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November 7, 2011

Washington Health Policy Week in Review Archive c4d88bef-c2fc-4ab5-87d2-ac742e6fed11

Newsletter Article


Debt Panel Democrats Kick Tires on Rivlin-Domenici Overhaul Plan

By John Reichard, CQ HealthBeat Editor

November 2, 2011 -- The leading budget gurus, to whom lawmakers are looking for advice on how to fashion a bold bipartisan plan to tame the debt crisis, made a forceful case for at least $4 trillion in deficit reduction. Their plan would restructure Medicare and raise revenues by ending tax breaks.

In an appearance at a hearing by the joint debt reduction panel, perhaps none of the analysts was more compelling than former Congressional Budget Office (CBO) Director Alice Rivlin in laying out a vision of how to protect vulnerable Americans while making a real dent in deficit spending.

The plan she developed late last year with former New Mexico Sen. Pete V. Domenici aims to keep the country from dipping back into recession and to overhaul Medicare without harming low-income beneficiaries, Rivlin said.

As appealing as that message might have seemed to deficit panel Democrats under pressure to preserve entitlements while reducing deficit spending, they greeted the Rivlin-Domenici proposal with a fair degree of skepticism. Among their questions were whether the plan would send traditional Medicare into a "death spiral," and how much money it would actually save.

Republicans are already pushing for fundamental changes in Medicare, particularly in the House where the GOP has embraced a plan written by Budget Chairman Paul D. Ryan, R-Wis., that would go even further than the Rivlin-Domenici proposal.

Joining Rivlin in testifying before the panel were Domenici, former Wyoming Sen. Alan K. Simpson, and former Clinton Chief of Staff Erskine Bowles. Simpson and Bowles headed President Obama's fiscal commission.

Four Trillion a 'Minimum'

The four witnesses agreed that a $4 trillion deficit reduction plan is needed—and that it must include both spending cuts and increased revenues. They suggested strongly that it's time for panel members to stop pretending otherwise.

"I have great respect for each of you individually," Bowles told panel members. "But collectively, I'm worried that you're going to fail—fail the country," he said.

"This is a problem we can't grow our way out of," Bowles added. "We could have double-digit growth for decades, and not solve this problem."

Bowles added that "$4 trillion is not the maximum amount we need to reduce the deficit. It's not the ideal amount. It is the minimum amount we need to reduce the deficit in order to stabilize the debt and get it on a downward path as a percent of GDP."

Simpson warned the panel against listening to voices on the right, like that of Americans for Tax Reform President Grover Norquist who has gotten pledges from many Republicans not to raise taxes. They also shouldn't heed, he said, calls from those on the left like AARP, which is running an ad campaign opposing any Medicare or Social Security cuts and warning that members who vote for such cuts could get voted out of office.

Simpson said he found the AARP ad "disgusting." And he said "we're just going to go around Grover and let Grover rant. Because I'll tell you one thing, if he and the AARP, if we are in thrall to those two groups, we haven't got a prayer, and neither have you."

Simpson told panel members that "you all know what you have to do in your gut. You know what you have to do."

Domenici delivered a similar message. "A plan that does not fundamentally restructure Medicare and other health entitlements will fail to adequately address the debt crisis that we face," he said. "Both sides, those who are against any fundamental health entitlement reform and those who oppose any revenue increases will be equally complicit in bringing the nation closer to the fiscal brink. I hope you heard that."

The panel faces a Nov. 23 deadline for producing a deficit reduction plan of at least $1.2 trillion over 10 years. If it misses the deadline or Congress doesn't enact its package, spending cuts totaling $1.2 trillion will occur automatically.

Rivlin said that "to achieve success, the committee will have to go well beyond the minimum charge of $1.2 trillion in savings over the next ten years, because even savings of this magnitude would leave the debt rising faster than the economy can grow."

Rivlin said that on the other hand "a grand bargain would reduce the chances of a devastating double-dip recession that could lead to a stagnant lost decade. It would also assure citizens and markets that our political process is functioning in the public interest, not stuck in partisan gridlock or overwhelmed by special interests."

Rivlin warned against further cuts in discretionary spending, saying they would "risk harming essential government functions. For the same reason, we urge you to avoid the sequester [automatic cuts]. Instead this committee should focus on reducing the growth of health care spending and reforming the tax code."

Overhauling Medicare

The Rivlin-Domenici plan would "preserve traditional Medicare for all seniors who prefer a fee-for-service system," Rivlin said. "It would also offer an array of comprehensive health plans competing with traditional Medicare to deliver the same benefits. Plans could not refuse any Medicare beneficiary" and would have payments adjusted to pay more for a particularly costly mix of enrollees.

Each beneficiary would receive a "federal contribution"—in other words, a sum of money the government would contribute towards premiums charged for the various plan options or for the traditional Medicare fee for service program.

Medicare would have a system of regional exchanges beneficiaries would go to pick either a new health plan or traditional Medicare. "The federal contribution would be determined by competitive bidding on a regional exchange," Rivlin said. "The federal contribution would be determined by competitive bidding on a regional exchange."

Competition "on a well-regulated exchange would lead providers and plans to deliver care more cost-effectively and reduce spending growth," she said. "As a fail safe, the federal contribution would be capped" so that it could rise by no more in a year than the growth in the gross domestic product plus 1 percent.

"Excess costs, if any, would result in an increased premium, but low and moderate income beneficiaries would be protected from these increase payments. This bipartisan proposal would preserve Medicare for our rapidly rising population of seniors," Rivlin asserted.

Plans would bid on the package of benefits to be delivered on exchanges and the federal contribution would be equal to the second lowest bid. If a beneficiary picked that plan or the plan with the lowest bid, he or she would have premium charges fully covered by the federal government. If the beneficiary picked a higher cost plan, he or she would pay the amount above the federal contribution. Thus beneficiaries would have an out-of-pocket incentive to pick a lower cost plan.

Sen. Jon Kyl, R-Ariz., a member of the deficit panel, asked Rivlin to explain why the contribution would be based on the second-lowest bid. "I think that's a very clever way to do this," he said.

Rivlin said the lowest bid "might well be flukishly low for some reason. "But people who . . . wanted to go to the even lower bid, the one that wasn't selected, could do so. And could get some money back," she said.

But Sen. Max Baucus, D-Mont., said some analysts worry that traditional Medicare could go into a "death spiral" under the Rivlin-Domenici plan. The worry is that insurance companies will offer coverage that is attractive to the most healthy beneficiary, leaving the less healthy in Medicare, he said. The more that happens, the more sicker people there are in traditional Medicare, and eventually that part of the program becomes unaffordable, Baucus suggested.

"We think we have avoided that possibility," Rivlin replied. "By the rules that we put in, any plan on the exchange would have to accept anybody. And they would be compensated on a risk-adjusted basis."

Sen. John Kerry, D-Mass, wondered whether Rivlin would classify changes to Medicare other than the "defined support" plan she outlined as structural reform of Medicare.

"Oh certainly," Rivlin said. "There are several approaches."

Kerry wondered whether things like raising the eligibility age would be considered structural reform, and whether moving Medicare away from fee-for-service medicine and into "value-based payment" where possible would fall into that category. Rivlin said no to the former but yes to the latter. "That's actually what we're proposing," she said.

Bowles listed other things he considered to be structural reform, such as ending first-dollar coverage for Medicare beneficiaries and letting Medicare using its purchasing clout to negotiate lower prices for drugs. He added that "we've got to have some kind of real tort reform."

Other panel members also seemed interested in types of Medicare changes that would be considered structural reform other than the defined support plan, perhaps reflecting a sense of how time consuming and complex it would be to make such a change.

But the budget analysts who appeared as witnesses emphasized that basic changes in taxation and entitlements don't necessarily have to occur instantly. What what is needed, they said, is legislation that includes a plan to make such changes.

Rep. Chris Van Hollen, D-Md., had an even more fundamental concern about the Rivlin-Domenici defined support plan: Would it save money?

He wondered, for example, if competition among plans would save money, why did Rivlin and Domenici include the "fail-safe" mechanism limiting the federal contribution to GDP plus 1 percent?

Rivlin said "I'm not absolutely certain . . . how the markets will work. We have seen even in the limited market that is Medicare Advantage, that in some places they work well and come in under fee for service and in other places they don't. We think this is a . . . much more robust plan than Medicare Advantage."

But she added that "the reason you want the fail-safe is so the Congress will absolutely know what they're going to spend going forward on Medicare. It's not going to be more," she said.

Van Hollen said the debt panel asked the CBO to take a look "at some of these ideas" including competition among managed care plans and an approach that involved a fixed government contribution. Van Hollen said it wasn't exactly the same as the Rivlin-Domenici plan, and it wasn't clear from his comments how dramatically it differed. But CBO's saving estimate was no more than $25 billion he said. "It's pretty clear, at least from these numbers, and we can take a look at them, that we're going to need to do other things that this is not a panacea," he said.

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Physician Payment Formula Cut Slightly Less Than Expected

By John Reichard, CQ HealthBeat Editor

November 1, 2011 -- Medicare payments to doctors will be reduced by 27.4 percent in 2012 under a final rule released by the Centers for Medicare and Medicaid Services. That's a slight decrease from the 29.5 percent reduction federal officials had predicted earlier this year.

CMS projects that it will pay out $80 billion in 2012 under the Medicare physician fee schedule, which establishes payment levels for more than one million Medicare health care providers, including doctors, podiatrists, nurse practitioners and physical therapists.

Even as they issued the rule, Secretary of Health and Human Services Kathleen Sebelius and Medicare chief Donald M. Berwick urged Congress to fix the physician payment formula, known as the "Sustainable Growth Rate."

"This payment rate cut would have dire consequences that should not be allowed to happen,'' Berwick said in a news release accompanying the final rule.

"Unfortunately, while Medicare remains strong, physicians are facing steep payment cuts as a result of a flawed 1997 law,'' Sebelius said in a statement issued soon after the final rule hit the Federal Register. "Almost every year for more than a decade, doctors have faced this annual threat and the Congress has in turn acted to temporarily prevent these deep reductions from taking effect. We have not and will not let deep cuts to doctors' payments occur. The Obama administration is 100 percent committed to fixing the flawed Medicare payment system and protecting Medicare beneficiaries' access to doctors."

Within five minutes of the final physician payment rule posting on the CMS website, the American Medicaid Association weighed in with a strong statement.

"The release of the Medicare physician fee schedule rule serves as a reminder to Congress that there is a looming crisis in the Medicare program only they can stop, and the clock is ticking,'' said AMA President Peter Carmel. "The Joint Select Committee on Deficit Reduction must include repeal of the formula in their recommendation to Congress to protect access to care for seniors and stabilize the Medicare program."

The physician payment rule includes changes in the data CMS uses to adjust reimbursement for geographic variations in the cost of providing care.

It incorporates a payment policy that "better recognizes efficiencies that are expected when multiple imaging services are furnished to the same physician or group practice, in the same session on the same day," the CMS news release said.

The payment rule also establishes criteria physicians are to use in making a "health risk assessment" in annual "wellness" visits to the doctor by Medicare enrollees to encourage them to adopt healthier behavior. The risk assessment is intended to provide the basis for a personalized prevention plan, CMS said. The agency said it's increasing Medicare payments slightly for the annual wellness visits to compensate for the added office staff time involved in administering the health risk assessment.

In addition, CMS said it is expanding the list of services that can be furnished through telehealth to include smoking cessation. Finally, the rule makes final the quality and cost measures to be used to adjust payments to doctors starting in 2015 based on the quality and efficiency of their care.

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Rate Review Starts for Policies Sold Through Associations

By John Reichard, CQ HealthBeat Editor

November 1, 2011 -- Starting this week some rate increases for health coverage provided through associations must be reviewed by government regulators to determine whether the hikes are reasonable in the government's view. The Nov. 1 effective date of the requirement brings association coverage under the same type of scrutiny that applies to other types of insurance plans in the individual and small-group markets.

The rate review procedure, established under the health care law (PL 111-148, PL 111-152), requires insurers to give a detailed explanation of their reasons for raising premiums if they propose an increase of 10 percent or more.

In some cases, state laws give regulators the power to reject rate hikes if they are deemed unreasonable. The federal government reviews rates in states lacking an effective rate review mechanism, but federal officials do not have the power to actually reject rate hikes that they say are out of bounds.

But Health and Human Services (HHS) officials say publicity about big increases that aren't justified has led insurers in a number of instances to scale back their increases.

"This step extends the benefits of rate review to an additional 1.8 million consumers, providing unprecedented scrutiny and transparency to health insurance rate increases," said Steve Larsen, director of the Center for Consumer Information and Insurance Oversight at the Centers for Medicare and Medicaid Services (CMS).

HHS officials said that by subjecting association plans to rate review, they are able to scrutinize a large chunk of the individual and small-group market that otherwise would escape review.

"This step also guarantees that insurers can't game the system and move coverage currently sold in the traditional individual and small-group markets to the association plan market to avoid the provisions of the rate review regulation," an HHS official said.

According to HHS data, 34 states will review association rates in the individual and small-group markets. In 10 states CMS will do some of the reviews and in 12 states CMS will review all rates for association products.

HHS issued a final rule in September determining the status of association coverage under rate review. A consumer group in Texas said that without bringing association coverage under rate review, many consumers in that state would not benefit from scrutiny of premium increases.

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AHRQ Awards $34 Million to Continue Fight Against Healthcare-Associated Infections

By CQ Staff

November 2, 2011 -- Federal officials recently announced $34 million in grants and contracts to hospitals, academic medical institutions and health care research organizations to fight against health care–associated infections (HAIs).

This is the latest patient safety effort by the Department of Health and Human Services (HHS), which has been working under its Partnership for Patients initiative to make hospital stays safer for patients.

In July, federal officials announced that more than 2,000 hospitals and 2,500 other organizations have signed on to a voluntary Medicare initiative aimed at reducing medical errors in the nation's health care system. 

"Infections are not an inevitable consequence of health care; they are preventable," said Carolyn Clancy, director of the Agency for Healthcare Research and Quality (AHRQ), which is funding the projects. "With this investment, we are building on proven strategies to give doctors and health care teams the help they need to ensure that patients are safe from infections."

The money will help pay for projects to develop, test and spread the use of new modules of the Comprehensive Unit-based Safety Program (CUSP), a proven method to prevent and reduce HAIs.

According to AHRQ, since 2008 the agency has been promoting the nationwide adoption of CUSP to reduce central line-associated blood stream infections (CLABSIs). The new modules target three additional infections that are also areas of focus for the Partnership for Patients:

  • Catheter-associated urinary tract infections, the most common HAI.
  • Surgical site infections, a complication that can occur at the incision site or deeper within the body.
  • Ventilator-associated pneumonia, which can occur in patients who require mechanically assisted breathing. This new module will be pilot tested in two states with funding from the HHS Office of Healthcare Quality.

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States Seek More Control in Teaming with Federal Government to Open Exchanges

By John Reichard, CQ HealthBeat Editor

November 4, 2011 -- The National Governors Association sent a letter this week to federal officials chafing against restrictions on their powers in setting up partnerships with the Department of Health and Human Services to open health insurance exchanges.

"Under the proposed partnership models, states would be required to cede many operations that have been traditionally handled at the state level, such as Medicaid eligibility," said the Nov. 2 letter from the NGA to HHS Secretary Kathleen Sebelius.

Under the health care law (PL 111-148, PL 111-152), states have various options when it comes to the requirement that residents of each state have access to an insurance exchange starting in 2014. They can set up their own exchange, let the federal government do it entirely, or enter into partnerships in which the work of creating exchanges will be shared.

Because of the complex jobs involved in starting up an exchange and the tight timelines, many states may need to go the partnership route in order to meet the deadline.

But the letter to Sebelius from Iowa Gov. Terry Branstad and Illinois Gov. Pat Quinn complains that unless states do the job entirely on their own, they have to cede too much control, with federal officials determining Medicaid eligibility, for example.

That would be a wasteful duplication of effort, the letter says, because "states have invested taxpayer resources in state-based eligibility systems since the Medicaid program began."

The letter adds that proposed HHS exchange regulations "also appear to preclude states interested in exchanges from obtaining funding to establish new state exchange functions after 2012. States are concerned that this construction would lock states into an all-or-nothing approach where the state's role in operating the exchange would be limited with little opportunity to gain additional operational authority if a state so chooses at a later date."

The letter reminds HHS officials that "many states are undecided on implementation strategies because of various uncertainties, including the lack of final rules and regulations."

The letter urges HHS to allow states to turn over to federal officials certain functions "where states have little or no current operational role." These include determining eligibility for federal tax credits to buy insurance; handling appeals of those decisions; and enforcing requirements that individuals have insurance.

The federal government also could help by certifying information technology that would meet requirements for exchange operations. "Federal development of software that could be provided to states, such as a benefit calculator, would be very helpful," the letter adds.

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CMS: Doughnut Hole Coverage Reduces Enrollee Costs by $1.2 Billion

By Nellie Bristol, CQ HealthBeat Associate Editor

November 4, 2011 -- More than 2.2 million Medicare Part D enrollees each received prescription drug discounts averaging $550 during the first nine months of this year as part of the health care overhaul's efforts to close the program's coverage gap, Centers for Medicare and Medicaid Services officials announced. In total, beneficiaries saved more than $1.2 billion in drug costs.

Release of the figures is part of the Obama administration's efforts to bolster public support for the overhaul to counter congressional Republican efforts to weaken or repeal the law. CMS officials have been making such data public on a monthly basis.

A state-by-state breakdown of the figures shows beneficiaries in New Jersey received the greatest average gap discount, totaling $686. Average discounts in Hawaii were the lowest, at $274.

The law (PL 111-148, PL 111-152) closes by 2020 the drug program's coverage gap—known as the "doughnut hole"—between the initial benefit limit and the level where catastrophic support begins (at $4,550 in out-of-pocket payments in 2011). In the first year, beneficiaries received a $250 rebate.

CMS is now phasing in percentage discounts for both brand-name and generic drugs. Once an enrollee's drug costs put him in the doughnut hole, he receives a 50 percent discount for brand-name drugs in 2011 and 2012. Coverage increases incrementally until enrollee payments are lowered to 25 percent of costs by 2020. Enrollees pay 93 percent of costs in 2011 for generic drugs, a rate that also drops incrementally to 25 percent by 2020.

In addition to lowering costs for drugs, the health overhaul has provided at least one free preventive benefit for more than 22.6 million Medicare beneficiaries, CMS reported.

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