By Rebecca Adams, CQ Roll Call

March 5, 2014 -- The Obama administration recently announced that consumers may remain for another two years in insurance plans that don't meet the health care law's benefit requirements, yet another in a series of delays or adjustments of large swaths of the president's signature legislative achievement.

That move will give state regulators and insurers the option of renewing plans until policy years that start no later than Oct. 1, 2016—which would be well after this year's mid-term elections and into the heat of the next presidential campaign. The new postponement could push the continuation of that non-compliant coverage into 2017.

Administration officials also told reporters on a conference call that they do not anticipate any other big changes throughout the rest of the open enrollment period. A White House official who was asked whether the March 31 deadline would stick said that "no major changes are anticipated at this point."

The official, speaking on background, said there "could always be small issues" that need tweaking, but that the White House is hoping to provide certainty to insurers and other industry officials.

Insurers, hospital officials and others would welcome predictability in the health care law (PL 111-148, PL 111-152).

In addition to the extension of noncompliant insurance policies, the White House shifted the deadlines for consumers to sign up in order for coverage to take effect on Jan. 1, delayed requirements for employers to cover their workers, have not yet launched the website for small businesses to enroll their workers in new marketplaces, and had to delay the submittals to states of enrollments of people who appear to qualify for Medicaid, among other issues.

Republicans quickly criticized the two-year extension of policies that do not meet the health care law's standards.

"Once again, the Obama Administration has shown it will do whatever it takes to hide the true impact of ObamaCare from the American people—at least until after the next election," said Senate Finance Committee top Republican Orrin G. Hatch of Utah, in a statement. "After so many missed deadlines, delays and unilateral changes, you have to ask what is working with this law?"

The two-year delay may have more of a political impact in its assistance to endangered Democrats rather than a practical one. The Obama administration went out of its way to say that several Democrats facing tough elections contributed thoughts to the policy changes.

They thanked many by name, including Sens. Mark Warner of Virginia, Mary L. Landrieu of Louisiana, Jeanne Shaheen of New Hampshire, and Mark Udall of Colorado.

The White House also lauded Reps. Timothy H. Bishop of New York, Elizabeth Esty of Connecticut, Carol Shea-Porter of New Hampshire, Gary Peters of Michigan, Scott Peters of California, Ann McLane Kuster of New Hampshire, Kyrsten Sinema of Arizona, Ann Kirkpatrick Arizona, and Ron Barber of Arizona.

In the House, Majority Whip Kevin McCarthy of California said the announcement "is so blatantly political it goes beyond the pale." And Energy and Commerce Chairman Fred Upton of Michigan accused the Obama administration of ducking responsibility. "The administration cannot run fast enough away from its broken promises," Upton said.

But House Minority Leader Nancy Pelosi, D-Calif, called the move "a vision of smart, common-sense action from the Obama Administration to make this law work better for consumers and better serve small businesses" in a statement. She also criticized the House passage of legislation (HR 4118) that would delay the law's individual mandate penalties.

The delay came as part of a wide-ranging package of final rules and a bulletin that was recently released by the departments of Treasury and Health and Human Services (HHS). The regulations also finalize increased payments to insurers through the risk corridors and reinsurance programs, which are intended to compensate insurers who offer plans to individuals and small businesses.

Those insurers fear that some healthy people who would have enrolled in new plans that meet the health care law's tougher benefit rules may instead choose to stick with their old, noncompliant policies. The older policies may be cheaper for healthy individuals.

The plan to extend non-compliant policies builds on an offer that President Barack Obama made last November. He said that insurance plans that would otherwise end because they do not meet the standards of the health care law (PL 111-148, PL 111-152) could continue for an additional year, into 2014.

Obama had previously said that people who liked their plans would be able to keep them, so the administration felt political pressure to allow the plans to stay in place.

So far, 27 states plus Puerto Rico and Guam have taken the president up on the offer, according to state officials and the National Association of Insurance Commissioners.

The impact on the number of consumers is difficult to estimate. A White House official said that the number of people affected will dwindle by the time the extension ends. Gary Claxton, a vice president with the nonpartisan Kaiser Family Foundation, agreed that the impact of the policy change will be modest because the number of people affected will decline over time.

Currently, about 500,000 individuals are in those types of policies, according to a RAND Corp. study cited by the administration. The White House also will allow plans for small businesses that do not comply with the health care law to continue. About 1.5 million people are in both types of plans.

State regulators and individual insurers may decide not to allow extensions, or if they do, they may not publicize the decisions. Consumers then might not realize they have the option of sticking with their plans.

"At the end of the day, this is going to be a state judgment as to what's good for marketplaces there," said Chris Jennings, a former White House official who was not involved in the decision making in recent days, in a separate interview. "We still don't know how individual states will react nor do we know even within those states what impact it will have on the marketplaces...There'll be a very differential group of states who'll do different things and have different populations to start with."

Insurers were not happy. Officials with the America's Health Insurance Plans (AHIP) trade association said they are studying the rules to see if the changes to the risk corridors program will make up for any losses insurers may see if healthier people stick with their old, noncompliant plans.

"There is broad agreement that if more young and healthy individuals choose not to participate in the new marketplaces, it could lead higher premiums for those consumers that remain in the exchanges," said AHIP President and CEO Karen Ignagni. "That is why it is crucial that sufficient steps be taken to stabilize the market, and we are currently reviewing the new changes."

The regulations announced last week also finalized a proposal to give states more than an additional six months, until June 15, to decide if they want to run their own marketplaces next year.

Also, the rules made official a change in the date of the next open enrollment to Nov. 15, 2014, through Feb. 15, 2015.

And the rules exempted multi-employer plans, including Taft Hartley union plans, from having to pay a tax in 2015 that goes to help offset health insurers' expenses for treating high-cost medical cases. In another provision, the rules limited out-of-pocket costs for individuals in 2015 to $6,600 and $13,200 for families, up from $6350 for individuals and $12,700 for families this year.

Most of those changes were previously forecast in statements by administration officials and proposed regulations.

The administration also said they plan to allow small business employees a choice of plans in 2015. But they are considering the idea of proposing in a later guidance and rule-making that state insurance departments have the option of delaying that provision, which has already been delayed once.

By Rebecca Adams, CQ HealthBeat Associate Editor

March 7, 2014 -- New Hampshire Democratic Gov. Maggie Hassan hopes to sign a Medicaid expansion bill by the end of the month after the state Senate approved it this week. The state House, which previously passed Medicaid expansion legislation, may clear the bill as early as next week and give Hassan her wish.

New Hampshire has the best chance of enacting a Medicaid expansion out of the states that are debating the issue. In Virginia, Democratic Gov. Terry McAuliffe is touring the state to build support for broadening Medicaid, which he hopes will persuade resistant House Republicans to accept it. Utah GOP Gov. Gary Herbert has put forward a plan called Healthy Utah that is generating discussions.

In Pennsylvania, Republican Gov. Tom Corbett this week made changes designed to convince federal officials to approve his Healthy Pennsylvania plan. Corbett says his waiver request does not require legislative approval.

The efforts in all of the states would build on a model that federal officials first approved last year in Arkansas, which uses Medicaid dollars to buy private insurance offered through the new marketplaces created by the health law. Centers for Medicare and Medicaid Services officials also accepted similar expansion initiatives in Iowa and Michigan.

Action in New Hampshire

In Concord, N.H., the state Senate overcame previous Republican resistance by passing an expansion measure by a 18-5 margin. Seven Republicans joined Democrats in supporting it.

The legislation now goes to the state House, which is likely to pass it within the next couple of weeks.

Hassan has been pressuring Republicans to pass a bill and is eager to sign the expansion. Once she has done so, she will send the plan to CMS officials for approval.

The proposed legislation has an escape clause: it would sunset at the end of 2016.

The bill would allow adults younger than 65 who earn up to 138 percent of the federal poverty level to qualify for coverage. The first phase of the plan would help pay for job-based coverage for individuals. Another group of about 38,000 residents would be covered by the state's Medicaid program in the summer.

Moving Toward Compromise in Pennsylvania

In Pennsylvania, Corbett scaled back some requirements he had sought to make relatively healthy Medicaid beneficiaries to look for work. In the plan he sent to the CMS officials for review in mid-February, people who get Medicaid benefits would have to complete some job search activities.

In a March 5 letter to Health and Human Services Secretary Kathleen Sebelius, Corbett said he wants to amend the proposal to be a pilot program for one year.

The governor—who is facing re-election—is deeply involved in negotiations with federal officials now over his waiver request. The early stages of the talks started 11 months ago. State officials are hopeful the administration will approve some version of the plan this spring.

Beneficiaries in the newly proposed pilot program would have an incentive to either have a job or, if they work less than 20 hours per week, to look for another position because they would get discounts on their premiums or co-pays.

The discounts would vary depending on how many hours a week the person works. At a maximum, people working a 30-hour workweek or more would get a 40 percent reduction in their costs. People working less than 20 hours per week would have to show they are searching for another job or participate in activities, such as getting their GED high school equivalent certificate.

Corbett had already changed his original plan to charge people premiums. Under the version he sent to federal officials in February, beneficiaries will pay co-pays for the first year, as other Medicaid beneficiaries had done under the existing program. In the second year, people with income above 100 percent of the poverty line "will be required to pay a nominal payment toward a monthly premium," according to the waiver document. Those beneficiaries would not have to pay co-pays except for a $10 fee for emergency room use for care that was not an emergency.

All of the details are up for discussion, said Jennifer Branstetter, director of policy and planning for the administration, who spoke with CMS Deputy Administrator Cindy Mann this week and has volunteered to come to Washington in the next few weeks to discuss the request.

Branstetter portrayed the waiver request as a "true test" for the Obama administration.

"They said they willing to give states flexibility," she said. "We hope the Obama administration holds true to its word and will give Pennsylvania a chance. We're saying give us flexibility and let us show you the data after a year."

She said state officials believe that more Medicaid recipients will be motivated to work more if the pilot program is approved.

Corbett pulled Sebelius aside for a few minutes last week to talk about the plan when the nation's governors were invited to the White House for a broader meeting. CMS officials are non-committal about whether they will require additional modifications.

"CMS will examine this latest proposal, and will consider input during the public comment period and provide technical assistance to Pennsylvania on their waiver application before making a decision," said CMS spokesman Aaron Albright, adding that in Pennsylvania an expansion would mean coverage opportunities for hundreds of thousands of people.

By Rebecca Adams, CQ HealthBeat Associate Editor

March 4, 2014 -- The Arkansas House voted last week to send to Gov. Mike Beebe a reauthorization of the state's expanded Medicaid program known as the "private option."

The House voted 76–24 to authorize a funding measure expanding Medicaid by using marketplace insurance. The measure needed a supermajority of at least 75 votes in the House. The Senate last month endorsed the legislation.

Beebe, a Democrat, has been pressing the House to send him the bill. However, previous votes fell short of the 75 total needed for passage.

Supporters of the expansion had predicted that eventually the state legislature would decide to keep the program in place. Arkansas was the first state to get approval to use Medicaid dollars to buy private insurance for many beneficiaries through the new marketplaces created by the health care law (PL 111-148, PL 111-152). Federal officials also approved a similar plan in Iowa and are currently in negotiations with other states that want to follow that type of approach.

About 105,000 people are enrolled in the program, said a spokeswoman for the Arkansas Department of Human Services last week. That includes 93,966 who completed the enrollment process as of Feb. 23 who will get their coverage through the marketplace coverage, and another 11,595 people who will get their coverage through the fee-for-service Medicaid program. Many of those who will use the fee-for-service program have serious medical conditions.

By John Reichard, CQ HealthBeat Editor

March 3, 2014 -- Republicans, whether during the 2008 presidential election or the subsequent health care overhaul debate, faulted Democrats as being too focused on expanding coverage and not enough on controlling costs.

But some analysts, including former Congressional Budget Office Director Peter Orszag, suggest that perhaps the biggest change the law has delivered is in helping to slow down health care spending.

Coverage gains, while significant, have been sharply below projections. But few analysts foresaw the continued slowdown of medical spending over the past few years. Most do not credit the health law by itself for that. But a number say the overhaul—along with earlier private sector changes that authors of the law sought to intensify—may be having a significant long-term effect.

At a conference last week sponsored by the Aspen Institute, Orszag said that innovation occurring within Medicare in the wake of the 2010 law (PL 111-148, PL 111-152) is helping, along with other factors, to lay the foundation for a transformation of the health care system.

If policymakers build on the changes underway by ramping up pressure on Medicare to move away from the fee for service method of paying for health care services, the changes underway will continue, Orszag said. That assessment was echoed by former Centers for Medicare and Medicaid Services Administrator Tom Scully, a Republican.

If the push for alternative payment models wanes, on the other hand, the changes now in motion will lose their momentum and spending will again take off, Orszag and Scully agreed.

Orszag, who also served as President Barack Obama's budget director, said the recent Medicare spending slowdown is so dramatic that if it continues, the nation's dreary fiscal outlook will be turned on its head.

"Basically the entire long-term fiscal imbalance facing the United States comes from Medicare, Medicaid, and other health expenditures," he told the "Care Innovation Summit" on Feb. 27.

"If you continue the rate of growth that has occurred over the past five years in Medicare the entire fiscal imbalance disappears. That's how big the slowdown has been."

But Orszag added that "that's no guarantee of future performance."

His remarks came after a presentation by Patrick Conway, who heads the Center for Medicare and Medicaid Innovation at the Centers for Medicare and Medicaid Services. Created by the health law, the center has a 10-year budget of $10 billion which renews automatically at that funding level after a decade.

It has fostered a wide range of experiments in retooling health care delivery, and plays a major role in fostering Medicare contracting with accountable care organizations, or ACOs. These entities feature new affiliations among providers to provide team-based care in traditional Medicare. Their reimbursement hinges in part on whether they meet targets for controlling spending and improving quality. That marks a first step toward moving traditional Medicare away from fee for service payment incentives that reward the volume of care delivered regardless of its efficiency and quality, known as "value" in health policy speak.

Conway noted numerous experiments along with the dramatic flattening of Medicare spending growth in recent years. He spoke, for example, of declining hospital readmissions associated with those experiments and said the ACO program is proving to be so promising in controlling costs that it may be the first project coming out of innovation center to be scaled up nationally.

Orszag said based on recent trends and experiments described by Conway, along with private sector changes, "we've got a pathway forward here. This is a very exciting time to be in this sector."

Medicare spending is in a state of massive deceleration, he said, not because younger people are coming into the program with baby boomers retiring, or because of lower pricing. Those factors are having a small impact, but the big influence is a slowdown in the utilization of health care services, he said.

"The reason that that's happening is that the provider space in particular is looking out and projecting a significant change in how they're paid," Orszag asserted. In effect, they are making a bet that payment will no longer be based on the volume of care but rather its quality and efficiency.

He pointed to significant efforts in the hospital industry to reduce readmissions. They "are doing so today at a huge cost to them in terms of net revenue. They are doing it, maybe because they are benevolent, but, fundamentally because they believe that in that three- to five-year window they are going to be paid in a different way."

"Therein lies the trick, which is you've got a significant amount of private sector activity predicated on this projected shift in the payment model," Orszag said. "And if that projected shift doesn't happen, then a lot of this activity I think will fade away or will be reversed or will be dropped."

"The single most important thing we could do is set a goal—for let's say 75 percent of Medicare revenue being non–fee-for-service in a certain period—by like 2018 and a glide path for getting there," he said. "That will then unleash a lot of private sector activity around it. Payers and providers are looking for Medicare to be the fullback. They're already sort of running behind them, but you can only go as fast as your blocker ahead of you can do in general."

Scully agreed that the new provider focus on value will die without such a goal.

"We agree too damn much," he said. "I think we should shoot for a hundred percent" of Medicare spending by 2018 not being based on fee for service.

"Fundamentally price fixing has not worked in any economy in the history of the world ever," he added. "Every time you take somebody out the of the price fix environment and you get them in a risk environment, you get better results. It's just human nature. "

When a physician group is paid a fixed per capita fee for a year's worth of care for a patient and is told to talk to the person about sticking with his medication and incentivized to keep him out of the hospital, "it works overnight," Scully said. People "are smart, and they follow economic incentives, capitalism, and that's a good thing."

By Emily Ethridge, CQ Roll Call

March 6, 2014 -- House GOP leaders may offset a bipartisan bill to change how Medicare pays physicians with a delay of the health care law's individual mandate penalties, forcing Democrats to take a difficult vote next week.

The move could also kill—at least for now— the hopes of many that Congress would find a permanent solution to the much-hated sustainable growth rate (SGR) and move Medicare towards an improved payment system that rewards quality over volume.

Rep. K. Michael Conaway, R-Texas, announced the vote during a colloquy last week, saying the bill would be completely paid for, but that the offsets were still under discussion.

"The specifics of the pay-for have not yet been finalized. There are lots of things that are under consideration," said Conaway.

House Minority Whip Steny H. Hoyer asked whether the offset could involve delaying the law's (PL 111-148, PL 111-152) individual mandate penalties, noting that doing so would lead to its likely opposition in the Democratic-led Senate.

"If we use that as a pay-for, it seems to me it puts at risk" finishing the bill before March 31, when physicians would next have their payment rates cut, said Hoyer, D-Md. On April 1, the current three-month "doc fix" (PL 113-67) expires and physicians would see their rates cut by 24 percent.

That offset could be a dealbreaker for the legislation (HR 4015, S 2000) that represents a year's worth of work and compromise among three committees—Senate Finance, House Energy and Commerce, and House Ways and Means.

According to the Congressional Budget Office, the bill would cost $138.4 billion for 2014 through 2024 to replace Medicare's SGR and replace it with new payment systems.

Only 27 House Democrats voted this week for a bill (HR 4118) that would eliminate the individual mandate penalties for 2014, and the White House threatened a veto of that measure.

To offset the cost of the SGR replacement bill, the penalty delay would have to be much longer than one year or be combined with other offsets. The Congressional Budget Office (CBO) estimated the one-year delay would result in about $9.4 billion in savings over 11 years because of projected changes in insurance coverage under the bill. A GOP leadership aide said aides felt confident the offset would manage to cover the bill's cost over 10 years.

In 2011, the CBO found that repealing the individual mandate would save $282 billion from 2012-2021, mostly by reducing the government's payments for subsidized insurance through Medicaid and the law's insurance exchanges.

"The loss of revenues from eliminating the individual mandate penalty would increase the deficit; but the estimated savings from reduced subsidies are greater," the CBO said. The CBO also said that repealing the mandate would increase the number of the uninsured from about 23 million nonelderly residents in 2021 to 39 million.

Although the House has a good chance of passing the bill, the Senate Democratic leadership is likely to strongly resist any effort to delay the law's penalties. The Senate could choose to bring its version of the bill to the floor with a different offset, but the time for lawmakers to find some compromise offset is running out.

Rep. John Fleming, R-La., said if the replacement bill fails, he expects leadership to have another short-term doc fix bill "in their pocket" that lawmakers can vote on to avert those cuts.

But another short-term patch would come as a huge blow to the many provider groups who have lined up in support of the legislation.

Before Cantor made the announcement, members of both parties said they were preparing for an "ugly" offset. Republicans were wary of cuts to nursing homes and hospitals, saying leadership had said the cuts would have to come from savings in the health care industry.

"I am not going to shut down nursing homes and hospitals in my district to accomplish this," said Fleming, adding, "If we're barely propping up one side of health care doctors by completely destroying another part of health care, I don't see that as any real gain."

Rep. Jim McDermott, D-Wash., said he would not be surprised to see some kind of budget "gimmickry" in order to pay for the bill.

"I assume they're gonna pay for it with something unattractive, but I don't know what it would be," he said.

Rep. Phil Roe, R-Tenn., said earlier this week that even if the House manages to pass the bill, the Senate may not be able to do the same. He said senators could look at whatever is chosen as the offset and say it is not the right one.

"I don't think the will is there," Roe said of the Senate.

By Rebecca Adams, CQ HealthBeat Associate Editor

March 7, 2014 -- The Centers for Medicare and Medicaid Services (CMS) released a rule and a payment bulletin late last week establishing the basic health program, which is intended to be an affordable and stable alternative to marketplace coverage for low-income people.

The program is scheduled to start on Jan. 1.

The final rule changed the requirements for providers. Some people who commented asked CMS officials to require that health plans be required to show that their provider networks not only have a sufficient number of providers, but also have a sufficient geographic distribution so that consumers in rural areas, for example, have sufficient access to providers. Regulators responded by clarifying that plans should follow Medicaid managed care rules or marketplace rules to make sure that the number, mix, and geographic distribution of medical providers will meet the needs of consumers in the area. The plans also will have to follow Medicaid or marketplace rules on the types of providers that the networks have to include, such as federally qualified health centers, pediatric primary care providers and other specialists.

The final version of the rule also clarifies that states must offer people a choice of plans from at least two standard health plans. States can request an exception to this requirement if the state does not have enough plans to allow that.

The final rule outlines how states need to get certified for the program, the eligibility criteria for individuals, the financing of the program and oversight of it. The rule says that consumers' premiums cannot be more than the monthly premiums that they would have paid under the second-cheapest silver-level plan in the marketplace.

A year ago, the Centers for Medicare and Medicaid Services announced that officials would delay the creation of the program from 2014 to 2015. The rule went to the Office of Management and Budget for review in early February.

The health care law (PL 111-148, PL 111-152) gives states the option of using federal funds to subsidize insurance coverage for low-income residents who would qualify to buy coverage through a marketplace plan. The idea was to reduce the need for low-income consumers to change coverage if their income fluctuates between the thresholds that would qualify them for Medicaid and the marketplaces.

The program is designed to help those with incomes between the Medicaid-eligibility level of 138 percent of the federal poverty level and 200 percent of the federal poverty level.

The program may offer more affordable out-of-pocket costs for low-income people who enroll than they would face under the marketplace plans.

People who enroll in a state's basic health program also would not have to repay any extra subsidies that they were not entitled to receive.

States that decide to use this option would receive 95 percent of the amount of the premium tax credits and cost-sharing reductions that would have been provided in the exchange for this group of people.

The newly-released version also allows states the option of enrolling people for 12 months continuously without having to reapply.

Regulators also said in the final rule that they will allow states to get more certainty by receiving an interim certification of their proposed blueprint if requested. If states want to start the basic health program in the middle of 2015, they can ask CMS to approve a plan to shift people who are already enrolled in marketplace plans to the basic health program.