• Obama insists current coverage can be kept under health care reform
• Drug companies, Senate Finance, make deal on drug costs
• CMS clarifies ARRA effects on Medicaid eligibility

• Health insurance coverage extended for adult children in Pennsylvania
• State health care reform update

• Employees concerned about insurance coverage changes, their ability to pay

Obama Insists Current Coverage Can Be Kept Under Health Care Reform

On June 24, at a health care forum at the White House moderated by ABC News' Charles Gibson and Diane Sawyer, President Barack Obama reiterated many of the positions he has advocated since first taking office in January. Several times during the question-and-answer session Mr. Obama stressed that under health reform those individuals who had health care coverage that they liked could keep it, and that the health care system could be vastly improved with changes in how medicine is practiced and reimbursed.

"If you are happy with your plan and your doctor, you stick with it. If you don't have insurance, if it's too much for you to afford, if your employer doesn't provide or you're self-employed, then we will have what is called an exchange, but you can also think of it as a marketplace where essentially people can compare and look at what options are out there.

"They'll have a host of different health care plans available, each with their own physicians' network. And you will be able to sign up for the plan that works for you. We will help people who don't have insurance get insurance.

"Doctors are not going to be working for the government. They're still going to be working for themselves. They're still going to be focused on patient care. And in terms of how doctors are reimbursed, it's going to be the same system that we have now, except we can start making some changes so that, for example, we're rewarding quality of outcomes rather than the number of procedures that are done.

"And this is true not just for doctors, it's also true for hospitals. One of the things that we could say to hospitals is, reduce your readmission rate, which is also often a sign that health outcomes have not been so good. And it turns out that hospitals, when they're incentivized, actually can find ways to do it that, every study shows, does not have adverse effects on outcomes."

In response to a question from Diane Sawyer about why the government should be involved in reforms that already are being undertaken in the private sector by organizations such as the Mayo Clinic and the Safeway Company "and, with the right initiative and impetus, could be done in the private sector without government involvement," Mr. Obama said the following:

"Well, you just said 'with the right initiative.' And, unfortunately, that initiative hasn't been forthcoming....The average family has seen their premiums double in the last nine years. Costs for families are going up three times faster than wages. So if you're happy with your health care right now --and many people are happy with their health care right now --the problem is, ten years from now, you're not going to be happy, because it's going to cost twice as much or three times as much as it does right now....

"So, unfortunately, whatever it is that we're doing right now isn't working. What we see is great examples of outstanding care, businesses that are working with their employees on prevention, but it's not spreading through the system.

"And, unfortunately, government, whether you like it or not, is going to already be involved. You know, we pay for Medicare. We pay for Medicaid. There are a whole host of rules both at the state and federal level governing how health care is administered. And so the key is for us to try to figure out, how do we take that involvement, not to completely replace what we have, but to build on what works and stop doing what doesn't work."

Mr. Obama also noted that options for financing health care reform include taxing health care benefits over a certain level, capping the deduction, or imposing a surcharge on high-income individuals: "I continue to believe that the better way for us to fund this is through the capping of the itemized deduction."

A transcript of the forum, Questions for the President: Prescription for America, is available at
http://abcnews.go.com/Politics/HealthCare/story?id=7920012&page=1

Drug companies, Senate Finance, make deal on drug costs

A pharmaceutical industry trade group has reached agreement with the Senate Finance Committee on a prescription drug price break for Medicare beneficiaries that is estimated to equal $80 billion over 10 years. Under the agreement, announced June 20, drug companies represented by the Pharmaceutical Research and Manufacturers of America (PhRMA) will cover up to 50 percent of the cost of drugs under the Medicare Part D program, for beneficiaries who fall into the “doughnut hole.”

Under the Part D program, Medicare covers prescription drug costs up to $2,700 per beneficiary. From $2,700 to $6,100 in drug spending (the “doughnut hole”), the beneficiary is responsible for all drug costs. After $6,100, the Medicare benefit kicks in again. Under the agreement, drug companies will cover up to 50 percent of the costs of brand name drugs that fall into the doughnut hole.

The agreement is expected to be part of comprehensive health care reform legislation being considered by Congress. According to a release from Senate Finance Committee Max Baucus, D.-Mont., “the agreement would give the Secretary of Health and Human Services the authority to create the new Medicare Prescription Drug Discount Program on July 1, 2010, and the program would be administered by an independent third party. The agreement includes a provision to discourage private employers from dropping prescription drug coverage currently provided to retirees. It also establishes audits of drug company manufacturers to ensure the discounted prices are appropriately set.”

CCH Chicago Bureau, June 22, 2009

CMS clarifies ARRA effects on Medicaid eligibility

Directors of state Medicaid and children's health insurance programs are instructed on the effects of payments and tax credits given to individuals under sections 1001, 2002, 2201 and 2202 of the American Recovery and Reinvestment Act of 2009 (ARRA) (PubLNo 111-5) on eligibility determinations. The tax credits under section 1001 may be implemented by employers, who will decrease income tax withholding. Neither the increased net income nor any tax refund is countable income with respect to any federal or federally-assisted programs; the maximum amount to be disregarded is $400 or 6.2 percent. The tax credit, including any refund, available to government retirees under section 2202 may not be counted as income, and it may not be counted as a resource for two months after receipt.

Similarly, increases in unemployment compensation under section 2002 and the one-time payments of $250 to recipients of Social Security, Supplemental Security Income, Railroad Retirement Benefits, and Veterans Disability Compensation or pension benefits under section 2201 are not countable income to the recipient, a spouse or other members of the household for eligibility purposes. The one-time payment under section 2201 also may not be counted as an available resource for nine months after receipt of the payment, and a transfer of the payment during the exempt period may not be penalized under Soc. Sec. Act §1917.

The 6.2 percent increase to the federal medical assistance percentage (FMAP) under ARRA section 5001 is available to states unless they have: (1) restricted financial eligibility for Medicaid or CHIP since July 1, 2008; (2) used Medicaid funds to add to any rainy-day or reserve fund; or (3) required local governments to increase their contributions to the state's Medicaid expenditures during the recession period, October 1, 2008, through December 31, 2010. The states also will not receive increased FMAP for claims received on days when they were out of compliance with the prompt payment requirements. The prompt payment requirements were extended to hospital and nursing facility claims as of June 1, 2009.

CMS also clarified guidance of March 25, 2009, concerning the maintenance of effort requirements of section 5001. Increased FMAP will not be available for eligibility expansions raising the limit based on a percentage of the federal poverty level (FPL) after July 1, 2008; however, other eligibility expansions, such as those based upon more flexible methodologies for counting income or standards not based on the FPL may qualify for the increase.

The guidance on the effects of states' changes to the number of slots available in home- and community-based services (HCBS) waiver programs has been modified so that the change is compared to the higher of the number of slots authorized by state law or the number of slots occupied. State directors are encouraged to raise additional concerns and questions. CMS plans to respond with additional guidance as needed.

CMS Letter to State Medicaid Directors, No. SMDL-09-003, June 17, 2009

Health insurance coverage extended for adult children in Pennsylvania

Certain adult children will be able to remain on their parents' group health insurance up through and including the age of 29, under a law signed by Pennsylvania Governor Edward G. Rendell on June 10, 2009. Employers will have the option to include the extended coverage in their policies or not, at the insured employees' expense. In addition, insurers may increase premiums based on the continued coverage.

Eligible children include those who are not married, who have no dependents, are either residents of Pennsylvania or enrolled full-time in institutions of higher education, and who are not provided coverage under another group or individual heath insurance policy or enrolled in or entitled to health benefits under a government program. The law applies to new contracts and contract renewals occurring 180 days after June 10, 2009 (Act No. 2009-4 (S. 189), L. 2009, enacted June 10, 2009).

State health care reform update

For the last few years, states have been leading the way toward more comprehensive health care coverage to ensure that more people have or can obtain health insurance. Here are highlights of recent state action regarding health care reform:

Connecticut. State senators have passed two health care bills that would allow municipalities and small businesses to join the state employee health care pool. However, Gov. Jodi Rell vetoed a similar bill to allow pooling last year, and the Connecticut budget director has spoken out against it this year. For more information, visit http://www.cga.ct.gov/.

Florida. Gov. Charlie Crist has signed legislation that would provide health care coverage to an estimated 50,000 additional uninsured children. The new legislation shortens the waiting time to enroll in the state's Kid Care program and lessens the penalties for missing a premium payment. Currently, the program provides health care to approximately 1.5 million children. For more information, visit http://www.floridakidcare.org.

Maine. Gov. John Baldacci has signed legislation into law that will impose a 2.14% surcharge on health care claims to help fund DirigoChoice, the state-subsidized program offered to small employers and individuals (see Report 504.-9). This surcharge will replace a controversial assessment on health care insurers that failed to provide enough revenue to fund the program. The 2.14% surcharge will apply to claims starting October 1. For more information, visit http://www.dirigohealth.maine.gov/.

Maryland. Two-thirds of Maryland residents say that they support a health care proposal that provides catastrophic health care coverage for everyone and would be paid for by employers and individuals on a sliding scale, according to a poll from the Maryland Citizens' Health Initiative. In addition, 53% see health care reform as an urgent priority for the state, while 37% said that the state should wait for national health care reform. For more information, visit http://www.healthcareforall.com/HTML1.phtml.

Michigan. The state's Medicaid program is growing by approximately 15,000 people per month, but fewer physicians are accepting new patients insured by the program. Physicians say that Medicaid pays too little to cover their costs, and last month the program announced an additional 4% cut, which lowered payments for hospitals, dentists, and doctors. The program currently insures 1.6 million state residents. For more information, visit http://michigan.gov/mdch/0,1607,7-132-2943_4860---,00.html.

Oregon. The state senate has approved a measure to extend state health care coverage to an additional 80,000 children and 35,000 low-income adults. To extend coverage, the measure raises taxes on hospital revenues and establishes a new tax on health insurance premiums. The state also approved a bill that would create an Oregon Health Authority that would be charged with streamlining state health care services and carrying out a variety of initiatives to contain costs and improve quality. For more information, visit http://www.leg.state.or.us/senate/senateset.htm.

Pennsylvania. The Pennsylvania senate has approved a bill that would allow laid-off workers from firms with fewer than 20 employees to qualify for the federal subsidy for COBRA coverage (see News, April 27, 2009, States Enact And Extend Mini-COBRA Laws To Supplement ARRA Provisions). The federal subsidy provides coverage of 65% of workers' COBRA premiums for nine months, but is only available to workers at firms with 20 or more employees. The Pennsylvania program extends the same subsidy to employees of smaller firms who lost their jobs between Sept. 1, 2008, and Dec. 31, 2009. For more information, visit http://www.dsf.health.state.pa.us/health/site/default.asp.

Texas. The state senate has approved a bill that would increase enrollment in the state's Children's Health Insurance Program (CHIP). The bill would raise the income eligibility threshold for the program to 200% of the federal poverty level for a family of four. Also, under the bill, families' premiums, copayments, and fees would not exceed 5% of their net income. This could extend CHIP coverage to as many as 80,000 uninsured children statewide. For more information, visit http://www.chipmedicaid.org/.

Washington. Gov. Chris Gregoire has signed legislation that delays implementation of a 2007 law giving employees up to five weeks of paid leave after the birth or adoption of a child. The effective date of the paid leave mandate has been moved from October 2009 to October 2012, and will give lawmakers more time to identify a funding source for the program. Under the law, employees would be eligible for up to $250 per week of paid leave for up to five weeks. For more information, visit http://www.leg.wa.gov/senate.

Employees concerned about insurance coverage changes, their ability to pay

Eight out of 10 employees are concerned about changes their employers have made to their insurance coverage in the past year and how they will pay for these changes. A nationwide survey commissioned by Colonial Life & Accident Insurance Company and conducted by Harris Interactive,(R) revealed that, of full-time employed adults whose employers have made changes to their insurance coverage in the last year:

• 86 percent say they're at least somewhat concerned about unexpected medical expenses such as emergency room visits, major surgery, etc.
• 83 percent say they're at least somewhat concerned about both increased premiums and expenses no longer covered by their plans.
• 81 percent say they're at least somewhat concerned about the addition of or an increase in deductible amount.
• 79 percent say they're at least somewhat concerned about the addition of or an increase in their co-pay amount.

Nearly half of employees report changes in coverage since 2008. 49 percent of full time employed adults who are enrolled in an insurance program provided by their employers and/or their spouses say their employers made the following changes to their coverage in the past year (from 2008 to 2009):

• 65 percent reported increased premiums.
• 56 percent reported the addition of or an increase in co-pay amounts.
• 48 percent reported the addition of or an increase in deductibles.
• 13 percent reported an elimination of one or more types of coverage life, health, disability).

Employees concerned about inadequate coverage. The majority of full-time employed adults who are enrolled in an insurance program provided by their employers and/or their spouses also expressed concern that their insurance providers may not provide adequate coverage:

• 35 percent feel their plans may not adequately cover their inability to earn an income for an extended time due to illness or injury.
• 28 percent feel their plans may not adequately cover a serious illness such as cancer, stroke or heart attack.
• 19 percent feel their plans may not adequately cover an unexpected emergency room visit.
• 19 percent feel their plans may not adequately cover the death of a primary wage earner.
• 13 percent feel their plans may not adequately cover basic medical care, including preventive care.

Employees express interest in voluntary benefits. Employees expressed considerable interest in purchasing supplemental coverage or voluntary benefits to help pay for some of the expenses not currently covered by their insurance plans. 78 percent of full time employed adults who are enrolled in an insurance program provided by their employer and/or their spouse were at least somewhat interested in this type of coverage.

Harris Interactive(R) fielded the online study on behalf of Colonial Life between April 23 and 27, 2009, interviewing a nationwide sample of 1,024 U.S. adults aged 18 years and older who were employed full-time and enrolled in an employer-provided/spouses' health insurance plan. Data were weighted using propensity score weighting to be representative of the total U.S. adult population on the basis of region, age within gender, education, household income, race/ethnicity, and propensity to be online. No estimates of theoretical sampling error can be calculated; a full methodology is available.

Of the 1,181 full-time employees surveyed, 87 percent were enrolled in an employer-provided or a spouse's insurance plan.

• 84 percent were enrolled in health insurance.
• 64 percent were enrolled in life insurance.
• 42 percent were enrolled in disability insurance.

Source: Colonial Life, http://www.coloniallife.com/.

Substantial Savings Needed To Cover Health Care Expenses In Retirement: EBRI

The rising costs of health care, the declining availability of retiree medical coverage, and the increasing share of expenses that individual must pay indicate that "many workers are generally unprepared for both health care expenses in retirement and retirement expenses," according to a new study published in the June 2009 EBRI Notes.

In the article, Savings Needed for Health Expenses in Retirement: An Examination of Persons Ages 55 and 65 in 2009, EBRI's Paul Fronstin, Dallas Salisbury, and Jack VanDerhei, estimate that to cover health insurance premiums and out-of-pocket expenses in retirement, men and women age 65 retiring this year will need the following savings to have enough money:

                                             Men                                        Women

For an even chance      $68,000 to $173,000      $98,000 to $242,000

For a 90% chance        $134,000 to $378,000     $164,000 to $450,000

Persons currently age 55 will need even greater savings when they turn 65 in 2019, from $114,000 to $634,000 for men, and from $164,000 to $754,000 for women.

The estimates vary depending on individuals' source of health insurance coverage to supplement Medicare (retiree medical or a Medigap plan), any employer subsidies, prescription drug use, and their savings goal related to their comfort level with having a 50%, 75%, or 90% chance of having enough savings to cover health insurance premiums and out-of-pocket health care expenses in retirement.

Estimates for those seeking a median (50%) chance of having enough money for health care in retirement are higher than a year ago by about 9% for men and married couples, and by 16% for single women.

However, many individuals will need much higher savings to cover any long-term care expenses or to account for their retirement prior to becoming qualified for Medicare.

The present value of lifetime Medicare benefits for a husband and wife turning age 65 in 2010 has been estimated at about $376,000. Consequently, because Medicare on average covers 60% of health care costs for beneficiaries, the average husband and wife will need about $250,000 in savings to cover what Medicare does not cover. However, individuals cannot simply assume they are average, EBRI points out: While half of men and women turning age 65 in 2009 will live to age 81 and 84, respectively, 25% likely will live until ages 87 and 90, respectively. Furthermore, 10% of men and women currently age 65 can expect to live until 91 and 95, respectively. In the case of a married couple both currently age 65, the probability that at least one of the spouses will still be alive at these various ages is even greater.

The study notes that "issues surrounding retirement income security are certain to become an even greater challenge in the future as employers continue to scale back retiree health benefits, and when policymakers begin to realistically address financial issues in the Medicare program with solutions that are likely to shift more responsibility for health care costs to Medicare beneficiaries."

The June EBRI Notes is available at http://www.ebri.org.

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