By John Reichard, CQ HealthBeat Editor

April 11, 2014 -- Sylvia Mathews Burwell, if confirmed, would be the first secretary of Health and Human Services (HHS) since the Clinton administration who isn't a former governor.

That's probably a good thing. Running the sprawling agency now is less about getting big laws done than about making them work.

Burwell is a budget expert and a seasoned federal manager who's held top posts at the White House Office of Management and Budget (OMB) and the Treasury Department. She also did a stint as deputy chief of staff in Bill Clinton's White House.

Her nomination underscores how the Obama administration is doing whatever it can to leverage the unexpected break it caught in the almost shocking recent downturn in national health spending growth.

It's also about getting to the bottom of big administrative messes. HHS and the states are increasingly at odds over the backlog of Medicaid applications that's keeping hundreds of thousands of people from getting the coverage they were promised under the health law (PL 111-148, PL 111-152).

It's about delving into the details of emerging administrative challenges and putting a system of accountability in place to prevent more technological breakdowns. The crash of the federal insurance website healthcare.gov crash almost sank President Barack Obama's hopes for a presidency marked by historic progress in expanding access to health care and blindsided many of the law's staunch supporters in Congress.

Though she's never run a bureaucracy as large as HHS, Burwell is seen as someone who can supervise and fix things—and not as an ideological warrior or career politician.

Former HHS Secretary Tommy Thompson, a longtime Republican governor of Wisconsin, was identified with the then-controversial 2003 Medicare overhaul (PL 108-173), as was his successor, Michael Leavitt. Leavitt was viewed suspiciously by Democrats in part because of his efforts as governor of Utah to overhaul Medicaid.

Former Kansas Democratic Gov. Kathleen Sebelius helped sell the health law with her plainspoken manner and calm demeanor, even when facing harsh attacks. But healthcare.gov's failure won't soon be forgotten, despite the fact that perhaps millions of American who lacked health coverage before the health law now have it.

Burwell's background and lack of a public persona should help her cruise to confirmation in the Senate and ease her first weeks in the new job. The administration is wagering her ascension will mark the start of a period in which Americans begin to accept the law, and lawmakers, however grudgingly, decide to live with it and try to fix its flaws.

But Burwell may face unreasonable expectations. She'll be judged by whether Medicaid expansions continue in Republican-led states, as they did when Sebelius negotiated with her former peers.

Bill Hoagland, who for many years served as a GOP aide on the Senate Budget Committee, noted that he negotiated with Burwell when she served at OMB during the Clinton administration but said her recent experience has been relatively brief.

"I'm a little surprised that she would be moving this quickly over there," he said in an interview late last week. "She just submitted her first budget and now she's out of there. Maybe it highlights what the real issue is. And the real issue of federal spending is over there in the HHS budget."

"It must say something about their respect for her as a manager of an agency because that is a huge undertaking," Hoagland added. "It also says to me something about her ability to have a direct line to the president on the very difficult issues still before HHS in terms of the implementation of the Affordable Care Act" and the costs of Medicaid and Social Security disability payments.

"This does mean even closer connections between the White House and HHS," agreed Mark McClellan, who ran the Centers for Medicare and Medicaid Services during the George W. Bush administration. "A lot of people may focus on how that may mean more White House control, but it works both ways. Having that close connection and experience with the president and his policy goals means she'll be trusted to lead at the department as well and that could help HHS get more things accomplished faster."

Beyond the health law, Obama clearly would like to be remembered for steering the nation away from more deficit spending following the economic crash. But any such expectations may be setting Burwell up for failure, Hoagland said. Hoagland sees the slowdown in health spending as the result of "one off" events. Even though per capita Medicare spending growth is down, there are "many per capitas" coming with an aging population, he noted. Hoagland said he expects per capita spending to rise also as enrollment expands.

Matt Salo, executive director of the National Association of Medicaid Directors, said he doesn't have a sense yet of how Burwell will fare with Medicaid expansions or whether she can duplicate Sebelius' success in states such as Arkansas, where a deal allows Medicaid expansion to occur strictly through private plan enrollment on insurance exchanges. It's an approach other red states are watching with interest.

Mastering the technological problems Sebelius faced will be no small matter, Salo added. "You can't say enough how complex the IT challenge is at the heart of all this. We see it every day in Medicaid," he said. Federal officials "saw it trying to build healthcare.gov. Very few people in outside world appreciate how hard this stuff is."

By John Reichard, CQ HealthBeat Editor

April 8, 2014 -- Washington policymakers may be even less motivated to strike a big deficit reduction deal targeting entitlement spending thanks to an eye-popping statistic tucked in a recent Medicare payment announcement.

Medicare officials said spending per beneficiary is falling at almost double the rate that they estimated in February.

Centers for Medicare and Medicaid Services (CMS) Deputy Administrator Jon Blum said Medicare's so-called cost growth factor, calculated in February at minus 1.9 percent, is now calculated at minus 3.4 percent. That it is falling at all is remarkable given Medicare's long history of per capita spending growth.

The statistic was calculated as part of a final rate announcement that private Medicare plans that serve 15 million beneficiaries would see a 0.4 percent boost in their payment rates for 2015.

The spending drop-off is expected to lessen pressure on policymakers to take politically unpleasant steps to slow Medicare expenditures, such as raising the program's eligibility age from 65 to 67 or make "Medigap" supplemental coverage less generous. Instead, it could mean lower Part B premium increases in the future and, perhaps, longer term solvency for the program, which serves the elderly and disabled.

"The slowdown in Medicare fee for service spending is dramatic," said Dan Mendelson, a former White House health budget chief in the Bill Clinton administration. "It definitely will mean good news for solvency when the trustees report is released this spring."

The spending trend could also lower the cost of overhauling Medicare's sustainable growth rate (SGR) formula governing physician reimbursement, some analysts say. Congress has been looking at across the board cuts to providers to offset an overhaul of the formula next year.

It will take many months for all of these possible effects to be sorted out and confirmed. "I think it's good news across the board," said Tom Scully, a Wall Street executive who ran CMS during the George W. Bush administration and before that was a top White House health budget official.

A CMS official who was not authorized to publicly discuss the matter said the Medicare spending dropoff is part of a trend toward a slowdown in overall health care spending. It's attributed to an effort to "shift the dynamic about how health care is delivered" in the United States, including moving providers away from delivering a high volume of services and to focus more on the quality of treatment, the official said.

Medicare per capita spending is coming down not only in the traditional fee-for-service program—where critics say payment incentives are too strong to deliver ever-greater volumes of services—but also in the Medicare Advantage program, CMS officials say.

The latest figures show that by 2015, Medicare spending per capita will drop at an annual clip of 3.3 percent in the fee for service program and 4 percent in the Medicare Advantage program, the official said. Overall, the estimated per capita drop is 3.4 percent.

The trend "takes off the pressure for a big budget deal," assuming it continues, said Scully. And it will lessen interest in the near term for raising the eligibility age and in moving to premium support based overhaul of Medicare, he said, adding that he still thinks the latter move is a policy change worth making.

Scully still sees a budget deal on entitlements as inevitable, particularly because of the costs of the health care overhaul law (PL 111-148, PL 111-152). But he said meaningful discussions won't take place until 2017 at earliest, after the next presidential election.

The way doctors and hospitals deliver care is changing in response to a move away from the traditional fee for service system, Scully said. Increasingly payments are "capitated," meaning providers get a fixed sum ahead of treatment, putting pressure on them to avoid wasteful services so they can keep more of their reimbursement.

Those payments that aren't capitated increasingly are taking other forms that have similar resource-sparing incentives. Models include "bundled" payments for a package of services needed to treat a particular condition or "value-based" payments that rise with the quality and efficiency of health care delivery.

Those changes are occurring both in Medicare and in the commercial sector, he said. Another Medicare model is the reductions in payments sustained by hospitals if their treatment leads to unnecessary readmissions, he says. The commercial sector feeds off of such changes in Medicare and vice versa, according to Scully.

Scully sees other factors at play that change the way physicians deliver care such as the rapid growth of managed care in both Medicare and Medicaid. Also, high deductibles in the commercial sector are driving down the use of services by consumers and also influencing the way physicians practice, he says.

The shift in payment incentives and in the way providers practice medicine "is happening faster than I think a lot of people realize," Scully said.

Further evidence of profound changes in Medicare costs could be reflected in the Medicare trustees report due out later this spring and in August, when the Congressional Budget Office (CBO) issues a mid-year estimate of government spending levels.

But the announcement was only the latest piece of evidence of a Medicare cost slowdown. Former CBO Director Peter Orszag recently said "the entire fiscal imbalance" in the nation's long term budget outlook disappears if trends that occurred over the past five years in Medicare continue. "That's how big the slowdown has been," he said.

If that's so, prospects for a big entitlement overhaul will be dramatically diminished. Potomac Research analyst Paul Heldman said "it may take a couple of presidential elections" for that to happen.

The slowdown may also drive changes in physician reimbursement. The Medicare cost growth rate "clearly affects the SGR score," said Scully.

Julius Hobson, a lobbyist who serves as senior policy analyst for the Polsinelli law firm, agrees. He called the new cost growth figure "a big deal."

Hobson noted that when CBO in 2012 sharply lowered its estimate of the cost of an SGR overhaul, it did so on the basis of three years of declining volume in Medicare services. The latest cost growth factor figure suggests that trend is continuing, he said. Hobson added the figure might indicate that physician payment cuts next January under the SGR formula could be smaller.

But while the cost growth figure may bode well fixing physician reimbursement, analysts shy away from trying to quantify the effects on the SGR. Heldman, who said he wasn't willing to make any predictions about the SGR based on the cost growth factor, said he needs to see more specific figures on physician services first.

By Rebecca Adams, CQ HealthBeat Associate Editor

April 11, 2014 -- The dramatic slowdown in health care spending over the past four years is significant. But it won't last forever and shouldn't be an excuse for failing to make fundamental changes that could counter health inflation in the coming decades, said several experts at a recent forum.

The event, held at the Brookings Institution Engelberg Center for Health Care Reform, focused on the significant effects that health care spending has on the federal budget and the well-being of the public.

Health spending's share of the gross domestic product has grown from 5 percent of economic output in 1960 to more than 17 percent today.

Former Centers for Medicare and Medicaid Services Administrator Mark McClellan said the choice of Office of Management and Budget (OMB) Director Sylvia Matthews Burwell as the next nominee to head the Department of Health and Human Services (HHS) could reflect that the agency will be expected to not only expand coverage but hold down costs.

"For decades, health care spending growth seemed like a given, with important fiscal and economic consequences," McClellan said. "These health care programs have major budgetary as well as fiscal and health implications."

Experts couldn't agree on how long the slowdown in health spending will continue. The cause has been alternately attributed to the recession, the steady uptick in out-of-pocket costs for consumers and a greater use of lower-cost treatments such as generic drugs. Another factor could be a decline in new breakthrough drugs or medical technology. Some credit more preventive care and payment systems that rewards providers based on quality rather than volume.

Additionally, one new tax in the health care law (PL 111-148, PL 111-152) "has the potential to have a very large effect," according to Engelberg Center senior fellow Paul Ginsburg. The so-called Cadillac tax will impose a 40 percent on high-cost health plans in 2018, but some employers already appear to be redesigning coverage to avoid it.

One obstacle to lower future health care costs is the political clout of pharmaceutical companies, medical providers and health industry officials who stand to lose from lower spending, said former OMB Director Alice Rivlin. Although she said some politicians and health industry officials realize that there is substantial waste in the system and "we have to get rid of it," one person's definition of wasteful spending is another person's income.

"Even dumbo things like competitive bidding for wheelchairs—who's against that? Well, manufacturers of wheelchairs," Rivlin said. "They're pretty powerful, so it isn't a slam dunk."

Even if spending is permanently brought in line with inflation, the nation still faces a sizable long-term fiscal gap, according to William Gale, the co-director of the Urban–Brookings Tax Policy Center.

Gale and his colleagues forecast four scenarios for future health spending through the next 75 years. If health care spending grows at the same rate as economic growth, then the fiscal gap is about 2.6 percent of the gross domestic product over that period.

If health care has an excess cost growth of about 2.5 percent, then the "fiscal gap explodes—exceeding 30 percent of GDP," wrote Gale and his colleagues in their paper.

Over the next decade, which is the most important time period for lawmakers who rely on Congressional Budget Office estimates of legislation, Gale projected that total federal deficits would be about 4.1 percent if health care spending and economic growth are about the same.

If health care spending has an excess cost growth of about 2.5 percent, then deficits would total about 6.3 percent of gross domestic product by 2024.

In the past half-century, health care spending has ballooned. Health care accounted for 2.1 percent of federal spending in 1962. Last year, it accounted for 27.7 percent of all outlays.

The surge is due to a decline in the amount of money patients have to pay out of their pockets for health care costs, the growing share of medical care that is paid for by government programs, relative prices and income growth, said Louise M. Sheiner, a senior economist with the Federal Reserve Board of Governors, in her presentation.

McClellan and Rivlin tried to look ahead to whether some key efforts to hold down health spending will make a major difference in a nation where the population is aging.

The pair looked at the idea of changing federal payments for providers so that value is rewarded rather than volume.

They also examined insurance designs that shift costs to consumers, and the idea of making more information to patients so they can choose lower-cost interventions. They discussed high-deductible health insurance plans, which typically are paired with health savings accounts. And they examined insurance designs in which consumers get a set subsidy to put toward health insurance and must choose among health plans.

McClellan and Rivlin additionally wrote about efforts to encourage prevention and wellness. Those could stave off expensive care for years.
"In each case, we have found promising interventions with some record of success, but no compelling evidence that a particular set of reforms will be sufficient to counteract the upward pressures on health spending," wrote McClellan and Rivlin.

They concluded: "While the slowdown in health care spending growth has taken some pressure off public and private budgets, it would be a mistake to assume that slow growth in health care spending will continue or that spending reflects high-value care and therefore, health care delivery reform is no longer an urgent priority."

By John Reichard and Adriel Bettelheim

April 9, 2014 -- The Obama administration is portraying the recent release of a trove of Medicare physician payment data as an exercise in transparency that will help taxpayers see how their money is being spent and encourage consumers and researchers to identify excessive billings.

The biggest beneficiaries, however, may be health insurers and hospitals eager to reduce overuse of certain costly treatments, and trial lawyers looking for patients who have been readmitted to hospitals or who have had repeat procedures for the same medical problem.

Health policy experts and former government officials say the release of 2012 billing data for $77 billion of claims under Medicare's Part B fee-for-service program is part of a longstanding pattern in which the government releases Medicare data to prod, or in some cases shame, health providers into adopting what it deems best practices.

In 1987, the Health Care Financing Administration, a predecessor to the Centers for Medicare and Medicaid Services (CMS), released information on deaths that occurred the previous year within thirty days of admission for the roughly 6,000 hospitals caring for Medicare patients.

The process became more refined during the George W. Bush administration, when Medicare began collecting and posting data on the quality of care provided by hospitals, nursing homes, home health agencies and other providers. The information was posted on CMS "compare" websites, which were billed as a means for the public to assess how individual providers stacked up against each other on various quality measures.

Quality reporting by hospitals was voluntary at first, and few participated. That changed after Congress added a provision to Medicare payment legislation docking reimbursement to facilities that didn't publicly report the information, virtually all hospitals in Medicare have participated.

Doctors have successfully fought efforts to keep surgical performance data confidential. However, the Obama administration resumed the trend last May with the release of data on hospital billings to Medicare that revealed significant price disparities for the same services.

"Taxpayers have the right to understand what is being paid for, how it is being paid for," Jonathan Blum, principal deputy administrator of the Centers for Medicare and Medicaid Services, said in a conference call with reporters last week. "We are asking the public's help to check, to find waste, to find potential fraud, and to help the program spend its valuable resources more wisely."

Physicians groups have long opposed the release of the billing information on the grounds that it would result in unwarranted bias against doctors. The American Medical Association said that cost was an imperfect barometer, and that quality, value and outcomes need to be taken into account.

But the recent release was all but assured after a federal judge in Florida last June lifted an injunction on publishing the information that had been in place in 1979. Dow Jones & Co. Inc., the publisher of the Wall Street Journal, had challenged the injunction, backed by the Department of Health and Human Services (HHS).

Paul Ginsburg, former executive director of Medicare's Physician Payment Review Commission and now a public policy professor at the University of Southern California, said the data will help insurers make assessments of physicians and possibly trim those doctors who run up costs.

"This is going to make it much easier, more stable, more reliable to make assessments of physicians because often insurers don't have enough data from their own enrollees" to make judgments about physicians, Ginsburg said.

Hospitals, accountable care organizations, and other networks of providers will also use the information to decide which doctors they want to do business with, he predicted. Certain group practices will also use the data to make recruiting decisions.

"I don't see a lot of direct use by individual consumers," Ginsburg said. "Consumers need an intermediary to use this for them. I don't think too many consumers can use it directly."

Former Centers for Medicare and Medicaid Services Administrator Thomas Scully predicted trial lawyers will closely examine doctors' practice patterns for signs of frequent hospital readmissions.

"These are taxpayer dollars, it's a good thing to be putting out," he said.

Experts said the data could also be used to glean how many procedures a doctor performs. Such volume assessments can be an important tool to gauge quality of care, Ginsburg said.

Ophthalmologists, oncologists and other physicians who tend to use high-cost drug treatments are disproportionately represented among the top billers. Blum and other government officials say they are looking at how treatments vary by region, and if large sums are being spent in certain parts of the country without a corresponding improvement in quality and satisfaction with care.

"We view our role as enabling a vibrant health data ecosystem," said Niall Brennan, acting director of CMS' Offices of Enterprise Management.

By Emily Ethridge, CQ Roll Call

April 10, 2014 -- Health and Human Services (HHS) Secretary Kathleen Sebelius recently said that about 7.5 million people have chosen health plans in the exchanges, and said she did not expect any more delays in the health care law.

Sebelius told the Senate Finance Committee that 400,000 people had signed up in the federal and state exchanges since March 31, and she expects that number to continue to grow. Last week, the administration announced that 7.04 million consumers had applied for health insurance coverage through the exchanges as of March 31, the deadline for open enrollment.

A late surge in sign-ups in the days before the deadline helped pushed the administration above its goal of 7 million. The number has continued to tick up as the administration allows consumers who say they were unable to complete their applications by March 31 to finish the enrollment process. A number of state-run exchanges are also extending their open enrollment periods into April.

Lawmakers, led by new Chairman Ron Wyden, D-Ore,. set a mostly amiable tone at the hearing, focusing questions on the health care law (PL 111-148, PL 111-152) as well as the department's budget request for fiscal 2015. They covered topics ranging from President Barack Obama's commitment to the children's health insurance program to Alzheimer's disease to what HHS is doing to address obesity.

Ranking Republican Orrin G. Hatch of Utah asked Sebelius how many exchange enrollees had their previous insurance plans canceled because they did not meet requirements under the health care law, and how many were previously uninsured.

Sebelius said the administration continues to collect that information from insurers, and will share it with lawmakers once they get it all. She noted that more than 2 million people have signed up for plans since March 15, so the data will take awhile to gather.

"We will be feeding you information as soon as we get it from the companies," she said.

Sebelius also told Hatch that there would be no more delays in the rollout of the health care law. "We do not anticipate at this point, senator, additional delays. Most of the policy issues are out," Sebelius said.

Wyoming Republican Michael B. Enzi asked Sebelius why the next open enrollment period will not begin until Nov. 15, after the midterm elections He asked for assurance that the decision was not made to provide "political cover for vulnerable members."

Sebelius said the date was chosen in collaboration with insurers, who cannot make bids for new plans until they learn the makeup of their current pools of enrollees.

Panel Democrats mostly cheered the law, although Mark Warner, D-Va., said that he and several other Democrats have introduced a series of bills to fix or improve parts of it. He noted his bill (S 2176) that would streamline the reporting requirements for businesses under the law.

New Jersey Democrat Robert Menendez told Sebelius about the extensive backlog of applications in New Jersey's Medicaid department, in part because workers are having to manually input information for new applicants.

Sebelius said that the law's Medicaid expansion served as a "wake-up call" for many state agencies that were not ready to receive automated data. She said HHS is now "ramping up" pressure on states to get their programs ready to send and receive automated data with the federal system.

"We'll look at potentially some administrative reductions in payment if people don't pick up the pace," Sebelius warned. "Because having a backlog that is not being processed in a timely fashion is just keeping too many people from the health care that they are entitled to."

Wyden cheered the recent slowdown in Medicare growth, and asked Sebelius to analyze the reasons behind it. Sebelius said that between 2001 and 2009, Medicare per-capita spending grew at a rate of about 6 percent a year, falling to a rate of 1.6 percent between 2010 and 2012. Medicare actuaries recently adjusted the anticipated growth trend to be -3.4 percent, which Sebelius said was "the lowest growth ever seen in the history of the program." She attributed part of the slowdown to changes made in the health care law.

By Rebecca Adams, CQ HealthBeat Associate Editor

April 10, 2014 -- The public has until early Friday to comment on a controversial Medicaid expansion plan in Pennsylvania. After the comment period closes, intense discussions between federal and state officials will determine whether the state will become the 28th jurisdiction, including the District of Columbia, to broaden eligibility under the health care law.

"Tomorrow the formal negotiations start," said Corbett spokeswoman Kait Gillis.

The informal conversations have been going on for a year, culminating recently in a tense phone call between state and federal officials. Gillis said that Pennsylvania officials detected a "shift toward a lack of flexibility and compromise in that conversation." Afterward, Republican Gov. Tom Corbett told state reporters on April 2, "Right now, the road is getting bumpier rather than smoother.... I am getting to my breaking point."

A review of some of the 740 comments filed by late last week shows that consumer activists and medical providers are actively lobbying the Centers for Medicare and Medicaid Services (CMS) to make changes to Corbett's plan. The comment period closes at 6 a.m. on Friday.

Consumer activists very much want Pennsylvania to broaden Medicaid. But they have a long list of changes they asked CMS officials to force the state to make to the waiver request.

The most high-profile part of Corbett's plan—and least likely to be approved—would allow beneficiaries to sign up for a one-year, voluntary job search program. People who did sign up under the pilot program would get discounts on the costs of their health care. State officials outlined their idea in a March 5 letter that modified a more stringent requirement in previous versions of the plan.

Several groups asked CMS officials not to approve that part of the waiver request.

"Programs aimed at connecting people to employment, however laudable, have no connection to the purposes of the Medicaid program, and Pennsylvania's proposal should be rejected on this basis," a group of 25 national consumer organizations and 10 state organizations stated in a latter. The group includes the March of Dimes, National Alliance on Mental Illness, Planned Parenthood Federation of America, the Center on Budget and Policy Priorities and the Georgetown University Center for Children and Families.

Forty advocacy groups for children also said that the work required to verify work-related activities would take away from staff time dedicated to enrolling children.

Both groups said that the premiums under Corbett's plan are too high. And the letters said that CMS officials also should modify the state's idea to prevent people who have failed to pay their premiums from getting Medicaid benefits for certain periods of time. The governor would disqualify people for three months the first time they fail to pay premiums, for six months the second time and for nine months the third time, the groups said.

Corbett also has said he wants to use Medicaid dollars to buy beneficiaries private health plans, such as those offered through the marketplace created by the health care law. CMS officials approved a similar idea in Arkansas, but advocates questioned why it is needed in Pennsylvania. In Arkansas, Medicaid recipients did not previously use managed care plans, but Pennsylvania beneficiaries do. The consumer advocates questioned whether Corbett is trying to bypass some of the protections that Medicaid managed care plans must comply with, such as appeals procedures for consumers when health plans deny coverage of services.

"We're happy that Corbett says he wants to move forward but his proposal has many flaws and certainly, really digging into it as we did, the proposal is vague and in many respects it's not clear why he wants to do what he says he wants to do," said Joan Alker, executive director of the Georgetown Center for Children and Families in an interview. "We don't think it's approvable in its current form."

Other groups that commented on the proposal were medical providers who said they were upset that their services would not be covered. The most vocal were podiatrists, optometrists and chiropractors.

Comments from individual practitioners flooded in, with many saying that their services could prevent more costly care in the long run. A number of the physicians said that diabetics would be particularly harmed.

CMS officials will evaluate the comments during a 15-day review period that can be extended.

The health care law (PL 111-148, PL 111-152) provides federal funds to cover 100 percent of the cost of covering people who become eligible under the expansion for the first three years and phases down after that to 90 percent of costs.