By Jane Norman, CQ HealthBeat Associate Editor

March 25, 2011 -- Confronted with selling a health care law that in its first year hasn't yet won over the hearts of the public, Democrats and the Obama administration are targeting young adults to spread the word about the benefits of the law for them.

The administration is also turning to the place where young adults get their information—social networks. There's a Facebook page created by the Department of Health and Human Services devoted to both young adults and their parents, answering questions about how the law applies to them.

It includes a video featuring Kalpen Modi of the White House Office of Public Engagement, who goes by the name Kal Pen as an actor in the "Harold and Kumar" movies. Modi gives step-by-step directions in the video on how to obtain insurance coverage on a parental plan.

Building youth support is also key as President Obama prepares for his 2012 re-election run and looks to retain the backing he found in 2008 from that demographic—and expand it to include those who were too young to vote in that election but have since reached their 18th birthdays.

Health and Human Services Secretary Kathleen Sebelius said that 1.2 million young adults graduating from college this year will be able to stay on their parents' health insurance policies. Under the law (PL 111-148, PL 111-152), young adults under the age of 26 are allowed to remain on their families' health insurance plan.

That's a switch from years past when laws varied from state to state but many young adults lost coverage at 19 or as soon as they graduated from school and were no longer students.

This year, many young adults "would have been in the open market absent a parents' plan," Sebelius said on a conference call with three groups that advocate for young adults—the Young Invincibles, Campus Progress and student chapters of the Public Interest Research Group.

If the law were repealed as Republicans advocate, the new benefits for young adults would vanish as well, Sebelius said.

"One of the groups that benefits the most from the law is young adults," she said. Americans in their 20s are almost twice as likely to go without health insurance as older adults, she said.

That message was echoed by House Democrats.

"Health reform is about making the health care system work for American families, not insurance companies," said Rep. Sander M. Levin of Michigan, ranking Democrat on the Ways and Means Committee, in a statement. "This concept seems lost on Republicans, whose repeal efforts would reverse the age 26 provision, which is already making life easier for young adults and their families."

Democrats face a problem in that young people haven't had to purchase health insurance in the past and now will be faced with a penalty if they don't, and some young adults may not like that idea. Republicans have not yet shown that they're targeting young people for opposition to the individual mandate, but the requirement is unpopular across the board in polls.

Another problem for Democrats is that insurers say that "rating band restrictions" under the law limit how much more insurers can charge the elderly than they charge the young and that will drive up premium charges for young adults. On the other hand, Americans under 30 will be able to buy lower cost plans that cover only the catastrophic costs of illness.

ACO Rules
Also on the call, Sebelius fielded a question about when regulations for accountable care organizations (ACOs) might be coming out. ACOs were created in the health care law to encourage quality and cost savings in Medicare and are organizations made up of different types of providers, typically doctors and hospitals.

The regulations likely will emerge "in the very near future, in the next couple of weeks," Sebelius said.

By John Reichard, CQ HealthBeat Editor

March 25, 2011 -- Congress will soon be looking for a way to address the problems associated with a 29.5 percent payment cut that the Medicare physician reimbursement formula will impose next year on doctors.

The federal Medicare Payment Advisory Commission (MedPAC) is gearing up to help, and if things go according to plan, the panel will recommend to Congress in October how best to revamp the sustainable growth rate formula, which doctors know—and malign—as "the SGR."

Assuming MedPAC can reach a consensus—something it could not do in 2007, its last serious attempt—it could guide Congress on how to reshape the formula, which pays physicians to deliver care to millions of the nation's most vulnerable people.

Insights into what MedPAC might advise can be gleaned from the minutes of the panel's most recent deliberations and a 2007 report to Congress in which the commission outlined alternatives. Many MedPAC commissioners seem determined to make physicians individually accountable for the way they practice medicine. Indeed, doctors may be on the hook financially not only for the quality of treatment they deliver and the outcome, but also for how they husband resources.

Now, doctors actually can get paid more for being sloppy or inefficient. Medicare's "fee for service" system boosts a provider's income with each new appointment, test, or procedure ordered.

Look for recommendations to foster greater teamwork among doctors and other caregivers, perhaps by pushing them to form the "accountable care organizations" the Obama administration is about to propose for Medicare as required by the health care law (PL 111-148, PL 111-152).

Such changes couldn't happen overnight, given the $300 billion to $400 billion it would cost over a decade to replace the current formula. But with the recent pattern of "doc fixes"—short-term adjustments to the SGR—becoming ever more expensive, Congress may be willing to pay for a complete overhaul within a few years.

Given how much it would cost to redo the formula, MedPAC Chairman Glenn Hackbarth is determined to extract changes to give taxpayers better value for each Medicare dollar. Of course, Congress wants a menu of possible Medicare cuts elsewhere to offset the enormous expense of switching to a system in which doctor payments rise modestly based on a measure of inflation for medical costs. Hackbarth already has signaled that implementing any MedPAC recommendations would cost big bucks.

Establishing a sustainable increase in Medicare payments to doctors seemed liked a good idea when Congress adopted it in the 1997 balanced budget law (PL 105-33). The SGR set an annual spending target based on the growth of the overall U.S. economy. Spending that exceeds the target must be recouped in payment cuts the following year.

In practice, Medicare spending busts the target every year and Congress passes a payment patch—the doc fix—to prevent the resulting cuts. But the formula never forgets. Any excess not recouped stays on the books and increases every year that spending exceeds the target. Until recently, the cost of temporarily averting cuts was not offset and only added to the debt that must be recouped in cuts. The result: escalating spending above the target that forces bigger and bigger cuts and increasingly costly patches.

Julius Hobson, a former American Medical Association (AMA) lobbyist now with the law firm Polsinelli Shugart, notes that as a result, the 10-year cost of replacing the SGR with modestly growing annual rates has escalated from $85 billion a decade ago to some $350 billion.

Hackbarth has shrugged off AMA warnings for years that the SGR would lead doctors to bolt Medicare. The pay may not be great, but doctors have stuck with Medicare because it pays claims efficiently, which helps their cash flow. Hackbarth warned the Ways and Means Health Subcommittee on March 15 that doctors may soon start to drop out, leaving seniors without care.

A nearly 30 percent cut in reimbursement rates probably would lead to significant defections. But the current system of short-term patches already interrupts claim payments and gives doctors cash-flow headaches. Many doctors close to retirement are sick of Medicare's administrative hassles, such as adopting health information technology and reporting data about quality of care. The cycle of shorter payment patches could be the last straw.

House Republicans are consulting with doctor groups on how best to replace the SGR. They're aiming to pass legislation later this year that uses Medicare cuts in the new health law to cover the costs. But that's a non-starter. Federation of American Hospitals President Chip Kahn says that while he wants to fix the SGR, hospitals and other providers shouldn't be "taxed" to cover the costs.

A grand bargain on the federal budget deficit could bring tax-code changes that would raise enough money to replace the SGR with the more efficient scheme that many on MedPAC envision, some analysts say. But there's not much chance of that until after the 2012 elections.

For now, look for Congress to whip out its charge card again at the end of the year and pay another $20 billion to $25 billion for a 12- to15-month payment patch while the SGR debt keeps growing.

By Jane Norman, CQ HealthBeat Associate Editor

March 24, 2011 -- Health and Human Services officials working to make a long-term care insurance program viable have a struggle ahead, but it is possible to design some changes to help the program survive, members of an Urban Institute panel said at a discussion.

The potential fixes may include some tough choices, such as making people pay into the program for longer than the current five years before they are eligible to file for benefits. Other options include tightening rules on who is eligible or tying premium increases to inflation.

An intense marketing campaign to sell employers and workers on the usefulness of long-term care insurance will be needed, panelists said. Even so, predictions are that just five to six percent of workers may take part.

The Community Living Assistance Services and Supports (CLASS) program was included as part of the health care law (PL 11-148, PL 111-152). It is a voluntary insurance program, based on premiums and designed to forgo taxpayer support. People who become disabled could draw a cash benefit averaging $50 a day for as long as they qualify.

Employers would choose whether to offer the program, and if they do, workers would have to opt out if they do not want to participate.

HHS officials have said the program is not workable in its current form and they are moving to change its structure, under authority the law gives HHS Secretary Kathleen Sebelius. Kathy Greenlee, assistant HHS secretary for aging, recently told a congressional panel that the program will not launch unless it is financially sustainable (See related story).

A main problem is that nothing like CLASS exists in the private long-term care market, so there is no direct experience that can be used to predict outcomes, said Brenda Spillman, a senior fellow in the Urban Institute's Health Policy Center.

Sorting Out the Details

The program was built "on the current political environment, not on sound technical advice in advance of drafting," she said. And it was based on the faulty assumption that employers and workers will be very interested in signing up, she added.

"I think it can and will happen in some form because they've got some pretty good heads working on it," Spillman said. But she said there are fundamental challenges, with the biggest one being that anyone can join the program regardless of previous health problems, which means the risk pool may be weighted toward the sick. Another is that it is a voluntary purchase, which means a "nightmare, literally," in figuring out how to structure a premium that is enticing enough to bring in participants and yet can sustain the program over the 75 years required in the law, she said.

Howard Gleckman, a resident fellow at the Urban Institute, said it would help to come up with financial incentives to get employers to take part and penalties for workers who delay enrollment. While in an ideal world the program would work best with a mandate that everyone take part, like the individual mandate for health insurance, "that's not going to happen," he said.

Any changes, though, will be closely scrutinized by advocates for people with disabilities who have championed the program. Marty Ford, who represents both The Arc and United Cerebral Palsy on issues such as long-term services, said it should be emphasized as the program is introduced to the public that it would assist people of every age who become disabled, not just the elderly. "It isn't long-term care, and it isn't nursing home care," she said. And marketing will be "very, very important," Ford said.

She also warned that by tightening eligibility standards, "you have to be very careful to not inadvertently eliminate people you want in the risk pool," such as those who may pay lower premiums because they have low incomes but also are healthy.

Allen Schmitz, a Wisconsin actuary who helped develop a model used by the American Academy of Actuaries to analyze the program, said that adverse selection in the risk pool—people with the greatest need for insurance buying it while others stay out—must be controlled for the program to succeed. "The better you can control adverse selection, the more marketable and affordable the premium will be," he said.

By Rebecca Adams, CQ HealthBeat Associate Editor

March 24, 2011 -- The $5 billion early retiree subsidy program created by the health overhaul law has been swamped with so many requests that the program may be out of money by 2012, far earlier than its expected 2014 end date, according to a new analysis by the House Energy and Commerce Republican staff.

The health care law (PL 111-48, PL 111-52) provided the money to subsidize employers' health insurance costs for retirees who are not old enough to qualify for Medicare. The fund pays employers 80 percent of claims that are more than $15,000 per retiree but less than $90,000. The program was created as a way to help maintain coverage for people until insurance is available through the exchange markets that will open in 2014.

The report quoted Richard Popper, the director of the Office of Insurance Programs for the Center for Consumer Information and Insurance Oversight, as telling aides at the Subcommittee on Oversight and Investigations this month that the program would exhaust its funds in 2012. Department of Health and Human Services (HHS) officials do not dispute that estimate.

At least 5,452 applications had been approved by Dec. 31, 2010, to participate in the program, according to a separate March 2 report by HHS.

By the end of 2010, the program had paid $535 million in reimbursements to 253 approved employers. The largest share of the reimbursements went to state government plans. The payments made to individual plans ranged from $285.13 to $108.6 million.

By the Republican committee staff's count, if the remaining 5,199 approved applicants get as much money as the 253 groups who received subsidies in 2010, then the money will be gone as early as this year.

More than half of the money spent in 2010 went to five groups—the California Public Employees' Retirement System, which got the biggest chunk nearly $58 million; the state of New Jersey Treasury Department, Pension Accounting Services; the Georgia Department of Community Health, State Health Benefit Plan; the commonwealth of Kentucky; and the Employees Retirement System of Texas.

An HHS spokeswoman said that program officials will stop taking applications when they see that they will not have any more money to distribute. She noted that President Obama's budget projects that there will be about $24 million of the $5 billion left for the 2013 fiscal year, which begins on Oct. 1, 2012 and ends on Sept. 30, 2013.

She said that the program is serving an important need.

"Before the Affordable Care Act became law, employers were dropping coverage for early retirees," said HHS spokeswoman Jessica Santillo. "The Early Retiree Reinsurance Program gives critical assistance to businesses so they may continue to provide coverage to retirees who aren't eligible for Medicare. Cities and states facing tight budgets and businesses that have seen their health care costs skyrocket welcome this relief."

By Jane Norman, CQ HealthBeat Associate Editor

March 22, 2011 -- While it's not been the most remarked-upon feature of the health care law, the federal government injected nearly $1 billion into local economies in 2011 via rebates for Medicare prescription drug benefits. Californians received $87 million and Floridians received $64 million in the payments authorized by the health care law.

Studies released by the Department of Health and Human Services also show that the $250 checks were cashed quickly after they were received. On average, checks were cashed within 15 days of when they were issued, HHS said. Nearly half of Americans who received a check cashed it within 10 days.

Under the overhaul law (PL 111-148, PL 111-152), seniors and persons with disabilities covered under Medicare Part D prescription drug plans were eligible for the checks if they had drug expenses that put them in the donut hole for 2010 - meaning that their drug expenses exceeded their coverage limits but didn't hit the catastrophic level. The $250 checks were automatically mailed to beneficiaries, and were tax-free. Nearly four million people received checks.

The most people receiving checks were in California, followed by Florida, New York, Pennsylvania and Texas. The Centers for Medicare and Medicaid Services says that 58 percent were women and 42 percent men. Some people may yet receive checks because claims from late last year are still being processed.

In 2011, there won't be any rebate checks but there is a new 50-percent discount on covered brand name drugs that people buy while in the donut hole. CMS says 48,000 people already have saved $38 million through this year's initiative.

By Rebecca Adams, CQ HealthBeat Associate Editor

March 25, 2011 -- If the health care law's requirement for most individuals to buy insurance is struck down by the U.S. Supreme Court, other viable alternatives exist, the Government Accountability Office (GAO) says in a new report. But all of them involve tradeoffs or challenges.

The report outlines the pros and cons of each approach, but it does not estimate how much more or less effective each would be, when compared to the individual mandate.

Some experts have said that if the Supreme Court finds that the individual mandate to buy insurance is not constitutional, other alternatives could accomplish the same goal of expanding coverage.

The GAO report, which was requested by Democratic Sen. Ben Nelson of Nebraska, evaluated nine different approaches that also could encourage Americans to buy insurance.

In order for the new system created by the health care law to succeed, it is important that a large number of healthy people buy insurance so that the costs of coverage can be spread across the population. The law adds a number of new regulations for insurance so that people who have been sick or have pre-existing conditions can gain coverage. But if those patients are added to the coverage pool, premiums for everyone else in the program will go up unless more healthy people also join and subsidize the costs of providing care for the ill.

The American Cancer Society Cancer Action Network (ACS CAN), which supports the individual mandate, said in a statement that the GAO needs to do more work to determine the effectiveness of each approach in expanding coverage.

The mandate "has proven to be one of the more unpopular provisions in an imperfect bill, but by insuring that nearly all Americans have coverage, the provision will enable consumer out-of-pocket costs to stay within reasonable limits and ensure that the law's critical patient protections can remain in effect," said the statement. "Although the GAO report discusses alternatives to the individual responsibility provision, it provides little analysis showing that any of them would lead to equivalent, economically sustainable insurance coverage for the 32 million additional Americans who will be covered under the Affordable Care Act. ... Because of the weakness of the GAO findings, ACS CAN recommends that the GAO undertake additional analysis to assess whether any of these alternatives would result in quality, affordable coverage for as many Americans as would the individual responsibility provision."

The nine ideas that the report analyzed were proposals to:

• Modify open enrollment periods and impose penalties for people who enroll late.
• Expand employers' roles in auto-enrolling workers.
• Conduct a public education and outreach campaign.
• Provide broad access for personalized help with health coverage enrollment.
• Impose a tax for all taxpayers to finance uncompensated care.
• Allow greater variation in premium rates based on the age of enrollees. The health care law limits the difference in price that can be charged for people of different ages.
• Condition the receipt of certain government services upon proof of insurance.
• Use insurance brokers and agents differently so that they be paid a flat fee to help people enroll in coverage.
• Require or encourage credit rating agencies to use insurance status as a factor in determining credit ratings.