By John Reichard, CQ HealthBeat Editor

June 17, 2011 -- From a call by Republican governors to overhaul the program, to forums, speeches and new reports, the Medicaid program attracted an unusual level of attention in Washington the week of June 13–17, but whether the heightened scrutiny will push the federal–state program in new directions is unclear.

At the start of the week, 29 Republican governors released a set of principles for overhauling Medicaid. Two days later, Sen. Orrin G. Hatch of Utah, the top Republican on the Finance Committee, unleashed an attack on the program and on the provisions of the health law (PL 111-148, PL 111-152) that expand it.

In a speech to the Heritage Foundation, Hatch said that the law's 2014 expansion of the 67-million-enrollee Medicaid program to add 16 million uninsured is a "direct assault" on states' rights in the Constitution. And Hatch essentially said that he agreed with the view that being on Medicaid is worse than having no coverage at all in terms of the health care recipients get.

Sen. John D. Rockefeller, IV., D-W.Va., let loose with a similarly fiery speech—in defense of the program. "Medicaid does exactly what it was designed to do ... provide a safety-net for low-income Americans," he said in a June 13 speech on the Senate floor. "There are lots of worthwhile and positive ways that we can improve the program. But trashing Medicaid for political gain should not be an option," he said.

The sense of gravity surrounding the future of the program also was apparent at a June 13-15 Washington, D.C., conference called the National Medicaid Congress. Some speakers emphasized the deep damage they said would be inflicted on the nation's health care safety net if a proposal backed by Rep. Paul D. Ryan, R-Wis., to turn Medicaid into a block-grant system becomes law.

They emphasized that the debate about Medicaid's future focuses on dollars and budgets and not on the possibility that big cuts might mean that safety net hospitals could close and that recipients who are severely disabled might not be able to get the care they need on the private market. But attendees also were reminded that the nation faces a grave economic threat associated with its national debt and that the Medicaid entitlement must be addressed.

Dean's Take

Warnings of the big stakes involved in curbing Medicaid growth were not confined to Republicans. Former Vermont Gov. Howard Dean said at a different forum sponsored by the University of Virginia that the growth of health spending is so severe a threat crowding out education and other societal needs that everyone in the nation should be part of a "capitated" managed care plan, whether they are in private insurance, Medicare and Medicaid. Under capitated plans, providers get fixed per-capita payments made ahead of time to deliver a specified set of benefits.

Dean called for a "global budget" for U.S. health care spending. "The key here is you have to put substantial downward pressure on the medical-industrial complex," said Dean. "If we keep feeding the beast it's going to get bigger and bigger," he said. "I really don't think throwing more money at health care is a good idea."

Urban Institute President Robert Reischauer defended the Medicaid expansion, saying that "more people are in need and have had to turn to the government for this help." But he said that the consequences of failing to control health spending growth are "tragically large" because higher state Medicaid costs are translating into them not spending enough on education. Reischauer said the U.S. is not exactly the world leader in primary and secondary education and is losing its leadership position in higher education.

The week's wide-ranging discussions about Medicaid did not suggest that support is coalescing for specific cost control tactics.

GOP governors spoke favorably about Medicaid block grants in their statement of principles but were otherwise vague in their policy prescriptions other than to emphasize state control of Medicaid. Democrats are unlikely to accept block grants in debt ceiling negotiations with Republicans, however.

Removal of "maintenance-of-effort" standards that require keeping current Medicaid eligibility standards in the health law is a real possibility as part of those talks. But elimination of the "MOE" is unlikely to trim enrollment levels or spending in a big way.

The Medicaid and CHIP Payment Assessment Commission released a report during the week detailing the role of managed care in Medicaid.

The report did not point the way to specific cost control strategies but it did note that an increasing number of people, including those with complex health care needs, now belong to private managed care plans that contract with Medicaid.

But there's no consensus that moving Medicaid recipients into capitated managed care plans is an effective cost control tactic. A Connecticut state official told the National Medicaid Congress that his state is moving away from such private plans because they aren't really working closely with providers to make health care more efficient.

And a study by the Commonwealth Fund concluded that payments to capitated plans entail considerable waste.

Another study documented problems with access to specialty care in Medicaid. Researchers posing as the mothers of sick children covered by Medicaid or the Children's Health Insurance Program called clinics representing eight medical specialties in Cook County, Illinois. Overall, 66% of Medicaid–CHIP callers were denied an appointment, compared to 11 percent of privately insured callers, the study found. Among 89 clinics that accepted both private and publicly funded insurance, the average wait time for Medicaid–CHIP enrollees was 22 days longer than that for privately insured children, said the study, published in the New England Journal of Medicine.

"As we encounter new opportunities for restructuring the U.S. health care delivery system, there is a need for empirical data on policy mechanisms that can minimize disparities in access to care," the researchers said.

Medicaid managed care plans that are owned by publicly traded, for-profit companies spent an average of 14 percent of premiums on administrative costs, higher than the average of 10 percent spent by non-publicly traded plans, according to a Commonwealth Fund study. The non-publicly traded plans are owned by groups of health care providers, health systems, community health centers, or clinics.

"Managed care plans represent a large piece of Medicaid’s future, and plans owned by publicly traded companies will likely be a growing share of this market," said lead author Michael McCue, a professor at Virginia Commonwealth University. "In order to assure that Medicaid provides high-quality, efficient health care, it will be crucial that state Medicaid directors responsible for managed care contracts take into account publicly traded plans' commitment to Medicaid and whether they are striking the right balance between providing high-quality care to patients and increasing earnings."

State officials were discussing Medicaid and managed care at this week's National Medicaid Congress, and at least one health care official at the conference said his state was moving away from the capitated model.

Mark C. Schaefer, director of Connecticut's Medical Care Administration, said his state changing course because managed care plan officials haven’t convinced the state that model is more efficient. 

In the Commonwealth report, 27 percent of the publicly traded Medicaid-only plans reported quality measures and scored lower on these measures compared to non-publicly traded plans; they scored 13 percentage points lower when it came to managing chronic illness, and 11 percentage points lower on a composite score measuring preventive care.

According to the report, "Assessing the Financial Health of Medicaid Managed Care Plans and the Quality of Patient Care They Provide," Medicaid managed care enrollment is increasing and the authors anticipate that trend will continue.

In 2009, the Centers for Medicare and Medicaid Services reported that 72 percent of Medicaid enrollees were fully or partially covered by a managed care plan, up from 55 percent in 2000. The number of enrollees in managed care plans owned by publicly traded companies jumped significantly—from 5.6 million to 9.8 million people between 2004 and 2009.

"This report shows us that it is possible for health plans to keep administrative costs down and quality high for Medicaid beneficiaries," said Commonwealth Fund President Karen Davis. "Millions of people are already covered by managed care plans, and millions more will be added to their ranks when Medicaid is expanded in 2014 under the Affordable Care Act. Now is the time to ensure performance of private contractors to assure that scarce resources are used wisely and patients get the high quality health care they deserve."

By John Reichard, CQ HealthBeat Editor

June 14, 2011 -- Many in health policy say that paying fixed monthly fees per enrollee to private health plans to deliver Medicaid benefits seems like a powerful tool to manage costs. But the state of Connecticut is revamping its program to move away from such "managed care capitation."

Instead, the state is relying on more of the tools provided in the health care overhaul law (PL 111-148, PL 111-152), such as the use of medical homes to try to deliver care more efficiently, a Connecticut state official told a Washington, D.C. health policy forum.

Mark C. Schaefer, director of Connecticut's Medical Care Administration, said the state is moving in that perhaps surprising direction because managed care plans haven't transformed the delivery of care enough to satisfy the state that it's more efficient.

"With our capitated managed care program there really was not a relationship between the providers who deliver the care and the managed care organizations," Schaefer told the forum, called the National Medicaid Congress. "They basically didn't talk aside from contract negotiations around rates and that sort of thing. . . they were very light in terms of engaging the provider community and thinking together about the best way to solve today's health care problems."

Medical homes are doctor's offices that agree to coordinate health care services to avoid duplication and treatment in needlessly expensive settings. Patients that have a medical home are supposed to be able to more easily schedule appointments and contact their physicians by email. The "home" is supposed to help remind patients of the preventive care they need and to adhere to care regimens.

Connecticut officials hope that this approach, which will take several years to implement across the state, will more fully engage providers. Money made available under the 2009 economic stimulus law (111-5) is helping to pay for the adoption of electronic health records, a key step in getting accredited as a medical home, Schaefer noted.

"More than anything else this new system has to have providers at the table bringing their best thinking about how practice needs to change to address issues of duplication, inefficiency and ineffective care," Schaefer said. But, he said, medical homes and "health homes," a similar concept that entails caring for patients with more complex health care needs, are not likely to provide the ultimate answer.

Medical homes will need to join with other providers such as hospitals, home health agencies and community health centers in local consortia and take on medically complex patients as well as other Medicaid enrollees to truly make care less costly, he suggested.

Connecticut prefers the flexibility it has under the health law to control costs to a block grant approach advocated by a number of governors. Block grants would require a far more hands-on state involvement in managing its Medicaid program—and potentially in having to fund it if there are unexpected spikes in the cost of providing care states are unwilling to see their residents go without.

"We like the security of what we've got now in our partnership with the feds and we feel that we've got the flexibility and the opportunity right now in our relationship with the feds to innovate in health care service delivery in the way that we need to," Schaefer said. "So there's not much we're looking for in a block grant approach and some things that we have to fear from that."

Washington state has also made clear that it does not favor block grants. 

Nancy V. Atkins, commissioner of the Bureau for Medicaid Services in West Virginia, who spoke on the same panel as Schaefer, said her state also does not like block grants in part because it now receives relatively generous federal reimbursement for its Medicaid program.

"It puts a lot of responsibility on the state," she said. "And we have a partnership, a state-federal partnership is the way it's working right now. So we're certainly not in favor of block grants either."

By Jane Norman, CQ HealthBeat Associate Editor

June 14, 2011 -- Costly hospital readmissions that pose a huge challenge for the health care system can be reduced among Medicare beneficiaries, preliminary "dramatic" results from a major Medicare study as well as a separate Harvard Medical School report are indicating.

The findings could be significant because an increasing number of Medicare patients are being readmitted to hospitals within 30 days of their discharge. Avoiding readmissions has been become a priority for Centers for Medicare and Medicaid (CMS) officials as the agency is trying to become a major force in the improvement of the nation's health care. Also, under the health overhaul law, beginning in October 2012 Medicare will begin financially penalizing hospitals for certain preventable hospital readmissions.

Paul McGann, deputy chief medical officer at CMS, said at a "Medicare Readmissions Summit" that a three-year pilot program at the agency that involves some 1.12 million Medicare patients is showing "dramatic" preliminary results. The "Care Transitions Project" that aims to reduce unnecessary readmissions is targeted to 14 communities around the nation. Each is led by a state Quality Improvement Organization.

The idea has been to focus on how to make "seamless" transitions can from hospital to home, skilled nursing care or home health care, involving all the providers that a patient sees as well as community, family and care givers. McGann said he believes it's one of the largest studies that's ever been done on readmissions. The results are being analyzed in preparation for a published paper in a peer-reviewed medical journal.

According to a June report from the Agency for Healthcare Research and Quality, there was a 19 percent 30-day readmission rate among Medicare patients age 65 and older in 2008, based on data from 15 states. Among younger Medicare patients – those with disabilities—the rate was about 24 percent. Rehospitalizations in Medicare are estimated to cost $17 billion a year and can be very debilitating for patients.

The CMS study involved 70 hospitals, 227 skilled nursing facilities, 316 home health agencies and 89 other facilities. The health care providers and communities weren't told what to do but rather were encouraged to come up with locally generated plans in their own backyards.

They did get dozens of suggestions, though, such as asking doctors to regularly follow up with phone calls to patients after their discharges, improving patients' understanding of the right medicine to use and when, or using "care transition coaches" to help people make the shift from hospital to home, according to documents on the CMS web site.

More broadly, the U.S. health care system needs to have leaders who will see rehospitalizations as an important issue, said McGann. "There is a significant lack of leadership in this regard, both in the communities and the hospital community and even at CMS" he said. "We are taking steps to correct this at CMS."

What's important is to make the decision to change, he said. "Will is important here and we have to agree to correct this problem," said McGann.

McGann said that the project found that readmission rates "clearly"were reduced and the rate of initial admission were reduced even though that wasn't a goal of the study. Nursing home and home health care services utilization increased slightly. Preliminary cost savings are "very promising" though numbers are not ready for release yet, he said. "These results are going to be dramatic and they are going to be powerful," McGann said.

The 14 communities were divided into three tiers. The bottom tier "struggled mightily" with reducing readmissions rates, said McGann. But the top tier managed to improve by about 15 percent, he said.

Separately, a new study at the Hebrew Rehabilitation Center, which is affiliated with Harvard Medical School, looked at discharges from the center's skilled nursing facility before and after certain interventions were made. The rehospitalization rate fell from 16.5 percent to 13.3 percent. More people were sent home and the number sent to long-term care facilities decreased. The study was published in the Journal of the American Geriatric Society and the lead author was Randi E. Berkowitz, a geriatrician.

Patients admitted to skilled nursing facilities tend to have a high rate of early and unplanned readmissions, said a statement from the center about the study. To reduce readmissions, the center used several approaches. It employed a standardized template for admissions that included guidelines for care for common geriatric problems and questions about what medications patients were taking. Patients with three or more admissions in six months received palliative care—that relieves symptoms of serious illness without resolving the disease—to see if hospital admission was what the patient and family wanted, or if the condition could be better managed at home or in long-term care.

Another CMS initiative cited by McGann is the Partnership for Patients campaign, an ambitious patient safety project announced in April that is designed to decrease preventable hospital-based acquired conditions and lower hospital readmission rates by the end of 2013. It's already come under attack, though, by congressional Republicans who question how much money it will actually save. More than 3,000 organizations have signed up for the partnership, said McGann.

Given the preliminary results of the care transitions project, "with deliberateness and method and purpose, if we continue to pursue this and modify as we go along, it's clear readmissions rates can be reduced" by the magnitude envisioned by the Partnership for Patients campaign, he said.

McGann also offered extensive praise for CMS Administrator Donald M. Berwick. "CMS under Don Berwick's leadership is the most exciting place that I've ever worked in my life," said McGann. "It is just an unbelievable ride."

He said he has been asked by others if he is "masochistic" for working for an administrator who apparently tends to challenge presentations or concepts brought to him.

"The reason is because he's engaged," said McGann. "So often in the past ... we'd be going to an administrator to present the things and a rubber stamp would come out and there was no interplay of ideas or exchange of innovation. Under Don Berwick, you never know what's going to happen next. You can work for three months on something and bring it in and he'll just generate on the spot very new ideas.

"So it's an exciting place and things are just changing at a very rapid pace."

• Care Transitions Project

By Emily Ethridge, CQ Staff

June 16, 2011 -- House and Senate Democrats introduced legislation to reduce drug costs in Medicare's prescription drug program, a measure that exemplifies the kinds of changes to health entitlements that Democrats say they are willing to accept in the negotiations over raising the debt limit.

The measure, introduced in the House and Senate, would require drug companies to provide prescription drug rebates to those eligible for both Medicare and Medicaid, as well as to seniors in the low-income subsidy plan in the Medicare Part D prescription drug program.

Democrats hailed the bill as a way to wring more savings out of the Medicare program, on top of the ones included in last year's health care law (PL 111-148, PL 111-152), without cutting benefits.

"We face a stark choice," said Henry A. Waxman, D-Calif., ranking member of the House Energy and Commerce Committee. "The Republicans have proposed eliminating basic Medicare and Medicaid guarantees. But Democrats have better ideas. This bill saves Medicare more than $100 billion by eliminating drug manufacturer windfalls instead of hurting seniors."

The bill would reduce the deficit by $112 billion over 10 years, according to the Congressional Budget Office.

But the Pharmaceutical Research and Manufacturers Association, which represents brand-name drug companies, panned the measure.

"Already, negotiations between biopharmaceutical research companies and Part D plans are leading to significant rebates on medicines," said deputy vice president Karl Uhlendorf. Uhlendorf. "In addition, price controls in Part D would likely lead to increased premiums on certain beneficiaries in the program, according to the Congressional Budget Office."

Republicans maintain that significant changes to Medicare and Medicaid, which together account for about one-fifth of federal spending, are necessary to reduce deficit spending. The House-passed fiscal 2012 budget proposal (H Con Res 34) would transform Medicare from a program that guarantees a range of specified health benefits to one in which seniors receive an annual stipend to purchase private insurance beginning in 2022—something Senate Democrats have flatly rejected.

Democrats said their bill would force drug companies to shoulder the burden of the cuts, rather than seniors and the disabled.

"Rather than dismantling Medicare and Medicaid, we can reduce the deficit by over $112 billion by eliminating a taxpayer-funded windfall for drug companies," said bill sponsor Sen. John D. Rockefeller IV, D-W.Va.

President Obama's bipartisan fiscal commission recommended the rebate idea as a way to pay for blocking scheduled cuts in payment rates to physicians who treat Medicare patients. Rep. Pete Stark, D-Calif., said the Democrats' bill could be used in the same way to strengthen Medicare.

"The savings from this legislation could pay for a multi-year 'doc fix'— something we tried to do in a comprehensive way but have had to address yearly so Medicare's payments to doctors aren't slashed," said Stark, ranking member on the Ways and Means Subcommittee on Health.

Democrats said the 2003 Medicare prescription drug program law (PL 108-173) lifted the requirement that manufacturers pay rebates on drugs used by so-called "dual eligibles," resulting in increased drug costs for the program.

Under the bill, drug manufacturers would be required to pay the difference between the average rebate they pay to private drug plans in Part D, and 23.1 percent of the drug's average manufacturer price, starting in 2013. If the prices increase more quickly than the rate of inflation, manufacturers would pay additional rebates.

Also, five Democratic senators wrote a letter to Minority Leader Mitch McConnell, R-Ky., asking him to abandon proposals that would transform Medicare or cut benefits, and instead look for cuts along the lines of those included in the health care overhaul law.

The House budget resolution "would bring unnecessary suffering to American seniors, while missing the salient fact that health care costs are exploding for everyone, no matter who the insurer is," said the letter, signed by Sheldon Whitehouse of Rhode Island, Tom Harkin of Iowa, Patty Murray of Washington, Charles E. Schumer of New York, and Debbie Stabenow of Michigan.

"The House-passed Ryan budget also overlooks the fact that the Affordable Care Act makes significant changes to our health care system to control health care costs, changes that are already underway. To protect Medicare, we should build on these kinds of delivery system reforms, rather than cut seniors' benefits," the senators wrote.

By Jane Norman, CQ HealthBeat Associate Editor

June 16, 2011 -- A national prevention strategy that was authorized in the health care law and that Health and Human Services (HHS) officials say sets a direction and priorities for better health has been unveiled.

With many U.S. deaths related to chronic disease and rampant obesity among children and adults, federal officials say it's urgent to act in a comprehensive way. Heart disease, cancer, chronic lower respiratory disease, strokes and unintentional injuries are responsible for 66 percent of all deaths.

HHS Secretary Kathleen Sebelius said at a press conference that the strategy builds on improvements in prevention made in the law (PL 111-148, PL 111-152) and will apply across federal agencies. "They are all committed to working together," she said.

The Agriculture Department, for example, will work on healthier school lunches. More walkable neighborhoods will be a priority for the Transportation Department. And cleaner air is the responsibility of the EPA, she said.

"The administration is laying the foundation to help transform our health care system from a system focused on treating the sick to one that's focused on keeping every American healthy," said Melody Barnes, director of the Domestic Policy Council at the White House.

Surgeon General Regina Benjamin said there's no funding directly linked to the new strategy, but rather it lays out what the federal government and communities should be doing. Some of the suggestions are already under way, she said.

The strategy was drafted by members of the National Prevention Council, which is made up of representatives from 17 federal agencies. Council members consulted with an advisory body and members of the public.

The strategy says that:

• Prevention begins in communities and homes, not just in the doctor's office.
• Preventive care such as immunizations and cancer screenings should be available, as it will mean better health and lower costs.
• Educating people about prevention and health in a way that's easy for them to understand will help them make better choices.
• It's important to try and eliminate disparities in health.

Specifically, the strategy focuses on an end to tobacco use, preventing drug and alcohol abuse, healthy eating, physical activity, avoiding injuries and violence, reproductive and sexual health and mental and emotional well-being.

Jeff Levi, chairman of the advisory group, said it's the first time government agencies have come together in such a prevention effort. The challenge will be for the government to keep its focus that prevention is part of everyone's core mission, he said.

"We have the leadership, and that's reflected here," said Levi. "Now it needs to become the culture of each of these agencies."