By Jane Norman, CQ HealthBeat Associate Editor

July 21, 2010 -- Democratic Sen. John D. Rockefeller IV has leveled a new salvo at the health insurance industry, writing in a letter that insurers are attempting to "game" the health care law and are pouring "limitless" resources into their lobbying of state insurance commissioners who are developing key recommendations.

"It is clear that health insurance companies are sparing no expense to weaken this new law and the protection it promises to America's consumers," Rockefeller, of West Virginia, wrote Tuesday to Jane L. Cline, president of the National Association of Insurance Commissioners. Cline is the West Virginia insurance commissioner.

While new standards will create short-term problems for some carriers, "I respectfully request that you and your fellow insurance commissioners keep the consumers of your states foremost in your minds," Rockefeller wrote. So far, regulators have "wisely" rejected lobbying efforts, with a couple of exceptions, he wrote.

The NAIC is engaged in the lengthy and difficult process of developing recommendations for standards for the so-called medical loss ratio, or MLR, that's part of the new health care law. Democrats inserted the provision in the law with the intent of steering more insurance company spending toward benefits. The recommendations will be sent on to the Department of Health and Human Services.

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 like 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 aren't met.

The problem confronting the NAIC, made up of Democratic and Republican appointed and elected officials, has been defining just what are clinical services and activities related to quality of care.

Robert Zirkelbach, a spokesman for America's Health Insurance Plans, said that insurers indeed are closely following NAIC activities but have done nothing improper. Their goal is to see the MLR written in a way that won't disrupt health care coverage that consumers currently have, he said. "If the MLR is too restrictive it could turn back the clock," Zirkelbach said.

Cline, in a statement, defended the state regulators' work. "As one of the driving forces behind health care reform, the NAIC is pleased that Sen. Rockefeller continues to follow the implementation process and we welcome his sustained interest and input," she said. "As the senator's letter indicated, the NAIC has developed and maintains an open and deliberative process for the implementation of health care reform."

Rockefeller said he and his staff members have been closely following the NAIC deliberations because the medical loss ratio is a key consumer protection provision in the law. He said that the NAIC had created a "fair, deliberative process" that's allowed people to share comments and ideas, but insurers also have been "furiously lobbying" the organization to write the definitions in a way that will allow current business practices to continue.

Industry lobbyists, lawyers and consultants "pore over every word" of draft proposals, monitor every teleconference and "swamp" the organization's working groups with comments and proposed revisions, Rockefeller said. Insurers and their allies have submitted 160 comment letters of more than 600 pages while consumer representatives have presented 23, he said.

AHIP's Zirkelbach said insurers are "providing data and information on what health plans are doing" and are interested because of the impact on their business.

But Rockefeller said that insurers have been pushing to "weaken" the concept that "quality improvement" should be confined to expenses that have been proven in an objective way to improve patient care. Instead insurers want money spent processing and paying claims, creating provider networks, updating technology systems and protecting against fraud to be considered quality improvements, he said.

The subgroup looking at this issue did reject those arguments, Rockefeller said. But he objected to one exception allowing insurers to count "fraud and abuse detection" expenditures as medical expenses. An additional problem is that there's no detailed definition of those expenses, he said.

Additionally, Rockefeller said he's unhappy with another subgroup decision, this one to bar the public release of information submitted by insurers to justify their quality improvement expenses. He said he understand insurers' concern about disclosure of proprietary information, but traditionally companies have resisted disclosure of any information.

Zirkelbach said insurance companies believe that efforts now undertaken such as disease management, care coordination for patients with chronic conditions, 24-hour support for those with chronic conditions, health and wellness activities and health information technology should be considered in the "quality of care" category. "The important focus needs to be on what is the impact of the regulation going to be on programs that patients like and rely on today," he said.

Cline said everyone's welcome to express an opinion. "The NAIC encourages Sen. Rockefeller to continue to contribute to our transparent and thoughtful process," she said. "Only through continued collaboration, with input from all interested parties, can we work towards the goal of developing a sound platform for reform."

The commissioners couldn't meet an initial June 1 deadline for their recommendations set by HHS, citing the complexity of their task, but are expected to come up with the MLR language as soon as this month.

By John Reichard, CQ HealthBeat Editor

July 22, 2010 -- Rep. Pete Stark, D-Calif., and other House Democrats announced Thursday the introduction of a bill to add a government-run insurance plan to compete with private plans that will be offered in 2014 in insurance exchanges created under the health care overhaul law.

The bill (HR 5808), which has 128 original co-sponsors, would if enacted save $68 billion from 2014 to 2020, according to an estimate by the Congressional Budget Office (CBO).

The public option dominated much of the debate over health care overhaul legislation but could not get through a Congress with large Democratic majorities. Its chances of passage seem slim to none in coming months, particularly if Republicans gain seats in Congress in the November elections.

But Stark and other Democrats say the case is building all the time for adding a public option as premiums charged by private insurers rise ever higher. Some insurance industry officials worry that as premium charges grow over the years, support for the public option will extend beyond the passionate corps of Democrats now espousing the provision.

"Today, Consumers Union reported that Blue Cross Blue Shield plans amassed billions in surpluses as they raised rates for millions of Americans," Stark said in a news release. "This is a good example of why we need a public option—to create an insurance plan that competes based on delivering quality, efficient care, not on delivering profits to shareholders. The result is more competition, better coverage and lower premiums for millions of Americans."

Bob Kolodgy, chief financial officer at the Blue Cross and Blue Shield Association, said in a statement that "because nonprofit BCBS plans lack access to capital markets available to other companies, we rely on our own reserves to make the investments needed to increase efficiency and develop capabilities that help us better respond to increasing medical costs—a key driver of rising premiums. To suggest that reserves should be reduced now, at a time when health care reform has created an untested and uncertain environment, would be reckless."

The bill would save money by, in general, paying providers Medicare rates. Hospitals and doctors say they would be underpaid as a result, while insurers say that providers would hike their rates, forcing them to raise premiums to unaffordable levels.

Health care providers would not have to do business with the public plan as a condition for participating in Medicare.

The bill also would give authority to the HHS secretary to negotiate prescription drug prices for the public option, a measure that would be bitterly opposed by the pharmaceutical industry.

CBO's analysis of the bill assumes that premiums charged by the public plan offered in the exchanges would be five percent to seven percent lower than that of private plan competitors and that 13 million people would enroll in the public option in 2017-2019.

By Rebecca Adams, CQ HealthBeat Associate Editor

July 22, 2010 -- Research comparing different treatment strategies for the same disease has the potential to provide better information about what works in medicine, said advocates at a forum Thursday about the science—but one speaker warned that minorities could be harmed if insurers or Medicaid officials used the studies in reimbursement decisions.

The morning-long forum on "comparative effectiveness" research—sponsored by the Partnership to Improve Patient Care (PIPC)—featured remarks by eight advocates and Senate Finance Committee Chairman Max Baucus, D-Mont.

The most vocal critic was Gary Puckrein, the president and chief executive of the National Minority Quality Forum, a group that aims to reduce health disparities among minority populations.

"Minority populations have been truly disadvantaged," Puckrein said, by comparative effectiveness research that has been used by states to limit services for patients enrolled in Medicaid, the federal-state program for the low-income. For instance, state officials have sometimes decided to require patients to pay more for medications that were shown to be inferior to other alternatives.

Puckrein said that officials for insurance companies, Medicaid programs and other programs should not charge more or refuse to pay for services that are shown in studies to be less effective than others. He said that the effect on individual patients may differ.

The health care legislation signed by President Obama calls for the creation of a new institute that will fund comparative effectiveness research (CER). The new institute will build on previous work, including studies funded through $1.1 billion provided through the 2009 economic stimulus law (PL 111-5).

Acknowledging that the federal government is poised to spend billions over the next decade on comparative studies, Puckrein asked that policymakers and those involved in coverage decisions recognize that the conclusions in studies may not apply to all patients. Minorities are often underrepresented in studies and the effects of various treatments on them may not be completely understood.

"Even though I don't get it, I understand the train is out of the station," Puckrein said, referring to the enthusiasm and funding for CER. "When you start putting out these CER studies, let's be very careful that we articulate who the study applies to.... It's really a very narrow group of individuals that these studies should be applied to. If we can do that, I'll live through the CER experience."

Baucus, taking the microphone after Puckrein, noted that the health care law requires that the new institute consider that the effects of treatments may be different for certain subpopulations, such as minorities, people with certain genetic compositions, patients with disabilities, and others. He also said that the institute will not develop medical guidelines, treatment protocols or coverage recommendations of any sort.

The chairman defended the funding for CER and the health care law in general, saying that doctors and patients have more tests and treatment options than ever, but comparative effectiveness research is needed because "in many cases, we simply don't have enough available evidence to choose between options."

By Rebecca Adams, CQ HealthBeat Associate Editor

July 20, 2010 -- When federal officials released final rules on July 13 governing how medical providers should use electronic records, they scaled back some requirements in an earlier proposal. They said they wanted to strike a balance and create goals that were ambitious but also realistic.

But some House Ways and Means Health Subcommittee Republicans made it clear in a hearing Tuesday that they thought the requirements had been eased too much.

The rules will provide hospitals and providers such as physicians with incentive payments if they create and use electronic health systems.

Republicans Wally Herger of California and Sam Johnson of Texas specifically questioned why the rules do not require providers to exchange electronic information in a secure way. Instead, officials would require providers only to test systems to see if they are capable of exchanging information during the first stage of the three-phase initiative.

David Blumenthal, the national coordinator for health information technology, responded that exchange systems are not ready to be deployed in all parts of the country. He said that providers should not be penalized if an exchange clearinghouse that must be used to trade information is not operating in an area or if hospitals and physicians have not set up an agreement on how to securely share data.

"It's not fair to individual physicians who are trying desperately to become meaningful users" of health information technology to require them to securely transmit data if the problems are "something they can't control," said Blumenthal.

He noted that the rule does move forward on exchanging information through such requirements as telling physicians to transmit more than 40 percent of prescriptions electronically.

Most importantly, Blumenthal said, the next two phases of the initiative will have more ambitious goals.

"In 2013, they have to be ready to exchange in a much more robust way," said Blumenthal, adding that the administration is "starting where we think industry is, but putting them on notice that they're going to have to move fairly rapidly."

The rules stem from the 2009 economic stimulus law (PL 111-5), which may provide as much as $27 billion in incentives over a decade in an effort to move the practice of medicine into the digital age. Eligible medical professionals such as physicians may receive as much as $44,000 under Medicare and $63,750 under Medicaid and hospitals may receive millions of dollars for meeting requirements in the rules to create and use health IT systems.

Blumenthal and Tony Trenkle, director of the office of e-health standards and services at the Centers for Medicare and Medicaid Services, repeatedly defended the regulations as an important step that encourages medical providers to make progress on electronic health systems without setting the bar unrealistically high.

The officials also heard complaints from lawmakers that the administration did not make one requested change. The regulations will treat hospital systems with more than one hospital as one provider, while some lawmakers and hospitals prefer that they be treated as separate hospitals.

Trenkle noted that officials "did hear from a large number of groups and organizations and members of Congress on this issue," but that what officials sought "to do in the final rule was be consistent with our payment policies" in Medicare. The administration officials said that they could be sued if they adopted a policy in the regulations that differed.

However, Democrat Earl Pomeroy of North Dakota said the outcome "was very disappointing" to lawmakers. "You'll probably be hearing more from us on this," he said.

By Jane Norman, CQ HealthBeat Associate Editor

July 22, 2010 -- The Obama administration released on Thursday the interim final rules outlining how patients can make appeals if they are unhappy with a decision by their insurance company.

Under the new health care law (PL 111-148, PL 111-152), consumers will have processes available to them for appeals and claims internally within insurance companies, and to independent external review boards. The rules, now open for public comment, will apply to many plans beginning on or after Sept. 23 — though not all plans.

Phyllis Borzi, assistant secretary for the Department of Labor's Employee Benefits Security Administration, told reporters in a conference call that 31 million people in employer plans and 10 million in individual plans will benefit from the new standards in 2011.

Both group and individual plans will be covered, but not those that have been "grandfathered" in under the health care law, which means no major changes have been made in the plans since the March 23 passage of the law.

The proposal notes that as plans lose their grandfathered status in years to come, more will have to comply with the new federal appeals process. Borzi said the number of individuals covered by the new appeals rules is expected to rise to 88 million by 2013.

The rules will also apply to self-insured companies, which means the employer operates its own insurance plan and pays a third party to administer it.

External, third-party appeals of insurance decisions are now available in 44 states, and the processes and time limits for filing appeals vary. Many only cover HMOs. The new federal standards will replace that patchwork of protections, officials said, and make it simpler to file an appeal.

States can keep their external appeals processes but will have to update them to meet the new federal standards, and those patients whose states lack appeals laws can use the federal program. A study by the Kaiser Family Foundation found consumers won their external appeals 45 percent of the time under current state laws.

Plans will have to have an internal appeals process that allows consumers to appeal when they are denied a claim for a covered services or when coverage is canceled, gives them detailed information about the grounds for denials, notifies consumers that they have a right to appeal and tells them how, ensures a full and fair review and provides expedited appeals in urgent cases, according to an administration fact sheet.

The patient appeals announcement is the latest in a series highlighting the immediate benefits offered under the law, stressed by Democrats seeking to gain greater public acceptance for the overhaul. Other proposed rules have spelled out initiatives such as no cost-sharing for preventive care, insurance plan coverage for young adults and restrictions on policy cancellations for sick people.

The rules on appeals were announced by the departments of Health and Human Services, Labor and Treasury.

Also announced, by HHS, was the availability of $30 million in consumer assistance grants for states so that consumers can be educated about health care coverage. They are intended to help people enroll in programs, file complaints and appeals against health plans, track complaints and provide education. State attorneys general offices, insurance departments, consumer assistance agencies or other agencies are eligible. Information on the grants is at www.grants.gov.

By John Reichard, CQ HealthBeat Editor

July 21, 2010 -- Despite doubts that Congress will pass legislation before the August recess to maintain higher levels of Medicaid funding, senior groups say they'll keep putting pressure on lawmakers to act this month.

"We keep pushing, because it's just a critical issue," Nora Super, director of federal government relations at the senior lobby AARP, said in an interview.

The issue of higher Medicaid funding isn't going away, despite repeated difficulties moving such legislation with lawmakers skittish about deficit spending. Speculation flared about a deal involving higher funding flared late Wednesday, but such rumors have repeatedly proved to be unfounded.

Advocates labor on, however.

In recent days AARP circulated a letter to each member of Congress calling on them to immediately pass legislation that would extend the higher levels of Medicaid funding afforded to states as part of the economic stimulus law.

The funding expires Dec. 31 and AARP, governors, hospitals and nursing homes are all advocating an extension until June 30, 2011 of those higher levels because of shortfalls in state revenues associated with the economic downturn.

"A quarter of all Medicaid beneficiaries are over 65 or are people with significant disabilities, making this vital program particularly important for our members," said the July 16 letter from AARP Senior Vice President David P. Sloane.

"Home- and community-based services, which are cost effective and allow people to stay in their homes, rather than be institutionalized, are likely to be among the first services slashed from state Medicaid programs because they are considered 'optional' services" that states are not required to cover, the letter from Sloane said.

States are reluctant to trim Medicaid because for each dollar they lop off they lose another dollar or so in federal revenue from the federal-state matching program. So to the extent they have assumed higher funding levels in their budgets and must now trim them with legislation to assure those levels stalled, cuts could come in spending on areas such as higher education, infrastructure and corrections.

In addition, the health care overhaul law and the economic stimulus law limit states' ability to reduce Medicaid benefits. But there are no restrictions on cutting payment rates to providers, which already are so low that Medicaid recipients have difficulty finding doctors.

Both the House and Senate have approved $26 billion to extend the higher "federal medical assistance percentage" (FMAP) payment rates until mid-2011. But they've done so in different legislation vehicles and a recent attempt to enlist the support of Maine Republican Sen. Susan Collins by trimming the FMAP relief package to $16 billion failed.

AARP and the National Council on Aging are planning other efforts to boost Medicaid funding levels, such as a July 29 event marking the anniversary of the legislation creating Medicare and Medicaid.
But Finance Committee Chairman Max Baucus, D-Mont., responded doubtfully Tuesday when asked whether he sees a path forward for Medicaid funding legislation before the Senate winds up its business the first week of August.

"It's just a matter of scheduling," he said "There's so much" [the Senate needs to do]. "I don't know."

Lobbyists say that election year political considerations may mean action on higher funding is more likely to come in a lame-duck session at the end of the year. Congressional candidates fear they will be punished at the polls for votes that ignore growing concerns about the federal deficit.

Another issue is that expiration of the higher funding levels is not imminent. "The urgency may not be there because it doesn't expire until the end of the year," Super said.

Another lobbyist who declined to be named in order to be able to speak more freely said that while hospitals, governors and senior groups will keep pushing events to put the pressure on lawmakers, the key is finding out what will "move the needle" to turn opposition by Collins, Sens. Olympia Snowe, R-Maine, and Ben Nelson, D-Neb., to support higher funding levels. It could be pressure from a governor, a local senior group or a hospital association, the lobbyist said. Their support would give such legislation the 60 votes needed to move through legislation through the Senate, the lobbyist added.