By Nellie Bristol, CQ HealthBeat Associate Editor

December 16, 2011 -- Federal officials stopped well short of issuing a detailed rule on what "essential benefits" must be included in the new health exchanges. Instead, they issued a pre-regulatory bulletin that says states will have the flexibility to choose from four different coverage options already available in their states, an approach that could result in different benefits throughout the country, advocates said.

Health and Human Services (HHS) officials said this bulletin will guide them as they write the regulations in the future. But clearly they are sensitive to the fact that state officials have complained that it's difficult for them to develop their exchanges without a key element: what benefits they have to offer.

"HHS is releasing this intended approach to give consumers, states, employers and issuers timely information as they work toward establishing exchanges and making decisions for 2014," the agency news release said.

Under the approach, states would develop their benefit packages based on coverage in one of the three largest small-group plans in the state; the state employee health plans, or from the federal employee health plan options. They also could choose the largest HMO plan offered in the state's commercial market. States not choosing a benchmark would automatically be assigned an essential benefits package equal to the small-group plan with the largest enrollment in the state. HHS officials told reporters the method is similar to that used to define benefits in the State Children's Health Insurance Program and for some Medicaid recipients.

"It recognizes that issuers make a holistic approach in constructing a package of benefits" that "balance consumer needs for comprehensiveness and affordability," said Sherry Glied, HHS Assistant Secretary for Planning and Evaluation. The approach will be used for 2014 and 2015, after which the agency will evaluate the results and develop a process for updating benefits and taking into account innovations in care, she added.

The health care overhaul (PL 111-148, PL 111-152) requires coverage in preventive care, emergency services, maternity care, hospital and physician services, mental health and substance abuse, and prescription drugs. It also requires coverage of items and services in rehabilitative and habilitative services, laboratory services, and pediatric care including dental and vision. If a state selects a plan that does not cover all of those categories, it must look at other plans to fill the gaps. States could modify coverage within a benefit category if it doesn't reduce the value of the coverage.

The approach is intended to gives state the flexibility to choose a plan that is equal in scope to services covered in a typical employer plan in their state, according to HHS documents.

But Carl Schmid, deputy executive director of The AIDS Institute, said the methodology "was not what we expected" and allows a range of coverage in different states. "This is very clever. We were looking for some federal protections, for a federal floor to the benefit design. It looks like we're not going to get that and we're still going to get the state patchwork of care," he said.

Schmid said the agency also failed to provide any guidance on copays, deductibles and premiums, "which is important, extremely important." HHS said in the bulletin that cost sharing would be addressed in future announcements and that those rules "will determine the actuarial value of the plan."

For people with HIV, the bulletin includes some alarming news, Schmid said. For example, the proposal is to include coverage for one drug per class. People with HIV often take a variety of drugs, most of which are in a single class: anti-retrovirals. What they are proposing, Schmid said, is less than what is available under the Medicare Part D prescription drug program. "This is a real concern to us," he said.

The American Cancer Society Cancer Action Network said that, although the method does offer flexibility, it also has concerns about the uncertain levels of coverage.

Families USA Executive Director Ron Pollack, an administration ally, said in a statement that this bulletin is a "first step," but also expressed concern.

"We understand the inclination to balance flexibility, comprehensiveness of coverage, and cost in developing the essential benefits standard," Pollack said.

"To the extent that the states select plans that do not provide comprehensiveness or short-change one of the 10 benefit areas or health plans appear to be offering benefits that are skewed to avoid providing coverage for people with major illnesses or disabilities, very significant adjustments are going to have to be made," Pollack said in an interview.

He said particular attention will have to be paid to some categories, such as rehabilitative, habilitative or mental health and substance abuse services that often are not provided in some employer plans. "To the extent that health plans provide minimal services in those areas because they're trying to keep out the very people who need rehabilitative and habilitative services or mental health services, those are things that are going to have to be rectified."

Pollack said he also has some concern that one of the benchmarks being used are small business plans and whether the scope of services are adequate in such plans.

One group had an even stronger reaction. Debra L. Ness, president of the National Partnership for Women and Families, said in a statement that the benefits determination method is "deeply disappointing and jeopardizes the promise of health reform for millions of women" by ignoring health law directions to "develop a detailed package that would apply uniformly to plans across the nation."

She added: "If essential benefits are left to the states and based on insurance plans sold on the market today, we will miss the opportunity to ensure consumers get the coverage they need and pay for. We will also miss the change to prohibit discriminatory benefit packages, which was a key advance and one of the measures that made reform so historic and meaningful for women."

Steve Larsen, head of the Center for Consumer Information and Insurance Oversight for the Centers for Medicare and Medicaid Services, said states have made decisions about "what benefits are appropriate in that particular state," adding "you do end up with some differences."

Nonetheless, Glied said most plans do cover most of the categories listed in the health overhaul. The three areas that receive the least coverage, as reflected in Pollack's comments, are habilitation and pediatric vision and dental services. In addition, Glied said research shows "there is very little variation among plans in scope of services" for most care. Most variation, she said is generally around cost sharing requirements.

An Office of the Assistant Secretary for Planning and Evaluation Research Brief also said "it appears that small group products and State and Federal employee plans cover similar services." However, service in preventive care, basic dental, acupuncture, bariatric surgery and hearing aids "appears to vary across and within markets."

Critics of the health overhaul didn't find any solace in the flexibility the federal government plans to give to the states.

"There is no question essential health benefits will increase the cost of insurance for almost every American," said Sen. Orrin G. Hatch, ranking Republican on the Finance Committee. "The framework proposed by the administration takes away the right of individuals to choose the health care plan that best fits their needs. Unfortunately, the partisan health care law is bending the health care cost curve in the wrong direction with more mandates, regulation, and price controls."

By Jane Norman, CQ HealthBeat Associate Editor

December 14, 2011 -- One of the most popular elements of the health care law—a provision allowing young adults to stay on their parents' policies—has resulted in an estimated 2.5 million Americans getting insurance coverage, Health and Human Services officials said last week.

Using data from the National Center for Health Statistics, an analysis by HHS officials estimated that from September 2010 to June 2011, the percentage of adults ages 19 to 25 with health insurance rose from 64 percent to 73 percent.

The health care law (PL 111-148, PL 111-52) allows unmarried dependents to remain on their parents' policies until they are 26, effective with insurance plan renewals that began Sept. 23, 2010. Grandchildren are not included.

The provision did not attract much attention or opposition when it was added to the health care overhaul as it moved through Congress but was touted as a way to extend insurance more broadly to "young invincibles," the nickname given to young people who go without insurance.

Now that feature has turned out to be a key way for the Obama administration to sell the law. "More young adults in this country can now go on and live their lives with less worry about visiting their doctor when they get sick, or incurring catastrophic medical bills if they are in an accident," HHS Secretary Kathleen Sebelius wrote in a blog post on the White House website. "And for us parents, this lets us breathe a sigh of relief."

Estimates released by HHS earlier in the year had suggested that 1 million young adults had gained insurance through the first quarter of the year.

Officials said new data from the June 2011 National Health Interview Survey tracked comparisons between adults 19 to 25 and adults ages 26 to 35. Coverage among those in the slightly older group remained at about 72 percent, in comparison to the increase among those adults slightly younger.

The analysis also pointed out that the gains were entirely in private insurance coverage rather than Medicaid.

By John Reichard, CQ HealthBeat Editor

December 15, 2011 -- Sen. Ron Wyden emphasized early Thursday that a new Medicare "premium support" plan he and House Budget Committee Chairman Paul D. Ryan are championing would protect seniors from having to pick up the full tab if Medicare cost increases exceed an annual cap they would put on Uncle Sam's contribution to the program.

But Wyden, D-Ore., and Ryan, R-Wis., were unable to specify how they would be able to keep that from happening. That part of the proposal hasn't been fleshed out, they said.

It's a missing element that, depending on how it's filled in, could be key to how successful Wyden will be in selling this new plan to fellow Democrats.

The unexpected proposal may rekindle the debate about how to overhaul Medicare. And Wyden's work on behalf of seniors earlier in his career when he was a Gray Panther organizer, make him a good ally for Ryan to have on the Democratic side of the aisle.

But top Democrats scrambled Thursday to marginalize the plan. The White House and Rep. Pete Stark of California, the top Democrat on the House Ways and Means Health Subcommittee, issued statements slamming the proposal. And advocates for Medicare beneficiaries appear to be gearing up against it too.

Wyden and Ryan appeared at a Washington, D.C. forum sponsored by the Bipartisan Policy Center, their first public appearance to pitch the proposal. Wyden's backing, which made him the first senator in his party to embrace premium support, is likely to infuriate fellow Democrats. His party plans on using the GOP's endorsement of premium support to persuade seniors citizens to vote against Republican candidates in next year's elections.

Premium support refers to a system under which Medicare enrollees would pick from a menu of competing plans with a fixed government payment to help defray premium costs. Democrats depict it as ending "the Medicare guarantee," a step that would scrap the federal government's compact with seniors to provide them with decent, affordable health care.

Under the new Ryan-Wyden plan, premium support would begin in 2022. Medicare enrollees could choose from a menu that includes not only private plans but the option of staying in traditional Medicare. Americans who are now 55 or older would not be subject to the premium support approach.

Wyden contrasted the plan with Ryan's earlier premium support and one developed by former Congressional Budget Office Director Alice Rivlin, a Democrat, and former New Mexico Sen. Pete Domenici, a Republican.

"This is the only proposal—let me emphasize, the only proposal—that stipulates that if costs rise you don't automatically throw those costs onto the backs of senior citizens in the form of higher premiums," Wyden said.

Wyden and Ryan would allow the federal contribution to premiums to rise each year by no more than the increase in the Gross Domestic Product plus one percent, adjusted for (plus) inflation. That's how much Rivlin and Domenici would let it rise too. But if Medicare's costs exceeded that cap, the federal government wouldn't pay them under the Rivlin-Domenici plan—seniors would, in the form of higher premiums.

"Everything's on the back of Grandma," insurance industry analyst Robert Laszewski noted recently in commenting on the Rivlin-Domenici plan. Insurers, doctors, and hospitals also should have to absorb some costs if expenses increase, he said. "Most of the risk needs to be with the big boys in the system."

Ryan and Wyden appear to have taken that view to heart. They say in a summary of their plan that "any increase over that cap will be reflected in reduced support for the sectors most responsible for cost growth, including providers, drug companies, and means-tested premiums."

"What we explicitly say is we believe this kind of approach where traditional Medicare and private choices compete against each other will hold costs down," Wyden said at the forum Thursday.

"But we have a safety valve more generous than some of tying the cost, the bar, to Gross Domestic Product plus one percent, and then we say that if the costs were to go over that bar Congress would have to do its job and work through why those costs are going up and could look at reducing provider reimbursement, changes in policies with respect to drug companies, higher premiums for most affluent senior citizens—a variety of approaches."

Added Ryan: "We want to give Congress the opportunity to step in front of that cap before it kicks in—to give Congress the opportunity to change the spending in the program to better customize those reforms to be within the cap before the cap hits across the board."

Therein lies the rub, however. What if Congress doesn't act to cut payments to doctors, hospitals, or drugmakers? Would all the costs above the cap then be shifted to affluent seniors in the form of higher premiums? Wyden and Ryan said no. But they couldn't say yet how they'd require others to absorb the higher costs.

A Wyden aide said after the forum that "the mechanism hasn't been fleshed out, but it won't be defaulting to premiums. There will be a default, but it won't be on premiums."

Ryan stressed the urgency of action, saying that the government is making "trillions" in empty promises in talking about entitlement programs. Competition within Medicare would generate major savings without the cap ever having to come into play, he asserted.

As an example, he cited the cost of Medicare's Part D prescription drug program. It's yearly expense is more than 40 percent below original projections thanks to competition among plans, he said. Neither Ryan nor Wyden would hang a dollar figure on potential savings of their proposal, however.

"We want to show that a bipartisan solution is out there," Ryan explained. "We want to show that a bipartisan consensus is forming and can be formed."

Added Wyden: "We know there's a campaign ahead, and everybody who has cast votes and made statements is going to be accountable for those. But at some point you've got to start paving the way for the future," he said.

However, White House Communications Director Dan Pfeiffer said in a statement that "Wyden-Ryan is the wrong way to reform Medicare.

"The Wyden-Ryan scheme could, over time, cause the traditional Medicare program to 'wither on the vine' because it would raise premiums, forcing many seniors to leave traditional Medicare and join private plans," Pfeiffer said. "And it would shift costs from the government to seniors. At the end of the day, this plan would end Medicare as we know it for millions of seniors."

Stark said: "Despite Wyden's claims otherwise, the Wyden-Ryan plan ends Medicare as we know it, plain and simple. If these two get their way, senior citizens' health coverage will depend on what big insurance offers and what seniors—most of them on modest, fixed incomes—can afford. That combination will jeopardize health and economic security for seniors."

Interest groups also began commenting on Thursday.

"Make no mistake, the Ryan-Wyden proposal is a voucher program designed to make people with Medicare spend more for their health care so that the federal government spends less—with some bells and whistles that sound attractive, especially when key details are left out," said Joe Baker, president of the New York City-based Medicare Rights Center. "Once again, we are told that 'market forces will pressure plans to keep their premiums as low as possible in order to gain market share.' But these are the same market forces we have had over the last 30-plus years in the under 65 health insurance market, and costs have spiraled and been passed along to employers and, ever more frequently, to employees in the form of higher premiums, higher copays and lesser benefits."


By Jane Norman, CQ HealthBeat Associate Editor

December 14, 2011 -- A Medicare initiative aimed at reducing preventable hospital injuries and complications will distribute $218 million in awards to 26 "hospital engagement networks," Department of Health and Human Services officials recently announced.

The local, state and national hospital systems who get the grants will use the money to improve safety and quality in their facilities. Funding is to be used for projects that they may not have otherwise had the money to put in place, such as better management of chronic illness or health information technology training.

The Partnership for Patients brings together the government and providers, unions, consumer groups and others to reduce the number of hospital-acquired conditions as well as hospital readmissions.

The $1 billion initiative is overseen by the Centers for Medicare & Medicaid Services Innovation Center, which was created in the health care law (PL 111-148, PL 111-152). The partnership began in April and now has some 6,500 participants, including more than 3,100 hospitals, HHS officials say.

The aim is to reduce preventable hospital errors by 40 percent in the next three years. In unveiling the project earlier this year, HHS leaders said it has the potential to help save 60,000 lives and up to $35 billion in costs, including $10 billion just for Medicare.

HHS said the 26 hospital engagement networks are the American Hospital Association, Ascension Health, the Carolinas HealthCare System, Catholic Healthcare West, the Dallas-Fort Worth Hospital Council Foundation, the Georgia Hospital Association Research and Education Foundation, the Healthcare Association of New York State, the Hospital & Healthsystem Association of Pennsylvania, Intermountain Healthcare, the Iowa Healthcare Collaborative, Joint Commission Resources Inc., Lifepoint Hospitals Inc., the Michigan Health & Hospital Association, the Minnesota Hospital Association, the National Public Health and Hospital Institute, the New Jersey Hospital Association, the Nevada Hospital Association, the North Carolina Hospital Association, Ohio Children's Hospital Solutions for Patient Safety, the Ohio Hospital Association, Premier, the Tennessee Hospital Association, the Texas Center for Quality & Patient Safety, United Healthcare, the Veterans Health Administration and the Washington State Hospital Association.

• Partnership for Patients
  

By Dena Bunis, CQ HealthBeat Managing Editor

December 15, 2011 -- Health and Human Services officials Thursday denied the state of Florida a waiver from the health care overhaul's medical loss ratio requirements after the agency determined that requiring insurers to meet the new standard would not destabilize the market.

Florida becomes the fifth state to have its waiver denied. Steve Larsen, chief of the Center for Consumer Information and Insurance Oversight, said in a conference call with reporters that beyond his department's review of the financial evidence surrounding this request, his office received a petition from more than 3,000 Florida residents as well as letters from more than 20 consumer groups who opposed the waiver. That represents the most consumer input on a waiver application that federal officials have ever received, Larsen said.

Under the MLR rule, insurers in the individual market have to spent 80 cents of every premium dollar on medical claims or other quality improving activities. Beginning this year, any insurance company that doesn't meet that standard has to pay rebates to policyholders.

Larsen said his department "ultimately determined that the state of Florida has a very competitive individual market and there was not a risk that applying the 80-20 split" would destabilize the market.

Florida's Office of Insurance Regulation had asked for an adjustment of the MLR standard that would have allowed insurers to spend 68 percent of premium dollars on claims in 2011, 72 percent in 2012 and 76 percent in 2013. There was no immediate comment from Florida officials on CCIIO's decision.

Health Care for America Now, a consumer advocacy group, applauded the decision.

"The administration sent a clear message to health insurance companies that their days of ripping off consumers are over,'' HCAN Executive Director Ethan Rome said in a statement. "HHS also said that politically motivated, bogus requests by extremist governors to protect insurance company profits will not be tolerated. This decision highlights how much money families will save because of consumer protections in the health care law."

Larsen said in reviewing Florida's insurance market they found 20 companies operating in the state that were big enough to be subject to the rebate provisions spelled out in the MLR regulation. Of those, he said, nine companies had more than 10,000 enrollees, a sign he said, of "a very competitive market."

Although at a hearing in Florida more than a year ago, several companies threatened to exit the market in 2011, not one insurer has done so. Instead, Larsen said, the companies were modifying their business plans so they could meet the 80 percent MLR standard.

Based on 2010 data, CCIIO estimated that consumers would get rebates totaling more than $100 million. But Thursday, Larsen said he expects that number to be lower because insurance carriers are responding to the new law and pricing their products in a way that lowers premiums, making them not subject to such rebates.

So far CCIIO has approved waivers for Maine, New Hampshire, Nevada, Kentucky, Georgia and Iowa. Besides Florida, adjustments were denied for Indiana, Louisiana North Dakota and Delaware. With the decision in Florida, five pending applications remain.

By Dena Bunis, CQ HealthBeat Managing Editor

December 13, 2011 -- Researchers at University of California, Berkeley, recently issued a report outlining how many family members of working Californians they say would not have access to affordable health insurance under proposed Treasury Department regulations. And the authors suggest an alternative they say would enable more people to get coverage.

Under the health care overhaul law (PL 111-148, PL 111-152), among those eligible for premium subsidies to help people buy insurance in the exchanges are those who are offered health insurance on the job but for whom that coverage is unaffordable. The definition of just what is "unaffordable" is what has led to this controversy.

Under Treasury's proposed rule, an employer's plan is unaffordable if the worker must pay more than 9.5 percent of his or her income. But that 9.5 percent only applies to an individual policy, not what it would cost an employee to insure family members.

According to a statement by First Focus, a children's advocacy group that organized a congressional briefing on this topic, while employee-only insurance premiums average about $5,000 a year, employee-and-family premiums are nearly triple that cost, averaging about $14,000.

Just using the population of California as an example, the Berkeley researchers found that if Treasury officials modified their rule to determine affordability based on the cost of family coverage, "an additional 144,000 Californians, more than half of them children, would get access to affordable coverage through the health insurance exchange.

"If California is representative of the United States as a whole, this translates into more than 1 million people who would be affected by the regulations," said Ken Jacobs of the UC Berkeley Center for Labor Research and Education.

Those who support the rule say adding dependents to the affordability calculation would dramatically change how much the subsidies would cost the federal government.

But the researchers said that if the rule were changed, their models show that there would not be a flood of new people eligible for subsidies.

"Less than 1 percent of people with employer-based coverage would move to subsidized coverage in the exchange as a result of having unaffordable coverage,'' said Gerald Kominski, incoming director of the UCLA Center for Health Policy Research. And, he said, many of those newly eligible for subsidies would be children so their health insurance costs would be lower.

"This new analysis highlights the importance of the administration getting the affordability measure right," said Rep. Pete Stark, D-Calif., said in a statement. "If they define it only in relationship to individual coverage, children and spouses fall through the cracks."

Treasury officials did not have an estimate on when the final rule would be issued. There was a two and a half hour hearing on the proposed regulation in November where groups spoke on both sides of this issue.