April 9, 2007 – A Monday roundtable discussion sponsored by Georgetown University and featuring some of health policy's leading lights was supposed to help illuminate a path to universal health coverage, but as it turned out, participants at best stumbled across a few guideposts that might point the way.

Among them: It would be wise to play down discord over the relative roles of government and the private sector in expanding coverage.

There was no obvious common ground at the event on how to fund wider coverage or how quickly to move to a universal system. And while a proposal by President Bush to tax lavish health benefits is clearly part of the debate over wider coverage, the big pot of money it could raise over 10 years to fund coverage of the uninsured hasn't generated quite the enthusiasm one might expect among compromise-minded policy wonks.

But, "in many respects we are on the same page," said Jeanne Lambrew, who served as a senior health policy adviser in the Clinton White House and now is an analyst with the left-leaning Center for American Progress. For example, Lambrew said, most health policy analysts agree everyone should be covered, and greater health care quality and efficiency should be top priorities.

Joining Lambrew as principal speakers at the event were Katherine Baicker of the President's Council of Economic Advisers and Stuart Butler of the Heritage Foundation.

Also in attendance were a dozen or so policy veterans, a number of them left-leaning academic types who have served in government but also senior congressional Republican staffers including Mark Hayes of the Senate Finance Committee and Chuck Clapton of the House Ways and Means Committee.

Illustrating the lack of excitement over possible funding approaches was an exchange concerning two ideas floated at the forum, a value-added tax of 3 percent to 5 percent on certain products, and Bush's tax proposal, which according to a revised estimate by the Joint Committee on Taxation would raise revenues of $333 billion over 10 years in creating a standard deduction for health coverage.

When one participant referred to one of the approaches as more politically feasible without making it clear which one he was referring to, virtually all of the participants laughingly pressed him on the matter. It turned out he meant the Bush proposal but that wasn't exactly a hearty endorsement of the administration plan's political viability, given the historic lack of U.S. support for value-added taxes, a form of tax paid on products and services at each stage of production or distribution.

Still, Butler drew no objections when he characterized tax breaks employers now get for health coverage—breaks targeted by the Bush plan—as having gone off the track. "I think the president has done a great service to the nation of opening up that debate," he said.

And Hayes noted several possible uses of the money the Bush plan would raise by taxing higher levels of benefits, including not just tax breaks to buy private coverage but also expansion of government health coverage programs. He said covering uninsured parents with incomes below the poverty level would cost $41 billion over 10 years.

Baicker said the administration firmly believes that private coverage is the better option for covering the uninsured, saying the private market avoids a one-size-fits-all approach and can better meet diverse needs while doing a better job through competition of controlling costs.

However, Alan Weil, executive director of the National Academy for State Health Policy, cautioned that it would be unproductive to emphasize the public–private question in tackling issues involved in achieving universal coverage, suggesting each side would get bogged down in mistrust of the other.

Diane Archer, founder of the Medicare Rights Center, suggested the public–private issue could be defused by making sure Americans have a choice of government-sponsored or privately sponsored coverage. She referred to recent polling in which 80 percent of the public expressed support for a universal coverage system in which individuals would have such a choice.

Butler noted that the lines between public and private coverage aren't necessarily distinct, which could help in reaching agreement on wider coverage. "I think it's very important to kind of bite the bullet and say that there really is an overlap between public and private, and that's actually an opportunity . . . Obfuscation is a great element in terms of getting agreement," he said.

"A lot of people who say it doesn't make any difference tend to use that to expand public programs," Butler added wryly. But he added, there may be ways of expanding the State Children's Health Insurance Program "in ways that are compatible with encouraging private coverage."

By Mary Agnes Carey, CQ HealthBeat Associate Editor

April 11, 2007 --Expressing concern about access for rural and other beneficiaries, lawmakers at a Senate Finance hearing Wednesday signaled the chamber may take a cautious approach to reducing Medicare Advantage reimbursement rates.

Lawmakers from both sides of the aisle also said plans that are operating efficiently and improving care should not have their payments cut.

The Medicare Payment Advisory Commission (MedPAC) and Congressional Budget Office (CBO) have found that on average, Medicare Advantage plans are paid 112 percent of the rates paid in traditional Medicare, and in some counties that differential can be as high as 50 percent. Insurers have disputed those estimates.

CBO Director Peter R. Orszag told the panel that equalizing Medicare Advantage and fee-for-service payment rates would save $54 billion over five years and $149 billion over 10 years.

Previously, CBO had estimated five-year savings of $65 billion, but the budget office said its new estimate assumed equalization would take effect in 2009 rather than in 2008 because plans have already begun the process of filing bids for 2008. Its previous 10-year estimate of $160 billion in savings was reduced to $149 billion for the same reason.

Finance Chairman Max Baucus, D-Mont., said reducing Advantage payments "could also result in many plans leaving the program, and mass disruptions to beneficiaries." Other Democrats, including House Energy and Commerce Chairman John D. Dingell of Michigan, have suggested that cutting Advantage payments could help finance an expansion of the State Children's Health Insurance Program (SCHIP), which is up for reauthorization this year.

Iowa Sen. Charles E. Grassley, the Finance panel's ranking Republican, said paying Medicare Advantage and fee-for-service plans the same amount "sounds like an easy thing to do, but I don't think that it's as simple as it seems."

Grassley, who like Baucus served on the conference committee that drafted the law that created Medicare Advantage, said taking such as a step would "undo policies supported by members on both sides of the aisle to promote the availability of Medicare coverage choices, especially for beneficiaries in rural areas."

Finance Democrats Ron Wyden of Oregon and Maria Cantwell of Washington expressed concern about across-the-board cuts in Advantage payments. "Seems to me all Medicare Advantage plans are not cut from the same mold," Wyden said, adding that his state's plans "have historically not been reimbursed in the appropriate fashion" and that Medicare should collect data on a regional rather than national basis to judge the plans' efficiency. Cantwell said Advantage payment reductions would be a "pretty blunt instrument" that would hurt more efficient private insurers in Medicare.

While the majority of Medicare recipients are enrolled in traditional fee-for-service programs, enrollment in Advantage plans has steadily increased. In 2004, 13 percent of beneficiaries were enrolled in the plans. That number has increased to 19 percent and will be 26 percent in 2017 if trends continue, Orszag told the panel.

Rapid growth in private fee-for-service plans has fueled much of the Advantage growth. Of the approximately 8.3 million Medicare beneficiaries enrolled in Advantage plans, 1.3 million are in the private fee-for-service plans.

MedPAC Chairman Glenn M. Hackbarth said rapid growth in private fee-for-service plans was "a warning light" because the plans largely duplicate traditional Medicare fee-for-service but are paid at much higher rates. "Prices send signals," Hackbarth said. "Right now, Medicare is sending the signal that they want private plans even if they cost more than fee-for-service." The signal Medicare should send instead, he said, is that it rewards efficiency.

Health insurers are fighting to prevent any payment cuts, saying they would harm beneficiaries and that the plans provide better care at less cost. "Medicare Advantage plans meet a critical need by offering care coordination and management for diseases that commonly afflict the elderly," said I. Steven Udvarhelyi, senior vice president and chief medical officer of Independence Blue Cross, a Philadelphia company that offers a variety of private health plans to Medicare recipients.

But other witnesses said there is little data to prove those claims and that all Medicare plans—including the traditional fee-for-service program—should be required to report more outcomes to help judge the plans' efficiency.

The Center on Budget and Policy Priorities said in a telephone press briefing after the hearing that certain Medicare Advantage private plans do little or nothing to coordinate care, naming private fee-for-service plans and preferred provider organizations as examples. Certain HMOs such as those that hire their own doctors—"staff-model" HMOs such as those found in the Pacific Northwest, for example—can be more efficient, said Robert Berenson, an Urban Institute researcher who spoke on behalf of the left-leaning center.

But the 12 percent more paid on average to Advantage plans is likely to grow even larger relative to the traditional program because of projected enrollment increases in private fee-for-service plans, the center said. Those plans are paid 119 percent of fee-for-service rates, according to MedPAC.

Berenson says the government is now paying private insurers in Medicare Advantage almost $1,000 more per beneficiary than it would cost to keep the beneficiary in traditional Medicare, as a way of hastening the privatization of the program, he said.

Berenson said Medicare is being privatized virtually without the public knowing it, and without ever putting the issue up to an up-or-down vote, by using taxpayer money to favor private plans and regulation to disadvantage the traditional program. At some point the ballooning expense of Medicare will lead government to switch to giving seniors fixed dollar vouchers to pay for private plans rather than continue the current entitlement, he said.

Robert Greenstein, the Center's executive director, said an expensive lobbying campaign by insurers to block payment cuts threatens to force Democrats to scale back their efforts to enroll children who are eligible for but unenrolled in SCHIP, or "blow a hole" in congressional efforts to stick to budgeting rules requiring offsets for program expansions.

Some lawmakers favor tobacco taxes to pay for SCHIP expansion, but even a 60-cent increase in cigarette taxes would only raise $25 billion to $30 billion over five years to fund wider SCHIP coverage, Greenstein said. "They're not going to do 60 cents a pack," he said. "I think that's beyond what's politically feasible."

--John Reichard contributed to this report.

By John Reichard, CQ HealthBeat Editor

April 13, 2007 -- The Medicare Payment Advisory Commission (MedPAC) lent its backing this week to the growing number of health policy leaders who seek to tackle rising health costs by researching health care services to identify which provide the best value.

The panel voted Thursday to include a recommendation in its June report to Congress that legislators "should charge an independent entity to sponsor credible research on comparative effectiveness of health care services and disseminate this information to patients, providers and public and private payers."

MedPAC files two major reports to Congress each year making recommendations on Medicare payment policy, one in March and the other in June. At its April 12–13 meeting, the panel also agreed to include recommendations in its upcoming June report regarding a new method for calculating hospital wages in setting Medicare payment levels and to lessen the hassles Medicare beneficiaries encounter filling prescriptions for certain drugs.

Leading health policy analysts recently called for funding for comparative research overseen by some authoritative entity.

One of those analysts, Gail Wilensky, administrator of Medicare and Medicaid in the 1990s under President George Bush, warned at a meeting in February that health care spending is growing around 2 percent faster than inflation and must be brought down to a more sustainable level, such as half a percent or 1 percent.

Senate Finance Chairman Max Baucus, D-Mont., also is urging more comparative effectiveness research. The bill (S 3) the Finance Committee marked up Thursday on Medicare drug price negotiating authority authorizes new studies comparing pharmaceuticals' effectiveness to guide Medicare prescription drug plans in decisions on what drugs to cover. The Senate is expected to vote on the bill the week of April 16.

It's uncertain how far Congress is willing to go. Wilensky said in February that bringing down the cost growth curve will require an investment of billions, not millions, of dollars in comparative studies.

During a press briefing Thursday, Centers for Medicare and Medicaid Services acting Administrator Leslie V. Norwalk said private plans offering Medicare drug coverage already can do their own analysis of how effective drugs are and take those findings into account as they develop lists of drugs that will be covered by the plan.

In other action, MedPAC voted to recommend to Congress a new method for compensating hospitals for their labor costs. The new method would reduce geographic variations in the wage index now used by Medicare, which leads to constant lobbying pressure by hospitals to be "reclassified" into neighboring areas with different wage index values that result in higher Medicare payments.

The new method is designed to reduce year-to-year volatility in wage index values as well as to reduce the large differences that now occur between neighboring counties.

Instead of relying on data submitted by hospitals as is now the case, the index would be calculated "from all employers and industry-specific occupational weights," according to the language of the recommendation. In effect, the index would be calculated using data from the Bureau of Labor Statistics and the U.S. Census Bureau.

Wage index values would be calculated county by county. The new method would be implemented so that "large changes in wage index values are phased in over a transition period," according to the language of the recommendation.

In calling for the repeal of the existing statute governing the hospital wage index, the recommendation also would end the practice of allowing reclassifications into neighboring areas and of permitting exceptions to complying with the index.

MedPAC also is calling for use of the new wage index method in calculating payments for skilled nursing facilities and home health agencies and for an evaluation by the Health and Human Services secretary of its use for certain other Medicare payment systems.

The commission also sought to lessen confusion that occurs over whether certain drugs are covered by Part D or Part B of Medicare. Part D governs the prescription drug benefit and Part B various forms of care outside the hospital.

In some cases, Part D prescription drug plans aren't able to determine whether B or D pays for a drug without requesting additional information, creating administrative hassles, and potentially delaying access to treatment.

Recommendations agreed to by the panel urge Congress to direct the Medicare program to "identify certain overlap drugs and direct plans to always cover them under Part D." Those drugs should be "low cost" and now "covered under Part D most of the time."

MedPAC also is advising Congress to allow Medicare prescription drug plans to cover a "transitional supply" of overlap drugs under certain conditions until a final decision is made whether they are covered under Part B or Part D.

Congress also "should permit coverage for appropriate preventive vaccines under Part B instead of Part D," MedPAC advises.

April 13, 2007 -- The Centers for Medicare and Medicaid Services (CMS) announced a proposed rule late Friday it said would increase the accuracy of Medicare payments for inpatient hospital care while improving its quality. The 1,204-page proposal also aims to notify the public about the financial involvement of referring physicians in doctor-owned specialty hospitals.

On average, Medicare inpatient rates for hospital operating expenses would rise 3.3 percent in fiscal 2008 for hospitals that report data on quality of care to CMS. Altogether, the 3,500 acute care facilities subject to the proposal would receive an added $3.3 billion because of the increase.

The proposal calls for continuing steps started by CMS two years ago to adjust payments to hospitals for the severity of illness of the patients they treat. Patients treated by hospitals are classified according to their diagnosis in categories called "diagnosis-related groups," or DRGs; the proposed rule would create 745 new "severity-adjusted" DRGs.

Severity adjustment is designed to eliminate the incentive hospitals have to "cherry pick" patients—in other words, to only treat relatively healthy patients within a DRG in order to keep more of the DRG payment because treatment costs are lower. Severity adjustments pay hospitals more if the patient is relatively sick and therefore more costly to treat, and less if the patient is in relatively good shape.

The proposal also continues a phase-in started in fiscal 2007 by CMS of another step to improve the accuracy of hospital payments—basing payment rates on the actual costs of the hospital rather than on what the facility charges. Under the proposal, two-thirds of a DRG payment would be based on actual costs and one-third based on charges; in 2009, hospitals would be paid 100 percent based on actual costs.

Specialty hospitals are a particular focus of the proposal, both in terms of their payments and in terms of alerting the public about potential safety and conflict-of-interest concerns patients may have about the facilities.

With respect to payment, CMS initially began its work on severity adjustment by focusing on doctor-owned specialty hospitals that treat cardiovascular conditions because of concerns that only relatively healthy heart patients were being treated by those facilities.

"Last year, we estimated that payment reforms for 2006 and 2007 reduced payments to cardiac specialty hospitals by over 5 percent," CMS said in a press release Friday. The proposed fiscal 2008 revisions "are estimated to reduce payments an additional 4 percent," the agency said.

The proposal also would create new disclosure requirements for specialty hospitals, which single out a specific category of surgical procedures and boast that their concentration on that type of care makes them more efficient.

Patients would have to be notified that the facilities are doctor-owned, and be able to obtain a list of names of the doctors who own the facilities. A doctor-owner who was also on the staff of a specialty hospital would be required, if he or she referred a patient to that facility, to notify the patient of his or her status as an owner at the time of the referral.

Patients also would have to be notified in writing if the specialty hospital did not have a doctor at the facility 24 hours a day, seven days a week. The facility would have to inform the patient how it planned to meet his or her medical needs if he or she developed an emergency condition when no doctor was on site.

The proposed rule also would bring to 32 the number of quality measures on which hospitals would have to report data in order to receive the full 3.3 percent payment increase. In addition, the proposal would begin implementing payment provisions preventing a facility from receiving full reimbursement for follow-up care it provides when a patient develops an infection or other preventable medical condition at the hospital.

CMS also is proposing to change the way it pays for medical devices that are recalled or replaced at no cost to the hospital or at a reduced cost. Now, "Medicare pays the same for the second procedure, even if the hospital acquires the device for free or at a reduced cost, as it did for the initial procedure when the hospital had to purchase the device," CMS said. "The proposed rule would reduce payment when hospitals use a recalled or replacement device at no cost or with partial credit."

By Dyane Fils, CQ Staff

April 12, 2007 -- If former Health and Human Services Secretary Tommy Thompson is successful in his presidential bid, he has a plan to overhaul the American health care system. The main themes: boost preventive care and healthy habits, while increasing efficiency through the use of electronic health records.

Thompson, who was elected governor of Wisconsin for four consecutive terms (1987–2001) and was HHS secretary for four years (2001–05), formally announced April 1 that he is seeking the Republican presidential nomination.

Thompson discussed his health plan Wednesday with the National Coalition on Health Care (NCHC), an organization of business, labor, consumer, and provider groups, at a Washington forum hosted by the Kaiser Family Foundation. The aim of his plan is "transformation," he said. "Reformation would be trying to patch up a system that is already failing."

According to Thompson, only 7 percent of all health care costs go toward maintenance of good health and prevention of disease. In order to encourage healthier habits, he said employers should bring in nutritionists to talk to their workers and subsidize the availability of fruits and vegetables in the cafeteria.

He also wants to encourage a tobacco-free culture in America by taxing smokers heavily. The resulting revenue would be placed in a separate account to equip those who want to quit with tools such as counseling and nicotine patches. Employers who provide insurance should charge a fee to employees who smoke, Thompson added.

On a financial front, Thompson said costs can be lowered by eliminating paper-based records, which he said account for 10 percent of health care costs, adding that all medical records should be available electronically so they can be accessed in any hospital or physician's office.

"And finally we just have to come to grips with the idea that we're not going to live forever," Thompson said. A large percentage of health care expenditures occur in the last few months of people's lives, he pointed out, and, "If you are dying of terminal cancer, you should not get a transplant."

According to the U.S. Census Bureau, 44.8 million Americans were uninsured in 2005, the latest year for which figures are available. While there are advocates of a single-payer system in which the government would pay for the care of all U.S. residents, Thompson wants the private sector to play a dominant role. He has rejected single-payer approaches like those included in legislation (HR 676) by Rep. John Conyers, D-Mich., saying that method would only stifle innovation in the medical field.

Instead, each state should appoint a commissioner to solicit bids from insurance companies for the working uninsured whose household income is $60,000 or more a year, he said. "Tear down the artificial laws that say a state cannot bid on a person in another state," he said. He went on to suggest that insurance companies across the nation would bid competitively to attract these new customers, and the federal or state government would then cover those who are too poor to pay anything at all.

The NCHC is inviting all presidential candidates to make a formal statement and discuss their plans for overhauling health care.

April 11, 2007 -- Some 600,000 severely disabled Americans waiting the required two years to qualify for Medicare go into debt or skip health care during that period, according to a report released Wednesday by the Medicare Rights Center and The Commonwealth Fund.

Citing the report, which chronicles the experiences of 21 disabled people during the two-year period, the center and several other advocacy groups urged elimination of the two-year waiting period. The period begins after people are deemed disabled by the Social Security Administration because of incapacitating health conditions. Robert Hayes, president of the center, said eliminating the period would cost $8.7 billion annually, with $4.3 billion of that cost offset by reduced Medicaid spending. Joining the center in urging elimination of the period were Easter Seals, the National Multiple Sclerosis Society, and other organizations.