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June 27, 2011

Washington Health Policy Week in Review Archive 5f201e2d-397d-4333-becc-c91ed0eb1cde

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Big Exchange Regulation a Good Bet to Bring Big Disappointment

By John Reichard, CQ HealthBeat Editor

June 21, 2011 -- One thing seems quite certain: Health and Human Services officials aren't going to make anybody happy when sometime around the July Fourth weekend they release a proposed regulation that will spell out what states must do to create health insurances exchanges.

That's because the data-crunching tasks involved are so complex, the design issues so controversial, and the timelines so tight that at some point advocates for states, consumers, and insurers seem certain to toss their Federal Registers in disgust.

But if HHS officials can spread out the pain evenly among the stakeholders and keep plodding ahead despite the complexity involved, they may ultimately prevail.

The big job right now is how to get exchanges off the drawing board in the face of the fine details about which plans can participate and the decisions state regulators will have to make about changing rules for insurance plans outside the exchanges. Many states are at a loss to figure out how to handle the complex data functions involved and are hoping that the proposed regulation will help them plot the path forward.

Consider the tasks exchange operators will have to perform. They will have to determine if a customer is an American citizen. They will have to decide how much money customers make and if it's appropriate to enroll them in Medicaid or a private plan. They'll have to determine if an individual is eligible for a subsidy and, if so, how much. They'll have to pay plans. And they have to do it fast, because if the enrollment process is slow and cumbersome, if subsidy amounts are wrong, and if they're slow to pay plans, there will many complaints.

The job will require the swift exchange of data between states, the Treasury Department, the Department of Homeland Security, health plans, and to the extent they participate, small employers. With states already under budget pressures, such challenges will strain their resources.

States must act quickly given that most must pass legislation next year to create exchanges—relatively few did so this year—in time to meet the Jan. 1, 2013, deadline states have to convince HHS officials that they have a viable exchange in the works that can be open for business by Jan. 1, 2014, as they are required to do under the health law (PL 111-148, PL 111-152).

States Want Timelines, Details on Options

David Quam, federal relations director for the National Governors Association (NGA), emphasized in a recent interview that states are anxious to see the proposal. "First and foremost, the states are looking for clarity" about the task ahead, he said. "We're looking for the reg to come out so that states can evaluate exactly where they are heading. Because without full information, it's hard to make good decisions.

"The states are very cognizant of the timeline and the time pressure they are under to get the exchanges set up," he said. "Decisions have to be made. One of the things we're going to be looking for in this reg is clarity with regard to timelines—what's expected when. And if all decisions aren't made with this reg, when are decisions going to be made, so the states know how to plan and when they have to make decisions,. because the clock is ticking."

States are "going to be looking frankly as this comes out to continue a conversation about the exchanges with HHS," Quam added. "As a matter of fact, at the upcoming NGA meeting in mid-July, our HHS committee session is going to be on exchanges. I'm hopeful that the reg is out before then because that's going to be a really robust conversation. In Utah where some of the details are out, governors are taking a very hard look at what the reg means. They can look at some of the details, identify any issues there, and then have a much clearer picture of the decisions they have to make."

Quam stopped short of saying states wouldn't make the Jan. 1, 2014, deadline. "But it's all the steps between now and then that can make or break this for a state moving ahead," he said. "Having this reg come out starts the dominos falling as to where a state is going to land at the end of the day."

But beyond the issue of the mechanics of assembling exchanges, health system stakeholders are looking for a wide variety of policy issues to be addressed in the proposed regulation. Perhaps the most important is, what happens if a state decides not to create an exchange, opting instead to let the federal government create and manage the new insurance marketplace.

"It's critical to know what the options are," Quam said. "This [proposed] reg is really going to help shed some light on what the issues are" in having a federal or state-run exchange. Governors "need to know what the federal option looks like to know what has to be done at the state level."

Design Issues Critical for Consumers

Washington and Lee University law professor Timothy Jost says flexibility is the watchword. "I think probably what most states want to see is maximum flexibility—it seems to be the key word—and as much funding as possible," he said. Jost added, half-jokingly, that states would like to see "as little accountability" as possible. "That might be overstating it. But I think that the states would like to be able to fit the exchange to their particular market and their particular politics."

But that may work at cross-purposes with the needs of consumers.

"From a consumer point of view, I think there are a number of issues that we're concerned about," Jost said. "One issue right up front is governance, and I think there the key concern is that the exchange be independent and basically not be run by the insurers and the people who market health insurance, that it be run in the interest of consumers. So I would be hoping that there would be strong conflict of provisions in the regulations to discourage exchanges where you have the insurers running their own market."

Jost adds that it's essential to keep exchanges from being a magnet for bad insurance risks without offsetting good risks.

"We've had a lot of exchanges before that have gone bad," he says. "The exchange ended up with the bad risks, and it eventually ended up being a high-risk pool, and it's not going to be viable if that's the way it works. There are quite a few protections built into the Affordable Care Act, but anything that can be done beyond that to discourage risk selection outside the exchange will be beneficial." He said it would be helpful if the proposed regulation encourages states to regulate the non-exchange market in a way that supports the exchange by not pulling good risks out.

A major concern for consumers is what the minimum benefit requirements will be in the exchanges.

Matt Salo, executive director of the National Association of Medicaid Directors, said that's not expected to be a part of the proposed regulation. HHS is expected to release a benefits package proposed rule this fall.

"But it's clearly important" to states in figuring out what they want to set out in exchange legislation, he said. For example, if the federal government requires a relatively lean set of benefits to be offered in the exchanges and a state wants a richer set of benefits, the state will be on the hook for the cost of the added coverage, Salo said.

Insurers Keeping an Eye on Minimum Standards

HHS officials have already let it be known that it will be up to states to decide whether they want exchanges to be "active purchasers" with the power to exclude health plans that offer consumers lousy deals or to function more like a bulletin board that posts a wide variety of plan offerings, provided that they meet certain basis minimum standards.

Robert Zirkelbach, spokesman for America's Health Insurance Plans, said it's those minimums that insurers are going to be watching for: How demanding will HHS be in deciding what is a qualifying health plan? Other important insurer issues are how HHS proposes to handle "risk adjustment," or the shifting of premium revenues from plans that get a large proportion of good risks to plans that get large numbers of bad risks.

Risk adjustment is supposed to remove the incentive that plans now have to enroll only good risks, but it's never been attempted on the level that would occur as the exchanges enroll millions of Americans. And like states, insurers are eager to know how federal officials will run exchanges and what demands they will make on participating plans.


Asked whether he thinks HHS will get the exchange regs right from the consumer point of view, Jost expressed some pessimism. His comments echo that of other consumer representatives who praised the initial consumer protections issued six months after the overhaul became law but were more critical of later regulations, such as those governing the review of insurance rates.

"I'm increasingly discouraged about the federal government," he said. "I feel like they started out very, very strong with the initial set of regulations that were put out, and I feel like in the last six months there's been a lot of backpedaling."

"Joel Ario, who's in charge of the exchange part of CCIIO [the Center for Medicare and Medicaid Services Center for Consumer Information and Insurance Oversight), is a great guy who's a strong consumer advocate and I am confident he will do everything he can to get strong regulations out. But I also feel like we're heading into an election and at this point the administration is trying not to cause trouble and I'm getting discouraged about the extent to which they're willing to take on controversial issues and do the right thing."

With many governors and state legislators hostile to the health law, the administration risks a new round of heavy criticism if it doesn't give state officials the flexibility they want to run the exchanges. But in many states with governors and legislatures friendly to insurers and insurance brokers, to them flexibility may mean more industry influence over exchanges than consumer advocates want.

But a managed care consultant who requested anonymity says it's news to him that the Obama administration is moving in his industry's direction. "Never once in all the industry discussions I've been in have heard 'Isn't it great HHS is listening to us?'" the consultant quipped.

He predicted that HHS will find ways to be tough on the industry without making itself a big political target.

For example, he predicted that the proposed regulation won't get into detail about how the federal officials will run exchanges if the states choose not to do so.

Details would make the administration "too much of a target," he said, adding that it will find a lower profile way to get into details. "They could do all that in the context of subregulatory guidance, because that's the way CMS operates," he said. They do it all the time."

The consultant said that given all the data burdens involved in operating exchanges he doubted they will open as scheduled on Jan. 1, 2014. In addition to all the other data chores exchange operators will have, they will have to risk adjust premium payment to plans, he said, adding that if premiums for the exchanges are not risk adjusted up front, "then there would have to be all kinds of reconciliation down the road. That would be chaos."

The consultant noted that at a recent AHIP meeting in San Francisco, one of the speakers asked a roomful of some 700 hundred audience members how many thought that all 50 states would have their exchanges ready to go by January 1, 2014. No one raised their hand, he said.

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Employer Health Coverage Draws Yet More Scrutiny from Researchers

By Jane Norman, CQ HealthBeat Associate Editor

June 21, 2011 --The share of Americans with employer-sponsored insurance dropped from 69 percent in 1999-2000 to 61 percent in 2008-2009. But the health care law might counter that trend among the nation's smallest businesses, a pair of recently issued reports said.

The new analyses were released by the Robert Wood Johnson Foundation. They came as a series of other studies by various groups have offered conflicting pictures of the future of employer-sponsored policies, which have been regarded as a staple at most large companies. Democratic backers of the health care overhaul law have been fighting a survey by McKinsey & Co. consultants that predicted major drops in employer coverage when the law (PL 111-148, PL 111-152) took effect.

Under pressure from the White House, Democratic lawmakers and others, McKinsey released details of its questionnaire and survey results. But that brought about more criticism from Democrats who said the questions were slanted and that the original report made the survey sound more scientific than it was.

Nonetheless, most of the reports have something in common: They caution that a great deal of uncertainty surrounds employer behavior when the health care system changes significantly in 2014, the year all provisions of the law take effect. And it may take a few years for it all to shake out, the reports say. A report issued by Avalere Health even cautioned that there may be a "me too" effect among employers who watch to see what others are doing.

The furor illustrates the tension around the long-running question of whether U.S. health care will remain centered around employers or shift to the state-based exchanges. If there are big changes, it might be a political problem for Democrats who said people could keep the health care coverage they have.

The study by the State Health Access Data Assistance Center at the University of Minnesota looked at the decade-long decline in employer-sponsored coverage for non-elderly people and said it occurred across all income levels, though half came in moderate-income families of four earning from $44,000 to $88,000.

The percentage of employers that offer insurance has declined, and so has employee "take up" of coverage when it's offered—with increasing premiums the likely major factor. Premiums are much higher for families than single people, and much of the decline in employer-sponsored insurance was among those who are dependents of an employed relative.

The erosion of employer insurance was found across all states, though in 12 states it declined 10 percent or more: Arizona, Arkansas, Indiana, Michigan, Minnesota, Mississippi, Missouri, North Carolina, Ohio, Rhode Island, Tennessee and Texas. It's important to monitor trends in employer coverage at the state level because states will have a lot of flexibility in how they implement the health care law, the report authors said.

The second report, prepared by the Urban Institute, focused on small businesses. In it, economic models predicted that the percentage of companies with fewer than 100 workers that offer health insurance would increase under the health care law, from 43.4 percent to 47.6 percent.

The largest increase would be in the smallest companies—those with fewer than 10 employees—that also are not subject to the employer mandate in the law and thus don't face possible penalties for not offering insurance, the report said. That's combined with projected cost savings in the price of insurance, in some cases tax credits and the ability of an employer to shop for better coverage in the small-business exchange.

Overall, a small increase in coverage is expected in firms with fewer than 50 workers, while coverage in larger firms—those with more than 50 workers—is expected to stay about the same, the models showed. While the gains are not as strong as for small firms, "they are also not consistent with more negative predictions suggesting a virtual collapse of employer health insurance," said the study.

As for costs, the study predicts an 8.6 percent decrease in employer health costs under the new law for all firms with under 100 workers; a 12 percent decrease for those with under 50 workers; and a 1.2 percent increase for those with 50 to 99 employees.

Linda Blumberg, a senior fellow at the Urban Institute, said that researchers wanted to focus on small businesses since they traditionally have been the least likely to offer health insurance and also have many low-wage employees.

Blumberg also said that the studies assumed full implementation of the law in 2010 and did not look at trends over the long term.

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Vladeck: It's Not a Medicare Crisis, It's a Revenue Crisis

By John Reichard, CQ HealthBeat Editor

June 23, 2011 -- Bruce Vladeck, who ran the Medicare and Medicaid programs in the Clinton administration, told a Senate Finance Committee hearing that the budget crisis facing the nation stems not from those two entitlements but from inadequate revenue and a flagging economy. Pump up revenues and get the economy growing and the financing challenges involved with the two government health care programs are manageable, he said.

Republicans on the panel and other witnesses at the hearing, which addressed the role of health care spending in the debt, sharply disagreed with Vladeck, who headed the Health Care Financing Administration, the predecessor agency to the Centers for Medicare and Medicaid Services (CMS).

It wasn't clear whether Committee Chairman Max Baucus was buying the Vladeck analysis, either. But the Montana Democrat was clearly on board with the view that more revenue will be needed.

Baucus seemed worried, if not shaken, when he paused the hearing at one point to announce that House Majority Leader Eric Cantor, R-Va., had withdrawn from debt ceiling negotiations with the White House because of his opposition to revenue increases.

"I'm very disappointed over that," Baucus said, calling the deficit a matter of national security. "I think revenue is needed, for a whole host of reasons ... More important, I think leadership is needed. Leadership needed on both sides of the aisle, and at both ends of Pennsylvania Avenue.

"You can't ask folks who receive federal benefits, whether they're retirees or Medicare or Medicaid recipients or farmers, to bear the sacrifice of deficit reduction alone."

Vladeck's testimony was almost startling in how skeptical he was that Medicare is in crisis.

"While the Medicare program has long-term financial problems that must be addressed," Vladeck said, "the current so-called 'crisis' is in fact an artifact of broader problems with the federal budget and budgetary politics and should not be used as an excuse to dismantle one of the most important programs the federal government has ever operated, or to renege on the commitment this government has made to generations of working people as it has collected taxes from them."

Sen. Orrin G. Hatch of Utah, the top Republican on the committee, responded that the Congressional Budget Office (CBO) reported that the debt held by the public will exceed 100 percent of GDP by 2021. "CBO concludes that 'the explosive path of federal debt underscores the need for large and rapid policy changes that put the nation on a sustainable fiscal course,'" Hatch said, He also noted that credit-rating agencies are warning U.S. policy makers about the need for action and that President Clinton has voiced concern that Democrats would do nothing to address Medicare insolvency.

"Now with these facts for context, I'm shocked and frankly bewildered that in your mind that this is not a crisis," Hatch told Vladeck. "Can you tell us what a budget crisis looks like to you?"

"Senator, there's no question in my mind that there is a budget crisis," Vladeck replied. "I don't think it's a Medicare crisis. I think the major source of our budget crisis ... is we're having a revenue crisis. Federal revenues as a proportion of the gross domestic product are at their lowest level since prior to the beginning of the Korean War," Vladeck said. "We had a balanced national budget in 1999 and in 1920 with federal revenues at 19 or 20 percent of the GDP and a growing economy, and now we have a stagnant economy and federal revenues at less than 15 percent of the GDP. No wonder we have a budget crisis." He added that "one can achieve long-term solvency in the Medicare program with decisions must less drastic than are being proposed" in the House budget resolution.

But former Congressional Budget Office Director Douglas Holtz-Eakin said, "I fundamentally disagree."

"In all these projections, revenues go to above historic norms and we still have an exploding debt spiral. That's just not our problem. It's the spending and the growth of the spending fundamentally, and Medicare is part and parcel of that."

The hearing included the usual charges that the health care law (PL 111-148, PL 111-152) will add to the already unaffordable costs of entitlement programs and countercharges that the health law will help slash deficit spending and spawn innovations that eventually tame health care spending growth.

But amid the partisan tussling there were brief glimpses of common ground. Democratic Massachusetts Gov. Deval Patrick and former Kentucky Gov. Ernest Fletcher, a Republican, agreed on the need to carefully scrutinize the relatively small percentage of Americans who account for a disproportionately large percentage of health care spending.

Better coordinated treatment would generate big savings, they suggested. Fletcher also said that serious wellness and prevention programs could sharply reduce coronary artery disease.

Vladeck agreed with senators who suggested that more uniform deductibles and co-payments in Medicare and a switch to more home-based care for chronically ill patients in nursing homes would help control costs.

Another area of agreement was the need to end the current fee-for-service payment system in favor of a payment system that spurs carefully coordinated, team-based care. But all of these changes would take many years to generate big savings, according to hearing testimony.

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Employers Interested in Comparative Effectiveness Research, Survey Finds

By Rebecca Adams, CQ HealthBeat Associate Editor

June 22, 2011 -- A survey of 75 employers who provide health insurance to their workers found that they view the new nonprofit institute created to fund comparative effectiveness research as the most reliable source of information on the subject.

The study was sponsored by the National Pharmaceutical Council.

The nonprofit, known as the Patient Centered Outcomes Research Institute (PCORI), was created by the health care overhaul (PL 111-148, PL 111-152). Its next meeting will be July 18-19 in Washington. About 76 percent of respondents to the online survey said they would rely on PCORI for comparative effectiveness information, compared with 56 percent who would continue to rely on information from their health plan partners, 28 percent who would trust their pharmaceutical benefit managers, and 8 percent who would trust health or benefit news sources.

PCORI is still in its infancy. It has yet to announce which specific conditions it will research and when the results of those studies would be available to employers.

About 45 percent of respondents rated their familiarity with comparative effectiveness research (CER) a three on a five-point scale, signifying that they were "somewhat familiar." Another 32 percent said they were more familiar than that. About 22 percent said that they were less familiar, including 13 percent who said they were not at all familiar with the concept.

On another question, about 52 percent said that the potential for CER findings to improve health benefit decisions is either "strong" or "very strong." Another 33 percent said the potential is "moderate." About 5 percent said the potential is low, while 9 percent said they did not know.

"This survey demonstrates that employers need to be regarded as key stakeholders in the CER conversation," Dan Leonard, president of the National Pharmaceutical Council, said. "Employers have a tremendous appetite for research that can help them understand the comparative benefit of various interventions and yield more value from every health care dollar they spend."

Respondents said that they would use hypothetical CER findings on lower-back pain and diabetes to educate employees about how to make better decisions (with 73 percent of respondents saying they would do that on back pain and 80 percent saying they would do that on diabetes). About 55 percent of respondents also agreed that they would use the findings to change coverage for back pain, and 66 percent said they would use it to change health plan coverage for diabetes.

The National Pharmaceutical Council hired the Benfield Group to conduct the survey. In December 2010, the Benfield Group launched the 15-minute online survey. About 75 people participated, with 81 percent of them saying that they decide or influence decisions about health benefits. To supplement the 75 completed surveys, Benfield completed 25 in-depth interviews with representatives of employers, employer health coalition leaders and employee benefit consultants.

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Advocates for Medicare Drug Negotiations See Opportunity in Debt Talks

By Emily Ethridge, CQ Staff

June 21, 2011 -- House lawmakers reintroduced a bipartisan bill requiring the government to negotiate lower prescription drug prices in Medicare, saying they hoped to push the idea in the debt ceiling talks.

Democrat Peter Welch of Vermont and Republican Jo Ann Emerson of Missouri said the measure would save the government up to $156 billion over 10 years—without cutting seniors' benefits.

"If they could agree to make this part of the Biden talks, that would be great for all of us," Welch said, referring to the negotiations being led by Vice President Joseph R. Biden Jr. "We have some optimism that this is an idea whose time has come."

Democrats are eager to show that the growth of Medicare costs can be reduced without fundamentally changing the program. Many Republicans have sought dramatic alterations of both Medicare and Medicaid to cut federal spending.

"Everybody in town, in Washington, understands what is the driver of, really, America hurdling toward bankruptcy, and it is the entitlement programs," Sen. Ron Johnson, R-Wis., said.

But Emerson said the measure, which has stalled in past Congresses, could lead to "substantial savings at a critical moment."

"Before we ever trim benefits to senior citizens, we must consider the efficiency of the programs that serve them," she said. "We have a duty to the taxpayer to get the best bang for the buck, especially on costly pharmaceuticals for which the federal government facilitates purchases in such large quantities."

The Pharmaceutical Research and Manufacturers of America (PhRMA), a group that represents brand name drug companies, opposes the measure and said that Medicare Part D beneficiaries already benefit from discounts negotiated between private plans and drug research companies.

"Many experts, including the [Congressional Budget Office], contend that the only way the government could effectively negotiate lower costs is to limit access," said Karl Uhlendorf , PhRMA deputy vice president. "While we are committed to making the Medicare prescription drug benefit even better, we remain opposed to restrictive policies that would reduce access of medicines to seniors and undermine the program's clear success."

Ever since the prescription drug Part D program was enacted in 2003 (PL 108-173), the Department of Health and Human Services has been prohibited from negotiating drug costs with manufacturers. The Welch-Emerson bill would require such negotiation.

In April, President Obama suggested negotiating lower drug reimbursements with the pharmaceutical industry as a way to lower Medicare costs. His bipartisan fiscal commission on the deficit recommended a similar idea in 2010.

Last week, 67 House Democrats expressed their support, citing "numerous examples" of how the program charges beneficiaries to pay higher prices than they should for prescription drugs. "We strongly encourage you to include this reform in any proposal to reduce the national debt," the Democrats said in a letter to Speaker John A. Boehner, R-Ohio.

Also last week, House and Senate Democrats introduced legislation (HR 2190, S 1206) to require drug companies to provide rebates for Part D program drugs to those eligible for both Medicare and Medicaid, as well as seniors in a low-income subsidy plan.

'They Like to Save Money'

Welch offered a similar Part D negotiating amendment to the health care overhaul bill that did not make it into the final version (PL 111-148, PL 111-152), but said he is more optimistic this time around.

"The times are different now," he said. "The new majority doesn't like the health care bill, but they like to save money."

He added that the Veterans Affairs Department, which does negotiate rates for prescription drugs, pays prices 58 percent lower than Medicare for some commonly prescribed drugs.

Republicans have criticized Democrats for rejecting a proposal to overhaul Medicare included in the House-passed fiscal 2012 budget proposal (H Con Res 34) without offering changes of their own. That proposal would change Medicare from a program that guarantees a range of specified health benefits to one in which seniors receive an annual stipend to purchase private insurance beginning in 2022.

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Wilson: AMA Reaffirms Support for Individual Mandate

By John Reichard, CQ HealthBeat Editor

June 21, 2011 -- American Medical Association President Cecil B. Wilson said that the physician organization's House of Delegates voted "overwhelmingly" to reaffirm its position supporting "individual responsibility" when it comes to the purchase of health insurance as long as assistance is made available to those who cannot afford it.

Essentially, Wilson was saying that the AMA was not backtracking on its support of the health care law (PL 111-148, PL 111-152) and its requirement that Americans have health insurance or pay a penalty.

Wilson was asked in a press call after the vote about a claim by one delegate that 4,000 doctors in Missouri dropped out of the AMA because of their unhappiness with the individual mandate. "It is a contentious issue for this country," Wilson said.

"We're still dealing with the debate about health system reform some 13 or 14 months after the law passed, and we're in the process of implementation. So it would be surprising if physicians who care most deeply about their patients and who are most intimately involved in providing health care would not feel some of that challenge in terms of making decisions.

"What I would tell you is that the vote of the House today was overwhelming." The House "came to a decision to reaffirm a policy that was originally established in the middle of the last decade. We're proud of that, and the AMA believes that that's the right course," Wilson said.

Wilson said AMA membership dropped between 1 percent and 2 percent more last year than it did the previous year. Some doctors said they were dropping out because of the health care law, and others said they were joining because of it, he said. But "we do not believe that the debate over health system reform had a significant effect in regard to our membership," he said.

An AMA statement elaborated on the reasons for sticking with the individual mandate. "The AMA's policy supporting individual responsibility has bipartisan roots, helps Americans get the care they need when they need it and ends cost-shifting from those who are uninsured to those who are insured," Wilson said in the statement. "Important insurance market reforms, such as an end to coverage denials based on pre-existing conditions, are only possible by having broad participation in the health insurance market."

Delegates also "reaffirmed support for AMA policy supporting health insurance tax credits and health insurance market regulation, health savings accounts, and direct subsidies for the coverage of high risk patients," the statement said.

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