By Mary Agnes Carey, CQ HealthBeat Associate Editor

November 15, 2006 -- Federal funding for state-run high-risk pools that provide health insurance to thousands of Americans is in jeopardy for fiscal 2007 unless lawmakers act before adjourning for the year, insurers said Wednesday.

In February, President Bush signed into law legislation (PL 109-172) that reauthorized grants to state-run health insurance pools for medically high-risk individuals who have had difficulty finding coverage elsewhere. The bill provided $75 million in fiscal 2006 in grants and $15 million in seed money for states that wanted to start high-risk pools.

While that measure provided money to help fund the existing 33 state high-risk pools and to help create new ones in other states, no legislation has passed so far to continue funding for fiscal 2007.

"It's just fallen through the cracks . . . We just need folks to press people in leadership and on the Appropriations committees" to take action, said Laura Trueman, executive director of the Coalition For Affordable Health Coverage, an alliance of insurance, health care, and business groups supporting market-based solutions to help reduce the number of the uninsured.

State high-risk pools often operate at a significant loss and federal funding helps offset those costs and reduce premiums for people who get health insurance coverage through the pools, speakers said at a news conference Wednesday.

Proponents of the pools also said members of both parties should support federal funding as a way to help reduce the number of uninsured Americans. "This federal funding is critical, and it is helping people stay insured," said Steve Browning, executive director of the Texas Health Insurance Risk Pool, which covers 28,100 state residents.

While the monthly premiums, deductibles, and copayments for coverage in high-risk pools often cost more than those found in traditional employer-sponsored coverage, state laws generally cap risk pool rates between 125–150 percent of the base individual market rate. The coverage offered by the pools, however, is still more affordable than health insurance coverage that high-risk individuals could purchase on their own, if they could find it, speakers said. Pre-existing medical conditions might prevent an insurer from offering coverage at all to an individual or family, while state high-risk pools might impose waiting periods before coverage begins.

A Maryland man who asked not to be identified said that when he left his last job, the only health care coverage he could purchase for himself and his family would have cost more than $2,000 a month—and might not have been complete—because one of his two children has a serious health issue. In the Maryland high-risk pool, he pays $690 a month for family coverage, with a $1,000 deductible and 20 percent copay, with an additional $500 deductible for prescription coverage.

By Cheyenne Hopkins, CQ Staff

November 17, 2006 -- Department of Health and Human Services (HHS) Secretary Michael O. Leavitt on Friday acknowledged tension between employers and physicians over a recent plan for health transparency but said the health care industry is responding.

At a National Summit on Health Care Transparency held by the Business Roundtable, an association of chief executive officers, Leavitt said HHS has started to focus on 200 employers and hopes to have more than 60 percent of the marketplace include "four cornerstones" that build on a recent presidential executive order as part of their purchasing criteria.

The executive order, issued by President Bush on Aug. 22, requires providers and plans doing business with federal health programs to publicize data on the cost and quality of their care and to organize billing and insurance claims in a way that allows the cost and quality of medical procedures to be compared easily.

The order also requires that providers and plans doing business with federal health programs meet "interoperability standards" when they acquire health information technology systems to ensure that those systems work well with each other. Leavitt said the plan provides cornerstones to build a health care system.

The order covers those doing business with Medicare, the Defense Department, the Department of Veterans Affairs, and the Federal Employees Health Benefit Program. Combined enrollment in those health coverage programs adds up to about one-quarter of all Americans with health coverage. Medicaid is exempted from the executive order.

On Friday, the American Benefits Council, the National Retail Federation, and the Leapfrog Group expressed support for the plan. The Leapfrog Group issued a release urging employers to sign a letter in support of the executive order. Jerry Carter, senior vice president of human resources for the International Paper Company, said a number of companies already have signed such a letter.

Leavitt said the effort for health transparency was greatly accelerated Friday with the Business Roundtable summit. The secretary said he hopes to have "scores of the largest companies committed" to using the plan as part of their purchasing criteria by the end of the year. So far, 30 health care systems have been certified for the plan, Leavitt said.

He also proposed forming business–health care collaborations into a network for standardization of cost measurement and creation of health transparency systems, adding that HHS intends to provide a charter for collaborations to have access to Medicaid and Medicare data to harmonize these matters.

Leavitt said changing the health care sector has proven a difficult task and the only method for change is one based on consumer value. He said the federal government, rather than the private sector, must lead health care change or it would be almost impossible to reach critical mass.

However, he acknowledged tension between employers wanting to get health transparency soon and physicians wanting to make sure such a system is accurate. Leavitt said because both business and health care providers have a vested interest, they can be motivated to provide a transparency system.

Much of the audience applauded Leavitt's plan. But some in the audience expressed concerns. One questioned whether the plan would create incentives for healthy behavior. Leavitt said the executive order would be a building block to spur other health care incentives, including ones for healthy behavior. He also proposed moving toward a system of prevention rather than treatment to lower health care costs.

Another audience member representing Westpoint Insurance Group Ltd. in Chicago said Leavitt did not address potential tension from patients, whom he said would be reluctant to switch doctors, even for a measurement standard.

Leavitt responded that the plan would lead to increased health knowledge for consumers through Web sites popping up with doctor information and employers integrating health transparency into their plan.

Health care represents 16 percent of the gross domestic product, Leavitt said. While he said he would not be so bold as to say the plan would result in a large drop in health care costs, he did predict a trend to a "moderate" decrease. Leavitt said the executive order would create competition based on value not on brand.

By Mary Agnes Carey, CQ HealthBeat Associate Editor

November 16, 2006 -- Filling in the Medicare drug benefit's "doughnut hole," lifting federal curbs on stem cell research, and reauthorizing a federal program that helps provide health coverage to children will all be priorities next year for the Senate Health, Education, Labor and Pensions (HELP) Committee, Sen. Edward M. Kennedy said Thursday.

Kennedy, a Massachusetts Democrat who will assume chairmanship of the HELP panel in the 110th Congress, laid out an ambitious agenda for the panel, including raising the minimum wage and reducing college costs. But health care will be a primary focus as well for Kennedy, who has long been a key player in health care policy.

In both a Senate floor speech and a news conference afterwards, Kennedy's health agenda touched on several themes, including using information technology to reduce health care costs while improving the quality of care delivered, finding ways to cover the more than 40 million uninsured Americans, and giving the secretary of the Department of Health and Human Services the ability to negotiate drug prices on behalf of Medicare beneficiaries. Kennedy said he also was "hopeful" that Congress would pass "mental health parity" legislation that would require insurers to offer the same coverage for mental health illness as they do for physical ailments.

Kennedy also said he will work to lift current federal funding restrictions on stem cell research despite President Bush's veto in July of legislation that would have accomplished that goal. "We will be back again and again next year until we succeed in overturning the restrictions on stem cell research that hinder the search for new cures . . .," Kennedy said.

Concerning the Medicare prescription drug benefit, Kennedy said the HELP panel would work with the Finance Committee to make the benefit "affordable and eliminate the doughnut hole and other inefficiencies." The doughnut hole refers to a coverage gap in some Medicare drug plans that requires beneficiaries to pay for drugs out of pocket when their costs in any given year total between $2,250 and $5,100.

Reexamining how federal funding of the Medicare drug benefit is distributed—in particular $44 billion in " subsidies" for managed care plans offering coverage to Medicare beneficiaries—might help produce funds to close the coverage gap, Kennedy said.

"There's a lot of money that's rattling around out there and the question is who's going to get it, and we're going to try to help those who should have it," Kennedy said. He also told reporters that the benefit is "enormously confusing" for beneficiaries.

If you have fewer choices, people take them and use them and benefit from them and work much more than if you have many different choices," Kennedy said, adding that Medicare beneficiaries in Massachusetts have 45 different plans to pick from if they want to enroll in the drug benefit, with each plan featuring different copays and deductibles. "It's confusing, it's upsetting, and it's enormously inefficient and costly," he said.

As HELP chairman, Kennedy pledged to continue working closely with the committee's outgoing leader, Republican Michael B. Enzi of Wyoming. "The gavel may change hands, but our partnership will not," Kennedy said.

By John Reichard, CQ HealthBeat Editor

November 16, 2006 -- Seventeen states will run out of federal dollars to fund their State Children's Health Insurance Programs (SCHIPs) before the end of fiscal 2007 unless Congress intervenes, West Virginia Democratic Senator John D. Rockefeller IV said at a Senate hearing Thursday afternoon. Congress must act during the current lame-duck session to wipe out the shortfalls totaling $920 million or else place 630,000 children at risk of losing their health insurance coverage, Rockefeller said in his opening statement at a hearing by the Senate Finance Committee's Subcommittee on Health.

Rockefeller has introduced legislation (S 3913) that would wipe out the shortfall by tapping unspent fiscal 2004 SCHIP allotments to the states as well as appropriating new money. Rep. John Barrow, D-Ga., has introduced a companion measure in the House (HR 6098) that Rep. John D. Dingell of Michigan, the top Democrat on the House Energy and Commerce Committee, is co-sponsoring. Senate Finance Committee Charles E. Grassley, R-Iowa, also has developed a proposal addressing the shortfall, but legislative analysts said his bill wouldn't go as far to end the shortfalls as the Rockefeller bill.

According to one analyst, Grassley appears to be trying to find a middle ground between those on the right who see SCHIP as a block grant program and those on the left who would like to see it become an entitlement. Those on the right believe that repeated congressional intervention to end shortfalls is tantamount to turning the block grant program into an entitlement. The Bush administration has resisted the idea of appropriating new money and sees unspent state allocations as a source of money to end shortfalls.

Grassley's bill would cost an estimated $450 million or so in new appropriated money while also relying on redistributed funds, the analyst said, while the Rockefeller measure has received a score from the Congressional Budget Office of between $300 and $400 million. It was not clear why the Rockefeller measure would appear to score at a lower level while providing more money to end the shortfalls.

State officials present at the hearing represented three different funding situations. Utah, for example, has unspent SCHIP money, West Virginia has spent its funds, and New Jersey has a shortfall. A Utah official said his state's current annual spending is about equal to its SCHIP allocation. While it has unspent funds from prior years—states have three years to spend their annual allocations—the state's governor wants to insure more children, and if that effort is fully funded, Utah will quickly spend its prior allocations and require added funding above its current level in future years.

A New Jersey official said her state has historically spent its entire SCHIP allotment and has been eligible for SCHIP funds not used by other states. But the pool of funds to be reallocated is shrinking as states cover more uninsured children, and the official said Congress faces an urgent need to increase annual allocations to states to meet a growing national need for health care coverage.

In an Oct. 24 letter, the National Governors Association urged House and Senate leaders to address the fiscal 2007 funding shortfalls before Congress adjourns this year and not to put off action until next year when Congress is due to reauthorize the SCHIP program. Sen. Orrin G. Hatch, R-Utah, said at the hearing that the program "must be reauthorized" because of its importance to children's health.

In a statement released late Thursday, the incoming chairman of the Senate Finance Committee, Montana Democrat Max Baucus, also expressed a sense of urgency about acting this year on fiscal 2007 funding shortfalls. "I still hope we can come together to find a way to address this issue before the year ends," he said. "The first shortfall state will begin running out of federal funds in January. Delaying federal action on providing funding to these states in need may force states to cut enrollment, threatening harm to thousands of children." Baucus added that "I hope that Sen. Grassley and I can work together with other members of the committee to find a solution to address this problem soon."

But reauthorization won't be cheap, with the annual cost of maintaining the current coverage level of 6.2 million pegged at $10 billion to $12 billion a year.

Rockefeller said, however, that despite that accomplishment, the current number of uninsured children in the U.S.—8.4 million—is about the same as the 10 million kids who were uninsured when SCHIP was created in 1997.
Rockefeller said that one of the goals of reauthorization must be an expansion of coverage, not just maintaining current levels of enrollment.

By John Reichard, CQ HealthBeat Editor

November 17, 2006 -- A commission charged with finding ways to overhaul Medicaid recommended a plan Friday that would place the program's sickest enrollees in managed care plans, give states more power to shape benefit packages, and push individuals to take more responsibility for their own nursing home costs.

The panel, which has been examining the issue for 18 months, also said Congress should give individuals tax breaks for private health coverage to keep them off of Medicaid in the first place and called for more frail and disabled patients to be treated outside costly nursing homes. The panel also called for boosting treatment efficiency for Medicaid enrollees by requiring each participant in the program to have an electronic health record by 2012.

Left-leaning advocacy groups lauded the panel's recommendations for boosting nursing home care alternatives but otherwise declared the work moribund. "It is a commission report that is and should be dead on arrival" in Congress, said Rachel Klein, deputy director for health policy at the left-leaning advocacy group Families USA.

Recommendations for greater state control over benefits and eligibility "are a Trojan Horse for greater cuts to people," said William Vaughan, a senior policy analyst at Consumers Union, the consumer advocacy organization that publishes Consumer Reports. With Democrats in control of the 110th Congress, "I think we now have a Congress that does not want to hurt Medicaid beneficiaries," he said.

While the Bush administration portrayed the panel as an independent commission that would take a fresh look at how to tackle the rising costs of Medicaid while addressing a growing lack of coverage in the United States, critics called it a mechanism to rubber stamp what they see as administration efforts to convert Medicaid from an entitlement into a block grant program.

Michigan Democratic Rep. John D. Dingell, incoming chairman of the Energy and Commerce Committee, issued a statement late Friday curtly dismissing the work of the panel. "While some in Congress thought this effort would bear fruit, I see no proof of that in this report," he said. "It is the job of the Congress to review the Medicaid program and legislate necessary changes, not a hand-picked Commission stacked against working families."

Montana Democratic Sen. Max Baucus, who in the 110th Congress will chair that chamber's committee with primary jurisdiction over Medicaid, said " while the Commission's interest in improving quality and promoting health information technology for Medicaid is laudable, many of its recommendations will undermine federal oversight of the program and reduce the likelihood that the most vulnerable Americans will get the comprehensive health care they need."

Seeking to counter critics who predicted the commission would prove to be a sham, the administration named Democratic former Tennessee Gov. Don Sundquist and independent former Maine Gov. Angus King to head the panel.

In a meeting Friday to take final votes on panel recommendations, Sundquist and King emphasized an aspect of Medicaid that many analysts see as a key to controlling its historically rising costs—the "dual-eligibles" who qualify both for Medicaid and Medicare.

Some 6.2 million people who receive full Medicaid benefits are duals, said David Rousseau, principal policy analyst with the Kaiser Commission on Medicaid and the Uninsured. While they make up only 14 percent of Medicaid's enrollment, they account for 40 percent of total Medicaid spending, he said, citing 2003 data.

Frequently the oldest and sickest Medicaid's 55 million enrollees, the duals suffer from a variety of costly illnesses. Their care often is not overseen by a single doctor who monitors all medications, proper preventive care, and whether they are receiving treatment in the least costly but appropriate setting. The dual system "is a mess," said commissioner Melanie Bella, vice president for policy at the Center for Health Care Strategies.

Sundquist lauded the panel's proposal to put duals in "Medicaid Advantage" plans modeled after "Medicare Advantage" plans in the Medicare program. "I believe we're going to fail if we don't try something new," he said.

Without action on the duals, "this system will break," another commissioner said. "We've got to throw things around and see what will work."

States would be authorized to place dual eligibles in Medicaid Advantage plans combining both Medicare and Medicaid benefits. The centerpiece would be a "medical home" for each dual—a doctor or doctor's office that would oversee and coordinate the enrollee's treatment.

The panel concluded that "federal law and regulations must be changed to encourage states to place all categories of Medicaid beneficiaries in a coordinated system of care premised on a medical home for each beneficiary."

While many in the non-dual Medicaid population are already in managed care plans, only about 1 million of the 6 million duals are in plans that come close to fully managing care, Rousseau said.

"These plans would be close to the patient, collecting and evaluating treatment data, and states and the federal government would monitor the plans to make sure obligations are being met," the commission reported.

To boost managed care participation, states could automatically enroll duals in managed care plans while giving them the right to opt out, the panel said.

But the panel strongly resisted efforts by commissioner Gwen Gillenwater, senior director for policy at the American Association of People With Disabilities, to ensure protection for duals switched into managed care.

Gillenwater urged that the recommendations include specific protections such as the right to continue seeing previous providers, information on which providers are included in a plan's network, ensuring a choice of plans, and access to ombudsmen to help patients cope with managed care. Vaughan noted that some 2 million of the duals suffer mental illness or dementia.

But Gillenwater was the only one of the panel's 15 voting members to back her amendment. Some commissioners said existing protections would be sufficient. In the end, she also was the only one to vote against the panel's overall package of recommendations.

The panel urged that federal and state governments provide tax breaks to encourage people to buy private long-term care policies. "For example, there should be an allowance for early withdrawal of IRAs, or other federally approved retirement accounts, for the purchase of long-term care insurance," it said. "Additionally, health savings accounts should be expanded for use for long-term care expenditures."

The panel added that employers should get tax breaks to offer long-term care insurance as an employee benefit, and friends and family should be given tax credits or deductions for providing long-term care.

But Vaughan said buyers of long-term care policies too often are hit with premium increases they can't afford despite assurances that rates won't rise sharply. "It is a royal waste of money to recommend taxpayer subsidies to buy long-term care insurance without requiring stronger national or state consumer protections," he said.

In addition to urging electronic health records, the panel said states should include provisions in contracts with plans and providers that their health information systems are compatible with other such systems. Additionally, Medicaid should focus on paying for better health care outcomes, the panel said, urging that Congress and Medicaid provide funding for care management and pay-for-performance systems that would be paid for with savings over a five-year period.

The senior lobby AARP praised the commission's recommendations for shifting to home-based care for patients who otherwise would go into nursing homes.

But giving states greater flexibility to run Medicaid programs, "while appealing, is ambiguous. Some proposals that others have labeled as flexibility are harmful because they inevitably lead to cost shifting and unnecessary denial of care," AARP said in a Nov. 15 letter to the commission. "The notion of beneficiary opt-out from mandatory enrollment in managed care also could prove illusory, especially for long-term care services . . . A state wanting to mandate managed care has no incentive to maintain an alternative fee-for-service system for opt-out."

By John Reichard, CQ HealthBeat Editor

November 14, 2006 -- The Medicare overhaul law thus far hasn't saved states money even though it switched prescription drug coverage for some 6.2 million elderly and disabled Americans from the state–federal Medicaid program to the federal Medicare program, according to a survey released Tuesday. And the budget savings measure signed into law in February doesn't appear to be having much impact on spending by state Medicaid programs for prescription drug benefits either, said the survey, conducted for the National Association of State Medicaid Directors (NASMD).

The Medicare law (PL 108-173) switched 6.2 million so-called "dual eligibles," who qualify for both Medicare and Medicaid, from getting Medicaid drug benefits to receiving their coverage under the new Medicare Part D prescription drug benefit. The law requires states to continue paying a portion of those coverage costs, but at a declining percentage each year. In 2006, states were supposed to reduce their outlays for dual eligibles by 10 percent, with that percentage growing larger on an annual basis. But overall, that 10 percent savings isn't materializing, according to the survey of 47 state Medicaid programs conducted in June and July of this year.

Fourteen states reported paying about the same for drug coverage for dual eligibles as they did before the Medicare drug benefit started this year. Twelve states reported paying more, and eight states said they are paying less. "The Part D benefit really hasn't saved states money," said Jonathan Blum, a vice president at Avalere Health, the consulting firm that carried out the survey for NASMD. The findings were released at a NASMD-sponsored meeting in northern Virginia.

More than two-thirds of states said they did not expect the budget savings law (PL 109-171) to reduce their spending on pharmacy benefits significantly. The law was intended to give states additional tools to control drug outlays, such as greater ability to charge Medicaid enrollees copayments for their prescription drug costs. But the survey found that only eight states are considering significant new cost-sharing responsibilities for prescription drugs in their Medicaid programs, Blum said. A key reason why states shied away was the political unpopularity of supporting such measures in an election year, suggested NASMD Director Martha Roherty. Thirty-six governors were up for reelection this year, she noted in a press briefing at the meeting.

David Parella, head of the Medicaid program in Connecticut, noted that his state has tried twice to impose a $1 copayment for prescriptions but each time repealed the requirement because pharmacists were given responsibility for collecting the money and were unable to do so. In effect, the copayments meant a loss of reimbursement and pharmacists have strongly opposed the copayment charge.

Together, the new Part D program in Medicare and the budget savings law "really haven't taken pharmacy benefits off the table" as a major cost headache for state Medicaid programs, Blum said.

A panel of state Medicaid directors who briefed reporters at the meeting said that, in general, they had not seen evidence so far of Medicaid enrollees losing coverage under a new requirement promulgated under the budget savings law requiring the program to document applicants' citizenship. Advocates for Medicaid enrollees had predicted that millions could lose coverage under the rule, not because they weren't entitled to coverage, but because documentation requirements are too onerous.

But if a general trend toward loss of coverage hasn't materialized so far, the exception to that is infants born in the U.S. to illegal immigrants. Prior to the rule, they were deemed eligible for Medicaid by virtue of their birth in the U.S. Now there is no such "deeming," and Connecticut's Parella said that as a result, he thinks infants are going without well-baby visits and treatment for complications from childbirth. The result may be that employers will have to pay part of the bill in the form of higher insurance premiums for extremely expensive stays in the neonatal intensive care unit caused by the loss of Medicaid coverage for infants, he said.

Dennis Smith, head of the Center for Medicaid and State Operations at the federal Centers for Medicare and Medicaid Services, said states have tools such as adopting "presumptive eligibility" policies and using "retroactive eligibility" to pay providers who treat such infants. But Parella said a number of states would not be able to pay for presumptive eligibility and said providers in many cases would not provide care if Medicaid payments for treating an infant were not assured.

Parella said he expects Congress next year to review the infant coverage issue. But advocates at the meeting noted that blocking the regulation, as well as other proposed regulations CMS will soon issue trimming $12 billion over five years from federal Medicaid spending, may have to offset by cuts elsewhere in the federal budget or tax increases. Smith wouldn't predict when the regulations would be issued, nor would he signal where the Bush administration might be heading in its fiscal 2008 budget proposal for federal Medicaid spending.

Conference attendees pressed Smith on whether the administration might ease its pressure on Medicaid spending in light of a sharp slowdown in enrollment and spending growth—federal Medicaid spending has actually declined recently—but Smith gave no indication that would be the case.