By John Reichard, CQ HealthBeat Editor

March 14, 2007 – If, as many analysts say, a pragmatic and bipartisan approach is essential to rebuilding the U.S. health system, what better place to begin the project than the Senate Finance Committee?

Committee Chairman Max Baucus, D-Mont., and ranking member Charles E. Grassley, R-Iowa, have a history of working well together, whether by tilting right on legislation creating tax cuts to tilting left with legislation expanding the Medicare program by adding prescription drug benefits.

But overhaul health care as a whole? When Sen. Ron Wyden, D-Ore., earnestly predicted at a hearing Wednesday that the team of Baucus and Grassley could get the mammoth job done, the improbable notion had other committee members grinning, either because they thought it was cockeyed, that it might just eventually happen despite the odds, or both.

Baucus clarified at the outset of the hearing that he intends to try. "Today we begin down a long and arduous road," Baucus declared solemnly in opening the first of a series of hearings on overhauling health care. "Today we begin again the journey toward universal coverage. It is a road that we must travel."

Grassley struck the same note of urgency. "This situation is untenable," he agreed. "Mr. Chairman, moving major legislation during a presidential election cycle is extraordinarily difficult but not impossible."

What that legislation might look like is unclear, but witnesses at the hearing agreed on some broad outlines. One was that universal coverage would cost $70 billion to $100 billion a year and couldn't be achieved simply by redirecting some of the $2 trillion already in the system to cover the nation's 47 million uninsured.

Another was that it probably is more practical to work with pieces of the existing system rather than try for a more radical overhaul that would be defeated by entrenched interests. "2.2 trillion dollars develops a lot of very strong advocates for their piece of the pie," said Brandeis University professor Stuart Altman. "I've watched some very good ideas go down in flames," he added.

Altman also suggested that it would make more sense to first cover the uninsured and then tackle rising health costs. Doing both at the same time would create too much political opposition to allow change to occur, he said. While some steps can be taken to tackle costs in the relatively near future, "fundamentally changing the cost curve" would require more than "marginal" changes, he said. If Congress tries that, "I do believe we will run into a buzzsaw."

Other witnesses joined Altman in suggesting that it would be unwise to try to expand coverage of uninsured Americans other than uninsured children through legislation reauthorizing the State Children's Health Insurance Program. Better to make sure that program is reauthorized than risk seeing it bog down as part of a more expansive measure, they said.

At least one witness tried to get the committee to think in terms of raising taxes. In a $2 trillion health care economy, adding $70 billion to $100 billion a year to cover the uninsured "would not seem insurmountable," James J. Mongan, president of the Boston-based health system, Partners HealthCare, told the committee. He added that "in terms of federal taxation levels this revenue could be raised and still leave taxes at or below levels of the 1990s, tax levels which underpinned one of our most productive economic eras."

But Grassley clarified in his remarks that he doesn't want to tilt too far left. "I support ideas that incentivize greater private coverage," he said. "Covering everyone with government-run health care is not the right direction for America," he said.

Wyden, who has relentlessly buttonholed the press and other lawmakers with attempts to build a bipartisan solution to covering the uninsured, differed with Mongan on the tax issue. "I disagree strongly" that taxes will have to be raised, he said, noting that the U.S. spends much more per capita on health care than other industrialized nations that cover all their citizens. "I think the money is there, we're not spending it in the right places."

"We should be able to get by with $2.2 trillion," agreed John F. Sheils, vice president of the Lewin Group, a consulting firm. Legislation introduced by Wyden to cover the uninsured (s334) would fund subsidies to buy coverage by ending the tax break employers get for providing coverage and increasing competition by insurers, but achieving universal coverage without new taxes will not be easy, Sheils said.

"I do believe there is enough money in the system," Altman said. But "I don't believe we can get it," he added.

Senators voiced some interest in national adoption of the Massachusetts law that aims to create nearly universal coverage in that state in part by requiring the uninsured to buy coverage, with subsidies to help them buy it if their incomes are low enough. Mongan pegged the annual cost of national adoption at $70 billion to $100 billion, but Sheils opined that the Massachusetts approach would not cover all uninsured Americans.

A proposed tax change by President Bush that would require reporting of some employer premium contributions as taxable income by individuals drew some support. Richard G. Frank, vice chair of the Citizens' Health Care Working Group, told the committee that capping the deductibility of employer premiums "would make things fairer and more efficient." But Sheils and Altman said the president's approach to using funds raised by capping the deduction would not effectively cover the uninsured.

Baucus plans to hold hearings on four other overhaul "principles" to move the debate forward: "pooling arrangements" to increase access to affordable coverage that isn't tied to a particular job; cost control; preventive care; and "shared responsibility" for costs.

While the plans for legislation by Baucus and Grassley are unclear, Grassley expressed optimism Wednesday about the prospects for action. "I'm encouraged by the fact that it seems there are more people in Congress talking about the issue than any time in the last decade," he said.

By Alex Wayne, CQ Staff

March 14, 2007 -- Presidential contender Hillary Rodham Clinton joined with House Energy and Commerce Chairman John D. Dingell on Wednesday to propose a huge expansion of public health insurance for children.

The New York senator and Michigan lawmaker, both Democrats, said they planned to introduce legislation Wednesday or Thursday intended to extend health insurance to all 9 million U.S. children estimated to be without it.

"It is a disgrace that in the wealthiest country in the world, nearly 9 million children lack health coverage," Dingell said.

The draft companion bills would boost spending on the State Children's Health Insurance Program (SCHIP) to encourage states to cover all children from families with incomes up to 400 percent of the federal poverty level, and would allow families ineligible for SCHIP to buy into the program. In states that expand eligibility to the level allowed in the bill, employers would get subsidies so they would not drop children from private insurance plans.

SCHIP, created in 1997, is a joint state–federal effort, similar to the much larger Medicaid program. It covers about 6 million children, as well as about 600,000 adults, at a cost averaging $4 billion over the past 10 years.

The program will expire Sept. 30 without congressional action. Most Democrats and many Republicans say they not only want to renew the program, but to greatly expand it.

Dingell will write the House's SCHIP reauthorization; his and Clinton's legislation likely represent the upper limit of any expansion. Congressional Republicans will probably insist on a scaled-back expansion in any final legislation.

President Bush has proposed spending about $30 billion on SCHIP over the next five years—some $45 billion less than proposals floated by congressional Democrats. Bush would reduce eligibility for children and discourage states from using the program to insure adults.

Earlier this week, Senate Budget Chairman Kent Conrad, D-N.D., said his proposed fiscal 2008 budget resolution would allow up to $50 billion in increases to SCHIP over five years, which he said would be enough to cover every child who currently does not have health insurance. Conrad said $15 billion in offsets would be identified in the budget, and an additional $35 billion was contingent on finding further offsets.

Broad Support for Expansion

Health insurance likely will be a major issue in the 2008 presidential race, with nearly 47 million Americans lacking coverage in 2005, according to the U.S. Census Bureau. Two leading contenders—Clinton and Republican Mitt Romney—are closely associated with proposals to expand coverage.

Romney, as governor of Massachusetts in 2006, signed a law that requires all states residents to obtain health insurance by July 1 of this year, in some cases with government assistance. Clinton, as first lady in the 1990s, largely authored President Bill Clinton's failed universal coverage plan.

While insurance companies were Clinton's opponents a decade ago, they are on her side today—at least in concept. Karen Ignagni, president and CEO of America's Health Insurance Plans (AHIP), which represents the industry, sent Dingell a letter March 13 generally backing an expansion of SCHIP and efforts to coordinate the public program with private insurance.

"Recognizing that we share common goals in this debate, we stand ready to work with you in building support for constructive legislation that provides quality health insurance for all children," she wrote.

AHIP and other consumer, trade, and interest groups have offered support to several different proposals to expand SCHIP. A bipartisan group of House members, led by Rahm Emanuel, D-Ill., have proposed expanding SCHIP and Medicaid to cover the 6 million children who are estimated to be eligible for public insurance but not enrolled. That proposal would be combined with a new tax credit to encourage middle-income families to buy private insurance for their children.

Emanuel has proposed paying for his plan—which he estimates would cost $60 billion extra over five years—by enacting separate legislation that would improve the collection of capital gains taxes.

Dingell said Emanuel's proposal is "a very useful piece of legislation and we certainly will be looking at it, too."

In the Senate, Finance Chairman Max Baucus, D-Mont., has proposed boosting SCHIP spending by up to $60 billion over the next five years, also with the aim of covering children who are eligible but not enrolled. Gordon H. Smith, R-Ore., who sits on the Senate Finance Committee, has proposed funding an expansion of SCHIP and Medicaid for children by increasing the federal cigarette tax.

Dingell said he did not yet know what his legislation would cost; it is still being scored by the Congressional Budget Office. He also could not say how it would be paid for, but asserted, "I have no doubt we can find savings elsewhere."

By Mary Agnes Carey, CQ HealthBeat Associate Editor

March 13, 2007 -- More than a dozen witnesses told a House panel Tuesday that the New Orleans area continues to struggle with providing basic health care services more than 18 months after Hurricane Katrina devastated the Gulf Coast.

Medical professionals cited a shortage of both primary care physicians and specialists, a lack of hospital beds, and mental health services as major problems, adding that bureaucratic holdups at the federal, state and local level are preventing the financial assistance necessary to help the region's health care system recover. Other complications include high rates of uninsured, low literacy and many non English-speaking residents, witnesses said during the hearing, which lasted nearly seven hours.

In the worst-hit parishes of Orleans, Plaquemines, Jefferson, and St. Bernard, the loss of hundreds of thousands of homes and the closure of health care facilities displaced thousands of physicians, mental health providers, nurses, and other health professionals, said Rep. Bart Stupak, D-Mich., chairman of the House Energy and Commerce Oversight and Investigations Subcommittee.

A few weeks ago, Stupak said, majority and minority committee staff visited the New Orleans area to evaluate the current status of health care services. "Unfortunately, what our staffs found is that much of the region's health care infrastructure still remains crippled and major problems remain unresolved," he said.

St. Bernard Parish, which lost 100 percent of its homes, offices and buildings and 154 of its residents after Hurricane Katrina, has faced numerous obstacles in delivering care and trying to rebuild its medical infrastructure, said Bryan Bertucci, a family physician and coroner for the parish.

"Our biggest hindrance is the overwhelming lack of medical facilities," he said. "Our 194 bed hospital is gone. Of 150 physicians only six remain. Only 10 registered nurses remain. To see certain specialists residents are often required to travel 30 to 60 miles. "He said the area has also encountered "one financial roadblock after another" as it has tried to rebuild. Its hospital, Chalmette Medical Center, was a fee-for-service hospital and received no funds. Because it was not a part of the parish budget, it could not qualify for Community Block Grant money, Bertucci said. He also said he has been unable to get a Small Business Administration loan to rebuild his office.

"We need a hospital. We need your help," Bertucci told the committee.

Some lawmakers and witnesses blamed a dispute between Louisiana state officials and the Department of Health and Human Services (HHS) over how to rebuild the New Orleans health care system as the culprit preventing the region from receiving the federal funds it needs to rebuild its medical infrastructure.

In his opening statement, Energy and Commerce Committee Chairman John D. Dingell, D-Mich., said that Oct. 20 2006, Louisiana Governor Kathleen Babineaux Blanco submitted a plan to HHS for a series of pilot projects for Region 1 in New Orleans, where many of the devastated parishes are located.

"What Secretary [Michael O.] Leavitt sent back is not even a formal plan," Dingell said. "It is a loose confederation of spreadsheets and bullet points that ask the state to disassemble it's statewide public hospital system and replace it with some form of insurance program."

Frederick P. Cerise, secretary of the Louisiana Department of Health and Hospitals, said at the hearing that his state would need $1 billion in new federal "disproportionate share hospitals" or DSH funding to implement the HHS proposal and allow hospitals to maintain their current level of care services.

"Without substantial additional funds that swap doesn't work for us," Cerise said.

Acting Centers for Medicare and Medicaid Services Administrator Leslie V. Norwalk said the administration wants to work with Louisiana officials to overhaul the state's current health insurance system that she said provides one level of health care for those with insurance and another one for the uninsured.

"There may be debate on the details, but I would say that everyone agrees the system is broken down and needs attention," she said.

When Norwalk began to detail the amount of federal aid that has been provided to help the New Orleans area, Stupak told her to "spare us the stats because all of the other witnesses said there's not enough funding in the system."

Some Republicans on the panel said they would like a clearer accounting of how additional federal funds have been spent on recovery efforts. Rep. Michael C. Burgess, R-Texas, asked that "at some point, I hope someone will give me a spread sheet" detailing where federal money has been spent. "I'm getting criticized at home" for the increased federal spending on Katrina, Burgess said.

Both lawmakers and witnesses expressed frustration over ongoing problems with the New Orleans health care system and what the federal government's role should be in the region's recovery.

"I've told the leadership of this House that we're tired of hearings. We want things to start happening," said panel member Charlie Melancon, D-La.

By Mary Agnes Carey, CQ HealthBeat Associate Editor

March 12, 2007 -- A Congressional Budget Office (CBO) health care advisory panel will provide information on the latest health care research and analysis to help CBO as it expands its work on health related matters, CBO Director Peter R. Orszag said Monday.

In an interview with Congressional Quarterly reporters and editors, Orszag said the CBO's role on health will be critical for Capitol Hill because no other agency supporting Congress has as broad a view of health care.

Controlling health care costs is a key focus for Orszag, who described the issue as "the fundamental challenge facing the federal government." He called the projected growth in health costs "unsustainable" and said the government must address the problem soon. "I would hope we do something, whatever it is," Orszag said. "We need to try different things" and evaluate the results.

The CBO health panel, composed of experts from the academic and health care communities, will conduct its first meeting in May. Members include former Centers for Medicare and Medicaid Services Administrator Mark B. McClellan, now visiting senior fellow at the American Enterprise Institute–Brookings Joint Center; former CBO director Robert Reischauer, now president of the Urban Institute; and Commonwealth Fund President Karen Davis.

The experts will provide the latest thinking on hot health topics such as the comparative analysis of health care drugs and treatments, and how to expand the use of health care information technology. "We're always looking at new evidence," Orszag said. The panel, however, will not issue recommendations.

In the interview, Orszag reiterated CBO's position that House-passed legislation (HR 4) that would require the secretary of Health and Human Services (HHS) to negotiate prescription drug prices would do little to lower costs because it would bar the government from setting up a formulary or restricting access to drugs as a way of leveraging lower prices.

"Just showing up and saying 'we're from the government and would like a lower price' doesn't help very much," he said.

When the House considered the bill in January, Energy and Commerce Committee Chairman John D. Dingell, D-Mich., said the CBO reached that conclusion "because they know full well that this secretary probably won't negotiate on [Medicare beneficiaries'] behalf." Dingell then promised that Democrats would hold the administration accountable if it did not lower prices. "We will give [the secretary] and the others in the administration the oversight they have lacked for six years," he said.

By Mary Agnes Carey, CQ HealthBeat Associate Editor

March 16, 2007 -- As Democrats consider payment cuts to Medicare Advantage plans as a way to finance an expansion of the State Children's Health Insurance Program (SCHIP) and other priorities, they may take an even closer look at Medicare private fee-for-service plans.

Of the approximately 8.3 million Medicare beneficiaries enrolled in Medicare Advantage plans, 1.3 million are in the private fee-for-service plans, one of the fastest growing sectors within Medicare Advantage.

But unlike other Medicare Advantage plans, which include health maintenance organizations and preferred provider organizations, private fee-for-service (PFFS) plans are not required to have a network of providers, nor are they subject to requirements for beneficiary protection or plan review and provider monitoring the way MA plans are, according to a Kaiser Family Foundation report released Friday as part of a forum on PFFS plans.

The plans, created as part of the 1997 balanced-budget act (PL 105-33), are paid on average 119 percent of traditional fee-for-service rates, and some panelists at the Kaiser forum said neither beneficiaries nor the government are getting their money's worth. Panelists also said beneficiaries are confused by the plans because they think they are traditional fee-for-service rather than a private market product.

"People sign on with these plans and they and they don't know what they're getting," said Joyce Dubow, AARP senior policy adviser on policy and strategy. Beneficiaries might not understand, for example, that while their doctor accepts Medicare fee-for-service reimbursement, the doctor might choose not to participate with the private fee-for-service plan. Dubow also said there is little evidence that private fee-for-service plans do a better job of coordinating care than traditional Medicare.

But proponents of such plans, who also spoke at Friday's event, said the plans offer more benefits and better coordination of care than traditional fee-for-service.

Gary Jacobs, senior vice president of Universal American Financial Corporation, whose company has 150,000 Medicare beneficiaries enrolled in private fee-for-service plans, said the plans include features such as nurses working with beneficiaries to better understand treatment options and computer systems that help catch possible drug interactions. In one month alone, he said, the plans' computer systems caught 55,000 drug interactions that could have harmed beneficiaries.

"This is all about choices for beneficiaries," Jacobs said.

But the amount that Medicare pays per beneficiary should not depend on what plan they select, said Mark E. Miller, executive director of the Medicare Payment Advisory Commission (MedPAC), which advises Congress on Medicare payment policy. "The payment should be neutral," Miller said. He also suggested that there are other coverage options for Medicare beneficiaries that offer the same services as PFFS plans but do so at a lower cost to Medicare.

MedPAC has previously found that Medicare Advantage plans are paid on average 112 percent of fee-for-service plans, a finding that the industry's leading trade group, America's Health Insurance Plans (AHIP), has disputed.

"We talk to AHIP every time we do this," Miller said Friday. Even with some adjustments AHIP would like to see in MedPAC calculations, Miller said, Medicare Advantage plans "are still being paid well above fee-for-service."

By Mary Agnes Carey, CQ HealthBeat Associate Editor

March 13, 2007 -- Expansion of the State Children's Health Insurance Program (SCHIP)—including coverage of more parents of SCHIP-eligible children—is one of the top legislative priorities this year for House Energy and Commerce Health Subcommittee Chairman Frank Pallone.

During a breakfast interview with health care reporters, Pallone, D-N.J., said his panel is hoping to markup SCHIP reauthorization legislation after the April recess, with cuts in federal payments to Medicare Advantage plans a likely target to finance an SCHIP expansion and other legislative priorities.

Insurers face concerted efforts by congressional Democrats this year to cut Medicare Advantage payment rates and have mounted a campaign to oppose any reductions, saying their plans provide more benefits and save beneficiaries money.

Pallone rejected arguments from the industry that beneficiaries would be forced to pay higher premiums and receive fewer services if Medicare Advantage payments were reduced. "They're going to make that argument but I don't think it's a legitimate reason," Pallone said. He and other Democrats have pointed to findings from the Medicare Advisory Payment Commission (MedPAC) that Medicare Advantage plans are paid 112 percent of fee-for-service rates, a finding insurers dispute.

"I think the MedPAC report clearly showed there was no reason for it," Pallone said the higher payment rate. "It's not justified. It's something we have to look at."

Other priorities for Pallone's panel include the impending 10 percent in Medicare payments to physicians. While Pallone said he preferred to address the issue over a two-year period, a one-year fix may be the end result. "It may come to that again," he said.

Pallone also said he expected mental health parity legislation to come before his panel but the committee has not yet set a date for action.

Legislation to reauthorize the Prescription Drug User Fee Act (PDUFA) will be before the subcommittee within the next few weeks, Pallone said, adding that a key focus of the debate will be to determine how to best target resources so the Food and Drug Administration can improve post-market surveillance of drugs and perform greater oversight of direct-to-consumer advertising. Another related bill would give the FDA the authority to approve generic biologics, which Pallone called "a big issue."

Increasing the use of health care information technology among hospitals, physicians and other health care providers is another priority, but Pallone said he was wary of proposals that would allow hospitals to share technology with doctors to achieve that goal.

"I don't want collusion, corruption and fraud," he said, echoing concerns from some analysts that such arrangements would cause doctors to steer patients to specific hospitals.

Increasing federal funding for health IT is critical, Pallone said. "There's got to be some new source of funding," he said. "You just can't take it from another provider." But he said private investment was needed as well.

By John Reichard, CQ HealthBeat Editor

March 16, 2007 -- The budget blueprint approved Thursday by a Senate panel reflects a long Democratic wish list for action on health care this year with little guidance on how to fulfill it. The exception appears to be a $50 billion reserve fund the plan would create for expanding the State Children's Health Insurance Program (SCHIP); the authors of the plan signaled that $15 billion should come from Medicare cuts.

The fiscal 2008 plan adopted by the Senate Budget Committee signals its health care spending priorities by creating a number of "budget-neutral reserve funds." Unlike the $400 billion reserve fund for Medicare drug coverage that congressional budget writers adopted in 2003, this year's reserve funds require offsets in the form of cuts or revenue increases elsewhere in the federal budget.

Congressional adoption of the plan doesn't actually require lawmakers to act on the priorities suggested by the reserve funds. However, it is a rough guide to what they might do, and to how much they might spend, to the extent that lawmakers do tackle health care this year.

The most prominent reserve fund is for SCHIP; it provides up to $50 billion over five years for reauthorization of the program "if such legislation maintains coverage for those currently enrolled in SCHIP, continues efforts to reach uninsured children who are already eligible for SCHIP or Medicaid but are not enrolled, and supports states in their efforts to move forward in covering more children."

The budget neutral feature of the fund means all $50 billion would have to come from cuts elsewhere in the federal budget, from increasing taxes or otherwise increasing revenue, or a combination of the two.

The budget resolution assumes a $15 billion reduction over five years in the Medicare spending "baseline," which is the federal projection of Medicare spending based on current law. It also assumes a $15 billion increase in the baseline for spending on a budget category that includes SCHIP. In other words, the committee is anticipating that at least $15 billion of the $50 billion for SCHIP will come from Medicare cuts.

But that doesn't rule out larger Medicare cuts. For example, all $50 billion in cuts could be taken from Medicare, said Robert Greenstein, executive director of the Center on Budget and Policy Priorities in a telephone press briefing Friday.

But no more than $35 billion of the $50 billion could come from revenue increases, he said. Medicaid cuts also could be used to pay for SCHIP funding. Sen. Gordon Smith, R-Ore., has proposed an increase in the federal tobacco tax to fund an increase in SCHIP coverage for uninsured children and pregnant women whose income is up to 300 percent of the federal poverty line.

The plan also would create a fund for costs associated with giving the Health and Human Services secretary authority to negotiate prescription drug reimbursement levels under the Medicare drug benefit. Any savings from the measure would have to be used to improve the drug benefit or reduce the deficit.

The plan also includes language that would prepare for possible legislation blocking a scheduled cut in Medicare payments to doctors. The language does not specify how much money the committee has in mind, but Sen. Judd Gregg, R-N.H., cited a figure of $50 billion or more in discussing the expense that might be involved. It was unclear whether Gregg would favor spending those sums.

Up to $5 billion is allotted for a reserve fund that would make improvements to the drug benefit. The plan doesn't say what those improvements are, but both House and Senate Democrats are lining up to push for passage of legislation that would sign up millions more seniors and disabled people for the extra help provided to low-income beneficiaries.

Another reserve fund is for costs associated with legislation that "makes health insurance coverage more affordable or available to small businesses and their employees without weakening rating rules or reducing covered benefits."

The plan also creates a fund for legislation that "authorizes the Food and Drug Administration to regulate tobacco products and assess user fees on tobacco manufacturers and importers" to cover the costs of that regulation.

Another fund reflects the interest of the committee in creating an entity to conduct research comparing the effectiveness of various types of products and treatments. Analysts say such research eventually could reap tens of billions of dollars in health care savings.

The committee expressed an interest in beefing up efforts to fight health care fraud, which researchers say could generate many dollars in savings for each dollar spent. The budget plan says up to $383 million may be spent on the fraud control program at HHS without it counting against limits on discretionary spending.

Overall, the plan provides for an increase in non-defense discretionary spending of a little more than 1 percent, adjusted for inflation, according to a Center analysis released Friday.

Other funds would be established for legislation to improve medical care and disability benefits and disability evaluations and claims processing for wounded service members. Language in the budget resolution also aims to address "deficiencies at the Walter Reed Army Medical Center."

Still other reserve funds address legislation to promote the quality of long-term care, fund adoption of health care information technology and create parity between insurance benefits for mental illnesses and other illnesses.

And there's even a reserve fund for "health care reform" to cover the uninsured—the creation of which is contingent on enactment first of SCHIP reauthorization.

But as Cuba Gooding, Jr., might say: "Show me the money!"