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Sebelius Shuffles Insurance Oversight Office into CMS, Shifts CLASS Act to Administration on Aging

By John Reichard, CQ HealthBeat Editor

January 5, 2011 -- Citing efficiency gains, the Department of Health and Human Services (HHS) is moving a key office charged with implementing the health care overhaul to the Centers for Medicare and Medicaid Services (CMS), a department source said.

HHS Secretary Kathleen Sebelius also is putting her department's Administration on Aging in charge of implementing provisions of the law popularly known as the CLASS Act (Community Living Assistance Services and Support Act). The provisions are intended to help people self-fund long-term care services when they become incapacitated, but critics say they will lead to enormous government expense down the road.

The reorganization places the HHS Office of Consumer Information and Insurance Oversight (OCIIO) under the control of CMS Principal Deputy Administrator Marilyn Tavenner. OCIIO's current director, Jay Angoff, will serve as an adviser in the HHS Office of the Secretary, advising Sebelius on policy issues pertaining to provisions handled by OCIIO.

The changes come amid growing doubts about how the Obama administration can fund implementation of the law in a new session of Congress given the many new Republican members who are hostile to the law. But the HHS source said the staff changes do not stem from the more difficult funding environment and said Sebelius, who served as insurance commissioner and later as governor in Kansas, has always sought ways to manage more efficiently.

OCIIO is in charge of everything from giving consumers detailed information to help them compare health plans to overseeing the creation of state insurance exchanges, to monitoring rate hikes by insurers, and has been run by the Office of the Secretary of Health and Human Services. Under CMS it will become the Center of Consumer Information and Insurance Oversight.

The HHS source said the move will economize by saving on health information technology costs, for example. "There are some important natural synergies between the functions of OCIIO and CMS, such as IT infrastructure, regulatory support, federal and state legislation, contracting, human resources and communications with partners and consumers, to name a few," the source said.

On its face, the change on its face would appear to ease coordination with Medicaid officials on the creation of insurance exchanges, which will have to steer customers efficiently into Medicaid or into a program of private plan subsidies, depending on their income levels. But oversight of the private insurance industry is a new function for CMS.

Republicans are likely to frame the change as a further weakening of the Medicare program coming on top of the $500 billion in Medicare cuts planned over a decade's time under the overhaul.

"First they took more than one-half trillion dollars out of the Medicare program to fund ObamaCare," a GOP congressional aide said. "Now they're raiding the staff tasked with running Medicare. This is just another example of resources being diverted from seniors' health care to be used to advance the Democrats' new government-run health care entitlement."

Angoff has been a high-profile executive in going after insurers for big rate hikes. Presumably his changed role won't preclude him from continuing that effort.

Dan Mendelson, a top health budget official in the Clinton administration, said in an e-mail that the Obama administration is hunkering down for budgetary warfare over implementation of the law.

"It's easier to target and de-fund a small agency like OCIIO," said Mendelson, now the president of the consulting firm Avalere Health. "By contrast, CMS has many core functions that are vital to the functioning of Medicare, so is guaranteed it will be getting some funding. So moving OCIIO into CMS should protect it somewhat from the zeal of the budget axe. Also it is easier for HHS to transfer funds within an operating division than across," he said.

Tavenner, CMS Administrator Donald M. Berwick and Angoff notified OCIIO staff of the changes at a noon meeting. CMS staffers were briefed on the changes later in the day. OCIIO has won much praise from the press and consumer organizations for its website, which provides comparative health information on health plans, and its official in charge of insurance exchanges has been praised by the insurance industry as a fair-minded regulator.

But the exchange creation effort faces major challenges, with major policy decisions essential to the creation of successful exchanges yet to be resolved. At least some states say they need much more guidance from HHS on how to get exchanges operating.

There may be logistical issues as well. OCIIO is now housed in Bethesda, while CMS is located in Washington, D.C. and Baltimore. Morale has been on the rise at OCIIO as it has become more fully staffed and it has made strides in implementation. How the move to CMS control and the move of Angoff to the Office of the Secretary will affect that morale is unclear. Tavenner is regarded as a strong administrator.

Sebelius notified House Appropriations Chairman Harold Rogers, R-Ky., of the changes in letters sent. His office declined to comment.

"We believe an operating division such as CMS has the best resources, in terms of expertise and administrative processes, to achieve successful implementation," Sebelius wrote.

Administration of the CLASS Act is just getting under way and is expected to involve "tens" of staffers while OCIIO's workforce is more in the "hundreds," the HHS source said.

"The CLASS office will establish the national voluntary insurance program, set premiums, set rules for enrollment and eligibility systems, and specify and design the benefit," Sebelius said in the letter to Rogers. "It will also establish systems for advice and assistance, and support a protection and advocacy network to serve beneficiaries of the program."

Kathy Greenlee, Assistant Secretary for Aging, is providing interim leadership to the staff working on CLASS.

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