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June 18, 2007

Washington Health Policy Week in Review Archive 032b50cc-3268-419f-890d-ec05a2e23cb0

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Children's Advocates Voice Anxiety About SCHIP Renewal

By Alex Wayne, CQ Staff

June 13, 2007 -- Congress is not proceeding on a renewal of children's health insurance as quickly as some advocates would like, causing worries that the program might expire.

Democrats and child advocates have made renewing the State Children's Health Insurance Program (SCHIP) a top priority this year. Created in 1997, it covers about 6 million children and more than 600,000 adults, at a cost of about $4 billion per year. Without congressional action, it will expire Sept. 30, though Congress would likely pass a temporary extension if it cannot agree on a permanent renewal.

Democratic congressional leaders have been discussing a $50 billion expansion of SCHIP, and several leading Democrats have introduced bills that would make the program a permanent and growing fixture of the government (S 1224, S 895, S 1364 HR 1535, HR 2147). But none of the bills has yet been considered by any committee, and Congress has a crowded calendar ahead, including annual spending bills and continued debate over the Iraq War.

Senate Finance Chairman Max Baucus, D-Mont., who will control an SCHIP renewal in his chamber, said Tuesday that he planned for his committee to vote on a bill before Congress breaks for its July Fourth recess. But he was not more specific.

"There had been a hope that there would be a markup a little bit earlier in June," said Jocelyn Guyer, deputy director of the Center for Children and Families at Georgetown University, during a conference call with reporters. The nonpartisan center advocates for SCHIP's expansion.

Support for an SCHIP expansion is widespread; Congress included $50 billion extra for the program, over five years, in its budget resolution (S Con Res 21). The bigger problem is how to pay for it. Under Democratic pay-as-you-go rules, new spending has to be offset with spending reductions or tax increases. Baucus said he has not decided how to offset an SCHIP expansion.

"We'll find a good way," he said.

The most commonly discussed proposals are either an increase in the federal cigarette tax or a reduction of payments to insurers who offer private health plans to Medicare-eligible seniors, known as Medicare Advantage plans. Republican Finance Committee members Gordon H. Smith of Oregon and Orrin G. Hatch of Utah have both endorsed a cigarette tax to pay for SCHIP, while the independent Congressional Budget Office and Medicare Payment Advisory Commission have both said that Medicare Advantage plans are paid about 12 percent more per beneficiary, on average, than traditional Medicare costs.

Georgetown's Center for Children and Families, meanwhile, released two reports Wednesday intended to influence the SCHIP debate.

The first warned that President Bush's proposal to limit enrollment in SCHIP to children from families earning no more than twice the federal poverty level could lead to as many as two-thirds of states scaling back coverage and "hundreds of thousands" of children losing their insurance.

Under current law, states have considerable flexibility to set eligibility for SCHIP, and can gain even more by seeking a waiver from the federal government. Some states allow families earning greater than triple the poverty level to enroll their children in the program. Bush's proposal, which he has not detailed, would appear to restrict that flexibility.

However, Bush's proposal is almost certain never to become law, as Democratic proposals to renew SCHIP all preserve or increase states' power to set eligibility.

The second report concludes that Congress should focus in an SCHIP renewal on expanding efforts to enroll children already eligible for the program, or for Medicaid.

About 9 million children in the country are estimated to be without health insurance, and two-thirds of them are thought to be eligible for SCHIP or Medicaid but unenrolled.

"If Congress wants to use an SCHIP reauthorization to cover more of America's children, the most important thing it can do is strengthen efforts to cover children already eligible for Medicaid or SCHIP," Guyer said.

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CMS: Seven Private Fee-for-Service Plans to Suspend Marketing

By John Reichard, CQ HealthBeat Editor

June 15, 2007 -- The Centers for Medicare and Medicaid Services (CMS) announced late Friday that seven insurers with the lion's share of the Medicare private fee-for-service plan market have agreed to suspend marketing of the plans. The announcement follows hundreds of complaints by Medicare beneficiaries that they were duped or strong-armed by sales agents into joining the plans without understanding how they worked or the restrictions involved. CMS said the plans will be able to resume marketing when the agency certifies they have controls in place to prevent deceptive marketing.

State insurance regulators joined Senate Aging Committee Chairman Herb Kohl, D-Wis., at a May 16 hearing in saying Medicare officials have failed to properly oversee the marketing of private plans in Medicare, with Kohl revealing the results of a congressional investigation he said turned up "countless" cases of seniors being preyed upon by unscrupulous insurance agents. Cases cited at the hearing primarily involved private fee-for-service plans, which were added to Medicare as an alternative to HMOs and other managed care plans that critics feared would increasingly ration care to the elderly.

CMS described the agreement as "voluntary" on the part of the seven insurers, and said they will be permitted to continue enrolling members during the marketing suspension. House Ways and Means Health Subcommittee Chairman Pete Stark, D-Calif., termed the agency's response to marketing abuses by private fee-for-service plans as "pathetic."

The seven insurers are Humana, United Healthcare, Wellcare, Universal American Financial Corporation, Coventry, Sterling, and Blue Cross/Blue Shield of Tennessee. A total of 1.5 million Medicare beneficiaries are enrolled in private fee-for-service plans, 200,000 of which signed up as a part of company or union retirement health benefit plans. The other 1.3 million are in the individual, "non-group" market—in other words, they signed up on their own. The marketing suspension applies only to the non-group market. The seven insurers have 90 percent of the non-group market, CMS said.

Abby Block, director of the CMS Center for Beneficiary Choices, told reporters in an afternoon telephone briefing that CMS received 2,700 complaints between December 2006 and April 2007 about plans in the private health plan side of Medicare, known as Medicare Advantage. The majority of the complaints were about private fee-for-service plans, she said. Other types of Medicare Advantage plans include HMOs and PPOs.

Block didn't blame the companies themselves for the marketing practices, but rather a relative handful of "rogue sales agents" selling their products. Wisconsin Insurance Commissioner Sean Dilweg told the Senate Aging Committee hearing in May that "seniors are being told that they can go to any provider without being told that they may only go to a provider that accepts Medicare, and also a provider that has agreed to accept the plan's payments."

To have the suspension lifted, a plan must provide a complete list of sales representatives if requested to do so by CMS and must authorize the agency—if it seeks to do so—to make the list available to state insurance departments. Plans must make calls to new enrollees to make sure they understand the plan rules and want to enroll. Sales reps will have to pass a written test showing their familiarity with Medicare and the product they are selling. Lists of planned sales events provided to CMS must include "delegated" brokers and agents as well as those sponsored by the plan.

Stark was unimpressed. "The administration's response is to allow private companies to determine which crimes they'll plead to and which sentences they'll serve," the California Democrat said in a statement. "This will do virtually nothing to protect Medicare beneficiaries and is a pathetic attempt to pre-empt congressional action." Stark added that the plans are receiving excessively high payments that, as long as they continue, will lead to huge sales commissions that continue to fuel marketing abuses. Stark is widely expected to propose legislation cutting Medicare payments to private fee-for-service plans.

Senate Finance Chairman Max Baucus, D-Mont., offered milder criticism. "I applaud plans for volunteering a suspension," he said. "I'd like to see CMS spend less time promoting private coverage and more time figuring out how to regulate the actions of insurers who sell directly to seniors."

Karen Ignagni, president of America's Health Insurance Plans, said the insurance industry is "moving immediately" to put additional protections in place. She said AHIP has asked CMS and the National Association of Insurance Commissioners to develop a uniform reporting mechanism allowing plans to clearly identify brokers and agents selling on behalf of Medicare Advantage plans. "Secondly, we have urged the development of clear guidelines for health plans to report serious broker-agent misconduct to CMS and the states," she said.

Others pointed a finger at the growing private health plan presence in Medicare. "This is a clear acknowledgment that there are health plan abuses throughout the country that are causing many seniors to be enrolled in plans that are unresponsive to their needs," said Ron Pollack, Executive Director of Families USA.

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Consensus Emerging on Need for New Board to Determine 'What Works' in Medicine

By John Reichard, CQ HealthBeat Editor

June 12, 2007 -- Lawmakers and witnesses at a House subcommittee hearing Tuesday agreed on the need for a public–private entity that would oversee research to determine which treatment approach works best for a particular medical condition.

"Getting reliable, unbiased comparative information is our best shot at controlling health spending while improving care and access," said House Ways and Means Health Subcommittee Chairman Pete Stark, the California Democrat who chaired the hearing. Stark said the effort should be led by the federal government, but should be "free from both industry and political influence. Let me repeat that, free from both industry and political influence."

The panel's top Republican, Dave Camp of Michigan, likewise expressed the need for a much broader effort on "comparative effectiveness" research. "While we have agencies like the FDA to determine if drugs and devices are safe, we have very little information that compares the actual effectiveness of drug, devices, and medical procedures."

Hard-nosed budget types likewise saw merit in a broad effort to promote comparative effectiveness research, saying it has considerable promise to bring down the nation's health spending growth while cautioning that it may take many years to deliver savings.

Expanded research tied to changes in payment incentives for providers and patients "offers a promising mechanism for reducing health care costs to a significant degree over the long term while maintaining or improving the health of Americans," said Congressional Budget Office Director Peter Orszag in written testimony.

"For any large-scale changes to occur, the new or expanded entity would have to generate new findings for a substantial number of medical conditions—which would take many years," Orszag said. The impact on spending is difficult to predict "because it is hard to know what the research will show," he noted.

Health economist Gail Wilensky testified that it is essential, however, to conduct such research to bring down spending growth to more sustainable levels.

Witnesses devoted much of their testimony to offering advice on how to structure and fund a new research entity to shield it from appropriations cuts and otherwise ensure stable funding while assuring the credibility of its findings.

Mark Miller, executive director of the Medicare Payment Advisory Commission, said his organization favors the creation of an independent entity to set the research agenda and disseminate findings. While various federal agencies conduct the research, "their efforts are not substantial enough or coordinated enough to affect needed change," he said.

Miller said in an interview after the hearing that MedPAC's view is that the new entity need not be a large new "bricks and mortar" federal agency but could consist of a independent board insulated from political pressures and a staff that sets the research agenda using existing public and private research programs and adds to their funding.

To avoid annual potential budget cuts in the appropriations process, the entity could have mandatory funding sources such as a tax on money collected by insurers or funding based on a small percentage of the holdings in the Medicare Trust Fund, MedPAC says.

Republicans expressed concern that the entity not be overly bureaucratic. Wilensky, a top health advisor in the administration of former President Bush, said that findings generated by the new entity should affect reimbursement levels, but not whether or not a particular service or product is covered by Medicare, for example.

"Government agencies should not be required to use or to rely solely on comparative effectiveness data to set reimbursements or make coverage decisions," said Camp.

Maine House Democrat Tom Allen testified on behalf of a measure (HR 2184) he is cosponsoring with Republican Jo Ann Emerson of Missouri that would create a "public–private funding mechanism which will pool federal resources with funds from health insurance plans and large employers with self-insured plans."

Stark didn't say what his specific legislative plans are on the issue, but praised the approach taken by the Allen-Emerson bill.

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'Make More Money Act' Might Need Renaming

By John Reichard, CQ HealthBeat Editor

June 14, 2007 -- Congressional Democrats and Republicans alike could find that the views of Wall Street analysts have much to offer as they consider Medicare payment revisions in coming weeks. Democrats with an eye on cutting payments to private health plans in Medicare will be interested to learn that from "the Street's" point of view, the plans are making lots of money. Republicans, on the other hand, could be chagrined to learn that the sales growth of Health Savings Accounts, a type of plan they view as key to braking the nation's rising health costs, appears to be tapering off.

Both types of plans owe their recent prosperity to the 2003 Medicare overhaul law (PL 108-173), popularly known as the Medicare Modernization Act. Stock and bond analysts said at a forum Thursday that they see changes coming in the legislation, dubbed by one Wall Street seer as the "Make More Money Act." Medicare payment cuts in Congress this year could make that name less appropriate, some attendees suggested.

The D.C. event, which was held to bring Wall Street's perspective to health policy makers, was sponsored by the Center for Studying Health System Change, a Washington-based health policy research organization.

Christine Arnold, managing director at the investment firm Morgan Stanley, noted that private fee-for-service plans in particular are flourishing under payment changes in the 2003 law. Almost three-quarters of the rapid enrollment growth in 2007 in the private health plan side of Medicare, known as the Medicare Advantage program, is in private fee-for-service plans, she said. But the unusually high payment rates they receive—they deliver care at an estimated 119 percent of the cost in traditional Medicare—make them a target for Democrats seeking savings to fund wider coverage of uninsured children through pending measures to reauthorize the State Children's Health Insurance Program.

Those high payments may be a luxury lawmakers decide they can no longer afford. The glory days of the private fee-for-service plans might be ending, suggested Joshua Raskin, senior vice president at the investment firm Lehman Brothers. "I'm not sure how many years we're going to be talking about it."

Boosters of private fee-for-service plans originally conceived them as a bulwark against the advance of HMOs, which have had a reputation of forcing doctors and hospitals to accept low payment rates and restricting where enrollees can go for care. In contrast, "fee-for-service" in the "private fee-for-service plan" moniker connotes the practice of traditional medicine with its unfettered access to doctors and hospitals. The plans also have been portrayed as entities that would pay doctors and hospitals more than penny-pinching HMOs would, easing the desire to ration care.

Robert Laszewski, president of the consulting firm Health Policy and Strategy Associates, urged that the plans in their current form be phased out over several years. They are a boon to the insurance industry because they are very profitable and to Medicare beneficiaries because they offer extra benefits, he noted. But the whole premise of the 2003 law is that market-based competition will lower, not increase, the costs of the Medicare program, he said.

Laszewski said it would be wrong to end the plans outright but added they should be viewed as a "prime the pump" strategy to get insurers back into rural areas. They should be turned into plans that can really manage costs—and if they can't they shouldn't exist, he suggested.

Raskin questioned how well a transition strategy would work for private-fee-for-service plans, however. As their payments are trimmed, their premiums will rise and the benefits will be cut, he said. "I think the biggest hurdle is going to be if you're going to be able to convince the seniors to stay in the plans."

Speakers at the forum suggested that HMOs in Medicare are much more efficient, but that there is also room to trim their payments.

Raskin said they can deliver the benefits offered by traditional Medicare at 95 percent of the cost of that program. Yet they are paid rates 110 percent of those in traditional Medicare, he said. "Medicare Advantage is extremely profitable to the HMOs," Laszewski concurred. "What [Medicare HMOs] should be doing is proving that the private market works. Instead, they're marching the NAACP out to say 'get us more money . . . so we can get poor people better benefits.' "

The analysts also suggested that Health Savings Account growth is tapering off because their tactic of lowering premium costs by raising deductibles only goes so far in controlling the underlying growth of health costs. "Everything I look at says it's stalling out," Arnold said of HSA sales growth. According to the America's Health Insurance Plans, sales of health plans associated with HSAs now stand at about 5 million.

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MedPAC Report Proposes Efficiency Measures

By Mary Agnes Carey, CQ HealthBeat Associate Editor

June 15, 2007 -- Establishing an independent entity that would sponsor research on comparative effectiveness of health care services, equalizing payment rates between Medicare Advantage and Medicare's traditional fee-for-service plan, and making changes to other Medicare payment systems are among the recommendations the Medicare Payment Advisory Commission (MedPAC) included in its June report sent to Congress on Friday.

Taking those and other steps, such as implementing a home health pay-for-performance system, encouraging hospitals to adopt strategies to reduce readmissions, and repealing the existing hospital wage index and replacing it with a new approach, would all help make Medicare more efficient, MedPAC concluded. Approximately 78 million Baby Boomers will begin to flood the program in 2010, putting pressure on the federal health care program that provides health care insurance to approximately 43 million elderly and disabled beneficiaries.

Many Democrats have been proposing payment cuts to Medicare Advantage plans as a way to finance other health care priorities, such as reauthorization of the State Children's Health Insurance Program. In its report, MedPAC said that while private plans have the potential to promote greater efficiency in health care delivery and outcomes, the current Advantage payment system does not promote efficiency primarily because county benchmarks—which are the basis of payment for Advantage plans—exceed Medicare's fee-for-service expenditure levels.

Benchmarks averaged 116 percent of expected fee-for-service spending in 2006, and those high benchmarks allowed plans to offer extra benefits to attract enrollees, which helped fuel Advantage enrollment growth. That growth has been greatest in private fee-for-service plans (PFFS), a type of Advantage plan, rather than in coordinated care plans, MedPAC found. Yet, on average, private fee-for-service plans provide the basic Medicare benefit package at a cost higher than the traditional fee-for-service program, while health maintenance organizations do so for less.

"In other words, PFFS plans are providing extra benefits because of the higher payment rates, not because of greater efficiency," the report states, adding that Congress should establish payment equity among Medicare Advantage and Medicare's traditional fee-for-service plans, setting benchmarks at 100 percent of fee-for-service. "The payment system should be neutral," and not vary on what plan the beneficiary selects, MedPAC executive director Mark E. Miller told reporters at a breakfast briefing. If the benchmarks are adjusted, Congress may want to establish a transition period to help ease the impact on plans and beneficiaries, he said.

Separately Friday, the Centers for Medicare and Medicaid Services (CMS) announced that seven health care insurers had signed an agreement to voluntary suspend marketing of PFFS plans in response to concerns about improper marketing practices.

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Study Shows Wide State Variance in Health Care

By Mary Agnes Carey, CQ HealthBeat Associate Editor

June 14, 2007 -- A new report from the Commonwealth Fund Commission on a High Performance Health System indicates states vary widely in health care quality, cost, and access.

Analyzing government health care data, the study ranks 32 indicators that include access, quality, avoidable hospital use, and costs. The five top-ranked states, Hawaii, Iowa, New Hampshire, Vermont, and Maine, all have high rates of insurance coverage, with nearly 90 percent of working-age adults insured, according to the scorecard of states' performance. Among the five lowest-ranking states, Nevada, Arkansas, Texas, Mississippi, and Oklahoma, insured adult populations range from 70 percent to 78 percent. In states with smaller uninsured populations, adults and children are more likely to receive essential preventative and chronic care and have ongoing connections to care, researchers found.

States in the Northeast and Upper Midwest often rank high in multiple areas listed on the scorecard, while states with the lowest rankings tend to be concentrated in the South. If all states could perform as well as the top-rated ones, 90,000 lives could be saved annually, 22 million additional adults and children would have health insurance, and millions of older adults, diabetics, and young children would receive essential preventative care, the study found. Public health programs also would fare better, with Medicare saving a potential $22 billion a year if high-cost states reduced their spending to levels of the average states.

"The differences we found between the top and bottom states were shocking, often a two- to threefold variation or greater," said report co-author and Commonwealth Fund Senior Vice President Cathy Schoen. "Where you live clearly matters: for access to care when you need it, the quality of care you receive, and opportunities to live healthier lives."

Researchers found no systematic connection between high spending and high-quality health care, with some states achieving high quality at relatively low costs. States with the highest levels of spending tended to have higher rates of preventable hospital use, including readmissions and admissions for diabetes, asthma, and other chronic illnesses that should be effectively treated outside the hospital. The scorecard also documents great variability across states in potentially preventable use of hospitals. For example, the rate of children admitted to hospitals for asthmas ranges from 55 per 100,000 in Vermont to 300 per 100,000 in South Carolina.

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