By CQ Staff

May 24, 2007 – Senate Finance Committee Chairman Max Baucus, D-Mont., said Thursday his panel is aiming for a June 7 markup of legislation that would reauthorize the State Children's Health Insurance Program (SCHIP).

"It will have 'payfors,' " Baucus said, but declined to elaborate on areas where he is looking for financing. Democrats have said that reducing payments to Medicare Advantage plans, which are private plans offering coverage within Medicare, are a likely target.

But other health care providers, such as hospitals, also may see their Medicare reimbursements reduced to finance a SCHIP expansion. Some lawmakers as well as health, business and consumer groups also have advocated an increase in the federal tobacco tax to finance the expansion.

Baucus, who has made SCHIP reauthorization the panel's top policy priority, has said that he supports spending an additional $50 billion on the program, which expires Sept. 30 and is up for reauthorization this year.

The fiscal 2008 budget resolution (S Con Res 21) includes a "deficit neutral" reserve fund that allows for up to $50 billion in new spending for SCHIP as long as the spending is fully offset.

By John Reichard, CQ HealthBeat Editor

May 24, 2007 – Sen. Hillary Rodham Clinton announced a health cost control plan Thursday she said would trim at least $120 billion a year from national health care spending. A key feature of the seven-point plan calls for a "National Prevention Initiative" that would require insurers doing business with the federal government to cover "high priority" preventive services as well as wellness programs to maintain health, the New York Democrat said.

"Building a national consensus around these cost savings is the first crucial step to cover all Americans with quality, affordable health care," Clinton said in a speech to George Washington University medical students outlining the proposal.

The Thursday address described the first part of what she said would be a three-part approach to tackling the nation's health care ills if she is elected president. The other two components of the approach are "improving quality for everyone" and "insuring everyone," she said.

Under her cost control proposal, insurers would have to follow the recommendations of the U.S. Preventive Services Task Force on what preventive care to cover. The federal advisory panel consists of academic researchers who sift through medical literature to determine which preventive services actually are effective in warding off disease and issue reports on their findings.

Better preventive care could reduce the incidence of obesity, diabetes, and cancer, Clinton said in her speech. "About 30 percent of the rise in health care spending is linked to the doubling of obesity among adults over the past 20 years," she said. If "our obesity levels had remained at 1990 levels, we would be spending 10 percent less on health today—a savings of $220 billion."

Only half of recommended clinical preventive services are provided to adults, and less than half of adults had their doctors provide them advice on weight, nutrition or exercise, she said.

Other elements of the proposal would aim to:

• improve health information technology. To help hospitals and doctors upgrade, "I would invest $3 billion a year in grants to help ramp up the system," Clinton said.
• streamline care for the chronically ill. "Americans with chronic disease such as heart disease and diabetes account for an astonishing" 75 percent of national health care expenditures, she said. Clinton would require that Americans with such conditions have access under Medicare and other federally funded plans to "chronic care coordination" plans providing a "medical home"—a provider or team of providers who would work together to avoid treatment complications or duplicative services.
• end insurance company "discrimination." As part of a plan for universal coverage Clinton said she will detail in coming months, she said, "We would create large insurance pools that lower administrative costs for small businesses and individuals by spreading the risk." She also said the plan would "end insurance company discrimination against people with preexisting conditions." Insurers would be required to allow anyone who wishes to join a plan to do so and bar insurers from charging higher rates to people with health problems.
• drive down costs with "best practices." Clinton said she would start a public–private "Best Practices Institute" to finance research comparing the effectiveness of various forms of treatment. Based on its findings, the institute would issue practice protocols.
• control prescription drug costs. Clinton would give Medicare the authority to negotiate for lower drug prices, allow the importation of low-cost drugs from abroad, and bring lower-cost generic versions of biotech drugs on the market.
• revise the medical malpractice system. She called for an approach that would encourage health systems to give liability protection to doctors who disclose medical errors to patients. Health systems that disclose these errors and move quickly to provide compensation are much less likely to be sued, she said.

By Sasha Bartolf, CQ Staff

May 22, 2007 – Congressional Budget Office Director Peter R. Orszag on Tuesday proposed the creation of a new research entity that would use evidence-based medicine to bring down soaring health care costs.

At an industry conference sponsored by Avalere Health, Orszag discussed his spending concerns for Medicare and Medicaid and the need for controlling excess cost growth that occurs through unnecessary medical procedures and the lack of standardized post-surgery processes.

Using back-surgery costs as an example, Orszag pointed to the variety of treatments and rates available to people with orthopedic problems and questioned why there wasn't a clear answer to what worked best and how much it should cost.

Orszag proposed creating a U.S. version, similar to the United Kingdom's National Institute for Clinical Excellence (NICE), which would collect non-randomized evidence of treatment provided by health care practitioners. In Orszag's vision, all health care facilities would maintain electronic health records that tracked the methodology used to treat specific ailments. Doctors would send their patient data to a research hub that would analyze which method worked best in treating a specific medical problem.

Controlling health care costs is a key focus for Orszag, who has described the issue as "the fundamental challenge facing the federal government." He has called the projected growth in health costs "unsustainable" and said the government must address the problem soon. "I would hope we do something, whatever it is," Orszag said in March. "We need to try different things" and evaluate the results.

Orszag said on Tuesday he realized that fiscal incentives are needed to motivate doctors and health care facilities to track patient diagnoses, treatment, and recovery. However, in light of rising health care costs, Orszag said that while "there are very few things that the CBO can say will offer this kind of potential for reducing health care costs," a health care system focused on evidence-based medicine is one solution.

Moreover, Orszag said he believed that the United States is "woefully underinvested in research," evidenced by the fact that 25 percent of the federal budget is spent on health care costs while CBO only has 15 percent of its staff working to analyze these costs.

Orszag said he realized that setting up research entities is not enough to produce significant overall health care savings. But he said that if the United States were to "aggressively undertake" steps to create the new entity, there would be a "significant reduction in health care costs, including Medicare and Medicaid costs.

"There is, I think, an amazing opportunity in this long-term fiscal challenge to take cost out of the system without harming health . . . and that opportunity is remarkable," Orszag said.

CBO will begin studies to determine whether existing groups could take on such a research task, and added that if a new entity had to be created, it could take even longer for them to score the costs for this project.

He said that suggestions that discretionary appropriations or private contributions through user fees could be used to fund the research are currently viable. But Orszag warned that because CBO reports usually focus on the cost-effectiveness and necessary funding for the next five to 10 years, the study would have to have a longer-term cost trajectory.

It would take at least five years for the entities to be up and running and for the financial incentives to be in place to encourage doctors to report their evidence-based medicine to these new organizations and for them, in turn, to effectively analyze the results of this data.

By John Reichard, CQ HealthBeat Editor

May 22, 2007 – House Energy and Health Subcommittee Chairman Pete Stark flipped the order of witnesses at a mid-afternoon hearing Tuesday to force the Bush administration to respond to testimony critical of private fee-for-service plans in the Medicare program. It was the start of what was a long afternoon for supporters of the plans, which the California Democrat said in his opening statement are "at the top of my list" for Medicare cuts.

Stark is eying cuts not only to private fee-for-service plans, but also to other types of plans in the Medicare Advantage program, the private plan side of Medicare. In that regard he got a boost Tuesday from the American Medical Association, which said Medicare Advantage plan payments should be lowered so that they are paid the same rates as providers in traditional Medicare.

But the focus of Tuesday's hearing was on private fee-for-service plans, which like Medicare HMOs are among the alternatives seniors have to traditional Medicare. Private fee-for-service plans are paid much more than those HMOs even though they are much less efficient, witnesses said. In addition, the big profit margins they enjoy lead them to offer huge commissions to sales agents, a practice that, combined with weak oversight by the Medicare program, has allowed deceptive sales practices to flourish, witnesses added.

But the Centers for Medicare and Medicaid Services said in written testimony that it is tightening oversight of fee-for-service plans, and the subcommittee's top Republican, Dave Camp of Michigan, said "we must recognize the value" they offer.

Originally designed to appeal to beneficiaries worried that traditional Medicare and Medicare HMOs would ration their care, private fee-for-service plans have soared in popularity, their enrollment fueled in part by coverage of out-of-pocket costs not covered in traditional Medicare. Private fee-for-service plans also have pumped up overall enrollment in the Medicare Advantage program.

Stark apparently wants to slam the brakes on that growth by cutting the plans' payments which would help him raise money to meet the Democratic goal of covering more uninsured children in the State Children's Health Insurance Program.

"Given that half of the projected Medicare Advantage growth is in this option, we need to immediately evaluate its value before it gets unmanageable," Stark said.

The witnesses he summoned Tuesday expressed much doubt about that value.

David Lipschutz, a staff attorney with California Health Advocates, a Sacramento-based group that counsels Medicare beneficiaries, said some of the plans are duping seniors with false promises. "In the one-on-one marketing pitch, prospective enrollees are told, 'You can see any doctor you want,' or 'You can see any doctor that accepts Medicare,' " Lipschutz said. "The reality is quite different." Many enrollees "have had problems finding providers who are willing to accept" the plan's conditions and payments, he said.

Stark released a letter from California Medical Association President Anmol S. Mahal noting "hundreds of phone calls from physicians complaining that their long-standing Medicare patients had enrolled" in private fee-for-service plans. The plans can "deem" the doctor as having a contract with the plan when he or she treats one of its enrollees, Mahal complained. But the payment rules of the plans can change and doctors don't know what those rules are, he said.

Meanwhile, patients who see "deemed" doctors pay higher co-payments, Mahal added. But if doctors on their own agree to contract with the plan to spare patients those higher charges, the physicians may receive payment rates below that in traditional Medicare, he said. His letter called for the elimination of private fee-for-service plans from Medicare Advantage, saying they have become "unwarranted profit centers for the insurance industry at the expense of patients, physicians, and the taxpayers."

Wisconsin Insurance Commissioner Sean Dilweg said insurance regulators in 39 states have received complaints about misleading claims by Medicare Advantage sales representatives about benefits offered by the plans or which providers are in their networks. These problems are most evident with private fee-for-service plans "because of the tremendous rate of growth in sales and enrollment in these plans," Dilweg said.

Patricia Neuman of the Kaiser Family Foundation said that while private fee-for-service plans cover many of the out-of-pocket costs beneficiaries are charged under traditional Medicare, in some cases sicker beneficiaries could face higher cost-sharing requirements. "Unlike traditional Medicare, some private fee-for-service plans impose daily hospital co-payments, daily co-payments for home health visits, and daily co-payments for the first several days in a skilled nursing facility," Neuman said.

Mark Miller of the Medicare Payment Advisory Commission said that private fee-for-service plans are the least efficient plans in Medicare Advantage, while HMOs are the most efficient plans in the program. These HMOs provide the benefits offered by traditional Medicare, plus extra benefits, at 110 percent of the costs of providing care in the traditional program. Private fee-for-service plans do so at 119 percent of those costs, he said.

But Abby L. Block, director of the CMS Center for Beneficiary Choices, said private fee-for-service plans "often locate in areas where Medicare Advantage plans have not traditionally been available." In a number of states they may be the only Medicare Advantage option, she said. The plans "also are attractive to employers and unions throughout the country, because they can readily provide coverage nationwide, including coverage that is adaptable to seasonal changes in residence."

Catherine Schmitt, vice president of Blue Cross Blue Shield of Michigan, urged against "vilifying" private fee-for-service plans, which provide benefits to some 100,000 retired union workers in the state, including when they travel to other parts of the country.

Separately, an American Medical Association (AMA) survey released Tuesday found physicians' experience with Medicare Advantage plans "troubling," with more than half of physicians reporting that their patients in a Medicare Advantage HMO or preferred provider organization being denied coverage of services typically covered in Medicare's traditional fee-for-service plan.

In addition, 84 percent of patients had problems understanding how the plans worked and 51 percent of doctors reported that MA payments are below the payment rate of Medicare fee-for-service.

"The private health plans were supposed to inject competition into the Medicare program, but instead we've ended up with a federal handout to the insurance industry," AMA Board Chairman Cecil Wilson said in a statement. "Eliminating the overpayments to the insurance companies will save Medicare $65 billion over five years, according to the government's own estimate." The AMA expressed its "staunch support of fiscal neutrality between the regular Medicare program and the Medicare Advantage program.

"It's shameful that under current law Medicare will slash payments to doctors well below the cost of caring for seniors, while increasing payments to highly profitable managed care companies," Wilson said. "Congress has to make a choice—preserve access to care for all seniors by stopping next year's Medicare cut to doctors, or continue to help insurance companies line investors' pockets."

The insurance trade group America's Health Insurance Plans (AHIP) in March released its own survey of physicians, examining doctors' attitudes toward Medicare Advantage and the likely effect that cuts to the program would have on seniors. According to the survey, 74 percent of doctors said cuts to the program would have a negative effect on seniors with only 16 percent saying it would have no real effect. The vast majority of doctors polled for the AHIP survey said Congress should cut other programs or raise taxes, rather than cut Medicare Advantage.

Mary Agnes Carey contributed to this story.

By John Reichard, CQ HealthBeat Editor

May 25, 2007 -- Congressional passage of the emergency spending bill (HR 2206) funding the Iraq War drew praise from hospital groups Friday for delaying, by one year, two regulations that would have trimmed Medicaid spending by $5.6 billion over five years. The measure also provides funding for states facing shortfalls this year under the State Children's Health Insurance Program (SCHIP) and saves a Wisconsin state program assisting lower-income seniors with their prescription drug costs.

The measure delayed one Medicaid regulation the Bush administration sought to end: controversial accounting methods used by states to increase federal Medicaid funding, heading off $3.8 billion in cuts over five years. And it halted another regulatory proceeding that would have ended federal Medicaid outlays for graduate medical education, sparing hospitals another $1.8 billion hit.

"We applaud congressional leadership for recognizing that harsh spending cuts will not solve Medicaid's problems," said Rick Pollack, executive vice president of the American Hospital Association.

"We fully appreciate that the Medicaid program can and should be reformed and improved," said Larry Gage, president of the National Association of Public Hospitals and Health Systems. "We look forward to working closely with the Congress over the next year to craft statutory reforms that improve the Medicaid program and strengthen, rather than destroy, our safety net."

The Bush administration, meanwhile, notified lawmakers Friday that despite the delay, it plans to publish in final form that regulation trimming $3.8 billion in Medicaid spending May 29. The regulation would prevent states from claiming federal funds for health care provided by local governments in amounts exceeding their cost of providing services to Medicaid patients.

The Bush administration and other entities, including the Government Accountability Office and the Health and Human Services Office of the Inspector General, have challenged the legality of the financing mechanism.

"We intend to comply with the statute" imposing the one-year delay, said Jeff Nelligan, director of media affairs for the Centers for Medicare and Medicaid Services (CMS). "In the interests of transparency, we wanted interested parties and the public to see the decisions that we made in responding to public comments on the proposed rule. This way, the public . . . will also see that we are still soliciting comments on the provision of the rule related to the definition of governmental entities."

But congressional Democrats said the effect of those Medicaid changes would be to cut off funding for facilities providing health care to poor people and children.

"Any change in Medicaid funding can have a dramatic impact on children's hospitals," the National Association of Children's Hospitals (NACH) said in a statement Friday. NACH President Lawrence McAndrews said, "When Medicaid funding is restricted, the pediatric safety net is put at risk."

In addition to praising the delay of the Medicaid changes, NACH lauded lawmakers for providing up to $650 million in federal money to address SCHIP funding shortfalls. "Any lapse in funding could result in children not receiving the care they need at the time they need it," McAndrews said.

The Congressional Budget Office has estimated that the net federal cost of the added SCHIP money could be as low as $396 million because of savings resulting from some children on SCHIP not having to go on Medicaid.

The spending measure also extends, through December 31, 2009, the SeniorCare program in Wisconsin that CMS said would end June 30 on the grounds that it was no longer needed because of the prescription drug benefit that began in 2006 under Part D of the Medicare program.

Senate Aging Committee Chairman Herb Kohl, D-Wis., held a hearing earlier this year in which state officials testified that many low-income enrollees in Wisconsin receive greater financial assistance under SeniorCare than under Medicare Part D.

"The administration tried to kill SeniorCare despite that fact that it is supported by the public, the state legislature, the governor, and the entire Wisconsin congressional delegation," said Rep. David R. Obey, D-Wis. "I'm glad we were able to overcome their resistance," he said.

By Alex Wayne, CQ Staff

May 23, 2007 – Sen. Ron Wyden, trying to build momentum for a broad health care overhaul, told an audience of small business owners Wednesday that they would be better off under his proposed health insurance plan than under today's patchwork system.

Wyden, an Oregon Democrat, has introduced legislation (S 334) that would end the nation's system of employer-linked private health insurance, and instead require individuals to buy insurance on their own. The plan would require employers to raise wages, instead of providing health benefits, or make payments to the government to help subsidize the cost of insurance.

"The employer wins and the worker wins on the first day" the legislation is enacted, Wyden told the business executives.

While Wyden has a Republican cosponsor for his plan, Robert F. Bennett of Utah, and a group of bipartisan House members also have said they support it, he has not yet gained traction with congressional leaders. Democratic leaders have said that their top health care priorities are to pass a large expansion of the State Children's Health Insurance Program, expand federal funding for embryonic stem cell research, and allow Medicare to negotiate prices in its prescription drug benefit.

President Bush has proposed allowing individuals to claim tax deductions for health insurance they buy on their own, a step toward breaking the link between insurance and employment. Wyden supports President Bush's idea, in concept.

Wyden's speech was hosted by the U.S. Chamber of Commerce, whose chief lobbyist, R. Bruce Josten, challenged Wyden to rebut skeptical business owners who may see his plan as a federal mandate or a recipe for a higher tax bill. The government does not require businesses to provide health care now. And if those that do were forced to raise wages to replace their health benefits, they would pay more taxes, because the cost of health insurance is deductible.

"I essentially take the gorilla off the employers' backs," Wyden responded. "The small business person would no longer be in the role of trying to deliver health care."

But he acknowledged that businesses would still have to contribute to health care costs, either by raising wages or with a "shared responsibility" payment to the government that would be based on revenue and numbers of employees.

"Instead of that gorilla on the back of the employer, I substitute a very small, friendly, furry kind of creature," he said.

Congress has not considered a thorough overhaul of the nation's inefficient health care system since 1994, when the complex plan proposed by President Bill Clinton fell flat and, many Democrats believe, contributed to his party's defeat in the 1994 elections. Wyden argues that now is a good time to address the issue again because the government is divided between Republicans and Democrats, forcing bipartisan compromises.

Some states, including Massachusetts and California, are working on plans to extend health insurance coverage to all of their citizens. But Wyden argues that is primarily a problem for the federal government, because problems with the health care system begin with the tax code.

"The states cannot fix problems they did not cause," he said.