By John Reichard, CQ HealthBeat Editor

September 18, 2013 -- Despite coverage expansion under the health law, national health care expenditures will grow by a lower yearly rate over the next 10 years than they have in previous decades, according to government economists.

Overall health spending in the U.S. will grow at an average annual rate of 5.8 percent from 2012 to 2022, according to the projections by the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS). That compares to an average spending growth rate of 7.4 percent per year from 1990 through 2006.

Eleven million uninsured Americans will gain coverage in 2014 when Medicaid expands in about half the states and health insurance becomes mandatory for most Americans, the study projected. Another 8 million will get coverage in 2015, it added. By 2022, there will be 30 million fewer uninsured Americans, it estimates.

Also noteworthy in the new analysis: an eye-catching decline in national prescription drug spending, which CMS analysts predicted will end with the expansion of health insurance coverage.

The analysis, posted last week on the website of the policy journal Health Affairs, also shows that Medicare spending growth fell to 4.6 percent in 2012, down from 6.2 percent in 2011—despite increased enrollment growth. Meanwhile, Medicaid spending grew only 2.2 percent in 2012. Both programs will see faster growth rates as their enrollments expand over the next decade, however.

Issued annually, the CMS projections are widely quoted in health policy circles and are viewed as authoritative, while subject to inaccuracies as are all economic forecasts.

Last year, for example, the same office predicted health spending would grow about 7 percent in 2014, with the expansion of coverage. But its new figure is 6.1 percent for next year. The revised estimate takes into account the 2012 Supreme Court ruling on the health law (PL 111-148, PL 111-152), effectively making it optional for states to expand their Medicaid programs.

CMS economists assumed in their new projections that 45 percent of the Americans who would potentially be eligible for expanded Medicaid under the health law live in states that actually will expand the program in 2014. They are assuming that figure will climb to 65 percent in 2015 and in subsequent years.

The study isn't a warning that the health law will cause a dramatic spike in national health spending. Nor does it support the conclusion that the overhaul is slamming the brakes on spending by streamlining health care delivery.

It projects that health care as a share of the gross domestic product will rise to 19.9 percent in 2022 from its level of 17.9 percent in 2011. The health law will "add approximately 0.1 percentage point to average annual health spending growth over the full projection period, and increase cumulative health spending by $621 billion," the study said.

Whether health spending will pick up sharply as the economy improves is now hotly debated, with a growing number of economists saying they see "structural" changes that will lessen the effects of economic growth. These changes include higher deductibles and other forms of cost-sharing and growing efforts by physician practices to better coordinate the treatment of chronic diseases.

Economists Cautious About Causes

But during a press briefing, the economists said they are being cautious about ascribing a large impact to structural changes. And they leaned in their analysis toward assuming that the waxing and waning of the economy has a significant impact on whether health spending rises or falls.

They said they examined 50 years of data on the link between the state of the economy and health spending patterns. Based on that analysis, when the economy improves substantially "we would expect health spending to respond," said CMS economist Gigi Cuckler.
"Based on that longstanding relationship, we're not convinced that relationship has been broken," she added.

In the near term, spending growth is modest.

"In 2012 national health spending is estimated to have reached $2.8 trillion and to have grown 3.9 percent—the same rate observed in 2011," the study said. The low rate in 2012 "reflects the persistent effects of the recession and the modest recovery."

The slower growth over the next decade than in the prior two decades also in part is driven by lower projected economic growth, said Stephen Heffler, who oversees the statistics group in the Office of the Actuary.

"It's also affected by what the inflation outlook is going forward and that over the next decade is lower that what we've experienced over the longer run history," Heffler said.

He also noted that while health spending has grown 2 percentage points faster than the GDP, historically the growth rates for GDP and health spending are beginning to converge, something to be expected as health care becomes such a large part of the economy, he said. The 10-year projection assumes health spending will grow at GDP plus 1 percentage point.

The 2014 upturn in spending growth to 6.1 percent spurred by coverage expansion will continue in 2015 also at a rate near 6 percent, the study said. In the absence of the health law, national spending in 2014 would grow 4.5 percent rather than 6.1 percent, it added.

In 2016 to 2022, the most significant one-time effects of coverage expansion are expected to subside.

The study says that by 2022, health spending financed by federal, state, and local governments will account for 49 percent of national health spending.

By Rebecca Adams, CQ HealthBeat Associate Editor

September 17, 2013 --The U.S. Census Bureau released status-quo health insurance statistics last week that reveal a nation that has become increasingly reliant on government-provided health coverage over the past decade, a trend that continued in 2012 and is expected to become more pronounced as the overhaul is fully implemented.

But there were no major changes from last year. The number of people without insurance in 2012—48 million people—was not statistically different from the 48.6 million uninsured the year before. About 15.4 percent of the population lacked insurance in 2012, compared to 15.7 percent in 2011.

The percentage and number of people covered by government health insurance was statistically significant, as more Baby Boomers became eligible for Medicare and the number of people relying on coverage provided by the military edged up. The overall share of people using government health coverage rose to 32.6 percent—101.5 million people—in 2012, up from 32.2 percent—99.5 million people—in 2011.

While the increase in people getting government health benefits was small from 2011 to 2012, the growing use of government benefits over the past few years is notable. The percentage of people receiving health care coverage through the government in 1999 was 24.2 percent. During the economic downturn, as more people became eligible for Medicaid and more people aged into Medicare, the share of people getting government coverage swelled to 29.1 percent in 2008.

The percentage of people with employer-sponsored insurance fell from 64.1 percent of residents in 1999 to 54.9 percent in 2012.
Some changes related to the health overhaul law (PL 111-148, PL 111-152) had more of an impact in 2010 and 2011, said David S. Johnson, chief of the Social, Economic, and Housing Statistics Division of the U.S. Census Bureau. And any further impact from the law is likely to be evident after the coverage expansion takes hold in 2014.

One impact that was reflected in previous data on the uninsured was a reduction in the rate of uninsurance among 19-to 25-year-olds, a group that had been the most likely to be uninsured, with more than 30 percent of people in that age range historically without coverage.

But after the implementation of a provision in the health care that allows young adults to stay on their parents' coverage until age 26, the rate of people that age without insurance fell to 27.2 percent in 2012. Now people who are 19 to 25 are tied for the most likely to be uninsured with people who are 26 to 34 years old.

However, as new insurance marketplaces start next year and about half the states broaden their Medicaid programs as allowed under the law, experts project that more people will gain government-provided insurance. The Congressional Budget Office recently projected that the deficit will resume growing in the coming decade as spending on Social Security and health care rises.

Gail Wilensky, who ran the Medicare and Medicaid programs during the George H. W. Bush administration, said it is "a little disconcerting that as we try to climb out of the recession we're not making much headway with the uninsured, although it's not really surprising because the number of people employed has not changed a lot." Wilensky said the expansion of coverage in the next couple of years will make a difference, although it is unclear how quickly changes will take root.

"If what's offered in exchanges, once they've had time to settle down, looks more or less like employer-sponsored insurance, we'll see increasing numbers of workers working for all but the largest employers getting insurance through the exchanges if they can get a subsidy," said Wilensky. "But if it looks more like Medicaid, that transition will be slower. That'll just be one more component increasing the government share."

The data census officials released early last week came from the Income, Poverty, and Health Insurance Coverage: 2012 report. This week, another census report, the American Community Survey, is scheduled to be released that will show localized health insurance data.

By Rebecca Adams, CQ HealthBeat Associate Editor

September 16, 2013 -- Pennsylvanians on Medicaid would pay premiums of up to $35 per month and adults would get their Medicaid benefits through the new federal marketplace, under an expansion proposal Republican Gov. Tom Corbett announced last week.

Corbett also asked federal officials to allow him to require that as a condition of getting Medicaid benefits, unemployed adults must search for work and sign up for job opening announcements. The state currently requires people receiving unemployment compensation to enroll in its career program, which also provides job training resources online or in person.

The expansion is part of a broad health care policy plan Corbett recently released. Some of the provisions will require a Medicaid waiver. If approved, Medicaid recipients would be paying a monthly premium for the first time. The premium amounts would be on a sliding scale, ranging from nothing to up to $35 per month for families, depending on the recipient's income.

Under Corbett's plan, adults would get their coverage through the new health law exchanges while children's coverage would not change, including those children whose parents did not qualify for Medicaid who would continue to be covered through the Children's Health Insurance Program.

"We are encouraged by Pennsylvania's commitment to helping cover more of the state's uninsured population," said a spokeswoman for the Centers for Medicare and Medicaid Services (CMS). "As we have done with other states, we are eager to work with Pennsylvania to provide the best options that work for Pennsylvanians ... HHS is committed to supporting state flexibility and working with states to design Medicaid programs that work for them."

State officials who briefed reporters by phone did not give a specific timetable for the launch of the revised Medicaid program.

"We don't know how long it'll take to get this up and running," said Public Welfare Secretary Beverly D. Mackereth. In an example of how the program would work, she said that if the expansion took effect in 2015, the state would get two years of full federal funding. That suggested that the state might not be able to get the program operating in time to take advantage of at least part of the first year of full federal financing in 2014.

"I have been urging Governor Corbett for nearly a year to expand Medicaid in Pennsylvania because it's the right thing economically and morally for our Commonwealth," said Rep. Allyson Schwartz, D-Pa., who is running for governor against Corbett. "Instead he has chosen a path of politically motivated delays and inaction hurting nearly 500,000 working Pennsylvanians who need affordable coverage and now won't be eligible under his proposal at the earliest until January of 2015."

Adults would not have to pay co-payments for visits to their primary care doctor but would face a $10 co-pay for emergency room visits that were deemed inappropriate because they were for non-urgent problems that could have been handled by a primary care doctor instead.

The Pennsylvania plan to use Medicaid dollars to buy coverage on the exchange is similar to a proposal Arkansas officials submitted to CMS officials in August. A consultant who has advised Arkansas on the design of its plan said recently that state officials are hoping to get approval of that plan as early as Oct. 1.

"Arkansas is very far along in discussions with CMS," said Deborah Bachrach, a partner in Manatt, Phelps & Phillips. "CMS has been extremely responsive and we've been working through all the issues that come up when you integrate public and private coverage issues. One by one, those issues are being resolved in a way that's workable for Arkansas. We are moving aggressively and Arkansas is looking toward an October approval, which shows CMS' commitment to working with states."

Officials in other states that have expressed interest in the approach being pursued in Arkansas and Pennsylvania, include Iowa, Ohio, Tennessee and potentially Virginia.

Earlier this year, Corbett refused to recommend an expansion, but has been talking with CMS officials for months.

The plan "works to ensure that every child has access to healthcare coverage and that every Pennsylvanian has access to a family doctor or healthcare provider," Corbett said in a statement. "It's a Pennsylvania-based plan that is based on common-sense reforms, creates real healthcare choices, reduces government bureaucracy and provides a pathway to independence for all Pennsylvanians."

State officials said they felt good about the chances that federal officials who have been briefed on the concepts of the plan will approve it.

"We believe it can be approved, and approved in short course," Todd Shamash, the governor's deputy chief of staff, told reporters, adding, "We think all of this, including the work search, is acceptable."

Shamash also said that the state legislature does not have to approve the Medicaid plan.

The governor noted that the current Medicaid program has 14 separate benefit packages for beneficiaries that his office said "far exceed national standards for coverage and are cost prohibitive for taxpayers." Those packages would be replaced with plans that offer the 10 essential health benefits required by the health care law (PL 111-148, PL 111-152).

The state envisions having two sets of benefit packages—one for the chronically ill and another less robust package for people who are healthier.

"We're paying for a lot of things right now that people don't use and don't need," said Mackereth.

Benefits for children and people with disabilities are not expected to change, said materials provided by the governor's office.

The proposal also would ask the legislature to eliminate a six-month waiting period in the Children's Health Insurance Program. The governor wants to ensure all children in the state have coverage.

Corbett also wants to tackle the issue of long-term care by creating a commission to recommend strategies to improve the coordination of care for that population.

By Rebecca Adams, CQ HealthBeat Associate Editor

September 18, 2013 -- Federal health centers would get paid about 30 percent more than current rates if federal officials finalize a recently proposed rule.

The payments for federally qualified health centers will transition to the new payment system throughout fiscal 2015, Centers for Medicare and Medicaid Services (CMS) Administrator Marilyn Tavenner said in a statement.

"The new payment system will help even more patients get care in federally supported health centers," said Tavenner. "The services provided by these centers help ensure patients get important primary and preventive care that lowers costs and improves health outcomes."

The same services that CMS officials have paid for in the past will continue to be covered, but health centers will be paid differently. Medicare officials want to give the clinics a single daily rate per beneficiary for all the services that a center provides to a patient. The rate would be adjusted based on how high the costs are in that particular region. Centers would get more for a patient who is new to the health center or is getting a comprehensive initial Medicare physical exam or an initial annual wellness exam.

Federal officials also have provided hundreds of millions of dollars in grants to the centers this year.

Health and Human Services officials announced they will provide $67 million to the centers in grants.

That includes $19 million to create 32 new clinics or other health service delivery sites. The funding is available because of the health care law (PL 111-148, PL 111-152), HHS said. The new clinics will take care of more than 130,000 additional people. The other $48 million will go to nearly 1,200 health centers to pay for improvements or activities they're already doing.

CMS will accept comments on the proposed rule until Nov. 18 and will release a final regulation next year.

By Rebecca Adams, CQ HealthBeat Associate Editor

September 20, 2013 -- A new coverage option known as the basic health program would take effect on Jan. 1, 2015, under a proposed rule released Friday by the Centers for Medicare and Medicaid Services (CMS).

CMS had announced months ago that they would delay the program until 2015. The delay had been explained in a "frequently asked questions" document.

The program, which provides federal tax subsidies for low-income people whose income is too high to qualify for Medicaid, is an alternative to offering that population coverage in the exchanges that will begin operating in January 2014 under the health care law (PL 111-148, PL 111-152). It is intended to help those with incomes between 138 percent and 200 percent of the federal poverty level.

Federal officials have an incentive to encourage use of that plan because it pays 95 percent of what an individual would get in the form of a subsidy if they went to get coverage through the new marketplaces. Some consumer advocates like it because they think the plan would make coverage less pricey by offering lower cost-sharing. Another bonus for consumers is that individuals who miscalculate the amount of their incomes or see their salaries rise over the year won't have to pay federal officials back any extra tax subsidies that they should not have been entitled to get.

The proposed rule lays out the procedures for certifying a state's plan for a Basic Health Program. The proposal outlines eligibility, enrollment and benefit requirements for standard health plan coverage offered through the program. CMS officials also explained how states can use federal funding for it and what the guidelines for consumers' payments should be.

By Rebecca Adams, CQ HealthBeat Associate Editor

September 18, 2013 -- Most children who qualify for Medicaid or the Children's Health Insurance Program (CHIP) are getting enrolled, according to a new study by the Robert Wood Johnson Foundation and the Urban Institute.

About 87.2 percent of children who were eligible for public health insurance programs in 2011 enrolled. That's an increase of 5.5 percentage points since 2008.

The number of eligible-but-uninsured children dropped from 4.9 million in 2008 to 4.0 million in 2011, an 18 percent drop in three years.

Nineteen states and the District of Columbia, most of them west of Texas, enrolled at least 90 percent of children who are eligible. Those states include a mix of states that have decided to expand Medicaid for adults and those that have not.

Some of the success in getting more youngsters signed up is due to growing awareness of the coverage and increased state efforts and encouragement by federal officials to simplify enrollment and renewal processes.

The report said that it is unclear whether the progress will continue.

"On one hand, a number of policies that will be introduced under the Affordable Care Act (ACA), including the expansion of coverage to more parents, the new outreach and enrollment efforts, and the new subsidies for coverage, combined with the individual mandate should lead to increases in participation in Medicaid and CHIP and reductions in uninsurance among children," said the report. "On the other hand, uncertainty over the future of CHIP, which was reauthorized through October 1, 2015, raises the possibility that the coverage gains that children have experienced will erode."