NOVEMBER 17, 2005 -- Centers for Medicare and Medicaid Services (CMS) Administrator Mark B. McClellan on Thursday uttered the words physician lobbyists have been laboring for weeks to get him to say—that the Bush administration will support legislation replacing scheduled cuts to Medicare physician payments with increases in 2006 and 2007.

But now Congress will have to scramble over the next few weeks to find the bucks to pay for it—up to $20 billion—because CMS won't help pay for the increases administratively. And in the process, lawmakers will have to fend off other lobbyists for hospitals, home healthcare agencies, and other healthcare sectors who don't want the money to come out of the hides of their clients.

McClellan's exact words, spoken in testimony before the House Ways and Means Health Subcommittee, tied support for a two-year payment boost to the adoption of a quality-based payment system. "As the budget reconciliation process moves forward, the administration will work with the Congress on a fully offset provision to address the negative physician update for 2006 and 2007 with differential updates for physicians who report valid consensus-based quality measures," he said.

Every bit of McClellan's jargon-laden statement carried meaning, and not just for doctors, but for health care broadly. Including the fix in the budget reconciliation bill means it would not be subject to a filibuster in the Senate.

"Fully offset" means the costs will have to be balanced with cuts elsewhere in Medicare or Medicaid, with hospitals and home health agency payments seen as particularly vulnerable. The term also means that, in the administration's view, the physician payment fix should not hike overall Medicare spending, which in turn can drive up the Part B premiums seniors have deducted from their Social Security checks.

"Negative physician update" refers to a scheduled 4.4 percent cut in 2006 to doctor payments, with similarly large cuts also scheduled for 2007 and several years thereafter unless Congress intervenes.

"Differential updates" means doctors will get a bigger increase if they report data on the quality of their care, a smaller one if they don't—another big step toward shifting Medicare to a system that pays providers more if they deliver higher quality care. That part of the McClellan statement likely grated on the ears of doctors, however, because they oppose a switch to "pay-for-performance" unless the Sustainable Growth Rate (SGR) formula generating payment cuts over the next seven years is scrapped entirely. And the two-year plan endorsed by the administration would not get rid of the SGR formula. Rather, it would merely prevent it from taking effect for two years. Doctors insist they should not have to incur the expense of information technology to gather and report data on the quality of their care as long as big cuts are still hanging over their heads for the 2008–2012 period under the SGR.

"Valid consensus-based quality measures" means a permanent government-directed process goes into effect in which an ever growing number of "performance measures" dictate how much providers are paid.

To supporters, that means more efficient care and healthier beneficiaries, but to some doctors at least, it means more administrative data-gathering burdens and more government meddling, even though measures are supposed to come out of a process of building consensus with physicians.

Subcommittee members greeted McClellan's words with predictions that Congress would likely go along with a short-term fix, despite their exasperation with its high cost and the failure it would represent to tackle the underlying cause of the multiyear cuts, the SGR formula.

Energy and Commerce Committee Chairman Joe L. Barton, R-Texas, complained that "we've dumped money into short-term fixes, which only exacerbated the problem. This only increased the total costs of reform and delayed the inevitable day of reckoning."

Under the formula, Medicare sets a target every year for its spending on physician care, and cuts payments the following year if actual spending exceeds the target, as a way to keep doctors from ordering too many tests, office visits, and procedures.

Because spending volume is growing by leaps and bounds every year, doctors are lined up for a series of cuts—unfair, they say, because their costs are rising and the care they provide has value.

Physicians urged CMS to make technical changes to the SGR formula that would sharply reduce the cost of legislation to scrap it. But CMS recently stated after months of reviewing the matter that it does not have the statutory authority.

The decision means Congress has to pay up for changing physician payment, even if it only delays the impact of the SGR. Subcommittee Democrats on Thursday faulted CMS for failing to make the technical formula changes, suggesting that the failure do so sets up doctors in the traditional fee-for-service side of Medicare for chronic underpayment, while HMOs, in the view of Democrats, are overpaid by Medicare.

Rep. John D. Dingell, D-Mich., said the administration is pursuing a strategy of ending traditional Medicare in order to benefit the insurance industry.

"A continued cut in payments to doctors in the fee-for-service program will only gladden those who wish to turn seniors over to private insurance companies," he said.

NOVEMBER 14, 2005 -- The Centers for Medicare and Medicaid Services (CMS) is awarding $8.85 million to hospitals that showed measurable improvements during the first year of the CMS/Premier Hospital Quality Incentive Demonstration, officials said Monday.

The pay-for-performance demonstration is the first time Medicare has awarded financial bonuses linked to the quality of care provided, CMS said in a news release. The demonstration also provides statistical evidence that the model works to improve the quality of health care, agency officials said.

"We are seeing that pay-for-performance works," CMS Administrator Mark B. McClellan said in a statement. "We are seeing increased quality of care for patients, which will mean fewer costly complications—exactly what we should be paying for in Medicare."

In the initial year of the three-year demonstration, the quality of care delivered improved in five areas: patients suffering from heart attack, heart failure, pneumonia, coronary artery bypass graft, and hip and knee replacement.

The average improvement across the clinical areas was 6.6 percent as measured by 33 nationally standardized and widely accepted quality indicators, according to Premier Inc., a nationwide alliance of not-for-profit hospital facilities and healthcare systems.

According to Premier, approximately 235 heart attack patients were saved as a result of improved quality.

Pay-for-performance or "P4P" pays a hospital or other health provider more for higher scores on specific measures of performance, such as the percentage of heart attack patients who have been prescribed lifesaving beta-blocker drug therapy when they leave the hospital. Federal officials and policy wonks are touting pay-for-performance as a way to improve medical care for Medicare beneficiaries and spend federal health care dollars efficiently.

Improvement in evidence-based quality measures is expected to save Medicare money over time because of the demonstrated relationship to improved patient health, fewer complications, and fewer hospital readmissions.

As part of the CMS/Premier demo, hospitals in the top 10 percent for a given condition were given a 2 percent bonus on their Medicare payments for that condition. Hospitals in the second 10 percent were given a 1 percent bonus.

Premier President and Chief Executive Officer Richard Norling said the findings, compiled from data gathered from more than 260 hospitals, "clearly indicate" that pay-for-performance programs improve the quality of care delivered in hospitals.

The largest award, $326,000, will go to Hackensack University Medical Center in New Jersey for care of patients with coronary artery bypass graft surgical procedures. The second largest award, $249,999, will be given to the Bone and Joint Hospital in Oklahoma City, Okla., for care of patients who received hip and knee replacement procedures.

NOVEMBER 18, 2005 -- The House passed a $49.9 billion spending cut bill early Friday morning, with a visibly relieved Republican leadership team corralling just enough moderates to support a package of cuts to entitlement programs such as Medicaid, food stamps, and student loans.

The bill (HR 4241) passed 217–215 at 1:42 a.m., after Mark Kennedy of Minnesota and Energy and Commerce Chairman Joe L. Barton of Texas voted at the very end to put it over the top.

No Democrats voted for it.

GOP leaders agreed to a number of demands late Thursday to win over the votes of GOP moderates such as New York Rep. Sherwood Boehlert, who had been deriding the package as a recipe for the party losing its majority in the House, and Delaware's Michael N. Castle.

A number of other moderates also came on board after extracting promises that their concerns would be taken up in the upcoming conference with the Senate, which passed a far different $35 billion spending cut plan (S 1932).

House GOP leaders agreed to modify cuts to food stamps and make slight changes to other provisions late Thursday.

Boehlert said shortly after 9 p.m. that he was promised that funding to revive an expired milk subsidy would be included during the conference with the Senate, along with additional home heating subsidies for the poor beyond the $1 billion included in the House bill. "Moderates feel we have been heard, we have been listened to," he said.

Steven C. LaTourette of Ohio switched his vote from red to green after being whipped by leadership.

"As lousy as I thought this bill was, I am in the majority and it's my responsibility to help the majority govern," LaTourette explained following the vote. He said he was offered nothing in exchange for his support.

Democrats harshly criticized the plan as part of a two-step budget strategy including tax cuts that would expand the deficit. Mississippi's Gene Taylor, who lost his home in Hurricane Katrina, ripped the idea of slicing programs for the poor to pay for emergency hurricane relief while cutting taxes in companion legislation.

"This is the cruelest lie of all, that the only way you can help people who have lost everything is by hurting somebody else," Taylor said.

Republican leaders, however, argued that they were only modestly slowing the growth of mandatory programs that increase every year on autopilot by cutting waste and abuse.

"You will listen to debate tonight that will sound like we are eliminating half of the federal government," said Budget Chairman Jim Nussle, R-Iowa. He said the cuts amount to less than one-half of 1 percent of federal spending over the next five years.

Conference Battle Looms
Passage of the budget bill was a hard-fought victory for the House leadership team, which has struggled for the past two months to unite the moderate and conservative wings of the party. But the celebration could be short-lived.

The Senate's $35 billion package of cuts carries far more sweeteners and fewer cuts to programs for the poor. The Senate plan also would make significant changes to the Medicare program, which the House version does not touch.

Senate leaders and the White House hope to include a provision in the final bill that would open Alaska's Arctic National Wildlife Refuge (ANWR) to drilling, but a number of moderate House Republicans say that would doom the bill.

House leaders stripped ANWR drilling from the bill on Nov. 9 to win over moderates; it remains in the Senate-passed bill.

The House bill includes a trade-related provision sure to be unpopular in the Senate: repeal of the so-called Byrd amendment, named after Sen. Robert C. Byrd, D-W-Va. That measure, which has been declared illegal by the World Trade Organization, funnels anti-dumping duties collected on imports and directs them to U.S. companies that have suffered from the unfair trade practices.

Sealing the Deal
House Majority Leader Roy Blunt, R-Mo., and Speaker J. Dennis Hastert, R-Ill., tried throughout the day to coax the last few votes needed for the savings package. The GOP leaders conducted limited arm twisting on the floor during the vote, which lasted 27 minutes. Kennedy and LaTourette, two key holdouts, received special attention. Kennedy was escorted to a voting machine by Hastert. Hastert and Blunt also cornered LaTourette. In just minutes, LaTourette, escorted by Blunt, changed his vote.

After the gavel fell, Blunt hugged LaTourette and Hastert stopped him for a lengthy handshake.

Other moderates who ultimately backed the bill justified their move by citing assurances from the leadership that their faction would not be ignored when the bill reaches conference.

If that should happen, Boehlert said, Hastert will have to scramble for votes all over again. "We made no commitments on the conference," Boehlert said. "They gave us a lot of what we asked for."

Boehlert said the moderates couldn't ask for all of the concessions they demanded and then vote no when they got them.

"This moves the process along. It does not guarantee anything."

Castle said he probably would have voted against the bill if it was the final form, but that he had been given assurances that the impact on the poor would be mitigated in a conference report.

Republican leaders declared victory at an early-morning news conference. Clearly elated, they congratulated each other on winning the vote.

"We worked hard to do this," Hastert said.

"You don't just put something like this together falling out of bed in the morning," added Nussle.

"This is the best example that I have seen since I came here of making a team work," said Robert W. Goodlatte, R-Va.

Former Majority Leader Tom DeLay, R-Texas, who ultimately persuaded Barton to vote for the bill, did not appear at the conference.

Barton had vowed repeatedly to oppose any bill that did not have Arctic drilling included. But he reversed course under DeLay's prodding.

Meanwhile, Hastert talked to John M. McHugh, R-N.Y., who had said he wanted significant additional changes to Medicaid. McHugh didn't get them. He held fast, and voted "no."

GOP Sens. Saxby Chambliss of Georgia, Rick Santorum of Pennsylvania, Lindsey Graham of South Carolina and John Ensign of Nevada lurked in the rear of the chamber, talking to several members who had been on the fence.

Conservatives hinted that the leadership team's hold on power would be tied to the fate of the savings package, with leadership elections expected in January and uncertainty over the fate of DeLay, whose leadership position was taken over by Blunt after DeLay was indicated in September.

Democrats are likely to use the vote as a weapon in the 2006 midterm elections.

Late Changes
The budget package came to the floor Thursday evening after a nearly six-hour recess that followed the defeat of the conference report accompanying the Labor-Health and Human Services, and Education appropriations bill (HR 3010).

One change made to the budget cut bill on the floor would allow people with incomes up to 150 percent of the poverty level who are receiving non-cash aid under the Temporary Assistance to Needy Families program to continue to be eligible for food stamps. Another would modestly increase Medicaid transformation grants to fast-growing states.

Leaders had slightly softened cuts in the budget savings bill to Medicaid and food stamps early Thursday in the Rules Committee. The biggest changes would make it easier for seniors to shelter assets and still be entitled to Medicaid coverage for nursing home care.

The bill as revised would maintain the $3 copayment required of Medicaid recipients for most medical services, rather than increasing it to $5. That would reduce the proposed savings by $100 million.

McHugh said the premiums would still have to be paid by more poor people than in the past, and most of the savings would come from an assumption that people would forgo medical care rather than pay. "I think that's poor policy," he said.

The savings package would preserve eligibility for the school lunch program for people who receive non-cash services under Temporary Assistance for Needy Families at a cost of $28 million over five years. A $20 million grandfathering provision for legal immigrants on food stamps also was added. The savings to food programs had been $844 million before the changes Thursday.

Castle said he hoped that any compromise package negotiated in a conference with the Senate would be closer to $43 billion in cuts. A group opposing the bill, worried that Castle was poised to vote for the package, protested in front of his Delaware office.

"We are going to hammer and make examples of him and every other moderate [Republican] who goes to the dark side and puts the needs of the poorest Americans last—and tax breaks for the wealthiest Americans first," said Brad Woodhouse, a spokesman for the Emergency Campaign for America's Priorities.

Conservatives, who had sought deeper cuts, were claiming victory late Thursday. Indiana Rep. Mike Pence, chairman of the conservative Republican Study Committee, called the vote a "moment of truth for conservatives in the Republican caucus."

Rep. Jeff Flake of Arizona, a member of the conservative RSC, said his group accepted the bill even though the cuts were slightly less than they asked for.

"Our expectations are lowered these days," Flake said. "It was important to make this small step . . . Now on to the 2 percent across-the-board cut!"

NOVEMBER 14, 2005 -- Backed by "surprising" poll findings, a panel convened by the National Academy for Social Insurance (NASI) is making a pitch for greater federal financing of long-term care. Seventy percent of Americans over the age of 50 expressed support for more federal financing, and 53 percent said addressing long-term care costs should be a high priority for the nation, NASI said.

NASI is a nonpartisan organization made up of the nation's leading experts on "social insurance," defined as "broad-based systems for insuring workers and their families against economic insecurity caused by loss of income . . . and the cost of health care."

Chaired by two former top health policy staffers who were on opposite sides of the 1992–1994 debate over universal health coverage, the panel was united on the need for more federal funding, despite warnings by senior federal budget analysts that current Medicare and Medicaid spending is unsustainable.

The panel said however that individual funding and private long-term care insurance also should play a part in funding nursing home care.

"Achieving a system that meets individual needs and distributes costs equitably will require greater federal involvement and financing," said panel co-chairwoman Sheila Burke, who was chief of staff to Robert Dole when the Kansas Republican was Senate majority leader.

Judith Feder, the panel's other co-chairwoman, said at a Monday morning press briefing that the panel did not expect most respondents would view costs as a high priority for policy makers.

Much of the public is unaware that the government doesn't pick up the costs for long-term nursing home care without a patient first becoming impoverished, she said. The panel expected the findings to highlight the need to build national awareness of the costs of long-term care, she said. Feder, who is dean of the Public Policy Institute at Georgetown University, advised President Clinton in the development of his unsuccessful plan to achieve universal health coverage through employer and federal funding.

According to one GOP Hill aide, the survey findings are hardly a surprise since increased federal spending would lower individual costs. He added that the survey was funded by the Service Employees International Union, which represents many nursing home workers. NASI's VP for Health Policy, Paul Van de Water, said that while SEIU paid for the survey, it was carried out jointly by a Democratic pollster and a Republican pollster to give it a "bipartisan cast." He added that the survey accounted for only 10 percent of the costs of the entire NASI project addressing long-term care costs. Other funding was provided by the Robert Wood Johnson Foundation, TIAA-CREF, and GE Financial Assurance, he said.

The panel's report identified two solutions as promising. One, "modeled on Social Security, would provide everyone access to a basic, limited long-term care benefit, supplemented by private insurance for the better-off and enhanced public protection for the low-income population," the panel's report said.

"The Social Security system was designed to provide beneficiaries with a base of income which they can supplement with pensions and savings. Social insurance for long-term care could provide the same kind of basic protection through Medicare, Social Security Disability Insurance, or a new public program."

Another promising approach would be to "establish a national floor of income and asset protection." The floor would replace or revise Medicaid, which picks up long-term nursing homes costs after a patient becomes impoverished.

"The floor could be set to allow people who worked hard all their lives to keep their homes and a modest amount of other assets, while those who are sufficiently well off could purchase private long-term care insurance to protect a larger amount of assets," the report said.

Medicaid is jointly funded by the federal government and the states, but many governors say states must have relief from their share of the long-term care cost burden. Either approach would "provide substantial fiscal relief to states," the panel said.

The survey did not measure support for tax hikes or changed federal spending priorities needed to increase federal funding of long-term care.

While legislation to expand the federal role in long-term care might seem improbable in today's budget climate, Feder said other legislation has recently defied the budget odds when a public need was identified: the Medicare drug law (PL 108-173).

Skillful "policy entrepreneurs" wait for a window to open, and "when political leaders, especially the president, make an issue theirs, the political process moves into high gear," the report says.

NOVEMBER 18, 2005 -- The Senate early Friday morning passed bipartisan legislation aimed at increasing the use of electronic medical records to prevent errors and increase efficiency in the health care system.

"The Senate has taken a huge step into the information age, finally," said Majority Leader Bill Frist, R-Tenn., who has touted the bill as one of his top priorities. "This bill will do as much as anything we have done in this Congress . . . to cut waste and inefficiency out of our health care system."

"The biggest benefit is that it's going to allow the medical data to move with the people as they move," said Michael B. Enzi, R-Wyo., chairman of the Health, Education, Labor and Pensions Committee.

He called it a "truly monumental piece of legislation."

The bill (S 1418) , which passed by voice vote, would establish an Office of the National Coordinator of Health Information Technology within the Department of Health and Human Services.

Competitive grants would be awarded to hospitals, group practices, and other health care providers that would facilitate distribution of health information electronically. To protect the privacy of the data, the measure would clarify that current health privacy rules apply to any health information stored or transmitted electronically.

Enzi's committee approved the bill by voice vote July 20.

The measure combined elements of two information technology bills: One (S 1262) sponsored by Frist and Hillary Rodham Clinton, D-N.Y.; the other (S 1355) sponsored by Enzi, and ranking Democrat Edward M. Kennedy of Massachusetts.

President Bush has set a goal for most Americans to have electronic medical records within the next decade. David Brailer, Bush's national coordinator of health information technology, estimates that the technology could reduce health care costs by $140 billion a year.

In the House, Republicans Nancy Johnson of Connecticut and Nathan Deal of Georgia have introduced health care information technology legislation (HR 4157) that would allow HHS to set national medical privacy standards if department deemed them to be necessary and Congress failed to legislate them.

The Senate amended the bill before passing it. Details of the changes could not immediately be determined.