By Niels Lesniewski, CQ Staff

August 10, 2010 -- The House did what it interrupted its August recess to do: clear legislation that would provide $26.1 billion in aid to states.

House members returned Tuesday to Washington to vote on the measure (HR 1586), which would provide $16.1 billion to extend increased Medicaid aid to states and $10 billion in funding for states to create or retain education-related jobs. It was cleared by a vote of 247–161, and now heads to the president's desk.

"We're trying to pass a law that will save hundreds of thousands of additional jobs in the coming year. It will help states avoid laying off police officers, firefighters, nurses and first responders. And it will save the jobs of teachers like the ones who are standing with me today," President Obama said Tuesday in a Rose Garden event flanked by schoolteachers.

Rep. John Kline of Minnesota, ranking Republican of the House Education and Labor Committee lambasted the bill, calling it "another bailout" and "another $10 billion we don't have."

"Because of major increases in the number of school personnel in recent years, states are operating education budgets they cannot afford," Kline said. "At best, inflating state education spending for another year will kick the can down the road."

House Appropriations Chairman David R. Obey, D-Wis., meanwhile, criticized Senate Republicans for delays in moving the measure forward.

"The minority party in the Senate is using the rules of the Senate to give them the functional equivalent of the majority's ability to determine the agenda of that body," Obey said. "And they have decided to follow a 'rule or ruin' approach to governance—blocking every action they can and, in this case, delaying action to the point of complete confusion."

The Senate previously turned back the $10 billion in education funding that Obey had attached to a $58.8 billion fiscal 2010 supplemental appropriation measure to fund the wars in Afghanistan and Iraq, and other priorities (PL 111-212).

Because many states have budgets with the expectations of federal money, the state-aid package could prevent the layoff of many public sector employees. Under the bill, additional Federal Medical Assistance Percentage (FMAP) in the 2009 economic stimulus law (PL 111-5) also would be extended for an additional six months.

Democrats generally voted for the legislation, despite having concerns about some of the offsets, including an $11.9 billion reduction in mandatory spending from ending increased food stamp benefits starting in April 2014 and a $1.5 reduction in appropriated funds for an Energy Department renewable energy program.

Republicans who opposed the bill expressed concern that another offset to change foreign tax provisions could harm the economic recovery by imposing new taxes on businesses.

Those offsets—which would raise about $10 billion in revenue—target the use of the foreign tax credit by multinational corporations. Major business groups have opposed the proposals, arguing that they would make U.S. companies less competitive abroad. But Democrats argue that the changes remove incentives for U.S. companies to locate their operations overseas.

Lauren Smith contributed to this story.

By John Reichard, CQ HealthBeat Editor

August 9, 2010 -- Perhaps as never before, community health centers are getting their day in the sun, with billions of dollars in new federal funding coming their way and a growing recognition of the key role they may play in providing cost-effective care to the newly insured under the overhaul law.

Marking the start of "National Health Center Week" was a new study released Monday that seeks to highlight another benefit of the centers—their impact on disadvantaged neighborhoods at a particularly troubled time in the nation's economic life.

Released by the left-leaning Center for American Progress (CAP), the study said that funding of the centers under the overhaul law and the stimulus law "will generate $53.7 billion in economic activity for some of the most disadvantaged neighborhoods in the country over the next five years," with $33.5 billion of that coming from the overhaul law.

Over the same period, the centers will support 457,289 jobs in the communities, some 284,000 from the overhaul law. The report breaks down economic activity and jobs created by the health centers by state, saying for example that in the year 2015 Wyoming will have 567 jobs generated by the funding, while California will have 71,649. The corresponding figures for economic activity generated in those two states that year are $57.4 million and $9.3 billion, according to the study.

These figures assume the direct outlays from the stimulus and the overhaul law will have a multiplier effect on local economies. The direct funding under the overhaul law and the stimulus measure is far lower than the estimated $53.7 billion in economic activity.

For example, the stimulus law provides $2 billion in funding over two years. The overhaul provides $9.5 billion in operating funds to fund expanded services at existing centers and $1.5 billion to construct new ones for a total of $11 billion over a five-year period.

The operating funds provided under the overhaul grow over time, starting with $1 billion in 2011, then rising to $1.2 billion in 2012, $1.5 billion in 2013, $2.2 billion in 2014 and $3.6 billion in 2015.

The added $9.5 billion in operating funds must be in addition to the current appropriated funding that totaled $2.2 billion in fiscal 2010.

HHS Secretary Kathleen Sebelius announced a first installment of center grants on Monday, saying that some $250 million would be awarded to support some 350 sites in fiscal 2011.

Besides the direct economic effect of employing more people within the center, the dollars provide indirect benefits, writes the author of the study, CAP's Ellen-Marie Whelan.

Thus, to serve an expanded clientele, a center would buy more waiting room chairs from a local furniture store, which in turn buys more paper from an office supply store to print receipts and a truck from a car dealer to make deliveries, and center employees spend their income on everyday purchases such as groceries, clothing, cars and TVs, Whelan writes.

Because of where centers are located, the funds target areas of greater need, she says. Under the law, the centers must be located in areas with relatively high poverty rates, such as inner-city neighborhoods or isolated rural areas.

In addition to studying the economic effects, the report profiles the clientele of the centers and the services they provide. Two-thirds of patients who receive care at the centers are members of racial and ethnic minorities. Seventy percent have incomes below the federal poverty level, which is $22,000 for a family of four. Almost all clients have incomes below twice the federal poverty level, but the centers take all patrons, whether uninsured or insured.

Speakers at a CAP-sponsored forum Monday noted that because of layoffs, even affluent Americans are going to the centers for treatment. An executive with a New York City-based center said she's even seeing laid-off Wall Street bankers coming for treatment, and another executive with a Loudoun County, Virginia-based facility said the departure of AOL from that community generated center clientele, including entrepreneurs who are starting their own businesses because of AOL's departure.

According to Whelan's report, "although there are over 8,000 community health centers, the unmet need is still enormous." It cited an estimate by the Government Accountability Office last year that 43 percent of areas of the country designated by the federal government as medically underserved still do not have a community health center.

The centers "serve a much higher percentage of individuals with Medicaid," Whelan adds. About half of the 32 million uninsured Americans expected to gain coverage under the overhaul are projected to go into the Medicaid program, raising concern that they won't be able to find health care services. But the growth of the centers will help serve them, she said.

But Daniel Hawkins, senior vice president of the National Association of Community Health Centers, said at the forum that the funding formula for centers is flawed in that it does not address areas of true need within affluent communities.

Thus there are no community health centers in Virginia's Fairfax County, even though there are pockets of true poverty there, he said. Similarly, the center in Loudoun County would lose federal funding if the county's demographics shift to the point that it becomes too affluent on average, he added. Hawkins said funding decisions should be center-based, with centers able to qualify for federal money regardless of area demographics if they could show that they serve a sufficiently large, needy clientele.

Funding for the centers has drawn bipartisan support over the years, with President George W. Bush championing a big increase in center funding during his administration.

Grace-Marie Turner, president of the right-leaning policy analysis organization the Galen Institute, said there is clearly an issue with access to care "in rural and many urban areas." But, she said, "I am very concerned about whether there are enough doctors and nurses to provide to staff the centers that already are in place. Making sure existing clinics are adequately staffed and funded would seem to me the highest priority before we dramatically expand the number."

Hawkins said, however, that the expansion of funds under the stimulus was supposed to provide services to 2.9 million more people within two years and that centers are on track to exceed that figure. "They're going to blow past that 2.9 million target," he said.

Hawkins said he expects the number of health care professionals employed at the centers to keep pace with the expanded number of size of facilities.

By John Reichard, CQ HealthBeat Editor

August 10, 2010 -- Although polling shows that seniors in general aren't well-informed about how the health care overhaul law improves their Medicare benefits, at least 750,000 are well aware of at least one tangible benefit — the $250 checks they get this year if they reach the gap in drug coverage called the "doughnut hole."

That's how many have received the checks so far, the Centers for Medicare and Medicaid Services announced Tuesday. "More beneficiaries will be receiving checks in the coming months as they enter the coverage gap," the agency added in a news release about the milestone.

The agency isn't shying away from opportunities to build public awareness of these and other Medicare improvements in the law. CMS also distributed Tuesday customized state press releases breaking out the number of beneficiaries per state receiving the checks. Releases were prepared for "the vast majority" of states, a CMS spokesman said.

The spokesman said that about eight million Medicare beneficiaries can be expected to reach the threshold of prescription drug outlays that reaches the doughnut hole, in which they must pay the full cost of a prescription. When that happens a significant number of seniors stop taking drugs, the agency says, putting them at risk for complications if the drugs are for chronic conditions like high blood pressure or diabetes, for example.

About half of the eight million receive the "low-income subsidy," which pays almost all prescription drug costs—so in their case at least, there's not a problem with loss of access to medications. But the other four million do not get the subsidy and are on the hook for all prescription costs in the doughnut hole, the spokesman said.

That suggests many more Medicare enrollees will be getting checks by the end of the year. The checks arrive automatically in the mail when enrollees reach the doughnut hole; there is no requirement that they sign up to get them. CMS is warning seniors not to give out any personal information to fraudsters suggesting they need to sign up.

A recent poll by the Kaiser Family Foundation found that only about one-third of Medicare enrollees knew that the overhaul law ends out-of-pocket charges in Medicare for preventive services such as mammograms, certain colon cancer tests, and a yearly physical. About half were aware of provisions of the law to gradually close the doughnut hole.

Brand name drug makers who want to continue in the Medicare Part D prescription drug program next year must sign agreements by Sept. 1, 2010, saying they will provide 50 percent discounts in 2011 for products prescribed to Medicare enrollees in the doughnut hole; generic drugs will be covered in the doughnut, CMS says. Each year thereafter, the coverage gap will gradually be narrowed further until it is eliminated in 2020.

CMS takes the opportunity in the press release issued Tuesday to remind seniors of other Medicare improvements in the overhaul law, such as its increased coverage of preventive care. It also says "seniors can expect to save on average almost $200 per year in premiums compared to what they would have paid without the new law."

Republicans and Democrats are at odds over what the Obama administration is saying about Medicare changes under the overhaul law, which in addition to improved benefits includes cuts to health plans and other providers and a Medicare payroll tax hike on affluent Americans.

Democrats say that seniors need to be educated about the benefits available to them under the law and that GOP "misinformation" about the law's impact on seniors must be corrected. But Republicans say Democrats have crossed the line into political campaigning on behalf of the overhaul law, charging that use of taxpayer funds for a recent ad featuring the actor Andy Griffith is illegal.

By John Reichard, CQ HealthBeat Editor

August 13, 2010 -- The Obama administration should change the way it's interpreting "grandfather" provisions in the health care overhaul law — the better to truly allow consumers to keep their current health coverage if they choose and to cope with rising premium costs.

That's the message the nation's biggest health insurance lobby is sending lawmakers through a new "issue brief" circulated this week to members of the lobby, America's Health Insurance Plans (AHIP).

The new brief "may prove useful in your discussions with lawmakers and others during the congressional recess," America's Health Insurance Plans President Karen Ignagni advises insurers in a memo distributing the document.

AHIP also sent an 11-page letter this week to the National Association of Insurance Commissioners (NAIC) urging them to include certain interpretations in their recommendations to HHS on an upcoming regulation on "medical loss ratios." "MLRs" set minimums for what percentage of the premium dollar must go for health care and quality improvement.

Insurers and their GOP allies complain that an "interim final rule" issued by the federal Department of Health and Human Services makes it too hard for plans to keep grandfather status, which exempts them from some of the mandates in the overhaul, including requirements that plans offer full coverage of preventive care and that create mechanisms to allow enrollees to appeal health plan decisions.

They add that the rule belies the claim of President Obama that people can keep their current coverage under the overhaul, if they so choose. Grandfather status applies to health plans on the market when the overhaul became law March 23.

The rule keeps plans from raising co-payments and deductibles beyond a certain point without losing their grandfather status.

But Oklahoma's Republican insurance commissioner Kim Holland said in a recent interview that that's a problem. Why? Because one way for consumers in the individual market to avoid big premium hikes is to switch to coverage with higher deductibles and other out-of-pocket costs, she said.

But under the HHS rule, when a grandfathered plan raises premium charges and a policy holders tries to avoid the added cost by switching to higher-deductible coverage, all the mandates will kick in that drive up premiums, she said. Rules on grandfather plans allow changes in cost-sharing that are too modest to allow people to avoid big premium hikes by accepting more cost-sharing, according to Holland.

Holland maintains that under the overhaul law individual insurance will become unaffordable for many Americans since subsidies to help them pay premiums don't begin until 2014.

AHIP's issue brief makes a similar point.

It says larger increases should be permitted in cost-sharing without a loss of grandfather status. Grandfather status should be protected "to preserve affordable coverage options and limit disruption of coverage for currently insured individuals," the brief says.

AHIP says that the curbs on changes to grandfathered plans in the HHS rule "effectively make grandfathering temporary." AHIP adds that modifications should be permitted in a plan's formulary of covered drugs without a loss of grandfathered status, and similarly that changes should be permitted in the lineup of providers who participate in a plan's network.

HHS defends the rule as a way to keep plans from raising cost-sharing beyond certain limits without having to also comply with wider protections afforded by the overhaul law, such as the preventive care and appeals benefits.

Although HHS issued the rule in final form, its "interim" status permits comments to be filed pro or con. The deadline for those comments is August 15.

The other big rule AHIP is trying to shape is the one on medical loss ratios. Its letter to NAIC voices concern that its recommendations to HHS won't count spending on important quality improvement initiatives toward requirements that 80 percent of premium revenues in the small group market and 85 percent of premiums in the large group market go either for health care or improved quality of care.

Acceptable quality improvement programs should not be limited to those that are the market today, the AHIP letter says. Also, fraud prevention and detection programs should count as quality improvement, as should the cost of installing new "ICD-10" billing codes expected to generate more data relating to quality improvement.

In addition, "utilization review" programs that assess whether certain medical procedures are appropriate should be viewed as quality improvement. The programs promote product safety by ensuring enrollees get the right procedure at the right time and in the right place and also address concern over geographic variations in the use of medical imaging procedures, AHIP says.

The letter also argues that federal and state taxes and fees must be excluded when calculating total premium revenues in the MLR. Insurers are up in arms about a letter from key lawmakers saying some of those taxes should not be excluded and have obtained a legal opinion saying the letter cannot be used as evidence of legislative intent after passage of the overhaul law.

Democrats and their allies say insurers are launching an all-out lobbying assault to distort the medical loss ratio rule in ways harmful to consumers.

By John Reichard, CQ HealthBeat Editor

August 12, 2010 -- Insurers expressed dismay Thursday over a letter by key congressional committee chairmen weighing in on a health overhaul law provision dealing with "medical loss ratios," saying that millions of consumers could be harmed by the way the letter says the ratios should be calculated.

The ratios, or "MLRs," are the percentage of premium revenues that insurers pay out for medical care.

The issue deals with an arcane aspect of the law pertaining to MLRs, but the bottom line is clear; insurers fear the Obama administration is going to box them into a position where they will be forced to issue rebate checks to consumers for not providing sufficient levels of medical care for the premium dollars they get from employers and individual consumers.

That would hand President Obama a victory going into the fall elections in that he could say the overhaul law will force insurers to issue consumers refunds after years of overcharging them for insurance.

These suspicions among insurers are heightened by the announcement Thursday that Obama plans to address a meeting in Seattle next Tuesday by the National Association of Insurance Commissioners. The NAIC will soon issue recommendations to the department of Health and Human Services on how to calculate the MLRs.

The letter, coupled with the president's visit to NAIC, is "brilliant timing," said a managed care industry consultant who requested anonymity in order to speak more freely.

The law specifies a percentage of the premium dollar that insurers must pay out for health care and what percentage they can use for administrative expenses including profits. In the case of insurers in the small group market, the MLR is 80 percent. In case of large groups, it's 85 percent.

In the August 10 letter to HHS Secretary Kathleen Sebelius, lawmakers including Senate Finance Committee Chairman Max Baucus, D-Mont., said that "we are writing to clarify legislative intent as it pertains to the exclusion of federal taxes" from premium revenue calculations used to determine a plan's MLR. To the extent a plan misses the mark—say by spending 83 percent of premiums on medical care rather than 85 percent—it must issue consumers a rebate check, in this example two percent of the premium charges.

The law says that in calculating premium revenues federal and state taxes and licensing or regulatory fees should be excluded. But the letter says that federal taxes and fees in this context refers only to those established under the health care overhaul law. "Federal income taxes or payroll taxes were not intended to be excluded," the letter says.

In addition to Baucus, the letter was signed by House Ways and Means Committee Chairman Sander M. Levin, D-Mich., House Energy and Commerce Committee Chairman Henry A. Waxman, D-Calif., House Education and Labor Committee Chairman George Miller, D-Calif., Senate Health, Education, Labor and Pensions Committee Chairman Tom Harkin, D-Iowa, and Senate Banking Committee Chairman Christopher J. Dodd.

Insurers said lawmakers are now rewriting the intent of the MLR provision after the overhaul has become law.

"The statute is crystal clear that federal taxes are to be exempted from the MLR calculation," said Michael Tuffin, executive vice president with America's Health Insurance Plans. "Rewriting the statute five months after enactment will inevitably result in coverage disruptions for families and small employers," Tuffin said. Disruptions could mean "changes in benefits, changes in cost sharing or if a plan is unable to meet this new requirement they may not be able to offer a particular product in a particular market."

Tuffin declined to comment on whether the industry will sue to block adoption of the lawmakers' interpretation in the MLR rule when it is issued. But he said "this is an exceptionally serious issue that will impact millions of policy holders and we're going to do everything we can to get clarity around the intent of the statute and the impact of changing the statute after the fact."

Insurers are "alarmed, surprised, off balanced, and extremely concerned about the financial impact," the industry consultant said. It is "very likely that many plans won't be able to meet the 80 and 85 percent standard," he added. "They're pulling out all the stops here." The industry "expects to get a legal opinion tomorrow and has people on the ground in Seattle" talking to attendees at the NAIC meeting. Insurers also are contacting state insurance departments, the consultant said.

"No one is talking about litigation." But if the industry can't prevail in Congress or in HHS rulemaking, that's the remaining weapon against the interpretation, he said

By CQ Staff

August 9, 2010 -- The Centers for Medicare and Medicaid Services (CMS) has sent a letter to state Medicaid directors telling them they can ease barriers to providing care to the frail and disabled outside of nursing homes.

The letter says that effective Oct. 1, under the health care overhaul law, states can allow access under certain circumstances to "home- and community-based services" before Medicaid recipients need institutional care.

Previously, states had to certify a Medicaid recipient need an institutional level of care to qualify for the same set of services outside a nursing home.

The Aug. 6 letter from Medicaid Center Director Cindy Mann says the changes allow states to target home- and community-based services (HCBS) to certain groups of people, to increase those services and to improve their quality. The services include providing home health aides, adult day care and respite care services to give usual caregivers a break in order to keep them from burning out.