By Jane Norman, CQ HealthBeat Associate Editor

May 9, 2012 -- Primary care physicians will receive reimbursements for Medicaid equal to what Medicare pays in a two-year "fix" mandated by the health care law, Health and Human Services officials said last week.

The increase will apply to Medicaid services provided in calendar years 2013 and 2014, and will go to family practice physicians, pediatricians and other practitioners of family medicine, as well as some primary care sub-specialties such as neonatologists.

This could be a significant increase for many doctors. States set Medicaid provider reimbursement rates, and primary care practitioners currently are paid 66 percent of the Medicare rate on average, though the percentages vary from state to state, Centers for Medicare and Medicaid Services (CMS) officials told reporters in a conference call.

Cindy Mann, deputy administrator at CMS, said that the $11 billion, two-year boost in reimbursements will be entirely paid for by the federal government rather than the state-federal sharing that generally is the practice for Medicaid. One of the key goals of the health care law (PL 111-148, PL 111-152) is to emphasize primary care, and the increased payments are an example of that, even if they will only last two years, Mann said.

The reimbursement increase was included in a proposed rule recently published by CMS.

Roland Goertz, board chairman of the American Academy of Family Physicians, who was on the call with Mann, said that family doctors know that people who don't have access to care put off health needs, and then a simple problem can become complicated. Two-thirds of the members of his academy continue to accept Medicaid patients even though the payment rates are low, he said. "We can't continue to depend on the good will of physicians who continue to provide care for less than the cost of that care," Goertz said.

Asked if doctors will seek to extend the temporary pay increase just as they have tried to avert scheduled reimbursement cutbacks under the Sustainable Growth Rate, Mann said that officials will be reviewing the results of the two-year change and whether the pay boost has provided a clear improvement in health care.

Said Goertz: "We're ready to lobby for what's right for improving the system."

Overall, the pay increase is projected to cost the government $5.7 billion in calendar year 2013 and $5.9 billion in 2014, CMS says. Unless Congress provides additional money, the higher rates for primary care providers would end after 2014. Individual states could, however, choose to maintain the higher reimbursements.

Sen. Orrin G. Hatch of Utah, ranking Republican on the Senate Finance Committee, criticized the rule in a statement last week.

"It's nonsensical to think a temporary, two-year bump in pay will actually attract and retain doctors to the Medicaid program unless the White House thinks Congress will keep extending these higher payment rates in perpetuity," Hatch said. "Every year, Congress has to stop Medicare physician payment rate cuts and this proposed regulation will now create the same dilemma under the Medicaid program. When that rate drops back down after 2014, what will happen to the health care Medicaid beneficiaries receive? Or is this just another budget gimmick to hide the true cost of the President's $2.6 trillion health law?"

As the nation moves toward full implementation of the health care law in 2014 and the expansion of eligibility for Medicaid to all adults under 133 percent of the federal poverty level, "it is critical that a sufficient number of primary care physicians participate in the program," the rule says.

By Jane Norman, CQ HealthBeat Associate Editor

May 8, 2012 -- A plan to improve dental care for American Indian mothers, children, and diabetics living on reservations in South Dakota is among 26 innovation projects that the Department of Health and Human Services (HHS) recently announced it will fund.

Delta Dental Plan will receive $3.4 million to train two dozen dental hygienists and community health workers to provide preventive care to patients on the reservations and coordinate their care, according to the HHS grant announcement. The plan covers more than 30,000 "isolated, low-income and underserved" Medicaid beneficiaries and American Indians throughout the state and is anticipated to save $6 million over three years, HHS officials say.

Despite pressing needs among poor and elderly Americans, the dental community in the past has resisted efforts to expand preventive dental care into the hands of hygienists or therapists because they say the training for such mid-level professionals is inadequate. But a similar program using dental therapists has been launched in Alaska to serve native Alaskans—another low-income population with major needs for preventive dental care.

The innovation projects, funded under the health care overhaul (PL 111-148, PL 111-152), are regarded as a core piece of the push to make the nation's medical system deliver higher quality care at a lower cost. Overall, during the next three years the grants are predicted to reduce health care spending by $254 million, a tiny amount in comparison to spending overall, but a start down the road to a better system in the eyes of the overhaul law's supporters.

"And we're just getting started. We'll announce another round of innovation awards in June," HHS Secretary Kathleen Sebelius said in a blog post .

The awards also have a political tinge in this campaign year as they are being doled out under the umbrella of the Obama administration's "We Can't Wait" initiative, named for President Obama's comment in October 2011 that "we can't wait for an increasingly dysfunctional Congress to do its job."

Sebelius said the 26 grants totaling $122.6 million, will allow the best ideas in health care to be tested to see how they work out. Those selected also were picked because they showed how the health care workforce could be expanded, said Sebelius.

Other projects include:

• A grant of $4.5 million to the Center for Health Care Services in San Antonio, Texas where 24 health care workers will be trained to provide behavioral care integrated with health care for 250 homeless adults with severe mental illness. Most are Medicaid beneficiaries.
• A grant of $9.7 million to Duke University to work with the University of Michigan National Center for Geospatial Medicine and organizations and counties in North Carolina and West Virginia to reduce deaths and disabilities from type 2 diabetes. Data will be used to target patients and neighborhoods by risk and communities that need interventions. Local teams of health care workers will provide home care.
• A grant of more than $10 million to Emory University in Atlanta, which will partner with a contractor and medical centers to hire 40 health care professionals who will be sent to rural hospitals in northern Georgia. Telehealth services will be used to link them with hospitals and doctors in Atlanta and reduce the need to transfer Medicare and Medicaid beneficiaries to city hospitals.

By Jane Norman, CQ HealthBeat Associate Editor

May 9, 2012 -- Everyone is still cautious, but officials from the Centers for Medicare and Medicaid Services and the Government Accountability Office said at a congressional hearing last week that implementation of the first phase of a controversial competitive bidding program for durable medical equipment in Medicare has been fairly smooth.

There are still some very unhappy medical equipment suppliers. Some are pushing Congress to change the way bidding is conducted. However Rep. Wally Herger, chairman of the health subcommittee of Ways and Means, said at the conclusion of the hearing that he would want to see Congressional Budget Office (CBO) projections before proceeding any further with an alternative. A major hurdle for opponents of the bidding program is that it saves money; it is tough to kill a cost-saver at a time of deficit reduction.

Herger, of California, also pointed out that lower prices from competitive bidding are benefiting taxpayers and Medicare enrollees. In the first round that began on Jan. 1, 2011 in nine major metropolitan areas, Medicare paid $1,395 for an oxygen concentrator and the beneficiary paid $279 on average in co-insurance, Herger said. Under the old fee schedule, the concentrator would have cost $2,080 and the beneficiary would have paid $416 on average, he said.

Rep. Mike Thompson, D-Calif., said that he has been "pleasantly surprised" by the results of the first round of bidding and "unlike the first try, we haven't heard an outcry from suppliers around the country facing difficulties in filing applications." Nevertheless both he and Herger said they're keeping a cautious eye on the program.

Herger said that while he strongly believes in competition in the private market, "the process by which the competition is conducted must be fair."

GOP aides said no specific legislation is being contemplated right now.

Bidding for durable medical equipment is, historically, a contentious subject in Medicare. Spending for items such as power wheelchairs, walkers, hospital beds and other equipment are significant—$14.3 billion in 2010, including beneficiary cost-sharing. Except for the nine metro areas that have competitive bidding, Medicare pays for equipment under a fee schedule for covered items. The agency regards this as inadequate, outdated and vulnerable to abuse.

So Congress set up a competitive bidding program in 2003 (PL 108-173) modeled after demonstration projects. But outrage among suppliers drove lawmakers to halt it in 2008. The program was revamped and then delayed until 2011. In the first round of the new bidding program, CMS awarded 1,217 contracts to 356 suppliers, director of the chronic care policy group for Medicare, Laurence D. Wilson said.

Wilson said that the program in just nine markets came up with $202 million in savings in its first year, a figure that also has been touted by other CMS officials and one that makes it tough for lawmakers to try for repeal or change. Competitive bidding is now in place in Riverside, San Bernardino, and Ontario in California; Miami, Fort Lauderdale, Pompano Beach, Orlando and Kissimmee in Florida; Kansas City in Missouri and Kansas; Charlotte, Gastonia, and Concord in North and South Carolina; Cleveland, Elyria, Mentor in Ohio, Cincinnati and Middletown in Ohio; Kentucky, and Indiana; Pittsburgh; and Dallas-Fort Worth and Arlington in Texas.

Next year bidding will be expanded to 91 metro areas, and will include more than half of all Medicare beneficiaries.

Kathleen M. King, director of health care for the GAO, told the subcommittee that the investigating agency looked at claims data for the first six months of 2011 because it was the most complete. GAO found that CMS had terminated few supplier contracts and that not many contractors had voluntarily canceled them. In addition, the number of calls about supplies from beneficiaries to a Medicare hotline declined. A CMS survey of beneficiaries found that 90 percent reported their equipment service as being "good" or "very good."

Nonetheless, with just one year of experience it is too soon to determine the full effect of the competitive bidding program, King said. Although in general, the first round was "successfully implemented," that was based on limited data, she said. In addition, the number of non-contract suppliers who were grandfathered in to the bidding program will continue to decrease over time as their rental contracts run out. It is not clear if they will try the bidding process. Therefore, "more experience is needed" before drawing any definite conclusions, King said.

Some suppliers want it gone. H. Wayne Sale, chairman of the National Association of Independent Medical Equipment Suppliers, said the current bidding program should be repealed and replaced with a "market pricing program" created by auction experts. He predicted that in the second round of bidding, equipment suppliers who either lose out on bids or cannot get business despite winning bids will be shut out of the program, their businesses will fail and jobs will be lost. Joel Marx, chairman of the American Association for Homecare, said the industry does not oppose competitive bidding; it just wants a different system used.

Alfred Chiplin, a senior policy lawyer for the Center for Medicare Advocacy, a non-profit, said that the center was pleased to hear about the savings projected by Medicare. However he was still cautious about whether beneficiaries will have the access they need to supplies under the new competitive bidding program. Chiplin said the center believes the program should move forward to the additional markets but much more education is needed for beneficiaries about what the program entails and where, geographically, it is being put in place.

By Nellie Bristol, CQ HealthBeat Associate Editor

May 9, 2012 -- Seventy percent of small businesses with fewer than 25 employees are eligible for tax credits to help them provide insurance for their workers, according to a study released last week by Families USA and the Small Business Majority.

In total, more than 3.2 million small businesses would qualify in tax year 2011, the report says. More than 1.3 million businesses are eligible for the maximum credit of 35 percent of premium costs, it adds. The report estimates that the credit would affect 19.3 million Americans employed by small companies and that the total value of the tax credits in 2011 is more than $15.4 billion.

The report, conducted by the Lewin Group, breaks down eligibility by state. The groups released it in an effort to promote the benefit. Established as part of the health care overhaul (PL 111-148, PL 111-152), the credit was expected to help 360,000 of the estimated 6 million small-business employers in 2011.

Critics of the program argue that its rules are too cumbersome and restrictive. In response, President Obama's fiscal year 2013 budget proposal would reduce the requirements to qualify for the credit and would expand the program. Businesses with up to 20 workers would be eligible for a full tax credit instead of just those with up to 10 workers under current law. Also, employers with up to 50 workers would be eligible for partial credit, instead of the 25 workers required by current rules.

In a recent press call, John Arensmeyer, Founder and CEO of Small Business Majority, an advocacy group, said 57 percent of businesses in a recent survey did not know about the program. Families USA Executive Director Ron Pollack said he expects participation to increase as more employers become aware of the benefit.

Two small-business owners participated on the call: Ron Nelsen of Las Vegas and ReShonda Young of Waterloo, Iowa. Nelson said he has offered insurance to his employees for years but rising premium costs forced him to cut back on his contribution. He filed for the small-business tax credit and claimed $2,235 in 2010 and $2,722 in 2011.

"This is the first good news surrounding health insurance coverage that I've had in a long, long time," he said. "With this tax credit, I'm not even thinking about having to tell my guys they're on their own when it comes to health insurance, and that's huge."

Young said her business qualified to receive 10 percent of its insurance costs through the credit, which allows her to attract and retain employees.

By Nellie Bristol, CQ HealthBeat Associate Editor

May 11, 2012 -- Variations in hospital readmission rates for heart failure were linked more to availability of care and socioeconomic factors than to severity of illness or hospital performance, researchers said at an American Heart Association conference in Atlanta.

Higher readmission rates occurred in communities with more physicians and hospital beds and separately, in areas with high poverty and large African American populations. Older people also were readmitted more frequently, according to the findings.

Readmission rates in the study ranged from 10 percent to 32 percent. What researchers dubbed "supply side factors" including the availability of doctors and beds, were the strongest predictors of regional variations in the rates, accounting for 17 percent. Poverty and racial makeup were tied to 9 percent of the variation. About 5 percent was linked to hospital performance and an additional 4 percent to the severity of the patient's illness.

Researchers looked at national billing records of more than 3,000 hospitals in 2008 and 2009 for more than 1 million Medicare patients with heart failure. Fifty-five percent of patients were female and 11 percent were African American. The average age was 81. The National Heart, Lung and Blood Institute funded the study.

Lead author Karen Joynt of the Harvard Medical School and Harvard School of Public Health said researchers don't fully understand why the factors studied affected readmissions the way they did. But she said the patterns were clear and warrant further review. She said the findings should inform Centers for Medicare and Medicaid Services (CMS) efforts to develop a financing mechanism for discouraging readmissions. Under current proposals, planned for implementation later this year, hospitals would be penalized for readmissions of Medicare patients within 30 days of an initial discharge.

If the policy is applied uniformly across hospitals, Joynt said, "CMS is likely going to be penalizing hospitals that serve a high proportion of poor and minority patients." Efforts to reduce readmissions need to take into account the neighborhoods in which hospitals are operating and engage caregivers other than just hospitals, she added.

"Our point in doing this is really to sort of say, 'look, community matters and community resources matter, and community poverty matters,'" Joynt said. "If we really want to be able to improve readmissions without widening disparities, maybe our policies need to think about ways to not only point out where hospitals are struggling, but also figure out what we can do to help them perform better."

Making changes to reduce readmissions will be easier for hospitals with more resources and better community connections, she added. "This is not ultimately a hospital problem. It's a health systems problem."

By John Reichard, CQ HealthBeat Editor

May 8, 2012 -- The market power of hospitals is a key factor driving increases in health insurance premiums, according to new research from the nonpartisan Center for Studying Health System Change. Policymakers may want to consider rate-setting as a tool to shrink some of those increases, the center says.

Based on site visits to 12 markets, researchers said that large insurers are reluctant to use their own market muscle to keep hospital rates down. Insurers worry they'll lose popular hospital systems from their provider networks. That in turn could be a turnoff for the employees of companies that are the insurer's customers, the researchers said.

Insurers are willing to accept relatively high hospital charges, possibly because they can pass along the higher costs to employers and their workers, according to the study.

Robert Berenson, along with other researchers affiliated with the center, said in the study that "although dominant health plans might be able to restrain prices and achieve other contracting advantages, they also must be sensitive to their employer customers' preferences for stable provider networks. Therefore, they are willing to tolerate large price increases from providers—as long as these insurers' competitors, other health plans, pay higher rates." Berenson also is a fellow at the Urban Institute and vice chairman of the Medicare Payment Advisory Commission (MedPAC).

The study was funded by the Robert Wood Johnson Foundation and the National Institute for Health Care Reform and appears in the May issue of the health policy journal Health Affairs.

"While hospital consolidation is often cited as the reason for growing provider clout, another important factor is employer reluctance to limit workers' choice of providers by excluding them from plan networks," said a center summary of the study. "According to study respondents, without a credible threat of excluding a provider, insurers lack a critical bargaining chip."

Market-oriented approaches to slow rising premiums are generally based on benefit designs that make consumers aware of costs, giving them an incentive to pick low-cost options, the study noted. "Alternatively, in the face of rising premiums, employers unwilling to adopt more restrictive benefit designs might support more direct regulation of provider rates," they added.

In a second study , researchers from the center noted that in the 1970s and 1980s, "many states considered multi-payer hospital rate setting, and eight eventually enacted laws authorizing public agencies to regulate hospital rates." Maryland and West Virginia continue to regulate hospital rates, researchers said.

"Studies indicate that rate setting slowed aggregate total hospital spending in New Jersey, New York, Massachusetts, Maryland, New Jersey and Washington. One exception was Connecticut, which reportedly lacked authority to enforce payer and hospital compliance with approved rates," the center said.

The study led by Anna Sommers of the center said that in 2000, hospital prices paid by private insurers on average exceeded hospitals' costs by 16 percent. By 2009, that gap had grown to 34 percent, the analysis said.

Hospitals say they are underpaid by Medicare and Medicaid. MedPAC data indicate that at least in Medicare, their payments do not fall short of their costs to the same degree that private insurer payments exceed them.

• Rate-setting study