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HHS and Congress Face First Hurdles in Enacting the Overhaul

By Jane Norman, CQ HealthBeat Associate Editor

April 5, 2010 -- Nobody said that dramatic change in the nation's mammoth health care system would be a breeze, and federal officials are experiencing plenty of headaches in just the first weeks after the overhaul was signed into law by President Obama. How will states handle the new high-risk pools? Will retiree prescription drug benefits provided by employers take a hit?

But a new survey released on Monday by the Commonwealth Fund also found that most health care opinion leaders think that access to affordable insurance will be improved for the uninsured under the new law, and most of the 201 questioned support the law's key features. Over the short term, though, the opinion leaders said that there may be problems in several familiar areas that have long been a worry when it comes to the overhaul — the number of primary care doctors available to provide care, states' ability to provide health care and enforcement of the mandate that every American must possess health insurance.

Other concerns loom as well. "Longer term, opinion leaders believe that improved affordability provisions for low- and moderate-income families, prevention and control of chronic disease and stronger cost controls are the most important issues to be readdressed in the next two to three years," said the study by Kristof Stremikis, Karen Davis and Rachel Nuzum of the nonprofit fund.

One way in which the law provides immediate help for the uninsured with pre-existing conditions is by authorizing the creation of state-by-state high-risk insurance pools, with the help of $5 billion in federal funds available on July 1. The federal support is set to end in 2014, when insurance companies will be required to accept all comers regardless of their health status.

Health and Human Services Secretary Kathleen Sebelius wrote to states on April 2 about their interest in participating in helping extend insurance to people with pre-existing conditions who have lacked insurance for at least six months before applying.

"We are interested in building upon existing state programs in this important initiative to provide expanded access to health coverage for individuals who cannot otherwise obtain health insurance. To that end, I am writing you today to request an expression of your state's interest in participating in this temporary high-risk pool program, consistent with one of the implementation options described below," Sebelius said in the letter.

She offered options, sayings that states can choose to operate new high-risk pools alongside existing ones, establish new pools in states that don't now have them, build on other existing coverage to assist people who can't now get insurance, contract with a private insurance company to provide subsidized coverage — or do nothing, in which case there would be no program in the state.

The letter said a review of state programs has found common ground in the benefits currently provided, and since HHS is considering a floor for benefits that all new programs would have to cover, it's anticipated that current benefit lists would be taken into account. Also, Sebelius said, states could follow criteria for pre-existing conditions set by the government, or could set their own, subject to federal approval. "We are committed to working with states to identify other areas where flexibility is appropriate," she added.

But many other details remain unclear, and HHS officials indicated in the letter that more information will arrive in states' hands by mid-April.

A troublesome issue that's cropped up is the reaction from corporations who contend they might have to scale back or drop prescription drug coverage for their retirees because of tax provisions changed by the new law. Republicans have pounced on that development as proof that the new law already is harming business and could shove retirees onto public plans, which already have grown in enrollment in recent years as companies drop health insurance, baby boomers age and workers lose jobs.

When the Medicare Part D prescription drug law was written in 2003, a tax break and federal subsidies were provided to employers to discourage them from dropping their retiree prescription drug coverage. Companies now will continue to receive a 28 percent taxpayer subsidy, and they will continue to be able to deduct all their own expenditures on the benefits. But they will no longer be able to deduct the federal subsidy money in addition.

Caterpillar Inc., Deere & Co., AT&T, Verizon Communications Inc. and Prudential Financial Inc. have said they will have to take first-quarter write-offs to reflect future higher costs due to the new tax provision. Some analysts are projecting write-offs as high as $4.5 billion by big firms in the first quarter alone, according to the Healthcare Reform Watch Group at the law firm Sonnenschein Nath & Rosenthal.

House Energy and Commerce Committee Chairman Henry A. Waxman. D-Calif., has called a hearing for April 21 to examine whether retirees will be affected, and issued letters to Verizon, Deere and Caterpillar. The committee said in a statement that company statements "appear to conflict with independent analyses which show that the new law will expand coverage and bring down costs."

Said Sebelius, on CNN, "They have been actually taking tax deductions on money that the government has given them in the first place. That will cease under this bill."

But Rep. Michael C. Burgess, R-Texas, said on Fox Business Network that the fact that the companies have been ordered to testify appears to be "naked intimidation at its worst" and that they were reporting their projections as required under the law.

"This is bad news for workers, and it's terrible news for the broader economy," Senate Minority Leader Mitch McConnell, R-Ky., said in the March 27 GOP response to the president's weekly radio address.

Brighter news for advocates of the new law came with the Commonwealth Fund survey, which queried health care experts in academia and research; health care delivery; business, insurance, and other health industries; and government, labor and advocacy groups.

Some 88 percent said the new law will successfully expand access to the uninsured, though there was more doubt about whether it would improve affordability for Americans who already have coverage, control rising costs and not add to the deficit. A majority also supported changes in medical malpractice laws, though the new law does not go further than authorizing grants to try out alternatives to lawsuits.

In an accompanying commentary, former HHS Secretary Michael Leavitt, a Republican who served under President George W. Bush, said that the law is a significant accomplishment but if he had his way, it would have focused on the real problem — cost. "Solving the cost problem paves the way for expansion of insurance coverage to follow," said Leavitt.

Former Senate Majority Leader Tom Daschle, D-S.D., in another commentary lavishly praised the new law but said it's just a beginning.

"This landmark legislation now gives us the opportunity to move the ball toward the goal

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