one by Rep. Pete Stark, D-Calif., and another by a bipartisan group led by Tammy Baldwin, D-Wis.

"The lack of health care coverage is our most serious domestic problem," Baldwin said at a press conference announcing her plan. Nearly 46 million Americans are uninsured according to U.S. Census estimates, and millions of Americans are underinsured.

Stark's "AmeriCare Health Care Act" calls for universal health care coverage for all Americans while the bipartisan plan calls for approval of state grants to create pilot programs around the country. "AmeriCare is more than a solution for the uninsured, it is a solution for the underinsured," said Rep. Jan Schakowsky, D-Ill., at the news conference announcing the proposal.

Stark's plan would dramatically restructure the way health care is provided.

The ranking Democrat on the House Ways and Means Health Subcommittee says his bill would ensure that all U.S. residents would be eligible to receive health care through a program modeled on Medicare. The program would use Medicare's infrastructure, which operates on a 2 percent margin. AmeriCare would provide comprehensive coverage including services from physicians, hospitals, mental health services, and affordable prescription drugs while also imposing a limit on out-of-pocket expenses. Costs of the program are unknown; but a similar plan examined in 2002 cost between $50 billion and $80 billion in new spending in the first years.

There would be a societal cost of $125 per person for the first year but that number would go down, said Jacob Hacker, a doctor and Yale University professor who supports Stark's proposal.

Stark's AmeriCare Health Care Act already has the support of the AFL-CIO and Consumers Union, good news for him in an election year.

While Stark's proposal calls for a complete overhaul of the current health care system, the other bill, The Healthcare through Creative Federalism Act (HR 5864), would empower states to develop methods to cover uninsured residents by creating a grant process. A committee run through the Department of Health and Human Services would be composed of selected appointees from the state and the federal level. As proposed by Baldwin with Reps. Tom Price, R-Ga.; John F. Tierney, D-Mass.; and Bob Beauprez, R-Colo.; the bill contains a budget neutral provision, requiring that the slate of programs have no net cost during the five-year operation.

Despite the lateness of the session, the two bills join another idea launched this week by Sen. Russ Feingold, D-Wis., that would authorize pilot programs to run in a few states. The State-Based Health Care Reform Act would cost approximately $32 million over a 10-year period and pay five-year grants for the pilot program with the money coming from offsets.

"With an American-style approach to reform, that gives flexibility to the states and fuels innovation, real health care reform is within reach," Feingold said in a statement released by his office. "I support guaranteed health care coverage for all Americans and this bill moves us toward that goal."

By John Reichard, CQ HealthBeat Editor

July 27, 2006 -- Unmoved by skeptical questioning from House lawmakers, the head of the Medicare program said Thursday that the moment has arrived for widespread adoption of quality measures of physician care. Centers for Medicare and Medicaid Services Administrator Mark B. McClellan repeatedly rebuffed suggestions by Democrats at a House hearing that measures aren't well-developed enough across the physician sector to permit their use to be tied to physician payments.

Nor would McClellan take the bait when Georgia Republican Charlie Norwood suggested that government bureaucrats have no business telling doctors how to practice medicine by tying payment to use of the measures.

McClellan's testimony before the House Energy and Commerce Health Subcommittee suggested that the administration will push Congress later this year to adopt legislation blocking a scheduled cut in physician payment of almost five percent next year—with the proviso that doctors will only avoid lower reimbursement if they report data allowing Medicare to measure the quality of their care.

"We definitely want to work to address the scheduled payment reduction," he said in remarks to reporters after his testimony. But "we still want to make sure we're addressing it in a way that doesn't increase overall costs and beneficiary premiums."

McClellan suggested that could be accomplished in part through savings generated by adopting measures of quality. "There is growing evidence that these quality reporting programs and steps toward performance-based payments can save money overall," he said.

McClellan said hospitals are a good model for physicians to follow with regard to measure-based payment. In the hospital sector, reporting data on quality performance measures is voluntary, but hospitals that do so receive a higher payment update.

McClellan cited hospitals as a model during the hearing, as well. When Rep. Sherrod Brown, D-Ohio, suggested that measures aren't close to being ready across the board for the physician sector, McClellan noted that hospitals started with a limited number of performance measures. "This is a gradual process," McClellan said.

He said that 34 physician specialties have developed measures that doctors could use to report performance data using the current claims they file when they seek reimbursement from Medicare. Only 5 specialties lack such measures, he added.

McClellan hammered away at the point that Congress can't simply respond to scheduled payment cuts by putting more money into the physician payment system without adopting new steps to ensure that the money is well-spent. "We should be paying for care in a way that encourages improved quality and keeps overall costs down," he said. Simply putting more money into the system also is untenable because it drives the premiums beneficiaries pay for Part B of Medicare higher, he added. McClellan suggested that quality-based payment is particularly needed in light of faster-than-expected growth in Medicare's Part B program, much of which is spending on physician care.

"The main reason for the 10 percent growth in expenditures for physicians' services in 2005 is an increase in the volume and intensity of services," he testified. "The continuing rapid growth in utilization and thus in Part B spending has two important consequences: it will lead to substantial increase in Part B premiums and will increase the difference between actual and target expenditures with the existing update formula." That formula requires payment cuts to recoup spending in excess of the target Medicare sets every year for how much physician spending should grow. The faster that spending grows and the more it exceeds yearly targets, the more payments to individual doctors must be cut under the Medicare formula.

While Democrats questioned what one called the "rush" to adopt measures in payment, a Subcommittee Republican questioned the government's role. Norwood urged McClellan not to fool himself that bureaucrats can tell doctors what quality care is. But McClellan said measures are being developed with the leadership of doctors. "CMS expects that physicians will continue to be the leaders in the development of performance measures for the various specialties," he said.

The event was the second day of a hearing that began Tuesday on the subject of Medicare physician spending. As he did Tuesday, House Energy and Commerce Committee Chairman Joe Barton, R-Texas, again expressed interest in passing legislation this year that would scrap the problematic current payment formula and switch to yearly payment increases based on the change in the Medicare Economic Index (MEI), which tracks the costs of delivering physician care.

McClellan said that would be costly and that doing so would have to be combined with other steps to keep the volume of services down. While McClellan agreed "structural" change is needed in physician payment, he didn't appear to be endorsing a wholesale switch to an MEI-based system. Democrats pressed McClellan on issues other than quality measures, but the CMS administrator was similarly unmoved in those areas as well. Brown noted that 205 Democrats in the House sent a letter to the administration Wednesday opposing the issuance of regulations by CMS they said would cut Medicaid by $30.4 billion over 10 years. The letter said that among other things, the regulations would trim health care services to children.

Asked by Brown if he could assure lawmakers the administration wouldn't move on the rules, McClellan said that as the administration moved forward with the regulations it would take the concerns of lawmakers into account. The regulations will be proposed as soon as possible, McClellan said. Changes by the administration in Medicaid are redirecting dollars to where they are needed most, he said.

By Sarah Abruzzese, CQ Staff

July 27, 2006 -- Most seniors enrolled in a Medicare drug plan are satisfied with their plans, according to a new survey released Thursday by the Kaiser Family Foundation.

Of the 1,585 seniors age 65 and older who took part in the survey, 623 were enrolled in a Medicare Part D drug plan. And while eight out of 10 seniors were satisfied with their plan and three out of four would sign up for the same plan again, almost two of 10 said they had a "major problem" using the plan.

About one-third of seniors who had used their drug plan had problems—18 percent describing those as major and 16 percent said it was minor, according to the report. Those problems include unexpected costs, not getting a prescription from the pharmacy, having to switch drugs because one isn't covered, and not receiving an enrollment card. Drew E. Altman, the foundation's president and chief executive officer, however, said "it bears close monitoring that the sickest seniors are most likely to report problems."

Sen. Charles E. Grassley, R-Iowa, said in a statement released by his office, "Although beneficiaries reported having some problems, the majority also reported that the problems have been resolved." Grassley, the chairman of the Finance Committee, which has jurisdiction over Medicare, went on to say that "the survey also helps to identify areas on which we need to continue to work." He added, "We need to make sure beneficiaries know that extra help is available for premiums and cost-sharing. We also need to make sure beneficiaries have the resources they need to make their choice." According to the survey, only a third of seniors said they knew there is a coverage gap or "doughnut hole" to Medicare's drug benefit. Under the drug benefit, Medicare pays 75 percent of drug costs up to $2,250 after an initial $250 deductible. Medicare then pays nothing until the drug expenses exceed $5,100.

Also, two out of three seniors weren't aware that special assistance is available for low-income seniors. And of those seniors who would qualify for the assistance, only 32 percent were aware of the program. CMS spokesman Peter Ashkenaz said the Kaiser survey "shows that a majority of people who are enrolled in the drug plans are satisfied with the program." He said, "We are pleased to see that Medicare beneficiaries are getting more than three million prescriptions filled every day. We will keep working to make sure people will continue to get drugs under this important program."

By John Reichard, CQ HealthBeat Editor

JULY 26, 2006 -- Under fire from the Senate Finance Committee, organizations that contract to improve care to Medicare beneficiaries have begun the delicate task of building support for legislation that would widen their role. At a Hill briefing on Wednesday, the organizations sought to educate congressional aides on their various projects and demonstrate that their efforts are truly improving care quality.

The "QIOs," short for Quality Improvement Organizations, also have aligned themselves with physicians seeking an overhaul of Medicare's physician payment formula. Both the QIO lobby, the American Health Quality Association, and the biggest physicians' lobby, the American Medical Association, weighed in this week in support of a bill introduced Monday by Rep. Michael C. Burgess, R-Texas, that would boost physician payment while expanding the role of QIOs.

Hanging over the QIOs is an investigation by the Senate Finance Committee, whose leaders have urged the Medicare program not to broaden the role of QIOs until questions about possible financial improprieties on their part have been resolved.

Also needed is a "more thorough evaluation" of QIOs' effectiveness in improving quality, said Senate Finance Committee Chairman Charles E. Grassley, R-Iowa, and ranking member Max Baucus, D-Mont., in a recent letter to the Center for Medicare and Medicaid Services.

"Medicare shouldn't promise to pay more for a pig in a poke," Grassley said in a press release May 12.

Grassley has raised questions about the salaries and travel expenses of QIO executives and board members. AHQA has said that QIOs agree reforms are needed and that virtually all of the organizations have adopted standards governing QIO board structure, executive and board compensation, and appropriate travel.

The Burgess bill (HR 5866) reflects the recommendations of a recent Institute of Medicine study calling for the expansion of the role of QIOs so any provider can obtain their help improving quality. Nursing homes, for example, have sought the assistance of QIOs in redesigning their procedures for caring for elderly patients to lower the incidence of bed sores, which can be fatal. But because of funding limitations QIOs have limited the assistance they provide.

Grassley has yet to weigh in on the Burgess QIO provisions but QIOs themselves sought to convince aides of the efficacy of their organizations at Tuesday's briefing.

One QIOs' main activities of is working with hospitals to measure and improve the quality of their care. Dale Bratzler, medical director of a QIO called the Oklahoma Foundation for Medical Quality, told the briefing that hospitals working with QIOs showed improvements in treating heart and pneumonia patients four times greater than that of other hospitals, according to the 2005 National Healthcare Quality Report, an annual report on the nation's health care quality issued by the Agency for Healthcare Research and Quality.

Bratzler also noted another project in which QIOs are involved, the Surgical Care Improvement Project, aims to reduce preventable illness, injury, and death related to surgery by 25 percent by 2010 . The program aims to better prevent post-surgical infection, heart attacks, blood clots, and pneumonia. About 2,000 hospitals are taking part in the effort, he said.

QIO-initiated efforts have helped increase from 48 percent in 2002 to 73 percent in 2005 the percentage of hospital patients getting antibiotics at the right time and have helped reduce surgical infection rates by 27 percent, he said.

Bratzler also noted a recent statement by quality guru Donald Berwick, president of the Institute for Healthcare Improvement in Cambridge, Mass., crediting QIOs for the success of his "100,000 Lives Campaign," which recently estimated that 122,300 lives had been saved in participating hospitals that retooled systems of care.

It's unclear how successful those statistics will be in building support for the Burgess bill in light of the Grassley probe. The Burgess bill is also an iffy vehicle for the QIO provisions because of its inclusion of physician payment revisions that would cost scores of billions of dollars to fund.

But for now the link to the Burgess bill and the involvement of the AMA has elevated the profile of the QIO provisions on Capitol Hill. Also giving them a boost was the appearance at the briefing of John C. Nelson, whose tenure as president of the American Medical Association recently ended and who now serves as the medical director of a QIO operating in Utah and Nevada.

Nelson suggested that even if the Burgess bill in its current form isn't enacted, the QIO provisions might yet go forward. If there is going to be a physician payment bill of any kind, he said—referring to a more limited bill—it would be linked to quality improvement, he said.

That cost—plus the complexity of overhauling the sustainable growth rate (SGR) formula for Medicare physician payment—has slowed action on the issue.

By John Reichard, CQ HealthBeat Editor

July 25, 2006 -- To get out of a swamp you've got to start walking, and if nothing else, House lawmakers mired in the issue of overhauling Medicare physician payment spent a few hours pickin' 'em up and puttin' 'em down Tuesday.

Getting out of the muck may seem impossible—the Medicare payment formula has cuts of about five percent per year lined up for nine years. But replacing them with a modest yearly payment increase that reflects the rising expense of delivering physician care would cost the federal government $218 billion over 10 years, according to the Congressional Budget Office (CBO).

Nevertheless, Texas Republican Joe Barton, the chairman of the committee, which shares jurisdiction over the issue with the Ways and Means Committee, emphasized at a hearing Tuesday that he does not want to delay dealing with the matter.

"I want to reiterate: I think it is possible to fix the system, and I think it's possible to fix it in this Congress, which means, in the next two months," Barton said at a hearing by the House Energy and Commerce Health Subcommittee.

But Barton and other lawmakers remain perplexed about which direction to go. There's bipartisan agreement that the Sustainable Growth Rate (SGR) formula must be scrapped, but no agreement on how to pay for doing so.

Yet Tuesday's hearing may have marked progress of sorts, not only because lawmakers were at least talking about the seemingly intractable issue, but that they actually offered some ideas for a down payment on a long-term fix.

Offering a road map on the issue—and looking to start making his mark on health policy—was Rep. Michael C. Burgess, R-Texas, an obstetrician-gynecologist elected to Congress from the Forth Worth area in 2002. Burgess introduced legislation (HR 5866) on Monday that would erase the scheduled payment cuts while arming Medicare beneficiaries with more information on the quality of physician care.

The conservative Republican is no booster of government health care, but his proposal is solidly in line with the recommendations of Washington's health policy establishment. The bill would replace the SGR with an increased payment each year based on the change in the Medicare Economic Index (MEI) calculated by the Centers for Medicare and Medicaid Services to track changes in the cost of delivering physician care.

The Burgess bill would lower the MEI by one percentage point, which in 2007 would mean a payment increase of 2.7 percent. The Medicare Payment Advisory Commission (MedPAC) has called for an update based on the MEI, forecast to be 3.7 percent in 2007, minus an adjustment of 0.9 percent to reflect improved productivity in delivering care, for a total increase of 2.8 percent.

The Burgess bill also would enact recommendations by the Institute of Medicine to improve Quality Improvement Organizations (QIOs), which contract with Medicare to improve quality of care under the program. The bill would make the quality improvement activities of QIOs available to all providers, guarantee a minimum of funding for QIOs; and require a review of their resources when the organizations' duties are expanded, among other measures. The bill also would establish a system of quality measures in which doctors would voluntarily report data on the quality of their care.

"Patients could assess the level of quality their prospective doctors are achieving and decide which doctor they would prefer," Burgess said. Burgess said in an interview Tuesday that he is awaiting scoring from the CBO on the cost of his bill and declined to offer his own estimate. The savings on the cost of the bill that could be obtained by subtracting one percentage point from the MEI each year would be "speculation," Burgess said.

Burgess would pay for the measure in part by ending the stabilization fund established by the Medicare overhaul law (PL 108-173) to ensure the availability of regional managed care plans in Medicare. He also would end a system of "double payment" for certain medical education expenses by taking them out of payments to managed care plans.

But those two steps would fall well short of paying for the bill. Rep. Tom Allen, D-Maine, also said he supports trimming payments to managed care plans as a way of paying for revising physician payment. He said that according to a CBO estimate, reducing "overpayments" to managed care plans would save $63 billion over 10 years.

Energy and Commerce Health Subcommittee Chairman Nathan Deal, R-Ga., said in an interview after the hearing that discussion of "pay fors" is a positive step. "These are all things we need to look at," he said. Deal stopped short of endorsing the Burgess bill, however. "I certainly support moving forward" on the physician payment issue, and the proposal "starts the discussion," he said.

The American Medical Association (AMA) called the bill "a major step toward ensuring health care access for seniors." The American Health Quality Association, which represents QIOs, likewise urged enactment of the bill.

"At the heart of the problem is the government's severely flawed Medicare physician payment formula that defies logic and ignores economic reality," said AMA Board Chairman Cecil B. Wilson. Goading Congress to act sooner rather than later is that its recent pattern of enacting one-year "fixes" to prevent cuts that otherwise could occur under the SGR becomes more costly each year.

To control the volume of physician care, the SGR sets a target each year for Medicare spending on doctors' services. If actual spending exceeds the target, "excess spending continues to accumulate until it is recouped by reduced updates," MedPAC noted in its testimony. "To work off this excess, according to Medicare trustees, the SGR will call for cuts of five percent every year for nine years," MedPAC said. But even as the cost of payment fixes rise, it's highly unlikely Congress will muster the will to act sooner than later on a complete overhaul. Most, if not all, analysts are predicting another short-term fix this year. Asked about the possibility of a markup this year of a payment overhaul, Deal smiled and while not ruling out the possibility this year, also suggested that it might have to wait until early next year.