By John Reichard, CQ HealthBeat Editor

August 5, 2010 -- Republicans hoping to uncrate live rounds of rhetorical ammunition against the health care overhaul law had to be disappointed Thursday in flipping through the pages of a new report by Medicare and Social Security trustees on the solvency of those programs — it credited the overhaul with strengthening not only Medicare, but Social Security, too.

At the same time, however, administration officials acknowledged the uncertainties behind the report's conclusion that the overhaul law will extend the solvency of the Medicare hospital trust fund a record 12 years — from 2017 to 2029.

Health and Human Services (HHS) Secretary Kathleen Sebelius said at a press briefing that she'll convene a technical advisory panel to examine the assumptions on which the solvency projections are based. Their findings will be available in time to influence next year's solvency projections, officials said. HHS invited nominations for members of the panel in a July 30 Federal Register notice and is accepting them until Aug. 10. The panel's first meeting is expected to occur this fall.

Panel members will weigh in on the likelihood that productivity gains underlying the law's low hospital payment rate increases can actually be accomplished, an administration official said at a background briefing on the report. Those low rate increases account for much of the $500 billion or more in Medicare savings projected for the first decade of the overhaul.

The savings are a big reason why the law extends the solvency of the hospital trust fund for so many years. Higher payroll taxes on affluent Americans also explain the stronger trust fund. The law increases those taxes by 0.9 percent for earnings above $200,000 in the case of single taxpayers and above $250,000 in the case of married couples filing joint returns.

In his own analysis, released several months ago, Medicare Actuary Richard Foster suggested a strong likelihood that the low rate increases are unsustainable and will be overturned by Congress at some point.

But the overall tone of the report is a big plus for the administration and the overhaul law. In an opening "message to the public" accompanying the report, trustees declared that "the outlook for Medicare has improved substantially" because of the law.

"Despite lower near-term revenues resulting from the economic recession, the Hospital Insurance Trust Fund is now expected to remain solvent until 2029, 12 years longer than was projected last year" before the overhaul law was passed, the message says.

And the projected shortfall in the hospital trust fund over 75 years has been chopped to 0.66 percent of taxable payroll from 3.88 percent in last year's report.

The report said the 75-year outlook for Social Security has somewhat improved because of a provision of the health care overhaul that imposes a tax starting in 2018 on high-cost health plans. The tax is expected to prod insurers to offer more efficient plans. To the extent they do, analysts say workers will have higher incomes, which in turn will yield more revenue from the Social Security payroll tax.

While the trustees express uncertainty about the law's assumption that the health care sector can actually make 1.1 percent gains in productivity each year to generate big Medicare savings, trustees do so in a way builds the law up, rather than suggesting that it is unsustainable and should be changed.

"The improvement in Medicare's finances projected in this report highlights the importance of making every effort to make sure that the Affordable Care Act [the overhaul law] is successfully implemented," the report says.

The hospital trust fund is far from being the only thing that determines the solvency of Medicare overall, which also funds doctor and other outpatient care through Part B of the program, private health plans through Part C and prescription drug benefits through Part D.

Both Part B and Part D will remain adequately financed into the indefinite future "because current law automatically provides financing each year to meet the next year's expected costs," the report says.

Part B spending now accounts for 1.5 percent of the Gross Domestic Product (GDP). Last year's trustees' report projected that would increase to 4.5 percent of the GDP in 75 years. But under current law it's expected to reach only 2.5 percent of the GDP by that time.

But the productivity gains required to achieve Medicare savings under the law may prove difficult over long periods of time, the report acknowledges, "and will probably require that payment and health care delivery systems be made more efficient than they are currently."

An administration official said the changes that will be tested under the law, such as the development of "accountable care organizations" to better coordinate care by multiple providers and "bundled payment" to reduce incentives for high volume care, will help providers make the needed productivity gains.

But whether these changes can be made in a way that consistently brings down the rate of cost growth has yet to be demonstrated. Foster, the Medicare actuary, has estimated that the law must save Medicare $233 billion over ten years through productivity gains in order to meet its savings targets.

The extended solvency of the hospital trust fund doesn't mean it's in good shape either. The report says "the fund is not adequately financed over the next 10 years." Its outlays have exceeded its income annually since 2008 and are expected to do so through 2013. "The shortfalls projected for the next four years can be met by redeeming trust fund assets, which at the beginning of 2010 were $304 billion, but the asset balance would fall below the Trustees' recommended minimum level starting in 2012," the report says.

Depletion of the assets of the fund resulting in its "exhaustion" does not mean it would run completely out of money in 2029, but that its dedicated revenues would only be able to pay 85 percent of hospital costs. Dedicated revenues coming into the fund would be sufficient to cover a declining percentage of its costs over time, dropping from 85 percent in 2029 to 76 percent by 2045, then slowly rising again to 89 percent in 2084.

The improvement in Part B funding also isn't what it's cracked up to be because it assumes that huge cuts in Medicare physicians payments, such as a 23 percent cut scheduled at the end of the year, will actually occur. That's almost certainly not the case.

Actual Part B costs will hinge on what Congress does to block those cuts. An alternative projection in the report estimates that Part B spending will be 5.2 percent of the GDP 75 years from now, not the 2.5 percent projected under current law.

The monthly Part B premiums seniors pay for doctor care also may be rising sharply for some higher income beneficiaries. The report says that "as occurred in 2010, it is expected that about one quarter of Part B enrollees will be subject to unusually large premium increases next year. This occurs because premium rates are set so that total premiums finance a specific share of Part B costs, and it is projected that the other three-quarters of Part B enrollees will not be subject to a premium increase in 2011 due to an expected zero Social Security benefit cost of living adjustment in December 2010."

An administration official said that monthly premiums could rise for some beneficiaries from $110.50 a month now to $129.60 a month next year.

Overall, the trustees concluded that while the overhaul law made improvements in Medicare and Social Security, the "significant longer term financial imbalances of the programs still need to be addressed. The sooner action is taken to address the long-run financial imbalances, the more reform options will be available," they said.

Republicans, however, charge that the report is a sham in that the law doesn't actually save money to be used for Medicare in later years. Instead, it uses the money to finance another entitlement program, coverage of the uninsured, they said.

By Niels Lesniewski, CQ Staff

August 5, 2010 -- The Senate on Thursday approved a $26.1 billion state-aid package that the House is poised to consider next week, after being called back from August recess.

The measure (HR 1586) would provide funds for state and local governments to prevent layoffs of teachers and maintain Medicaid health coverage of the poor, despite budget crunches. The vote was 61-39.

The House Rules Committee scheduled a meeting for 6 p.m. Monday, Aug. 9, to set ground rules for considering the aid package when the House assembles at 10 a.m. Aug. 10.

New York Gov. David A. Paterson had warned in an interview with CNBC earlier this week that some 30 states have budgeted on the assumption the federal funds would arrive.

Republicans have criticized the legislation, saying it is essentially an election-year gambit by Democrats to assuage teachers' unions.
"There's nothing in this bill that says that anyone has to belong to a union," Sen. Tom Harkin, D-Iowa, chairman of the Health, Education, Labor and Pensions Committee, responded Thursday.

Harkin praised Maine Republicans Olympia J. Snowe and Susan Collins, who provided the crucial votes needed Wednesday to surmount a filibuster against the bill, for "putting our kids ahead of their party ideology" and backing the measure.

The legislation would provide $10 billion for education jobs and give six more months of increased federal Medicaid reimbursements to states at a cost of $16.1 billion. The effort was led by Majority Leader Harry Reid, D-Nev., and Patty Murray, D-Wash., who are both facing re-election challenges.

The Congressional Budget Office says the bill is budget-neutral over 10 years. However, the offsets, a potpourri of spending rescissions and revenue-raisers, drew criticism from a number of sources.

Republicans dislike provisions that target the use of foreign tax credits by multinational corporations. Unlike earlier versions of the bill, which included retroactive effective dates and raised more than $14 billion, the version included in the final measure generally has prospective effective dates and would raise about $10 billion.

On the spending side, supporters of the supplemental nutrition assistance program — better known as food stamps — oppose reductions starting in 2014 to extra benefits provided under the 2009 economic stimulus law (PL 111-5).

In addition, the bill would rescind $1.5 billion in stimulus funds for an Energy Department program backed by many Democrats including House Speaker Nancy Pelosi, D-Calif. Reid told reporters Thursday that he had already spoken to Jacob Lew, nominated as director of the Office of Management and Budget, and that the energy funding is only "temporarily gone."

An aide to House Rules Committee Chairwoman Louise M. Slaughter, D-N.Y., indicated prior to the Senate vote that the committee is likely to meet the evening of Monday, Aug. 9, to set up Tuesday floor consideration of the measure. The House is expected to send the bill to President Obama for his promised signature.

Before passing the bill, the Senate easily defeated two motions to suspend the rule that prevents non-germane amendments or motions after cloture has been invoked.

Jim DeMint, R-S.C., sought to commit the bill to the Finance Committee to require that panel to report it back with permanent extensions of 2010 individual and small-business income tax rates, requiring spending rescissions as offsets. Max Baucus, D-Mont., Finance Committee chairman, blasted the idea as "a gimmick," and "not serious."

— Edward Epstein contributed to this story.

By Jane Norman, CQ HealthBeat Associate Editor

August 2, 2010 -- The state exchanges that will serve as health insurance marketplaces under the health care law may differ in major respects from state to state, panelists at an Alliance for Health Reform briefing said Monday. At the same time, cash-strapped states are struggling to understand the many pieces of the sweeping law they're expected to implement and monitor, often with not enough time or staff.
"What this has really meant for a lot of states is more caffeine, less sleep and a lot of time on the phones," said Lorez Meinhold, the director of health care implementation for the state of Colorado.

The new law (PL 111-148, PL 111-152) establishes a minimum federal floor on many policies and leaves it up to states to stay there or go beyond, said Brian Webb, manager for health policy and legislation for the National Association of Insurance Commissioners. "It really is now back on the states," he said.

The briefing on the Hill sponsored by the nonpartisan alliance and the Robert Wood Johnson Foundation focused on the problems and challenges that states face in putting in place the health law, and there appear to be plenty — as well as plenty of choices.

The exchanges are an important underpinning of the law, in that they'll provide access for consumers to purchase affordable insurance. The Department of Health and Human Services announced last week that it is offering $51 million in grants for which states can apply to start the process of setting up their exchanges.

Len Nichols, a health policy expert from George Mason University, said states must create exchanges by March 23, 2012, though they will not be operational until 2014. States that decline to do so will have to take part in exchanges established by the federal government.

"That's a signal — if you choose not to create it, the feds will come and do it," Nichols said. "You have a choice about whether you want to make that exchange truly live and breathe and reflect state reality or whether you want to be directed from Washington." States can choose whether to run it themselves or have a nonprofit operate the exchange.

States' "maybe single most important power" is deciding who will participate as well, he pointed out. The government defines the regulations but states decide who satisfies the regulations, Nichols said. "I predict it will be a little bit different in Utah than it is in Massachusetts, and I also submit that's probably OK."

There already are indications that some states where the movement to repeal the law is strong may not move to set up exchanges. Republican Nebraska Gov. Dave Heineman has said he doesn't know if the state will apply for the grant money to establish an exchange, for example.

States are just beginning to explore how their exchanges will work, panelists said. "What are the values? What are the things you want the exchange to address?" said Meinhold. Colorado can't even begin to contemplate whether it should be in a regional exchange, which is also allowed under the law, she said.

"We talked to Utah and New Mexico, but we don't even have a vision as a state about what we want," she said. "So really, to start having a conversation with other states about they want, and to get an agreement, all within three years, and an electronic interface that works, scares the bejesus out of most states. The technology of some of these requirements is an overwhelming endeavor."

No states feel prepared yet for the challenge of implementation, said Nichols. "I think all of them, regardless of public rhetoric, are checking out their options," he said.

Webb of the National Association of Insurance Commissioners also suggested that if insurance companies attempt "driving a truck" through regulations on medical-loss ratios (MLR) set by the government, state regulators may ask that the Department of Health and Human Services return to regulations and "tighten them up" to prevent abuses. "There's no real process in the law for doing that in the future, but we're working with HHS to make sure we can," he said.

Under the MLR, beginning in January, large-group plans must spend 85 percent of premiums on clinical services and activities related to quality of care, with just 15 percent devoted to other items such as salaries, administrative costs and profits. For small-group and individual plans, 80 percent of premiums must be spent on clinical services and quality of care and 20 percent on anything else. Rebates will have to be paid by the companies if the percentages are not met.

The NAIC is currently in the process of trying to form recommendations on those regulations, which Webb said should be finished by "the end of summer," though he wouldn't define that would be. "Is that end of the school summer? Labor Day? Or is that the sun summer, like Sept. 22? We are doing our best," he said. The group intends to begin collecting information on insurance company spending by April 2011, he said.

Sen. John D. Rockefeller IV moderated part of the panel and at one point quizzed Jay Angoff, head of the HHS Office of Consumer Information and Insurance Oversight, on how the MLR regulations will be enforced over time. "It is an important issue," replied Angoff, refusing to elaborate further despite probing by Rockefeller, a West Virginia Democrat who has expressed continued interest in tough action against insurers.

Meinhold said that her state's goal is to have the law fully implemented by 2020. The law will require state agencies to work together and cooperate in unfamiliar ways, and an implementation plan is needed, she said. In addition, many governors and state legislators won't be in office in years to come, and the law is not a focus on the campaign trail, so states need to form a blueprint as to what happens next to ensure momentum continues, she said.

By Jane Norman, CQ HealthBeat Associate Editor

August 5, 2010 -- Insurance companies, health care providers and professional organizations that oversee physicians on Thursday announced a host of private-sector initiatives aimed at complementing the federal push for wider use of electronic health records in health care.

But the insurers said that, at least for now, they're not interested in penalizing doctors or hospitals who don't adopt electronic recordkeeping that meets federal standards. Instead they are offering incentives ranging from zero-interest loans to outcome-based bonus payments.

The announcements at a forum at the National Press Club came a month after the Department of Health and Human Services released a final rule setting the standards for electronic health record use by doctors and hospitals. That regulation governing the "meaningful use" of electronic records grew out of a larger health information technology program in the 2009 economic stimulus law that will provide up to $27 billion in incentives over a decade.

"Making this work is not a piece of cake," said Stuart Altman, a professor of national health policy at Brandeis University, at the event sponsored by the Health Industry Forum and Health Affairs magazine. He added that when the federal government and private sector are on different paths when it comes to technology, "it just doesn't work," including when one jumps ahead of the other. "If we are going to make this work as a country, both parts of our big system have to play together," said Altman.

David Blumenthal, the national coordinator for health information technology at HHS, said the private companies are "allies" in the effort to spread the use of technology and to improve the health care system's quality, control its costs and boost its efficiency. "We have, from the beginning, and will continue, to seek partnerships with private sector organizations of all types," he said. "This is going to be a team sport."

Charles Kennedy, vice president for health information technology at WellPoint, Inc., with more than 33 million members, said the company will be aligning its pay-for-performance incentives with the federal meaningful-use standards, which will make it easier for physicians since they will have a single measurement to meet.

WellPoint also will set up a short-term program to help with financing for health tech needs for hospitals in rural, critical access or medically under served areas. It will be launched in California and Georgia. "We don't want health IT to create a world of have and have-not," Kennedy said. WellPoint will spend in the "hundreds of millions," he said.

Lonny Reisman, senior vice president and chief medical officer at Aetna, Inc., said Aetna has spent $1.8 billion on health technology over the last five years, "so this is not new to us." Aetna will provide incentives related to achievement of specific goals by physicians, he said.

At Highmark Blue Cross Blue Shield, the company will also be aligning its pay incentives for physicians and hospitals with federal meaningful-use standards, said Donald Fischer, chief medical officer. "What we'd like to be able to do is not just give credit to physicians" for using electronic records "but having an impact," he said. More points will be given to doctors for using electronic recordkeeping, he said.

Rhonda Medows, chief medical officer at UnitedHealthGroup, said the company would push a five-part effort, including a national program with outcome-based payments for physicians who have successfully adopted electronic recordkeeping that meets federal standards. In the past the program has just been regional.

In addition, UnitedHealthGroup will give new credit toward its "premium designation" for physicians who meet federal standards for health technology, Medows said. That designation is publicized to consumers, she noted.

In the company's physician advocacy program, experts who help doctors with administrative work will be trained to help physicians assess the gaps in their practices' programs, and zero-interest loans will be made available to help physicians access a care management program, until they can receive federal reimbursement in 2011, Medows said.

One provider organization that has moved forward on health tech is Partners Healthcare, a system founded by Brigham and Women's Hospital and Massachusetts General Hospital, said Tom Lee, network president. In 2007 they made implementation of electronic records a criteria for remaining in the network. "At the end of the day we threw out about 188 physicians who did not want to implement and it was a landmark moment for us," he said. Incentives and tougher approaches will be used in the future, he said.

"About 200 physicians will be finding out this fall they are in danger of being thrown out of our network for not using electronic prescribing" at a set level, he said. Residents also are being trained in health IT.

On another front, the American Board of Medical Specialties, which oversees physician certification, said it will reward doctors for meaningful use of health tech in its continuing program for maintaining certification. And the Federation of State Medical Boards said it "recognizes widespread adoption of electronic health records could be used by doctors to both improve patient outcomes" and assess competence for the purposes of issuing licenses.

By Jane Norman, CQ HealthBeat Associate Editor

August 6, 2010 -- Calling the new health care law "an unprecedented intrusion on the sovereignty of the states and the freedom of their citizens," attorneys general from 20 states and the National Federation of Independent Business (NFIB) made another move Friday in their lawsuit against the overhaul.

The officials filed a response to a Justice Department motion to dismiss the states' lawsuit. Oral arguments in the suit are set for Sept. 14 in Pensacola, in federal district court in the Northern District of Florida. Florida Attorney General Bill McCollum is leading the drive among attorneys general to kill the law's requirement that Americans should be required to obtain health insurance.

"We think we will win on this," McCollum, a Republican candidate for governor, told Fox News on Thursday, predicting the suit eventually will end up at the U.S. Supreme Court and garner a 5-4 decision in the states' favor.

The U.S. government asked in June that the suit be dismissed, saying that "consistent Supreme Court precedent" shows the law is proper. The Justice Department also said that states don't have the legal standing to make a claim and that even if they did, precedent establishes that regulation of economic decisions such as how to pay for medical services is allowed under the Commerce Clause of the Constitution.

"Having failed in the legislative arena, opponents of reform are now turning to the courts in an attempt to overturn the work of the democratically elected branches of government," Stephanie Cutter, assistant to President Obama for special projects, wrote in a blog post earlier this week. She predicted the Obama administration will prevail.

The latest legal move came the same week that 71 percent of Missouri voters in a primary election voted Tuesday in favor of a proposal that would kill the requirement to obtain health insurance in the law (PL 111-148, PL 111-152). It's unclear what the legal impact of that vote will be.
In addition, a federal judge in a separate lawsuit Monday refused to dismiss a challenge to the law by Virginia Attorney General Kenneth T. Cuccinelli. That decision was not on the merits of the law or whether it is constitutional; instead, it said that the Virginia attorney general had the standing to continue.

The states and the NFIB said in their filing on Friday that they are "profoundly affected" by the law and its requirement that all Americans obtain health insurance, as well as requirements to expand Medicaid coverage to people earning above the poverty level, so they have standing to file. "Congress' commerce power extends to regulation of activities having a substantial relation to interstate commerce, but does not allow it to compel inactive individuals to enter a marketplace against their will," they added.

Besides Florida, other states involved in the lawsuit are Alabama, Alaska, Arizona, Colorado, Georgia, Indiana, Idaho, Louisiana, Michigan, Mississippi, Nebraska, Nevada, North Dakota, Pennsylvania, South Carolina, South Dakota, Texas, Utah and Washington. Two individuals also are named, Mary Brown and Kaj Ahlburg.

Meanwhile, advocates of the law are pondering what impact it would have if the individual mandate is eliminated, either by referendum, in the courts or in Congress.

Jonathan Gruber, a professor of economics at the Massachusetts Institute of Technology and widely quoted congressional witness in favor of the overhaul, wrote in a Center for American Progress paper on Thursday that the mandate is one piece of a "three-legged stool" needed to make the system function. The other two elements are the new rules that prevent insurance companies from denying coverage or raising premiums based on preexisting conditions, and the subsidies to make insurance affordable, Gruber said.

He said that repeal of the mandate would mean more people would wait until they get sick to buy insurance in the new exchanges, increasing the average premium cost by 27 percent in 2019. Fewer than 7 million people would be covered by 2019 rather than the 32 million now projected, but federal spending would decline by only a quarter because the sickest and most costly uninsured people would be the ones most likely to gain coverage, Gruber said. "Critics who propose to 'repeal and replace' the Affordable Care Act don't seem to understand that all three legs of the stool are critical for reform," he wrote.

By Jane Norman, CQ HealthBeat Associate Editor

August 6, 2010 -- The government will make information available next week on how to apply for $250 million in grants that will boost the expansion of 350 community health centers, Health and Human Services (HHS) Secretary Kathleen Sebelius announced Friday.

The centers, which deliver primary and preventive care regardless of patients' ability to pay, received funding through the economic stimulus law as well as the new health care law. In a conference call with center administrators, Sebelius said the economic stimulus funneled $2 billion toward the centers during the past 18 months and that the health care law will add $11 billion over five years.

"That work has already begun and we're working hard to get the resources out in the community," she said. "The funds will allow current centers to expand to new sites and offer new access to people of their community." The $250 million will be allocated in fiscal 2011.

One sign of the importance placed on the role of community health centers in expanding care is that insurance companies that take part in the exchanges created under the law must include essential community providers like the centers in their networks, Sebelius noted.
In addition, funding for the National Health Service Corps puts a priority on additional providers in areas without a lot of medical professionals, she said. Sebelius earlier this week announced $159 million in grants to beef up the health care workforce.

The community health centers cared for 19 million patients in 2009, according to HHS, and employed more than 123,000 people, most in low-income communities. Of the patients, 38 percent were uninsured and 37 percent were Medicaid recipients; the remainder had private insurance or were Medicare beneficiaries.