By John Reichard, CQ HealthBeat Editor

November 2, 2007 -- Now it's up to Congress. The Centers for Medicare and Medicaid Services (CMS) has announced a final Medicare regulation that will trigger a 10 percent cut in payments to doctors Jan. 1 if lawmakers don't get their act together to stop it.

Most observers predict Congress will pass legislation blocking the scheduled cut, just as it did for each year dating back through 2003, when "negative updates" also were scheduled under Medicare's controversial physician payment formula. But with estimates of the cost of a two-year fix blocking scheduled 2008 and 2009 cuts ranging up to $20 billion or more, lawmakers are dragging their heels finding payment offsets.

CMS said in a news release late Thursday announcing the new rule that it would pay about $58.9 billion to about 900,000 doctors in 2008 under the regulation. But that includes the deep cut—10.1 percent to be exact—which CMS apologetically said it "has no choice but to implement." Actual outlays are likely to be considerably higher assuming Congress does act.

"Sixty percent of physicians say the cut will force them to limit the number of new Medicare patients they can treat," warned American Medical Association Board Chairman Edward Langston in a statement. "Congress must step in to replace the cut with payment increases that keep up with medical practice costs," he said. "The U.S. House has already acted, and now Medicare patients and the physicians who care for them are asking the Senate to take similar action."

But there's the rub. Legislative provisions approved by the House earlier this year would pay for a two-year fix by making deep cuts in payments to private health plans in Medicare, but that's a non-starter in the Senate. Senate Finance Committee members have met to try to assemble a package of cuts elsewhere in Medicare to pay for the physician payment fix, but have suggested that they may not be able to find offsets to pay for more than a one-year fix.

By John Reichard, CQ HealthBeat Editor

October 29, 2007 -- A leading national health insurer announced Monday that it has agreed to seemingly tough state oversight of what could be a hot new tool in the consumer marketplace: ranking doctors based on their efficiency and quality.

The agreement between Cigna and New York State Attorney General Andrew M. Cuomo involves only one state and one insurer. But with private insurers and the federal government eyeing the use of the rankings to restrain rising health care costs, the deal could be a national model. Cuomo and Cigna touted it in those terms Monday and the American Medical Association followed suit, with president-elect Nancy H. Nielsen saying it "will influence other states to implement careful and independent oversight and evaluation of physician performance measurement projects."

The practice among insurers of ranking doctors is growing rapidly. But the pact "marks the first such agreement between a major insurer and a state attorney general," according to a press release from Cuomo's office.

With a number of studies concluding that much of U.S. health care spending is wasted on unproven procedures, analysts see a big opportunity to get more bang for the health care buck by focusing on the prescribing patterns of doctors. They hope that data on quality and efficiency will bring new "value" to health care spending by steering patients to more skilled providers and by encouraging their more wasteful colleagues to adhere to practice norms to produce the best medical outcomes at the lowest possible costs.

But doctors warn that poorly designed systems could lead them to avoid costly patients who could reduce their rankings.

This summer, Cuomo sent letters to Cigna and other insurers expressing concern about their ranking methods. An Aug. 16 letter to Cigna noted the insurer's plans to market to employers a network of specialists picked based on their performance on quality and efficiency measures. "Employers who have selected the Cigna Care Network may create financial incentives, such as reduced copayments or deductibles, to encourage their employees to use that network," the letter noted. But depending on how the rankings are constructed, "consumers may be encouraged to choose doctors because they are cheap rather than because they are good."

The letter cited a number of potential flaws with ranking systems. For example, using data based on payment claims might omit necessary clinical information contained in medical charts. "It may be necessary to audit or validate claims data, even on a random sampling basis," Cuomo's office said. In addition, the claims database may be too small to generate reliable rankings, and the number of patients per physician may be too small to yield meaningful results. "Because several physicians may treat the same patient during the course of a single episode of care, it may be unfair to attribute to one of these several physicians all care rendered by those in the group," the letter added.

"Given these risks, we were surprised to learn that you initiated the Cigna Care Network without disclosing the data you used to rank the doctors, even to the doctors themselves. As a result, doctors and consumers have no ability to bring errors in the rankings to your attention so that they may be corrected," the letter said.

Cuomo said Monday that the agreement with Cigna culminated in a series of negotiations addressing key problems with rankings. "By working together with Cigna, consumer advocates, doctors, and medical societies, we have been able to create a new template for ranking programs that the entire industry can follow."

Under the agreement, Cigna said it will ensure that rankings are not solely based on cost. The deal provides that "in information for consumers and public reporting, measures of cost-efficiency and measures of quality of performance shall be calculated separately and disclosed as such. To the extent the individual scores for quality of performance and cost efficiency are combined for a total ranking, the proportion of each measure shall be clearly disclosed." Where available, Cigna said it would rely on measures developed by the National Quality Forum, a public-private group that issues measures based on a consensus-setting process involving providers, insurers, consumers, and government officials. Where NQF standards aren't available, the insurer said it would rely on those developed by other consensus-forming groups or other "bona fide nationally recognized guidelines."

To judge efficiency accurately, the agreement provides for the use of computer software that takes into account the medical complexity of the cases treated by an individual physician. In addition, Cigna "shall compare physicians within the same specialty within the appropriate geographical market," the agreement states. The insurer said it would disclose the number of cases on which ratings are based in order to assure accuracy in sample sizes. It will explain how it decides to which doctor a patient will be "attributed" for ranking purposes when more than one doctor is involved in treating the patient. It will disclose to doctors how the rankings are designed and give them a chance to appeal incorrect rankings. And the company said it would pay for a "Ratings Examiner" responsible for overseeing compliance with the agreement and for reporting to the AG every six months on compliance.

Under the agreement, the Ratings Examiner must be an independent "national standard setting organization." And Cigna Chief Medical Officer Jeffrey Kang said the insurer "will also contribute up to $100,000 to an independent organization to develop better means of communicating to consumers all aspects of the ranking program in a clear and straightforward manner."

AMA's Nielsen said "this agreement is important because it establishes a process that seeks to guard against some of the risks inherent in physician performance programs run by health insurers. A lack of scrutiny has allowed health insurers to unfairly evaluate a physician's individual work using an insufficient number of patient cases, questionable quality measures, and poor adjustments for risk."

By John Reichard, CQ HealthBeat Editor

October 31, 2007 -- With Michael Moore's documentary "Sicko" as the impetus, much of this year's media buzz about universal health care coverage focused at first on government-run systems in other countries as models for change. As the months have gone by, however, presidential hopefuls have weighed in with plans they say are more oriented to the United States and the major role the private sector plays domestically in health care delivery. At a press briefing Wednesday, U.S. insurance industry officials sought to sharpen that focus on private sector approaches, insisting they favor universal coverage while pointing to European countries that require citizens to buy private coverage as potential overhaul models.

Shifting the focus back to Europe may seem ironic given the scorn heaped on the British health care and Canadian systems by many conservative politicians and business executives in the United States. But George Halvorson, CEO of Kaiser Permanente, one of America's largest health plans, said "it makes a huge amount of sense for us to understand what is going on in Europe."

There is a misconception that European health care in general is like Canadian and British government-run systems, when in fact countries like the Netherlands and Switzerland center their systems of universal coverage on the private sector, he said.

"In the U.S. there is a confusion between 'universal coverage' and 'government-run,' " noted Karen Ignagni, president of American's Health Insurance Plans (AHIP), which sponsored the briefing along with Kaiser. AHIP opposes single-payer government-run systems, but "we are fully committed to the concept of universal coverage," Ignagni said.

AHIP and Kaiser Permanente said their aim is not to endorse a particular system, but they flew in insurance executives from Switzerland and the Netherlands to talk Wednesday about the approach taken by those two countries. With a growing number of U.S. proposals focusing on mandates that individuals buy private coverage as well as relying on government subsidies to lower the cost in some cases, the two countries seem particularly apt.

Daniel H. Schmutz, chief financial officer of Helsana, Switzerland's largest health insurer, said each resident of the country is required to buy a basic package of private health insurance. The Swiss system is funded by individual premiums and tax revenue, with the government subsidizing the premium costs of lower-income individuals. Residents choose from among the offerings of 90 insurers, with varying levels of deductibles and managed care options resulting in different premium levels for the basic package. On average, a family of four in Switzerland pays the equivalent of 850 U.S. dollars per month for basic coverage, he said, and about 30 percent of the population gets government subsidies to help pay those costs.

Similarly, the Netherlands has switched to a system in which each individual is required to buy private coverage, said Willem van Duin, a board member of Eureko, the corporate parent of the Dutch insurer Achmea. Employers and individuals share premium costs roughly on a 50–50 basis. Individuals who can't afford their premium costs can obtain "health allowances" from the government to help pay their premiums.

The soaring costs of government-run health care drove the Dutch to that system in 2006. Before 2006, two-thirds of Dutch residents were enrolled in government health insurance programs, and one-third had private coverage. But "cost explosions" led to a sense of urgency about changing the system, Van Duin said. Health costs rose 7.7 percent in the Netherlands in 2000, 10.6 percent in 2001, and 11.9 percent in 2002, he said. Health care consumes about 9.2 percent of the Dutch Gross National Product; estimates were that the percentage would rise to 14 percent in 2040. To help tame those rising costs, the Dutch opted for a private sector-oriented competitive system.

Potential similarities, such as individual mandate and private subsidies to pay for it, between Switzerland and Holland on the one hand and the United States on the other go only so far, of course. Much would have to change in the U.S. system to come in line with those of the two European countries. For example, Dutch and Swiss insurers must take all applicants, unlike U.S. insurers, who now can refuse to take those likely to have high health costs. Another difference is that insurance in the two European countries is "community rated," meaning that healthy and sick alike are in a common pool and generally pay the same premiums, with some adjustments based on age. To help them pay for higher risks, Dutch insurers receive payments from a "Risk Equalization Fund."

Schmutz said the Swiss have a cruder form of risk adjustment that pays insurers more if its makeup of enrollees are relatively elderly.

Another potentially key difference is the willingness of the Dutch and the Swiss to pay individual income, corporate, and other taxes to fund the government subsidies. "In the Netherlands it's fully accepted that you pay income taxes," said Van Duin.

Schmutz said the Swiss are just as tax averse as Americans, but added that they are willing to pay for health care. Both executives emphasized the importance as well of "consensus" as the foundation of a system of universal coverage based on private insurance. A split electorate wouldn't allow such a system, Schmutz suggested. "I think we would have a very difficult time in Switzerland if we had a 51 to 49 situation," he said.

By Sasha Bartolf, CQ Staff

October 31, 2007 -- Republican presidential candidate Sen. John McCain, R-Ariz., said Wednesday that cost is not the reason many of the 47 million Americans without health insurance have not tried to get it; it's simply because they choose not to have it.

Many healthy people decide not to have insurance policies because they don't think they need it, and mandating health insurance for all Americans, therefore, is unnecessary, McCain said.

"I'm not going to force Americans to buy insurance," McCain said. "But if we bring down the cost, I'm convinced more and more will take advantage of it," he said. And since individuals with insurance are generally healthier, lower-cost coverage could even persuade those who have eschewed health insurance so far to sign up.

The Arizona Republican, speaking at a health care forum organized by the Federation of American Hospitals and Families USA, reiterated his belief that the government should not mandate health insurance for all Americans, but instead offer tax breaks that allow individuals, employees, and families to choose the health care plans they want from anywhere in the United States.

In what appeared to be a new stance, McCain said there is "no reason to remove employer tax incentives . . . . that should stay as it is." He proposes that individuals be given a tax break of $2,500 to invest in health care policies of their choosing, while families receive a tax break of $5,000.

When a moderator said premiums for family coverage now top $12,000 annually, McCain responded that his plan was "not a perfect solution;" however, for those currently getting no tax breaks for health care insurance, "something is better than nothing" at all.

McCain said he believes the biggest problem in American health care is not the quality, but the cost. He said he encourages allowing the government- and privately run sectors to compete to insure Americans, so that the consumer is guaranteed the best quality care for the lowest cost.

When asked whether he would favor health care plans such as New York Democratic front-runner Hillary Rodham Clinton's, which allows people to keep their private plan or opt into a government-sponsored one, McCain said he doesn't think the government should sponsor health care for all Americans. While he favors maintaining a "safety-net" of coverage, such as what is provided to seniors or low-income Americans in Medicare and Medicaid, he said he does not believe that all Americans should be required to participate in government-sponsored health care.

McCain also defended his decision to vote against measures (HR 976, HR 3963) to reauthorize the State Children's Health Insurance Program (SCHIP) and the 2003 Medicare Prescription Drug, Improvement, and Modernization Act (PL 108-173).

He said he could not support the 2003 law since it allowed prescription drug costs to be lowered for millionaires as well as low-income seniors. When questioned about his vote against legislation to reauthorize SCHIP, McCain said that he refuses to support a government-funded health care program that everyone is eligible for, rather than one that is targeted at those who truly need the help.

Earlier on Wednesday, the Democratic National Committee released a statement criticizing McCain's views on whether insurance companies should be forced to cover chronically ill people. McCain said he believes insurance companies should not be forced to take in chronically ill people; rather, the government should work to cover those who are unable to receive private insurance. He also recommends pouring resources into stem cell research and into preventative care, so that people are less likely to develop deadly or debilitating diseases.

By Drew Armstrong, CQ Staff

November 1, 2007 -- The Senate on Thursday passed a revised children's health insurance bill that President Bush has threatened to veto, just as he did an earlier version. But Congress may not give him that chance right away.

Senate Majority Leader Harry Reid, D-Nev., said House Majority Leader Steny H. Hoyer, D-Md., had suggested congressional leaders hold up on sending the bill to the White House to allow more time for bipartisan, bicameral negotiations to craft a compromise.

And if the bill does go to Bush, "it's my recommendation that we do not even attempt a veto override," Reid said. "We are very close to being able to do a bipartisan, bicameral children's health bill," he said.

Reid said he had discussed the matter with House Speaker Nancy Pelosi, D-Calif., and she concurred.

The Senate passed the bill (HR 3963) Thursday by 64–30, after voting 65–30 to limit debate on the measure.

Senate Republican leaders blocked Reid's repeated attempts to delay passage of the bill to allow more time for the negotiations aimed at a compromise. They complained the talks were not designed to produce a bill that would win Bush's signature but rather to draw enough additional votes from House Republicans to override a presidential veto.

Senate Minority Leader Mitch McConnell, R-Ky., complained, "Senate Republicans are committed to finding common ground on this issue, but we cannot do it alone. We must forge a bipartisan compromise to maintain current coverage and extend coverage to additional low-income children which the president can sign."

Bush on Oct. 3 vetoed the first bill (HR 976) Congress sent him to expand the State Children's Health Insurance Program by about $35 billion over five years. A veto override attempt in the House Oct. 18 fell 13 votes short of the two-thirds majority required. All but two Democrats voted to override the president, so additional votes must come from Republicans.

The House on Oct. 25 rushed through a revised bill, but it did not win over any new Republican support. Both measures would expand SCHIP by about $35 billion over five years, to $60 billion. About 6 million are now insured through the program. The legislation would raise tobacco taxes to pay for the expansion, including a 61-cent increase in the cigarette tax, to $1 per pack.

The White House issued a statement warning Bush would veto the revised bill, just as he had nullified the first one. Reid said, "I don't think we should rush forward and try to override his veto. I think we should just let things simmer for awhile."

Authorization for federal SCHIP funding was extended in the first fiscal 2008 continuing appropriations resolution (H J Res 52 — PL 110-92) that expires Nov. 16.

Bipartisan Senate negotiators led by Finance Chairman Max Baucus, D-Mont., and the panel's ranking Republican, Charles E. Grassley of Iowa, have been meeting with a group of House Republicans in pursuit of a compromise.

"The changes that our members are looking for are not deal-killers," said House Republican Leader John A. Boehner of Ohio.

Reid said he believed House Republicans had been negotiating in good faith and wanted to craft a package that could become law. But he accused the administration of moving the goal posts on the negotiators. "The problem is each time something is crafted we get a call from the White House," Reid said.

Baucus said just before the Senate vote, "We've made progress, a lot of progress. We're very close. We'll meet again next Tuesday. We'll reach agreement soon."

In an Oct. 28 letter to House Democratic leaders, 38 Republicans outlined the changes they want in the SCHIP legislation. Boehner said the GOP members want to make sure children of illegal immigrants cannot obtain coverage under the program, that income eligibility caps are tightly drafted, and that the program covers children from families at or below 200 percent of the federal poverty level before those from families with somewhat higher incomes.

Democrats have said they are prepared to negotiate most points provided the final bill meets their core demand of expanding SCHIP to cover 10 million children, up from the roughly 5.5 million currently enrolled.

Boehner said the bill's tobacco tax increase, which Bush has objected to, is not a deal-breaker for House Republicans.

By John Reichard, CQ HealthBeat Editor

November 1, 2007 -- Regulations proposed by the Bush administration would slash inner city health care, end programs to help mentally ill adults function on their own, and end school-based efforts to help seriously ill and poor children enroll in Medicaid, witnesses said at a hearing Thursday held by the House Committee on Oversight and Government Reform.

The Bush administration is planning other similarly damaging regulatory proposals in its remaining months in office, charged Committee Chairman Henry A. Waxman, D-Calif. But Republicans defended the regulatory goal of reining in what they depicted as runaway Medicaid spending. "If you wait for the Congress to act on this, there won't be any money left in the federal budget," countered the panel's senior Republican, Thomas M. Davis III of Virginia.

Six regulations set in motion by the Bush administration over the past 10 months amount to a "thinly disguised assault on the health care safety net" and are completely at odds with congressional intent, Waxman said. "This is clearly lawless regulation, not anchored in statute. It does not have the support of the Congress and it deserves no deference from the courts."

Waxman said the regulations would: restrict coverage of rehabilitation services for Medicaid-eligible people with disabilities; eliminate the ability of schools to provide administrative services such as enrollment, eligibility counseling, and referrals to Medicaid; drop Medicaid funding for severely disabled children to schools where they receive Medicaid services; restrict what states may cover as outpatient services under their Medicaid programs; end Medicaid payments for graduate medical education (GME); and limit how states raise money to pay their part of Medicaid costs.

Dennis Parella, chairman of the National Association of State Medicaid Directors, told lawmakers that "it is surprising that this philosophy should come at a time when most experts in the field would say that the nation's health care system is in a state of crisis.

"The emergency rooms of our teaching hospitals are bursting at the seams as they try to provide both emergency and non-emergency care to the 47 million Americans who have no health insurance," Parella testified. "A greater awareness of autism spectrum disorders and mental illness among very young children has placed a strain on the entire mental health system. Persons with disabilities are struggling to find more creative alternatives to live independent and productive lives. A retrenchment by Medicaid will only make those struggles more difficult for millions of Americans at a time when no comprehensive reform of the health care system is even on the horizon. We are apparently unable to agree on what income level should qualify a child to receive assistance with health care under SCHIP [the State Children's Health Insurance Program], much less comprehensive health reform."

Barbara Miller, a Maryland woman who said she suffers from bipolar mood disorder, described treatment services she has received that would be "in jeopardy" under one of the proposed regulations. "When I first started participating in rehabilitation services in 1990, I received 'Assertive Community Treatment' at a house where I lived with several other people. Staff would come out regularly to check on me, measure progress on my treatment plan, and see how I was responding to medications. They also provided training about living with mental illness to the pastor and his wife who ran the house." After she moved out to live on her own—"a huge step for me," she said—Miller received counseling to help her make the transition and the option of participating in "groups where people could support each other and not become isolated," she said. These rehabilitation services "are important because they prepare people with serious and persistent mental disorders to go back to work and cope with life in the community." If the federal government withdraws funding, "many more people with serious mental disorders will end up in emergency rooms, inpatient hospitals, nursing homes, or the prison system."

Twila Costigan, a program manager for the Intermountain Adoption and Family Support Program in Helena, Montana, said that rehabilitation services that would be cut under the regulations bring hope into the lives of seriously emotionally disturbed children who otherwise would be neglected in residential treatment facilities. The services help the children live in foster care in part by helping foster parents take care of them, she said. The children involved "have experienced trauma, abuse, neglect, and abandonment from their family of origin."

Alan Aviles, president of the New York City Health and Hospitals Corporation, said the Medicaid cost limit regulation—suspended by Congress until May of next year—would "dismantle significant components of our ambulatory care system and scale down our emergency departments" in New York City. The overall hit on the city alone would be $400-to-$500 million over five years, he said. "It's inconceivable we could continue to run the public hospital system in our city with that massive amount of underfunding."

The regulatory proposals would deliver a "devastating fiscal blow" to emergency departments "from which recovery may be impossible," said Angela Gardner, an emergency physician in Galveston, Texas. Gardner, testifying on behalf of the American College of Emergency Physicians, said the situation is already so dire that her facility could not provide a hospital bed to a man with a brain tumor who arrived in a coma. Gardner indicated that the man was likely to die as a result. "He will have his neurosurgeon, but he will not have a bed," she said. "Cutting our programs is not going to give us beds."

Sheldon M. Retchin, CEO of the Virginia Commonwealth University Health System in Richmond, said that the proposed rule to eliminate Medicaid Graduate Medical Education funding would lead to reductions in funding for training positions" for doctors who care for Medicaid patients. "We believe strongly that if Medicaid's support for teaching hospitals and medical schools deteriorates, then their very missions will be in great jeopardy," said Retchin, who testified on behalf of the Association of American Medical Colleges. "With 47 million Americans uninsured, and another 40 million on Medicaid, the safety net is stretched tight and teaching hospitals are holding the corners."

One of the proposed rules would limit Medicaid enrollment help for the vulnerable, said Denise Herrmann, a St. Paul, Minnesota, school nurse representing the National Association of School Nurses. "Many families served by school nurses live day-to-day and are stressed in making ends meet." They lack telephones, computers, and transportation and some are homeless. "Some are unable to read, and many are under-educated. Applying for Medicaid is an overwhelming task. School nurses identify the children who are most vulnerable and then help them find the best way to receive health care. Without Medicaid reimbursement for that type of school nursing activity, fewer needy children will receive health care services." Herrmann added that without the ability to file with Medicaid for these types of administrative expenses, some school districts will eliminate school nurse positions altogether.

However, states have a long history of devising Medicaid financing arrangements that "inappropriately increase federal Medicaid matching payments," testified Marjorie Kanoff of the Government Accountability Office. These schemes threaten the fiscal integrity of the Medicaid program, she said. Dennis Smith, head of the federal Medicaid program at the Centers for Medicare and Medicaid Services, said the proposed rules aim to protect the fiscal integrity of Medicaid.

He noted that the Clinton administration also took steps to curb state schemes to inappropriately boost federal Medicaid matching payments. "We believe these rules reflect the long-standing work of CMS and others, such as GAO and the OIG [Office of the Health and Human Services Inspector General] to restore greater accountability to the Medicaid program while safeguarding limited resources for actual services to those individuals who rely on the Medicaid program," Smith said.

"I think I've done what my predecessors have done," Smith said. For example, some of the activities described by Herrmann would not have been funded in the Clinton administration, he said. Medicaid reimbursement has covered things like "juvenile wilderness camps" and "small engine repair," he said. Medicaid covers the cost of direct care but "there are things that have been pushed ... beyond the edge" of what should be reimbursed. Smith added that interpretations by witnesses at the hearing of what the regulations would do go "further than what the rules actually say."

Connecticut Republican Christopher Shays expressed incredulity that the cuts made by the proposals would have such a dire effect. "I am hard pressed to know how terrible things will happen," he said. Over a five-year period, the cuts would trim just $11 billion on a total of $1.2 trillion in federal spending, he said. "I don't want to blow this hearing out of proportion." Davis of Virginia also noted that Medicaid faces huge spending increases in coming years. "A blank check just isn't going to solve it," he said.

However, Democrats said those cuts would hit those least able to withstand them, and the lawmakers appear intent on passing legislation to block the regulations—but they face the challenge of coming up with offsetting cuts or tax increases elsewhere in the federal budget to pay for the legislation if they stick to pay-as-you go budgeting rules.