By John Reichard, CQ HealthBeat Editor

February 22, 2007 -- The Federation of American Hospitals (FAH) unveiled a new plan Thursday to cover the uninsured, emphasizing that it builds on the current system of coverage and won't plunge Americans into uncertainty about their health care.

Announcing the plan at a Washington, D.C., press briefing, Federation President Chip Kahn didn't call it the "Harry and Louise" health plan, but he might have. Kahn was a top insurance lobbyist in the 1993–1994 health reform debate who helped launch the Harry and Louise TV ads in which a middle-aged couple complained that the Clinton health plan would create too much government meddling with their health care.

The campaign was credited with helping to derail the Clinton plan, apparently tapping into deep public anxiety about how the overhaul would reshape health care. Kahn emphasized Thursday that FAH's approach would point the way to virtually universal coverage within the context of the current system without creating as much uncertainty among Americans about their health care as would other recent proposals.

"All Americans can be covered without turning the world upside down" under FAH's new "Health Coverage Passport" proposal, Kahn said.

"All" actually means virtually all—98 percent of Americans would be covered, primarily through an expansion of private sector coverage. People who have health insurance now would keep their current coverage, while two of every three uninsured Americans gaining coverage under the proposal would be enrolled in private sector plans.

FAH also released poll results showing strong public support for its plan and that 79 percent of the public said a presidential candidate's position on the uninsured will influence their vote in the 2008 election.

Everyone would be required to have health coverage under the plan—but FAH estimated 100 percent compliance would be difficult to achieve. Medicaid would be expanded to cover all uninsured adults with annual incomes below the federal poverty level, now $9,800 for individuals and $20,300 for a family or four.

Funding would be increased for the State Children's Health Insurance Program (SCHIP) so that the program would cover all eligible uninsured children. Eligible people would be automatically enrolled in health coverage based on income data taken from other government programs such as those providing food stamps or school lunches.

Health Coverage Passports, or HCPs, would be issued to Americans below 400 percent of the federal poverty level who are not eligible for Medicaid or SCHIP. The passports would be subsidies that pay a percentage of premiums on a sliding scale based on income. People who can obtain coverage at work but are uninsured would be required to use the subsidies to enroll in their employer's plan. Other uninsured people would use the subsidy to buy coverage in the individual market.

Out-of-pocket monthly premium costs for individuals receiving the subsidies would range from $52 in the case of a person making $19,600 a year to $349 for a person making $39,200.

Uninsured people who make too much money to qualify for the subsidies would have to buy their own insurance, but their premiums would be tax-deductible. "This new tax deduction ensures that those purchasing their own insurance in the individual market are treated equally with those who receive a tax exclusion from employer-purchased coverage," said an FAH summary of the plan.

"Employer coverage will continue to be the largest source of insurance, covering 55 percent of the population," the summary said. "Employers who now offer coverage are likely to continue since employees can apply HCPs to their share of employer coverage."

The plan would entail revisions of state insurance laws. Coverage would be guaranteed to everyone regardless of age or health status. Premiums charged by health plans would be "community rated," meaning they could not vary with age, gender, health status, or other risk factors.

Health care providers would continue to care for uninsured people ineligible for public programs because of their citizenship status—currently 20 percent of the uninsured are not U.S. citizens, according to FAH. Language in the Medicare overhaul law (PL 108-173) would be reauthorized at a higher level of funding to offset costs to providers who provide emergency care to undocumented immigrants.

Anyone uninsured when filing federal income taxes or seeking health care would be enrolled in Medicaid or SCHIP if eligible, or in a private health plan eligible to receive the HCP subsidy, in which case they would be charged premiums minus the subsidy amount.

The group estimated that if the plan were adopted this year, the number of uninsured Americans would drop in 2007 from 47 million to 6.6 million.

However, one thing Harry and Louise might choke on is the cost of the plan. If implemented in 2007, the cost would be $115 billion, according to John Sheils, vice president of the Lewin Group, which calculated the cost.

Kahn sidestepped a question about where the money would come from, saying he'd be happy to be a part of that discussion once it's clear that Congress has mustered the political will to cover the uninsured. The group planned to brief congressional staff Thursday on the plan, but said it isn't scouring the Hill for a legislative sponsor.

Passage this year or next would obviously be a long shot, Kahn said, indicating it is being offered to shape the presidential debate on the issue and to offer one of the few "soup to nuts" proposals for covering virtually all of the uninsured. Kahn defended its price tag as an "honest" estimate of how much money would be involved. Sheils said that any plan covering as many of the uninsured as FAH's would have comparable costs.

By Rebecca Adams, CQ Staff
February 23, 2007 -- The nation's governors sent a letter to congressional leaders in both parties Friday asking them to block the Centers for Medicare and Medicaid Services (CMS) from issuing a rule in the coming months that state officials say could cost them $5 billion over five years.

The administration's proposal, issued in January, is aimed at stopping states from using funding mechanisms that federal officials say exaggerate the amount of money states actually spend for legitimate purposes in the Medicaid program, boosting federal payouts beyond the legal limit percentage the federal government pays for a state's Medicaid program. CMS proposed legislation to implement this policy last year but could not get it through Congress. Now the administration hopes to go forward with a rule this year.

The governors say the proposed rule would limit funding that could be paid to public providers, affecting a broad range of providers since it would redefine which hospitals and nursing homes would be considered "public." They also say that the proposal would "diminish longstanding, legitimate state funding mechanisms" that CMS has previously approved. The changes would impose "a huge administrative burden" on states, providers, and school-based health clinics, the governors wrote.

"The Medicaid administrative changes contained in the proposed rule . . . are a significant cost shift to states that governors strongly oppose," said the NGA letter, signed by New Jersey Gov. Jon Corzine, a Democrat, and Vermont Gov. Jim Douglas, a Republican. "The administration is moving forward with these proposed changes without any input from Congress or governors."

The letter called on Congress to "pass legislation to prevent CMS from moving forward with this proposed rule." The governors concluded that "these proposals would further impede our progress in implementing reform options and expanding affordable health insurance coverage."

CMS spokesman Jeff Nelligan said Friday, "Our goal is to ensure that taxpayer dollars are spent wisely and that low-income Medicaid beneficiaries receive the care they need. We believe the lack of transparency and accountability in Medicaid financing undermines public confidence in the integrity of the program as it is impossible to track the flow of taxpayer dollars."

He added, "Limiting federal reimbursement to a government provider to the cost of delivering service only makes sense. If a government agency is making a 'profit' off the federal taxpayer, something is wrong."

By Mary Agnes Carey, CQ HealthBeat Associate Editor

February 21, 2007 -- Examining how Medicare pays physicians and managed care plans and giving the government the power to negotiate directly with drug makers as part of the Medicare drug program are all top legislative priorities for AARP, the powerful seniors' group said Wednesday.

Other health-related items on the group's 2007 advocacy agenda include backing legislation that would permit safe and legal importation of drugs from other countries, beginning with Canada; greater market access for generic drugs, including biologics; and expanding health care coverage through Medicaid and the State Children's Health Insurance Program (SCHIP).

During a news conference, AARP officials said the group would continue to oppose the creation of private accounts within Social Security and would promote measures to improve retirement savings, such as a universal payroll deduction that would allow employees to automatically contribute a portion of their wages to retirement savings accounts.

"We have a narrow window of opportunity before the 2008 presidential election heats up," said AARP Chief Executive Officer Bill Novelli. "It's really time for the tired old era of gridlock to stop."

Health care will be a key focus for the group. Concerning the Medicare drug benefit, AARP said it would seek to eliminate or significantly change an asset test used to determine if beneficiaries qualify for financial assistance.

To help control rising health care costs, AARP is urging a greater focus on areas such as disease prevention, more widespread use of health care information technology, and chronic care coordination.

AARP also urged an examination of Medicare spending on physicians and managed care plans to help protect Medicare beneficiaries from rising out-of-pocket costs.

Some lawmakers, such as Ways and Means Health Subcommittee Chairman Pete Stark, D-Calif., have said that Medicare Advantage payment rates are ripe for review. At a hearing earlier this month, Stark said he doubted that the value of added benefits such plans provide comes close to the amount of money he said the plans receive in "overpayments."

Stark also has cited data from the Medicare Payment Advisory Commission (MedPAC) finding that, on average, Medicare pays Medicare Advantage plans 11 percent more per beneficiary than it pays traditional fee-for-service programs. Health insurers have long contended that the MedPAC calculations are flawed because they do not include a variety of factors, such as the fee-for-service program's graduate medical education payments to teaching hospitals.

Citing similar studies, AARP Legislative Policy Director David Certner said reducing Medicare Advantage payments was certainly an option. Taking such a step might not necessarily drive plans from the program, said John Rother, AARP's group executive officer for policy and strategy.

Some Medicare Advantage plans are providing "very, very generous benefits" that may have to be scaled back if federal payment rates were reduced, Rother said. "We think many of the plans that offer value will stay," Rother said. "They're not going to leave the market."

Mohit Ghose, a spokesman for America's Health Insurance Plans, said some of those more generous benefits, such as low copayments or transportation services, are critical for Medicare Advantage beneficiaries and allow them to receive health care they might not otherwise.

"We believe that Medicare Advantage plans provide a very direct value for the millions of people that choose to be in them," such as lower out-of-pocket costs and more comprehensive benefits, such as hearing, vision and dental services, Ghose said.

February 23, 2007 -- Fears that Medicaid spending is growing uncontrollably are unfounded and fundamental changes to the entitlement program could help eliminate interstate variations in benefits and help states cope with rising health costs, experts said Friday.

Two studies released as part of a Medicaid forum sponsored by the academic journal Health Affairs offered an array of ideas to resolve many challenges faced by the federal–state program, including funding, coverage and provider reimbursement levels. The authors discussed their findings during a briefing held by the Washington, D.C.–based Urban Institute.

A paper authored by Richard Kronick of the University of California, San Diego, and David Rousseau of the Kaiser Family Foundation's Commission on Medicaid and the Uninsured predicts that expected growth in federal and state revenues will likely be enough to sustain Medicaid spending increases over the next 40 years while allowing growth in spending for other public services.

A second paper written by John Holohan of the Urban Institute and Alan Weil of the National Academy for State Health Policy lays out four comprehensive options for restructuring Medicaid that would shift more of the cost and risk for growth in Medicaid spending to the federal government, producing a net federal spending increase of $24 billion to $34 billion a year.

In their report, Kronick and Rousseau conclude that despite the anticipated decline in employer-sponsored insurance and the long-term care needs of the baby boomers, Medicaid spending as a share of national health expenditures will remain almost constant from 2005 to 2025 at 16.6 percent, then increase very slowly to 19 percent by 2045.

They said that while some states in some years will experience fiscal pressure during recessions, state and federal government revenues will rise enough to sustain both Medicaid spending increases and substantial real growth in spending for other services.

But one could still "make the case to say there are changes that would improve the program," Kronick said.

The paper by Holohan and Weil presents options and cost estimates that the authors say could strengthen the program. Ideas they discuss include mandatory coverage expansions for groups such as parents and childless adults, shifting highest-cost cases to the federal government, and increasing federal matching rates for selected services or populations.

An overhaul or complete elimination of the current disproportionate share hospital or DSH funding system also is needed, the authors say, to help guard against current abuses.

"There may be a need for DSH but not the way it's structured," Holohan said.

Holohan and Weil also write that some widely held notions about the program—such as that Medicaid enrollees use too many services—are false. Medicaid beneficiaries' use of services is comparable to the private sector and enrollees often have a difficult time finding a physician who will accept Medicaid due to its low reimbursement levels, the authors wrote.

By CQ Staff

February 23, 2997 -- A hospital pay-for-performance project that has improved the quality of care delivered to patients has been extended for another three years, according to Premier Inc., a hospital consortium that is sponsoring the demonstration project.

In a news release, Premier said that the Centers for Medicare and Medicaid Services has approved an extension of the project, which includes more than 250 hospitals nationwide. The project provides incentive payments to participating hospitals if they performed well on 30 measures assessing treatment for heart attacks, heart failure, bypass surgery, pneumonia, and hip and knee replacements.

According to official results published last month, participating hospitals raised overall quality by 11.8 percent in two years in the five clinical areas studies, resulting in care and improved outcomes for more than 800,000 patients. A Premier report submitted to CMS on the demo also found that hospital costs could be lowered as much as $1.4 billion if certain treatment practices were followed for all U.S. patients with four of the five conditions.

"This project is making a real difference for patients now and in the future," said Richard A. Norling, Premier's president and chief executive officer.

The extension, announced Thursday, will allow CMS to test new ways to measure quality and new incentive models as part of the demonstration project. The extension will continue to track hospital performance in the clinical areas of pneumonia, heart bypass, heart failure, and hip and knee replacement, with flexibility to add quality measures and clinical conditions in the fifth and sixth years, Premier officials said.

New mortality and patient safety measures are among those that may be included, according to Premier. The extension will also test the effectiveness of two new models: hospitals achieving a defined level of quality and hospitals making the most improvement in quality that also achieve the quality threshold.

By CQ Staff

February 21, 2007 -- U.S. health care spending is expected to double from today's level, reaching $4.1 trillion, or 16 percent of the gross domestic product, over the next decade, according to new government data released Wednesday.

By 2016, health care expenditures will consume almost 20 cents of every dollar spent, according to estimates from economists and actuaries at the Centers for Medicare and Medicaid Services Office of the Actuary. The findings were published Wednesday as a Web exclusive by the journal Health Affairs.

Other highlights of the report include:

• Growth in health spending is expected to drop slightly from 6.9 percent in 2005 to 6.8 percent in 2006, marking the fourth consecutive year of a spending slowdown. The Medicare drug benefit, slower projected growth in Medicaid, and slower growth in private health care spending are contributing to that trend, the report's authors say.
• Consumers' out-of-pocket spending on health care, expected to reach $250.6 billion in 2006, is projected to climb to more than $440.8 billion in 2016.
• Total Medicare spending growth is expected to reach $417.6 billion in 2006 with the addition of the Medicare drug program, up from $342.0 billion in 2005.