By Jane Norman, CQ HealthBeat Associate Editor

March 16, 2011 -- The word "waiver" does not appear in the section of the health care overhaul law that bans insurers from imposing lifetime or annual limits on benefits.

But the 1,040 waivers covering 2.6 million people—granted by the Department of Health and Human Services for so-called "mini-med" plans—are an example of an unexpected development and a source of controversy in the rollout of the first year of the landmark law. While any major piece of legislation will bring surprises as it's put in place, the overhaul measure—which never went through a final scrubbing or conference committee—has encountered more than its share of turmoil in its first year of life.

Other somewhat surprising events that have shaped the implementation debate included loud protests by cash-strapped states over Medicaid maintenance-of-effort requirements, the difficulties of fashioning a financially stable program for long-term care and a Republican takeover of the House that accelerated the drive for repeal. Then there's been the rapidly expanding court battle over the law's constitutionality.

On the other hand, the law's extension of parents' health insurance to young adults—an addition to the bill overshadowed at the time by larger battles—has proven unexpectedly popular and helped boost the overall appeal of the overhaul. Enrollment in Medicare Advantage plans went up despite cuts to the program and warnings of its demise. And Medicare beneficiaries flocked to physicians' offices to take advantage of free annual wellness visits authorized in the law (PL 111-148, PL 111-152).

To some extent, such surprises are to be expected, observers say. "The law of unintended consequences is always a big factor in any bill," says Mark Hayes, former health policy director and chief health counsel for Republicans on the Senate Finance Committee. "It's impossible for any group of people to think of everything, and foresee everything."

When Republicans wrote the 2003 law (PL 108-173) that created the Medicare prescription drug benefit, many issues emerged associated with the quick transition to a major new government program, Hayes recalls. "That first couple of months it looked like the wheels would fall off," he says.

"Health care reform is certainly no different, and the scope is so much greater it's really not surprising at all that some issues are coming up," added Hayes, who's now with the law firm GreenbergTraurig.

Lots of waivers granted
Among them are the waivers, issued by HHS so that businesses, unions and other organizations don't drop minimal "mini-med" health care plans used to cover mostly low-wage, seasonal and part-time workers. The law bans lifetime limits on all health insurance policies, beginning Sept. 23, 2010, and annual limits as of Jan. 1, 2014, for any plan that's not "grandfathered."

Steve Larsen, director of the Center for Consumer Information and Insurance Oversight (CCIIO) at the Centers for Medicare and Medicaid Services (CMS), told a House panel that the word "waiver" might not be in that particular section of the law but that Congress recognized there should be a "transition period" for plans that need a bridge to 2014. Without such a bridge, "immediate compliance could cause disruption of this coverage," he said.

The law allows HHS to set a "restricted" annual limit on benefits prior to 2014 and gives the agency the ability to "ensure that access to needed services is made available with a minimal impact on premiums."

In June 2010, HHS published interim final regulations that set those new minimum annual benefit limits at $750,000 beginning Sept. 23, 2010, $1.25 million beginning Sept. 23, 2011, and $2 million beginning Sept. 23, 2012 through Jan. 1, 2014. The regulations also allowed a program to begin in which plans could apply for one-year waivers from the limits. Guidance on how to apply for a waiver was posted on the HHS website in September.

Larsen said applications came in at a relatively steady rate at first but then many more were received in December, since most plan years begin Jan. 1. As of February, Larsen said HHS has approved 94 percent of the applications received, or 1,040. Those waivers now cover 2.6 million people out of the 160 million who have employer-sponsored health coverage, or less than 2 percent of the total. "A very small percentage," Larsen said. Asked after the hearing how many more waivers are expected in 2011, he said he doesn't know, though "it's trailing off."

Democrats said the transition period was needed and expected, and praised the development of the waivers as an example of good governance. "No one really expected this sweeping and monumental change to be fully implemented overnight," said Illinois Democrat Danny K. Davis, ranking member of the House Oversight and Government Reform subcommittee that held the hearing.

Far from indicating weakness in the law, the waivers "reflect its strength in matching requirements with capacity," said witness Judith Feder, professor of public policy at Georgetown University and a senior fellow at the liberal-leaning Center for American Progress.

But Republican Trey Gowdy of South Carolina, chairman of the subcommittee, said the waiver process exposed the "myth" that people could keep their health plans under the law. He called the waiver process an "amorphous process shrouded in ambiguity, and understood by few." Other Republicans questioned Larsen on how well the availability of the waivers has been publicized and whether special consideration was given to labor unions, which he denied.

If nothing else, the exceptions have given Republicans another buzz word to use as they attack the law. One state has been approved and four states are seeking waivers—although HHS prefers the word "adjustment" in this case—to medical loss ratio rules that require insurance companies to spend 80 percent of premiums in individual and small group plans for health care and quality improvements. The wave of waivers prompted Republican Rep. Mike Rogers of Michigan last week to introduce a bill that would allow all individuals and small businesses to apply for waivers from mandates in the law. Everyone else is getting them, he said, in justifying the need for the measure.

Governors blast Medicaid rules
Other provisions have also gained unexpected prominence. The overhaul's requirement that states maintain their current Medicaid standards has produced many complaints from governors. Even President Obama recently acknowledged in remarks to the National Governors Association that more flexibility is needed.

Dean Rosen, former chief health adviser to Senate Majority Leader Bill Frist, says he's been "a little bit surprised the state issues have bubbled up so quickly." The law came as states' budgets are continuing to reel from the effects of the recession, says Rosen, who's now with the firm Mehlman Vogel Castagnetti. Given those influences, "it's a little surprising to me that Congress didn't foresee the pressure it was placing on states in the short term," he says.

Another program established in the law is facing revision even before its rules are written. The Community Living Assistance Services and Supports (CLASS) Act is intended to be an insurance program for all Americans for long-term care. But HHS Secretary Kathleen Sebelius said recently that she has the authority to make changes that would affect premiums, eligibility restrictions and penalties for people who drop out of the program.

Politically, those implementing the law faced a much different landscape in Congress and in the states after the November election than could have been expected when Congress approved it in March. Republicans took over control of the House and launched a drive for repeal that has included hugely increased oversight over implementation and many requests for Sebelius and other administration officials to appear for hearings. In the courts, more than 20 legal challenges were filed against the measure and several have already moved with surprising speed to the point where oral arguments are scheduled in appeals courts.

What People Like in Law
Then there are the revelations that the administration is eager to publicize. Sebelius said at a Senate Finance Committee hearing that HHS is seeing an unexpectedly large number of Medicare beneficiaries taking advantage of new free annual wellness visits. Contrary to projections, Sebelius said that Medicare Advantage enrollment is up 6 percent, and that average premiums are down by 6 percent compared with 2010, while benefit and cost-sharing levels remain about the same.

A provision in the law that allows young adults to remain on their parents' health policies until age 26 received little attention initially. But the administration widely touted its use for families. Polls have found wide public approval of that piece of the measure even while the public has doubts about the mandate that all Americans have insurance.

Perhaps as surprising as anything are recent findings that many Americans think the law already has been repealed when in fact only the House has passed a repeal bill. The Kaiser Family Foundation February poll found that 22 percent of those surveyed think the law is dead and gone and 26 percent are unsure of its status, which foundation CEO Drew Altman called a "doozy" of a revelation.

"As a part-time pollster I should not be too surprised by these results. But as someone who once taught a course called "The Policymaking Process" in a political science department at a major university, it is a little jarring to learn that almost half the American people do not know the difference between a symbolic repeal vote in the House and the actual repeal of the law," Altman wrote in a column accompanying the poll's findings.

By Jane Norman, CQ HealthBeat Associate Editor

March 16, 2011 -- Annual wellness visits now fully covered under Medicare have proven popular, with more than 150,000 Americans taking advantage of the new benefit as of late February, according to statistics provided to CQ HealthBeat by the Department of Health and Human Services.

HHS Secretary Kathleen Sebelius will tell members of the Senate Finance Committee that prevention is one of the key elements of the health care law, which will be one-year-old next week. And she will say the annual wellness visits are an example of early success. Until enactment of the law (PL 111-148, PL 111-152), seniors and people with disabilities received a one-time free visit with a physician when they joined the Medicare Part B program but had to pay for annual visits after that.

The uptick in the number of people accessing that wellness benefit also means cost savings, stressed administration officials, speaking on background. Peer-reviewed studies have shown that there are significant cost savings in the long run if chronic diseases like hypertension are detected early, or if diabetes is found and treated before it becomes debilitating, they said. In addition, immunizations for pneumococcal disease are under used by the Medicare population even though seniors die at the highest rate from such infections, they added.

Between Jan. 1 and Feb. 23 there were 151,764 beneficiaries who participated in annual wellness visits with physicians, HHS officials say. That adds up to nearly 2,800 seniors and people with disabilities per day seeing a doctor, administration officials said.

Costs for such wellness assessments normally would be $160 for a first visit and $105 for subsequent visits, officials said. Now the visit is free of charge. During the appointment, the physician and patient are supposed to develop or update personal prevention plans taking into account medical and family history, detection of any impairments, potential risk factors from depression and review of the patient's functioning ability and level of safety. Doctors can also give their patients advice on daily health habits and refer patients to other agencies or services for counseling or programs.

Officials said that Medicare coverage of the annual visit also means that employer-sponsored retiree programs will save money because they don't have to pay for the visits. States will also save money if they have covered the visits for beneficiaries in the past to fill in gaps, and seniors will save money if they've been buying Medigap coverage that pays for such visits.

By Dena Bunis, CQ HealthBeat Managing Editor

March 16, 2011 -- With the first anniversary of the health overhaul law just a week away, the Commonwealth Fund released the results of a new health insurance survey that documents how the recession has left millions of Americans without coverage. The survey also says the new law would eventually bring relief to such families.

According to the survey, an estimated 52 million American adults were uninsured at some point during 2010, up from 38 million in 2001. The effects of the recession were clear in the numbers.

Among respondents to the survey who said someone in the family had lost a job in the past two years, nearly half—47 percent—said that either they or their spouse had received health benefits through the job that was lost. And of those who lost their health insurance because they lost their job, 47 percent became uninsured. A quarter was able to go sign on to a spouse's health benefits, and 14 percent continued their coverage through COBRA.

Karen Davis, president of The Commonwealth Fund, a nonprofit health policy research group, said that even with the 65 percent government subsidy of COBRA premiums, "the 35 percent the unemployed person has to pay is too large a share to pay with their limited income.'' And, she said in a conference call with reporters, many people laid off from smaller firms were not eligible for COBRA.

"People are facing real problems with their budgets,'' said Sara Collins, vice president of the Fund and lead author of the report. "Health care is something they're not able to afford given the rest of the demands on their budget when they lose their job.''

Most of the unemployed who searched for coverage had to look in the individual market, Commonwealth officials said, and an estimated 11 million adults said they found it difficult or impossible to find a plan that had the benefits they needed. And 16 million couldn't find a plan they could afford.

When implemented in 2014, the report said, the health law would help such workers get coverage through the state-based health exchanges.

Additionally, the survey found that it wasn't just uninsured Americans who are having problems.

"Americans with health insurance had higher deductibles and consequently greater exposure to medical costs,'' the report says. "And millions were struggling to pay medical bills, facing cost-related barriers to getting the care they need, or skipping or delaying needed care, including prescription medications, because of cost."

Thirty-two percent of working-age adults—49 million—spent 10 percent or more of their incomes on out-of-pocket costs and premiums in 2010, up from 21 percent, or 31 million adults, in 2001.

"Even with insurance coverage, with today's limits on coverage and high deductibles, it can quickly drive families into bankruptcy,'' Davis said.

Again Commonwealth officials pointed to the premium subsidies and minimum benefit standards that will be in place in the exchanges that they said will help Americans stave off medical debt and bankruptcy.

This is the fifth biennial health insurance survey the fund has done. Princeton Survey Research Associates International conducted the 25-minute telephone interviews from July 14 to Nov. 30, 2010. They surveyed 4,005 adults. The survey has a margin of error of plus or minus 1.9 percentage points.

By Jane Norman, CQ HealthBeat Associate Editor

March 17, 2011 -- A top Health and Human Services (HHS) official pledged at a House hearing that a long-term-care program included in the health overhaul law won't be launched unless it is financially sustainable.

Kathy Greenlee, assistant secretary for aging at HHS, made that promise after House Republicans raised the possibility that premiums could top $240 a month and expressed disbelief that the program will ever work.

Greenlee also defended the $120 million requested by the Obama administration in fiscal 2012 for implementing the Community Living Assistance Services and Supports (CLASS) program, saying $94 million of it will be used for public outreach and education to bring in the kind of broad-based enrollment that the insurance program will need to succeed.

HHS Secretary Kathleen Sebelius had said earlier this year that the department was working to revamp the program, a rare example of an item in the health care law that the administration has declared unworkable in its current form. A presidential fiscal commission in December recommended that it be changed or repealed. The Congressional Budget Office has estimated that by 2030 benefits paid out in the program likely will exceed premium payments.

In another signal that the program is in trouble, three House members introduced a bipartisan bill to repeal it. The measure was written by Republicans Charles Boustany Jr. of Louisiana and Phil Gingrey of Georgia, and Democrat Dan Lipinski of Illinois.

But Greenlee told the Energy and Commerce Subcommittee on Health that given the critical unmet needs when it comes to long-term care, "we should not repeal CLASS until we have made every effort to reform the program." Under the law, CLASS is supposed to go into effect in 2012.

The initiative also enjoys passionate support from advocates for people with disabilities. Those supporters—who say the program can be changed so it is effective—packed the hearing room to applaud Democrats who spoke in favor of the program. The powerful senior lobby AARP also is a backer, and polls have found that a majority of the public supports retaining the program.

"We're trying to do something that's never been done before and so naturally there's going to be some kinks in it," said Rep. Frank Pallone, D-N.J.

The CLASS insurance program included in the health care law (PL 111-148, PL 111-152) was the longtime vision of the late Sen. Edward M. Kennedy, D-Mass. It's voluntary and intended as a supplement to provide assistance to the elderly and disabled, rather than a comprehensive benefit that would foot the entire bill for care in a nursing home or assisted living facility. The cash benefit projected under the law is $50 a day, indexed for inflation.

Employers who participate would offer it to workers, who would be automatically enrolled and pay premiums unless they choose to opt out. It would be an alternative to the current system of long-term-care insurance offered by private carriers but bought by just 8 to 10 percent of Americans, though HHS says one in six people over the age of 65 will spend more than $100,000 on long-term care. Many will spend down their assets to qualify for Medicaid.

But financial questions from both Democrats as well as Republicans have long dogged the program. And actuaries have warned that adverse selection will occur because people could opt out of it until they are sick. Anyone is allowed to take part in the program, regardless of health history and the benefits, can be paid out for a lifetime.

Rep. Joe Pitts, chairman of the Health Subcommittee, said Center for Medicare and Medicaid Services actuaries have estimated the premium could run as high as $240 a month or more to keep the program afloat. He asked Greenlee if that's possible. She replied that a premium amount has not yet been set. Three plans for the program's structure will be submitted to an independent advisory council and then the agency will publish its initial assessment of those plans. There may or may not be pricing information at that point, she said.

"We are committing to making reforms to the program so that we can hit the financial targets," she said. "We don't intend to implement the program without those changes."

Rep. Michael C. Burgess, R-Texas, said that he bought a private long-term-care policy at the suggestion of his mother, and more could be done by the federal government to encourage the purchase of private policies. "I'm not saying it would solve the entire problem," he said, but "it always seems like the default position is to expand public programs."

Republicans also were critical of the way the program is set up because premiums are collected for five years before any benefits are paid out. The effect is to produce $80 billion in revenue to offset the costs of the health care law, Pitts said. And while the law bans taxpayer funds from being used to pay for shortfalls in the program, "Congress can always pass a new law to allow the practice," Pitts said.

But William L. Minnix, Jr., president and CEO of LeadingAge, an association of nonprofits that deal with the aging, said that the law requires close monitoring and actions to correct any problems before a crisis, including temporary moratoriums on new enrollees or premium increases.

By John Reichard, CQ HealthBeat Editor

March 17, 2011 -- State officials from opposite ends of the political spectrum expressed strong interest in establishing their own health insurance exchanges, one of the few key areas of the health overhaul law sparking such bipartisanship.

But at a Senate committee hearing a Utah lawmaker instrumental in creating that state's exchange—which Republicans often cite as a model—said that his state's version has yet to pass muster with the Department of Health and Human Services (HHS).

Key policy differences remain between Republicans and Democrats over exchange design. However, every state but Alaska applied for and received grant money to plan the creation of insurance marketplaces. Sandy Praeger, speaking on behalf of the National Association of Insurance Commissioners (NAIC) reinforced the popularity of the exchange concept in her testimony before the Senate Health, Education, Labor and Pensions Committee.

"I just think this is a step in the right direction in getting everybody covered," said Praeger, Kansas' insurance commissioner. "It's not perfect. I think we all know that. And there are still issues that are going to have to be resolved." But the critical issue, she said, is controlling costs, and exchanges have the potential to do that.

"I'm a firm believer that you can improve quality and lower costs. They go hand in hand," Praeger added. If exchanges operating under a sound regulatory scheme take away the ability of companies to avoid bad insurance risks, "then the way they manage their profitability, is by making sure that the right care is delivered." Praeger said.

David Clark, a member of Utah's state House, voiced frustration, however, with the health law and the Obama administration. Clark noted that HHS guidance on exchange creation posits Utah and Massachusetts as "bookends" illustrating the flexibility states have under the law. Utah is often called a lean, less regulatory model and Massachusetts as more regulatory and complex. But Clark said the Massachusetts law is "grandfathered" under the law yet Utah "has to prove its worth."

The Utah exchange has yet to develop a number of functions that are required under the health care law (PL 111-148, PL 111-152). In addition, that exchange does not mandate a set of essential benefits that must be offered in order for a plan to participate. Thanks to Utah's low regulatory hurdles the exchange offers small businesses in the state the choice of some 100 plans.

"I'm very concerned about the impact this law will have on Utah's ability to continue to implement health insurance reforms in a manner that fits within the state's goals, said Sen. Orrin B. Hatch, R-Utah. "For example, if Utah were to apply to have their exchange certified today, Secretary [Kathleen] Sebelius would have to deny their application because of the onerous and costly mandates the law places on state-based exchanges. The Utah exchange is a true free-enterprise marketplace, but unfortunately the freedom that it affords does not adhere to the president's health care agenda."

The health law's requirement for a package of essential benefits is needed to spur plans to compete directly on the cost and quality of care, not on cutting benefits to avoid bad risks, said Joshua Sharfstein, secretary of the Maryland Department of Health and Mental Hygiene.

Praeger emphasized that states are eagerly awaiting a determination by HHS on what the essential benefits package will consist of. Once that's known it will be possible to gauge the level of insurer participation in exchanges and the choices consumers will have, she said.

Clark noted another feature of the Utah exchange that he's anxious to preserve: a "defined contribution" model that lets employers simply pick an amount of money they want to spend on a plan and get as much coverage as that amount will pay for.

"A defined health benefit left businesses with unpredictable and ever-escalating costs," the Utah state lawmaker testified. "Through access to Utah's new defined contribution market, employers can manage and contain their health benefit expenditures." Clark noted that 20 percent of businesses choosing the defined contribution model did not previously cover their workers. "Thus we can safely assume that many of those now covered through the exchange were previously counted among our uninsured population," he said.

But because the health law defines minimum benefits, it appears that a defined contribution option would not meet the requirements of the health law.

While these policy differences between Democrats and Republicans are major, state officials in both parties have nonetheless supported moving to create exchanges. But there are signs that even the broad concept of exchanges may become controversial. The Atlanta Journal-Constitution reported that Gov. Nathan Deal, R-Ga., who as a congressman opposed the law, is postponing legislation planning the state's exchange because of tea party protests that he is adding "Obamacare."

By John Reichard, CQ HealthBeat Editor

March 15, 2011 -- Warning that access to doctors in Medicare may become imperiled, the head of a key Medicare advisory panel said that he's hoping to have final recommendations ready for Congress by October on overhauling the program's troubled doctor payment system.

But given the enormous price tag of a complete overhaul—several hundred billion dollars over a decade—Congress will likely put off a permanent solution once again at the end of the year in favor of a less costly, short-term fix.

Although it appeared a few years ago that both Democrats and Republicans were ready to shove the costs of a comprehensive overhaul onto the deficit, the rise of tea party activists makes that unlikely any time soon. The excuse at the end of this year for another short-term fix may be that the issue will be handled as part of eventual legislation overhauling the Medicare entitlement.

Legislation blocking cuts under the current "Sustainable Growth Rate" (SGR) doctor payment formula expires at the end of this year. Without new legislation to block the impact of the SGR, physicians face a 29.5 percent cut in payments on January 1, 2012. The formula sets a yearly spending growth target for Medicare spending on doctor care, but the actual outlays routinely exceed the target. That forces cuts in doctor payment rates in future years to recoup amounts exceeding the target.

Glenn Hackbarth, chairman of the Medicare Payment Advisory Commission (MedPAC), told the House Ways and Means Health Subcommittee that the situation is becoming dire.
"For a long time I've been able to sit before the subcommittee and say, 'Yes, SGR is a problem but we don't see an imminent threat to access.' We think we're getting closer to that tipping point. And so we are looking at options for potentially addressing that."

Hackbarth emphasized that the commission does not see widespread evidence of an access problem right now. "But our concern is that the repeated difficult process of trying to avert large-scale cuts in physician payments, and of doing that over and over, sometimes multiple times in the same year . . . is undermining both physician and beneficiary confidence in the Medicare program," he said.

This won't be the first crack at a MedPAC solution to the SGR. In 2007 it released a report on the issue but could not achieve consensus on a solution.

"Whether I can get the consensus within MedPAC I won't know until we're further into the process, " Hackbarth told Subcommittee Chairman Wally Herger, R-Calif. "But that's the mind-set I have."

Hackbarth said in so many words that a complete overhaul of the formula is going to have a big price tag. " I don't think there is a rational policy option that is going to make that number go away," he said. "Everybody in this room, the CMS actuary, the Medicare trustees—everybody—knows that we're going to spend more than the SGR says we will. The only question now is whether we are going to spend more by making last-minute adjustments, more money on the existing payment system, or whether we're going to spend more strategically to achieve important goals for the Medicare program."

"I'm sure you know this is a bipartisan, major concern," Herger told Hackbarth. Herger said after the hearing that the goal is to move legislation modifying the SGR through Congress this year. Hackbarth said that a panel report due in June may give hints as to the nature of upcoming doctor payment recommendations.

The formal purpose of the hearing was to receive MedPAC's annual March report on payment recommendations for fiscal 2012. The report recommends payment hikes of 1 percent or none at all as lawmakers confront tough budgetary times.

MedPAC suggested 1 percent increases for inpatient and outpatient hospital care, doctors, dialysis facilities and hospice programs. And it said there should be no payment increase in basic rates paid to long-term care hospitals, home health agencies, skilled nursing facilities and inpatient rehabilitation facilities.

Fraud was also on the mind of commissioners. They recommended a closer review of home health care in counties with high use rates, as well as an HHS inspector general investigation of financial relationships between long-term care facilities and hospice programs to determine if there are inappropriate incentives to admit patients to hospice programs.