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March 19, 2012

Washington Health Policy Week in Review Archive ebefd1a0-041c-4369-b1bf-d478ab2e82f6

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HHS Keeps Exchange Rulemaking Moving Via Staggered Approach

By John Reichard, CQ HealthBeat Editor

March 12, 2012 -- The Obama administration has resorted to various tactics over the past two years to keep rulemaking moving under the health law despite the enormity of the job. On Monday it struck again, moving long-awaited final health insurance exchange regulations out the door, thanks to a staggered approach.

It was a little like giving a college professor a big chunk of a mammoth final term paper to read while promising to turn in the rest before she finished reading the first part.

The 644-page final rule released by Health and Human Services (HHS)combined into a single document, two sets of exchange-related regulations proposed last summer, while saying that other exchange-related proposals would be issued “shortly” as final regulations.

The rule sets standards for creating and operating exchanges, certifying the health plans they can offer and for creating streamlined ways to enroll in plans using Web-based systems and other approaches.

HHS said that a second rule on “reinsurance, risk corridors, and risk adjustment” for plans sold in exchanges will be published separately as a final rule. Also to be published separately are Treasury Department regulations relating to the issuance of premium tax credits that will help people buy coverage and a regulation governing Medicaid eligibility changes. Those rules will be out “shortly,” HHS officials say.

Missing Monday, however, were any details on what a federally operated exchange will look like, something officials in a number of states want to know before deciding if and when to create their own exchanges.

Federal Exchange Info Coming
In a noon press call, HHS officials said they are working hard to get information out about the federally run exchange. Describing what that exchange will look like “is a huge priority,” said Tim Hill, deputy director of the Center for Consumer Information and Insurance Oversight (CCIIO) at the Centers for Medicare and Medicaid Services (CMS). But he didn’t specify when those details would be available.

HHS is anxious to avoid being blamed for the laggardly pace at which many states are creating exchanges. It has used tactics such as bulletins and guidance documents, for example, to keep feeding states information on what they should be doing, even as proposed and final regulations haven’t materialized as quickly as states want.

In truth, states have delayed for other reasons. But the administration is anxious to avoid any perception that it should bear most of the blame. Ron Pollack, executive director of Families USA, said in that regard that the administration is off the hook.

“Today’s regulations are a major milestone,” he said. “They will help put families in the driver’s seat as they seek high quality and affordable health coverage.” But Pollack said his “biggest takeaway” from the release Monday of the regs is that it “makes clear that the ACA will be implemented effectively and on a timely basis.”

Just as they did in proposing exchange requirements last summer, federal officials emphasized the flexibility they are giving states to create the new marketplaces the health law (PL 111-148, PL 111-152) created for individual and small group policies. And the flexibility approach appears to be succeeded in muting stakeholder criticism of the regulations.

For example, the new rule makes clear that states can get federal money to create exchanges as late as the fall of 2014, even though under the health overhaul expanded coverage begins at the start of that year.

In a news release, HHS Secretary Kathleen Sebelius emphasized that the regulation provides states “the guidance and certainty they need” to structure exchanges in two key areas. One is “establishing a streamlined, web-based system for consumers to apply for and enroll in qualified health plans and insurance affordability programs.” The other is the standards for establishing the exchanges, including exchanges for small business, and certifying plan participation.

The regulation estimated that 8.9 million people will get their coverage through exchanges in 2014, 14.3 million will be covered by exchanges in 2015 and 21.7 million will use exchanges in 2016.

The rule said premiums for people buying individual policies through exchanges would be 14 percent to 20 percent lower than without these new marketplaces. Of that, 7 percent to 10 percent of the savings will be “due to the healthier risk pool that results from the coverage expansion.” And, the regulation said, “An additional 7 to 10 percent in savings would result from gains in economies of scale in purchasing insurance and lower administrative costs from elimination of underwriting, decreased marketing costs, and the exchanges’ simpler system for finding and enrolling individuals in health insurance plans.” The Congressional Budget Office developed these estimates.

The regulation estimated that the federal government will pay out $47 billion in 2014 through 2016 to insurers offering coverage in exchanges through “risk adjustment” and “reinsurance payments” (these were included in the regulatory impact analysis even though they will be addressed in a separate rule.) The former compensate plans hit with enrollment by “bad risks” — an unusually large number of sickly, expensive-to-cover patients. The latter payments aim to cushion insurers initially against unexpected losses as they enter the new and unfamiliar exchange market. But the rule says that because of other revenue these payments will be budget-neutral.

Rule Courts Consumers
The final language seeks to appeal to consumers.

For example, the regulation says that businesses that use new “SHOP” exchanges created for small employers under the health law will be able to give their workers a choice of plans. Workers need not all enroll with the same insurer, as is now typically the case.

And if workers do exercise different choices, the employer won’t be stuck with the administrative nightmare of having to deal with multiple plans. The exchange will. In that instance, the employer “will get a single bill and write a single check,” said Chiquita Brooks-LaSure, director of coverage policy in the Office of Health Reform at the Department of Health and Human Services.

On the other hand, there is no requirement that a small business offer its workers a choice of plans.

“Exchanges may also offer employers the opportunity to contract with a single plan if the exchange chooses to do so,” she said. Some consumer advocates fear that many small business employees will end up without a choice of plans because of this option.

But Pollack lauded aspects of the regulation as a step forward for consumers. He said, for example, that it adds a month to the initial open enrollment period during which exchange customers sign up for health plans. The period will run from Oct. 1, 2013 through March 31, 2014 instead of ending Feb. 28, 2014. He added that each exchange board must have at least one voting member who represents consumer interests. “We were not certain there would be such a requirement,” he said.

Under the regulation, consumers will be able to buy coverage “through an outside Web-based entity,” other than the exchange site itself, said Hill. That entity must meet “the standards and requirements set by the exchange for privacy and security and protecting personally identifiable information” such as income and the amount of the premium tax credit available, he added.

“The eligibility for determining the premium tax credit is going to be done by the exchange,” he said. “It is also the case that we have provided the state-based exchanges the flexibility to allow... a Web-based broker or a small business, Mom-and-Pop broker or agent, to interact with the exchange in an automated way so that they can get consumers enrolled in the exchange seamlessly and quickly,” Hill said. “There are lots of folks out there who can generate . . . interest and marketing to make the exchange available to consumers.”

Hill stopped short of saying private exchanges could do the enrolling. “I don’t know that I would use the words private exchange . . . but there is a facility for a Web-based entity to enroll somebody into the exchange,” he said.

The regulation aims to help consumers through grants to entities called “navigators.” They will distribute “fair and impartial information” about plans offered in exchanges and help consumers pick a plan, officials said. The standards that navigators will be subject to will not be same as broker licensing standards.

The regulation also says that exchanges can conduct eligibility determinations for Medicaid or make a preliminary eligibility assessment and turn it over to the state Medicaid agency for final determination.

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Commonwealth Fund: Health Indicators Vary by Community

By CQ Staff

March 14, 2012 -- How good one’s health care is, how much it costs, and how easy it is to access can vary widely from community to community, according to a Commonwealth Fund report released Wednesday.

Fund officials say its Commission on a High Performance Health System measured how 306 local areas stack up on such health indicators as insurance coverage, preventive care, and mortality rates.

Major U.S. cities also showed wide disparities in many key measures of health care, with San Francisco and Seattle ranking among the top 75 local areas in the country, while Houston and Miami ranked in the bottom 75. The report includes an interactive map that compares cities and communities across the United States.

The authors say the low-performing areas can now only learn from the higher-performing ones but that if they do, it would translate into more people being insured and better health care overall.

According to the scorecard, 66 million people live in the lowest-performing local areas in the country. “If all local areas could do as well as the top performers, 30 million more adults and children would have health insurance, 1.3 million more elderly would receive safe or appropriate medications, and Medicare would save billions of dollars on preventable hospitalizations and readmissions,’’ Fund officials said.

The study found geographic patterns, ones that were predictable. It says local areas in the Northeast and Upper Midwest were most often ranked at the top, while local areas in the South, particularly the Gulf Coast and southern central states, tended to rank at the bottom on many measures.

“This first local scorecard provides a baseline for how health care systems are performing at the local level when it comes to the most essential functions, including whether people can get the health care they need, whether they receive timely preventive care and treatment, how healthy they are and how affordable health care is,” said Commonwealth Fund Senior Vice President Cathy Schoen, a coauthor of the report. “The scorecard is a tool for local health care leaders and policymakers that allows them to focus on where their health care systems fall short, learn from the best-performing areas, and target efforts to improve where they are needed most.”

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CBO Sees No 'Sharp Decline' in Employer Insurance Under Health Care Law

By Jane Norman, CQ HealthBeat Associate Editor

March 15, 2012 -- An analysis the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) issued Thursday says that most employers will continue to have an economic reason to offer health insurance to their workers after the health care law is implemented.

It says that a “sharp decline” in employment-based insurance as a result of the law is “unlikely,” and even if it occurred it “would not dramatically increase the cost” to the federal budget.

Whether or not many employers will drop their health insurance plans has been a major point of contention between the law’s supporters and opponents. Some business groups have warned that the costs and complications of the law (PL 111-148, PL 111-152) will cause companies to give up on covering their workers. A widely publicized survey by McKinsey & Co. in 2011 said 30 percent of employers would end their coverage. But that survey was criticized, and other analysts predict a smaller effect.

Also Thursday a new study by the Center for Studying Health System Change (HSC) said the job loss caused by the recession has accelerated a long-term trend of fewer Americans having employment-based health insurance. They cited a 10-percentage-point drop in the number of children and working-age adults with coverage through the workplace from 2007 to 2010.

The CBO issued updated projections earlier this week that said that about 3 million to 5 million fewer people will get health coverage through their employers in 2019 through 2022 compared to current law

“Some observers have expressed surprise that CBO and JCT have not expected a larger reduction in the number of people receiving employment-based health insurance” in light of the subsidies that will be offered under the law to consumers buying insurance through the health benefits exchanges, says the analysis.

The CBO/JCT estimates take account of the subsidies. But it also recognizes that the law leaves in place financial incentives for employers to offer coverage and creates new ones, the analysis says. In addition, even under the health care law’s coverage expansion features, many people will not be eligible for Medicaid, the Children’s Health Insurance Program or subsidies, it says.

However, CBO and JCT also note that despite the care the two forecasting agencies have taken to model possible outcomes, “there is clearly a tremendous amount of uncertainty about how employers and employees will respond” to the law.

The analysis, though, comes down on the side of no big shifts. On the basis of both economic theory and evidence, it’s clear that employers put together their compensation packages to attract the best workers at the lowest cost, the analysis says. The fact that many currently offer health insurance to their workers despite the high cost of premiums and rapid growth in costs “shows that many firms continue to find health insurance coverage to be a worthwhile element of their compensation packages,” the analysis says.

Moreover, wages received by workers are subject to individual and payroll taxes, but health insurance benefits generally are not taxed. And employment-based insurance will continue to receive a significant subsidy through the tax exclusion for employer-paid premiums, as well as tax preferences that allow employees to pay their premiums out of pre-tax income, the analysis says.

Two Republican lawmakers used the analysis as a way to reiterate their opposition to the health overhaul law.

“As nonpartisan analysts made clear today, millions of Americans will soon learn the hard way that Washington’s overreach into their health care decisions will result in sharp disruptions to their coverage and their care,’’ said House Budget Committee Chairman Paul D. Ryan, R-Wisc. And Senate Finance Committee ranking Republican Orrin G. Hatch of Utah said the CBO analysis “exposes more of the real costs of the President’s unconstitutional, deeply-flawed health spending law. . . This law keeps getting worse and worse; it needs to be repealed.”

Jane Norman can be reached at [email protected].

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Recession, Employer Trend Has Led to Decline in Workplace-Based Health Coverage, Study Says

By Dena Bunis, CQ HealthBeat Managing Editor

March 15, 2012 -- The enormous loss of jobs between 2007 and 2010 exacerbated a long-term trend of fewer Americans having employment-based health insurance. Those two factors have led to a 10-percentage-point drop in the number of children and working-age adults with coverage through the workplace, according to a new study released Thursday.

The study by the Center for Studying Health System Change (HSC) for the nonpartisan, nonprofit National Institute for Health Care Reform (NIHCR) found that the proportion of people younger than 65 with no workers in the family jumped 10 percentage points to 31.6 percent in 2010. And that was the key driver of the decline in employer health coverage, accounting for about three-quarters of the drop since 2007, according to findings from HSC’s 2010 Health Tracking Household Survey, a nationally representative survey with information on 13,595 non-elderly people.

But the decline in employer-based insurance coverage goes beyond people losing their jobs. Some workers forced to take part-time work didn’t then get access to employer-based insurance, and rising health costs have led to fewer companies offering coverage and fewer workers signing up as premiums and co-pays increased.

“What’s happened to employer-sponsored health insurance in recent years is akin to an acute illness aggravating a chronic condition,” said Chapin White, an HSC senior researcher, and coauthor of the study with HSC senior fellow James D. Reschovsky. “The acute illness—the sluggish economy and weak employment situation—likely will resolve at some point, but the underlying chronic condition—rising health care costs—likely will persist.”

“The core threat to employer health coverage is health care costs increasing faster than wages, which makes employer coverage unaffordable for a larger share of the workforce, particularly low-wage workers,” said a news release on the study. “For example, among children and working-age adults with incomes below 200 percent of poverty—$44,100 for a family of four in 2010—the proportion with employer coverage dropped from 42 percent in 2001 to 24 percent in 2010,” according to the researchers.

Not surprisingly, households that included a worker with a college degree and a higher income were less likely to experience a loss of employer-based insurance than those with a high school or lower level of education. In households headed by someone with a high school education or less, the share with employer health coverage declined from 47 percent to 36 percent between 2007 and 2010.

The size of the company someone works for also affected the likelihood that they got health coverage through work. Among companies with more than 100 workers, employer coverage enrollment declined by less than 2 percentage points. But in companies with fewer than 100 employees, the percentage with health coverage through the job declined by more than 5 percentage points.

The authors make the point that while the health care overhaul targets those people who are most likely to lose employer-based coverage—young people, low-wage workers and those employed by small businesses—“employer-sponsored insurance likely will continue to erode, with or without health reform,” especially for people in those categories.

Dena Bunis can be reached at [email protected].

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Medicaid Expansion Rule Aims for Vastly Simpler Enrollment Process

By John Reichard, CQ HealthBeat Editor

March 16, 2012 -- A final rule released Friday spells out the terms for the expanded Medicaid eligibility in 2014 under the health care law and requires “real-time” enrollment that documents income, citizenship, and other data without the applicant having to bring in paperwork.

The rule also collapses the many eligibility categories now in Medicaid into just four: adults, children, parents and pregnant women.

“I’ll guarantee you that Medicaid will look and feel like a very different program in 2014,” federal Medicaid director Cindy Mann told reporters on a telephone briefing.

The rule will make it much easier for states to run their Medicaid programs, she said. “We had overwhelmingly strong support from all stakeholders for the rule,” she said. It also will make a big difference for the many low-income Americans who now go without coverage, she added. “Think for a minute about a 55-year-old woman who works in a restaurant. Her kids have grown—left the home—she earns let’s say $12,000 a year. In most states, if she’s not getting affordable coverage through her workplace, she’s not going to be eligible for Medicaid even though she really has no options. The Affordable Care Act fills that gap by expanding eligibility to low-income adults for the first time in the program.”

The health care law extends Medicaid coverage to all individuals between ages 19 and 64 with incomes up to 133 percent of the federal poverty level. That’s $14,856 for an individual and $30,656 for a family based on the 2012 federal poverty level. (While the law specifies 133 percent, in practice it’s 138 percent since states disregard five percent of income in determining eligibility, Mann noted.)

Mann said that under the health law the application process will be completed “literally in real time.” As an example, she said an application filed online at nine in the morning would be processed and, if in order, approved an hour later.

Health and Human Services is simplifying this process for the states by serving as a single point of computer entry to federal data sources such as the Internal Revenue Service to determine income, the Social Security Administration to determine identity and the Department of Homeland Security to confirm legal status.

Under the health care law, the uninsured will obtain coverage through Medicaid or on insurance exchanges using tax credits to help them pay premiums. In many instances, people won’t know whether they should be applying for Medicaid or premium tax credits—or in the case of their children, for Medicaid or the Children’s Health Insurance Program (CHIP).

No matter, Mann said. Applicants will have to fill out just one application. They won’t have to know ahead of time whether they should apply to Medicaid, CHIP or insurances exchanges to get tax credits.

In response to comments on the proposed version of the rule, the final version provides two ways for exchanges to perform Medicaid-eligibility evaluations. They can determine themselves whether an applicant qualifies for Medicaid or make an initial determination of that and rely on state Medicaid and CHIP agencies for a final determination. If they choose the latter, applications have to be processed in “timely” fashion, Mann said.

When Medicaid expands, large numbers of uninsured people who qualify for the program based on current criteria but haven’t enrolled are expected to sign up for coverage. That is because of expanded outreach efforts and the requirement in the health law that individuals without coverage pay penalties.

But those qualifying for coverage based on current criteria, the states will get current federal matching rates, not the enhanced federal matching rate provided for those newly eligible for Medicaid under the health law. In 2014, 2015, and 2016, the federal government will pay 100 percent of the Medicaid costs of the newly eligible under the health law; then the federal percentage gradually drops so that in 2020 it’s 90 percent, where it stays.

Matt Salo, executive director of the National Association of Medicaid Directors, said in an email that “the provision about how to conveniently calculate the regular and enhanced match rates for enrollees is not included in this regulation. The Centers for Medicare and Medicaid Services (CMS) anticipates a final rule on these provisions around October 2012. We understand why it takes so long, because this is extraordinarily complicated. But the longer any piece takes, the more it stretches already tight time frames” for the health law. That’s especially the case “since many state agencies are or soon will be preparing budgets for the next fiscal year.”

Salo added that state Medicaid agencies will need flexibility on the deadlines for determining final Medicaid eligibility when they do it rather than the exchanges.

Separately, CMS released regulations Friday establishing a time frame by which participants in the

Early Retiree Reinsurance Program must use reimbursement funds; and standards relating to reinsurance, risk corridors and risk adjustment to eliminate incentives for insurers to avoid covering people in poor health.

John Reichard can be reached at j[email protected].

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MedPAC Report Themes: Equitable Pay—and SGR Overhaul Map

By John Reichard, CQ HealthBeat Editor

March 15, 2012 -- Medicare Payment Advisory Commission (MedPAC) Executive Director Mark Miller recapped the group’s annual report to Congress on Thursday, focusing on what to do with the Medicare physician payment formula, equalizing payments for specific services, and how to pay skilled nursing facilities.

It’s tempting to ignore the annual March 15 report since so many of its recommendations are publicized at the start of the year. But looking at the report as a whole is a reminder of the major themes in the work of the influential commission. It’s also a reminder of overlooked findings that remain highly relevant to the work of Congress—not the least of which is that these Medicare experts have laid out a detailed, relatively low-cost plan to accomplish the seemingly impossible task of overhauling the “sustainable growth rate” (SGR) physician payment formula.

Miller said payment recommendations in the report would generate savings of $60 billion to $65 billion over 10 years if adopted.

The commission also specified cuts totaling $219 billion that could be made to offset the costs of overhauling the SGR. These included not only the MedPAC recommendations but also potential cuts identified by such entities as the Office of the Inspector General at the Department of Health and Human Services and the Congressional Budget Office (CBO).

The SGR proposal by MedPAC brings down the $300 billion price tag cited by the CBO as the cost of an SGR overhaul by cutting payments to some physicians, arguably for better-paid doctors who can more easily afford them.

Thus, in the first three years of the 10-year plan, specialists would take annual cuts of 5 to 6 percent. Payment rates to primary-care doctors would remain the same over the whole 10 years. That gets the price tag down to a still huge, but more manageable, $200 billion.

Miller said he’s not aware of any legislative proposal in Congress that incorporates the MedPAC plan. It’s “hard medicine,” he acknowledged. On the other hand, many lawmakers have balked at other potential payment offsets, such as savings from winding down the wars in Afghanistan and Iraq.

Miller also spoke of aligning payment rates across health care settings. Because Medicare fee-for-service payment systems were developed independently, “the program can pay very different amounts for similar services,” notes a MedPAC news release on the March report. “For example, Medicare pays about 80 percent more for a 15-minute evaluation and management office visit provided in a hospital outpatient department than in a freestanding physician’s office.”

One of the reasons so many hospitals are buying physician practices is that they can generate more revenue because of these higher rates, some analysts say. The doctor’s office can charge more for the very same service if it is hospital-owned.

MedPAC recommends equalizing payments over three years while limiting reductions for hospital outpatient departments that serve a large number of low-income patients.

In the case of skilled nursing facilities (SNFs), MedPAC recommends no increase in payments in fiscal 2013. It calls for “rebasing” of payments in 2014 that would lower payment rates by 4 percent that year.

The panel wants rates rebased because it says Medicare previously overpaid SNFs as a result of changes in industry bill-coding behavior. Because of these behavior changes, SNF profit margins on Medicare patients rose from 18.5 percent in 2010 to 24.2 percent in 2011, MedPAC says.

But the rates were too high to begin with before the coding changes, which is why MedPAC wants the rebasing, Miller said. SNF operators argue that Medicare rates should not be cut because they are underpaid by Medicaid. But overall profit margins taking all payers into account averaged 3.6 percent in 2010, according to the MedPAC report, up from 3.5 percent in 2009.

John Rother, president of the National Coalition on Health Care, called several ideas in the report “particularly promising” for controlling costs and improving quality. They include “provider payment reforms that would repeal the SGR formula, encourage accountable care organizations, and reward the primary care providers who will be crucial for lower costs and better care.”

In addition, he praised recommendations he said would discourage unnecessary hospitalizations of skilled nursing facility patients, change the design of Medicare benefits to encourage the use of quality generics, and financially reward outpatient surgical centers that provide high quality care. The coalition represents some 80 organizations, including medical societies, businesses, and unions.

John Reichard can be reached at

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