By John Reichard, CQ HealthBeat Editor

August 12, 2011 -- It may be mid-August, but the heavy lifting continues at federal agencies to create a far-flung system of insurance exchanges.

Obama administration officials on Friday outlined three new proposed regulations totaling more than 400 pages and awarded $185 million more in grants to states to build the insurance marketplaces.

No fewer than eight administration officials got on a press call with reporters Friday morning to answer questions about the three regulations and influx of dollars pushing the states forward with their exchange development efforts. Tea party activists and Republican officials in some states have decried the creation of exchanges as cooperating with “Obamacare.”

The show of force contrasted with other recent developments creating some uncertainty about the momentum behind exchange work: the coming departure of Joel Ario as head of the Health and Human Services Department exchange office, and the return by Kansas of a big grant to do pioneering information technology work to help other states perform the complex data transactions needed to make exchanges work.

The proposed regulations aim to establish processes for enrolling individuals and families in plans offered by exchanges; lay out how an estimated 20 million Americans will get tax credits to help them pay the premiums charged by insurers; and establish a “seamless” enrollment process in which people benefit from “one-stop shopping” in exchanges to easily enroll in Medicaid or the Children’s Health Insurance Program if they don’t qualify for the tax credits.

Simple and Speedy
In general, everyone is required to have insurance under the health law (PL 111-148, PL 111-152), but it’s not necessarily clear what kind of coverage an uninsured person is qualified to obtain. It could be the tax credits available to buy private coverage in the exchanges; Medicaid; the Children’s Health Insurance Program; or none of the above. The proposed regulations announced Friday aim to make exchanges a place that quickly determines eligibility and speedily enrolls people in the appropriate plan.

The intent is to “establish streamlined, coordinated eligibility determination systems for premium tax credits, Medicaid and CHIP that allow people to buy on line, by mail, or by phone through one simplified streamlined application,” HHS said.

One of the three proposals, the “Exchange Eligibility and Employer Standards,” in most cases “will allow for a near real-time eligibility process so that individuals can receive an eligibility determination and enroll in a plan in a single session,” according to an HHS fact sheet. “Exchanges will make it simple for individuals and families to access the coverage for which they are eligible, whether that is private coverage, Medicaid or CHIP.”

HHS added that “no matter how an application is submitted or which program receives the application, an individual will use the same application and receive a consistent eligibility determination, without the need to submit information to multiple programs.”

The 139-page proposal also deals with the creation of exchanges for small employers, called the “Small Business Health Options Program” (SHOP).

These exchanges will make it easier for employers to find out what plans cover, how much they charge, and the quality of their care. Employers that buy coverage through the SHOP may qualify for a tax credit of up to 50 percent of the employer’s contribution toward employee coverage. The SHOP is also supposed to reduce administrative hassles for small employers.

Medicaid Proposal Not Just About Exchanges
The 203-page proposed rule pertaining to Medicaid would require that exchanges conduct eligibility determinations for Medicaid but it deals with a lot more than that. It also implements the policy to provide additional federal funding for the states when Medicaid expands in 2014 under the health law to enroll an estimated 16 million uninsured people.

For example, the rule creates a new Medicaid coverage group covering adults with incomes up to 133 percent of the federal poverty line. In 2011, that’s $14,500 for an individual and $29,700 for a family of four. It outlines new federal payment matching rates for newly eligible enrollees providing 100 percent federal funding for calendar years 2014 through 2016, declining to 90 percent in 2020, the permanent federal matching rate after that point.

In addition, the rule proposes matching rates for states that expanded coverage in Medicaid for adults before the health law was passed. An HHS fact sheet on this proposal also notes that it “offers states a choice of new approaches for how they can access new federal funding for newly eligible individuals. Rather than require them to track who would be eligible before and after the health reform laws passed, the proposal lets states opt to use ‘proxy’ rules for who is newly eligible, statistical sampling, or data-driven estimates of the proportion of spending associated with newly eligible individuals.”

The proposal says that determining financial eligibility for both Medicaid and CHIP would be made simpler by relying on modified adjusted gross income. Eligibility categories would be collapsed into four primary groups: children, pregnant women, parents, and the new group of adults with incomes up to 133 percent of the federal poverty standard. Coverage renewals would be conducted once every 12 months unless the enrollee reports a change or the state agency has information prompting a reassessment of eligibility.

Tax Credits for 20 Million
The 67-page rule proposed by the Treasury Department “lays the foundation to deliver tax credits to help make health insurance affordable for middle-class Americans,” the department’s fact sheet said. When the health law is fully phased in individuals getting the credits will receive an average subsidy of $5,000 a year and a total of 20 million Americans will benefit, it added.

Recipients do not have to wait until they file a return to get the credit; they get it in advance in the form of an IRS payment to the insurance company in which they enroll. If it turns out that the credit was greater than they should have received, the overpayment is recaptured when they file their returns the following April.

In general, the premium tax credit is available to individuals and families with incomes between 100 percent and 400 percent of the federal poverty level, or $$22,350 to $89,400 for a family of four. To qualify, people in those income groups must use the credit on a “qualified health plan” offered by an exchange, and they can’t be eligible for Medicaid, Medicare, or “affordable” employer-sponsored coverage.

Official took pains Friday to say they want public comment and that the proposals will be improved depending on what they hear. The proposals have a 75-day comment period. In addition, HHS will hold forums to get public comment in Atlanta, Chicago, Denver, New York City, Portland, Oregon, and Sacramento, California.

Separately, HHS Secretary Kathleen Sebelius wrote to state governors Friday seeking their input. “Based on your feedback, HHS is already developing information technology initiatives to make eligibility determinations easier for states, including a federal “hub” through which HHS will provide certain data verification services to all Exchanges as well as Medicaid and CHIP, rather than requiring Exchanges and these other programs to separately interact with multiple federal agencies,” Sebelius wrote.

By Jane Norman, CQ HealthBeat Associate Editor

August 12, 2011 -- States don’t have forever to ponder their choices in creating health insurance exchanges under the health care law—and to help push that process along, 13 states and the District of Columbia were awarded $185 million in grants Friday to fund their efforts in developing exchanges.

Three states previously were awarded the “establishment grants,” which go to actually build exchanges as distinct from planning them. Forty-nine states previously received planning grants.

A third category of exchange funding is “innovator grants,” which have gone to seven states to develop information technology systems all states can draw on in developing exchanges.

Despite condemnation of the law by the Tea Party, Republicans are in the governor’s seat in two of the 13 states that received establishment grants Friday—Haley Barbour in Mississippi and Brian Sandoval in Nevada. Both states are also involved in a multistate suit filed against the law. But Barbour and Sandoval have not been resistant to putting the law in place pending a final decision on the legal challenge.

Not every Republican is accepting federal funds for exchanges, though. Two of the seven states awarded innovator grants have returned them. Earlier this week, GOP Gov. Sam Brownback of Kansas returned a $31.5 million “early innovator” grant that was to pay for state exchange development there, saying less costly approaches are needed to deal with problems in the health care system. Oklahoma previously returned its innovator grant.

The grants awarded Friday by the Department of Health and Human Services will be used to create marketplaces to make a menu of health insurance available to individuals and small businesses beginning in 2014.

States may apply for establishment grants through June 2012, with open enrollment for exchanges anticipated to launch in the fall of 2013.

“This means that much of the work in preparation for open enrollment needs to be completed earlier in 2013,” HHS Secretary Kathleen Sebelius wrote to the nation’s governors in announcing the new grants. “As such, I encourage states to have a fully developed grant strategy by early 2012.”

The grants can be used to help states determine whether they will have their own exchanges, partner with the federal government or rely on a federal exchange, she said.

The next deadline for applications is Sept. 30.

The grants awarded:

• California, $38.4 million. 
• Connecticut, $6.6 million. 
• District of Columbia, $8.2 million. 
• Illinois, $5.1 million. 
• Kentucky, $7.6 million. 
• Maryland, $27.1 million. 
• Minnesota, $4.1 million. 
• Mississippi, $20.1 million. 
• Missouri, $20.8 million. 
• Nevada, $4 million. 
• New York, $10.7 million. 
• North Carolina, $12.3 million. 
• Oregon, $8.9 million. 
• West Virginia, $9.6 million.

Indiana, Rhode Island and Washington were the three other states that received establishment grants earlier this year.

By Jane Norman, CQ HealthBeat Associate Editor

August 11, 2011 -- Federal officials are searching for ways to trim the high costs of caring for people with chronic illnesses enrolled in both Medicare and Medicaid, including through the health care law. And while such new approaches as team-based care provide signs of what can work successfully, there are some pitfalls as well, health policy experts said at a briefing.

For example, disease-management programs conducted via telephone haven’t been effective, said Randy Brown, vice president and director of health research at Mathematica Policy Research in Princeton, N.J. “It’s a cheap intervention but it doesn’t work,” said Brown, adding that multiple studies have arrived at that conclusion.

What is successful is face-to-face contact between providers and patients once a month or more; small case loads for providers; strong patient education, including proper use of prescription medications; good management of departures from the hospital; and staff members with expertise in patients’ social needs, said Brown.

He and other experts participated in a briefing sponsored by the Alliance for Health Care Reform and The Commonwealth Fund, which took a look at how to improve care and manage costs for the chronically ill through the use of teams of providers.

The Department of Health and Human Services (HHS) recently announced three new programs to help streamline and improve care for dual eligibles. The Federal Coordinated Health Care Office, created by the 2010 health overhaul law ( PL 111-148 , PL 111-152 ), is charged with finding ways to save money and improve care in connection with this group.

It is a pressing question for federal entitlement programs. Cathy Schoen, senior vice president of The Commonwealth Fund, said that nine million people are so-called “dual eligibles” covered by both Medicare and the state-federal Medicaid program. While they make up just 10 percent of the programs’ total population, they accounted for 38 percent of all spending in 2007.

Schoen said that for the chronically ill, care is often complex and expensive, involving multiple sites and types of specialists. Some people may have five or more chronic conditions, with medical issues mixed together with mental illness or behaviors like smoking or obesity.

Most of the bill winds up being paid by the federal government, though insurers pay out about $68 billion through employer-sponsored private health insurance coverage.

All of it calls for more of a coordinated, multi-specialist approach to care that looks at the whole person and not just treatment of each condition, the experts said.

In Massachusetts, a non-profit health care organization that offers medical and social services to chronically ill seniors and to people with disabilities appears to have reduced hospitalizations and costs among its elderly patients.

The Commonwealth Care Alliance, which is not related to The Commonwealth Fund, focuses exclusively on the care of Medicare and Medicaid’s most costly and complex enrollees, said Linda Simon, cofounder and chief operating officer.

Primary care as organized under traditional fee-for-service Medicare is “hopelessly ineffective,” Simon said in a presentation about the program. And, she said, long-term-care services traditionally are administered without any kind of individualized care plan or coordination.

Instead, her organization uses teams of different specialists, headed up by nurse practitioners. The teams are able to order services for patients, even transportation, without prior approval from the health plan because so much less is spent on hospitalization and nursing homes, said Simon.

According to a Health Affairs article about the plan, the number of hospital days per 1,000 members in 2007 was equal to 55 percent of hospital days for comparable patients in fee-for-service Medicare.

The plan also scored at 90 percent or higher in measures for diabetes care, monitoring of patients on long-term medication and access to preventive care services.

Simon said success requires an increased investment in primary care and the “creative” provision of services and support using teams whose members are collaborators, not competitors.

Simon’s materials for the briefing cited the example of a 55-year-old woman who, when she enrolled in the program, had multiple sclerosis, a history of depression and severe asthma. She had also been a smoker. The woman, who used a wheelchair, had been in the hospital multiple times during the past two years. She did not have consistent primary care and hadn’t gotten help for her depression or smoking. She was severely depressed, withdrawn, bed-bound, suffering from pressure sores and incontinent. Her predicted expenditures were $3,800 a month.

Under the plan developed by Commonwealth, she had 72 hours a week of personal care that eventually was able to be reduced to 40 hours. She also received in-home wound care, a specialized air mattress, transportation and a smoking cessation plan. A nurse practitioner found her a primary care doctor.

A year later, the woman was far more engaged with life and her community, her ulcers were healed, she had better management of her prescriptions, her asthma had decreased though the smoking plan was only partly successful, and she had a relationship with a primary care doctor though most of her care came through the nurse practitioner. She’d had just one three-day hospitalization.

Jane Norman can be reached at [email protected].  

By John Reichard, CQ HealthBeat Editor

August 12, 2011 -- The federal appeals court ruling Friday declaring the individual mandate in the health law unconstitutional may turn up the flame under efforts to find another way to prod uninsured Americans—especially young, healthy ones who are good insurance risks—to buy coverage.

Lawmakers already have done a fair amount of thinking about the matter, given how controversial it is require people to carry health insurance as the health care law does. It’s the least popular part of the law, according to polls.

Alternatives range from reducing open-enrollment periods to buy coverage, charging penalties for late enrollment in health plans offered by insurance exchanges, and allowing people to opt out from carrying coverage if they sign a waiver saying they will be financially responsible for all of their health care costs if they decide to go without insurance.

If the appeals ruling handed down Friday survives, the health care law, as a piece of policy work, will practically cry out for some kind of patch that puts pressure on people to buy coverage but doesn’t legally require them to do so.

That’s because the ruling keeps in place consumer protections in the law designed to make coverage affordable—such as the rule that insurance companies take all applicants regardless of their health status. Without more good risks coming into insurance plans to offset the costs insurers will incur from enrolling previously uninsured people with high-cost medical conditions, premiums may zoom for everyone.

The Government Accountability Office has examined alternatives to the mandate that might help bring those good risks in. And lawmakers such as Democratic Sens. Ben Nelson of Nebraska and Claire McCaskill of Missouri have talked about introducing bills with alternatives, as has Rep. Peter A. DeFazio , D-Ore.

GAO released a report in March saying that many analysts and experts see an approach similar to that taken in Medicare Part B or Part D as an alternative to the individual mandate. Part B, for example, the doctor care part of Medicare is voluntary, but almost everybody eligible signs up. That’s because the longer a senior waits to enroll, the higher the monthly premiums he or she must pay.

Similarly, the health law could be changed so that uninsured people would have to pay much higher premiums if they delayed the purchase of coverage. Open enrollment periods in health insurance exchanges could be limited to once every few years. There could be penalties for people who don’t enroll in plans offered by the exchanges in the form of having to pay higher copayments or deductibles for their benefits. Or, there could be some combination of all of those elements, GAO said.

The American Academy of Actuaries said earlier this year that the GAO report is a “significant” examination of possible routes for lawmakers to take, some of which should be considered even if the mandate is kept intact. “Any mechanism that encourages broader participation will help limit adverse selection,” Cori Uccello, senior health fellow for the American Academy of Actuaries, said at the time. “These tools should be considered with or without the coverage mandate.”

For his part, DeFazio has drafted a proposal under which those who do not want health insurance would be required to file an “affidavit of personal responsibility” waiving their right to enroll in a health insurance exchange or in Medicaid. They also would be barred from using bankruptcy court to reduce health-related debt.

Congress is unlikely to do anything to change the individual mandate provision of the law until its constitutionality is settled in the courts. But the talk about what lawmakers could do to replace it is sure to intensify until that happens.

By John Reichard, CQ HealthBeat Editor

August 11, 2011 -- The federal debt limit agreement gives opponents of the health care law as many as three chances to strike at its funding. But the odds are that they will be able to deal only glancing blows.

The opportunities come in the form of $900 billion in cuts through the agreement’s caps on discretionary spending; the provision for $1.2 trillion or more in additional deficit reduction to be negotiated by the Joint Select Committee on Deficit Reduction and enacted by the end of this year; and in the automatic cuts that will kick in if the committee can’t agree on all $1.2 trillion in deficit reduction.

With lawmakers now on the hook for trimming at least $2.1 trillion from federal deficits over the next decade, the debt agreement ( PL 112-25 ) creates a powerful dynamic for Republican critics of the health care law to divert its half a trillion dollars in Medicare and Medicaid cuts to deficit reduction and away from coverage of the uninsured.

The health care overhaul ( Pl 111-148 , Pl 111-152 ) is almost inevitably a target of the debt deal, said Robert Reischauer, president of the Urban Institute, a center-left think tank. “I think it puts pressure on it because close to the top of the Republicans’ list will be to repeal the [health care] law, or some lesser variant of it like reduce the subsidies for low-income folks or eliminate the individual mandate.”

But Reischauer and other analysts predict that Democrats on the joint committee will resist such changes. And while some cuts can be expected through trimming discretionary spending and a “sequester” of funds if automatic reductions are triggered, they won’t be large enough to force fundamental changes in the law, analysts said.

Republican critics of the health care law concede as much. “I think people are overemphasizing what this committee is going to achieve,” House Budget Chairman Paul D. Ryan , R-Wis., said Aug. 7 on “Fox News Sunday.” “I don’t think this committee is going to achieve a full fix to our problems because Democrats have never wanted to put their health care bill on the table.”

Discretionary Spending
That’s not to say there won’t be cuts. Dan Mendelson, who served as a top health budget adviser to President Bill Clinton, said that the $900 billion in cuts in discretionary funding could stop increases in funding for studies to identify best medical treatments.

“There is a lot of increased spending on evidence-based medicine” in the health care law, said Mendelson, referring to comparative effectiveness research. “The reform law had a lot of forward-thinking provisions intended to save costs in the long run, but that resulted in spending in the short run” — and those are now at risk, he said. Mendelson is president of the D.C.-based consulting firm Avalere Health.

Personnel at the Department of Health and Human Services also could be reduced through discretionary spending cuts, he said. The department has increased staffing to carry out the provisions of the complex law, he noted. “You can bet that the Republicans will be interested in that kind of spending reduction because it helps to slow down reform.” Reductions could take the form of hiring freezes during which HHS could not fill positions that become vacant as employees move on to other jobs or retire. Mendelson said that during his tenure in the Clinton administration about 5 percent of employees could be expected to leave in any given year. But the net effect would not severely undermine implementation of the health care law, he said.

Sequestration
“Sequestration”—legalese for any automatic cuts triggered under the debt agreement—would not have a big impact on the health care law, said Dean Rosen, who served as top health policy aide to Senate Majority Leader Bill Frist, a Tennessee Republican. Automatic cuts could wipe out up to $1.2 trillion in federal spending but only about half that could be for “non-security” programs—basically non-defense spending. And Medicaid, which is scheduled to expand sharply in 2014 under the health care law, is protected from automatic cuts. Protected too are “advance refundable tax credits”—the subsidies Americans will receive under the health care law to help them meet the requirement that they buy health insurance.

Rosen said some funding under the health care law would be hit by sequestration. A $10 billion fund to promote preventive health care could be cut by 2 percent a year as could subsidies to insurers to cushion any losses they experience from moving into the unfamiliar market in the health insurance exchanges the law creates.

But Rosen, now a partner with the D.C. law firm Mehlman Vogel Castagnetti, agrees with Mendelson that neither discretionary spending cuts nor automatic cuts would strike terribly hard at the health care law. The bigger potential threat, they both agree, is through any agreement produced by the deficit reduction committee that becomes law.

All forms of spending are fair game in such an agreement. But Mendelson said that “the politics of the commission will dictate that anything that is overtly ideological will be hard to accomplish in that context. And clearly repeal of reform is overtly ideological. They are going to be under a lot of pressure to keep the focus on how can we come together to agree on deficit reduction. They will not get agreement from Democrats on repeal of the mandate. That’s just not going to happen.”

“I do think that there will be a discussion of Medicaid,” Mendelson added. While lawmakers won’t trim the 2014 Medicaid expansion by reducing eligibility, they could shave benefits somewhat, he said. “Remember, it includes a lot of long-term post-acute care which is not typically covered in a standard benefit.” And for those eligible for both Medicaid and Medicare, care “is largely unmanaged. I continue to believe that there are significant savings that can be accomplished by improving care coordination for the dual eligibles. That is an area that they should focus on at some point. There are savings there.”

One potential way in which cuts to Medicaid could undermine the health care law is by further reducing already low Medicaid payment rates to providers, making it even harder for Medicaid enrollees to find doctors and hospitals willing to treat them.

But Rosen said “I don’t actually think that cuts to Medicaid that might come out of this committee would significantly weaken the Medicaid program” by the time 2014 rolls around and it’s time for expansion. For one thing, that’s only a couple of years away, leaving relatively little time for provider payment rates to be reduced. “I think that a lot of the effect of some things that are on the table frankly take effect in the out years,” Rosen said. The health care law includes other provisions that could somewhat blunt the impact of new cuts on access, such as added funding for community health centers and for primary care, albeit briefly.

Rosen sees a reconsideration of the 2014 Medicaid expansion coming regardless of what happens with the debt agreement. In other words, he believes that review, which he thinks will occur in a couple of years, was inevitable anyway. Medicaid is a “fragile” base on which to expand coverage because of low provider payment rates and existing access problems that pre-date the deficit reduction deal, he said.

Fundamental reconsideration of the expansion “is very likely because it’s even more clear now that we’re in a very acute situation with regard to the economy and our debt,” Rosen said.

By Jane Norman, CQ HealthBeat Associate Editor

August 8, 2011 -- Health and Human Services (HHS) officials on Monday reported “positive” results from a five-year demonstration project that has laid the groundwork for Medicare accountable care organizations (ACOs) that the agency wants to create throughout the system.

Centers for Medicare and Medicare Services officials said that the Physician Group Practice Demonstration showed there can be success in a pay-for-performance concept when it comes to improving the quality of care, coordinating services and saving money in Medicare. The lessons learned “provide great insight into how to use Medicare’s payment systems to improve quality while reducing costs,” CMS Administrator Donald M. Berwick said.

Berwick also clearly appeared to be responding to criticism leveled against the agency’s regulatory proposal for ACOs, which has been slammed as too complex and not generous enough in its financial rewards. About 1,200 comments poured in earlier this year and the agency is now mulling them over. Change takes time, he said.

“We have learned to invest in sustained improvement over time, and that short-term comparisons between startup costs and measurable results may fail to realize the long-term value of these results,” Berwick said.

The demonstration ended in March 2010. In January, a second demonstration began that is intended to give Medicare officials more data on how success in the demonstration can be sustained. Berwick said that he is “optimistic” that the groups that took part in the pilot and in this transition project “will continue to show improved quality and generate shared savings for the Medicare program.”

However, many of the physician practices participating in the Medicare demonstration program on ACOs have already said in a letter to Berwick that they have “serious reservations” about the economics and complexity of the proposed rule.

They also objected to the “downside risk”—the financial penalties that teams of providers would face if they exceed spending targets set for them under the program. “Such downside risk is compounded by significant investment cost on the part of the ACO,” they said.

Medicare and HHS officials have repeatedly said they welcome criticism and comments about the ACO rule and will take them into account.

The 10 physician groups taking part in the demonstration project set out in 2005 to see if they could meet 32 performance measures and save money, which would earn them incentive payments. The performance measures tied to quality were phased in over five years.

Mark McClellan, administrator of CMS at the time the demonstrations were launched, has said that he expects Medicare officials to sign the first ACO contracts next spring despite the criticism the proposal has endured.

According to Medicare, physician groups in the demonstration earned performance payments of up to 80 percent of the savings produced. Medicare kept the other 20 percent.

Among the 10 groups, two are free-standing physician group practices; two are faculty group practices within academic medical centers; five belong to health care systems that include at least one hospital; and one is a physician network sponsored by a hospital affiliate and made up of 60 small practices.

The deal proved profitable for them. Over the five-year life of the demonstration, Medicare paid out $110 million in shared savings.

Medicare officials said that by the fifth year of the demonstration, seven of the 10 physician groups hit all 32 of the performance measures: Billings Clinic in Billings, Mont.; Everett Clinic in Everett, Wash.; Forsyth Medical Group in Winston-Salem, N.C.; Geisinger Health System in Danville, Pa.; Middlesex Health System in Middletown, Conn.; Park Nicollet Health Services in St. Louis Park, Minn.; and St. John’s Health System in Springfield, Mo.

The other three groups made 30 of the 32 performance measures. They were the Dartmouth-Hitchcock Clinic in Bedford, N.H.; the University of Michigan Faculty Group Practice in Ann Arbor, Mich.; and the Marshfield Clinic in Marshfield, Wis.

For all 10, this was a “significant” improvement from the first year of the demonstration, when only two of the physician groups hit all of the benchmarks, Medicare officials said. The 10 physician groups represent 5,000 physicians and 220,000 Americans enrolled in traditional fee-for-service Medicare.

Jane Norman can be reached at [email protected].