• CBO estimates Medicare savings In House reform bill
• Baucus facing increased resistance on taxing health care plans
• Updated Medicare Hospital Compare web site displays readmission rates
• Senate HELP Committee approves long-term care section

• Indiana health plans must cover care related to cancer trials
• Texas mandates health plan coverage for prosthetics, orthotics
• Washington establishes minimum lifetime limit on coverage for organ, tissue transplants

• Hospitals pledge $155 billion in reductions for health reform
• Group proposes expanded Medicare tax to fund health care reform
• Public health insurance plan option could make market more competitive
• Employers prefer incremental approach to health care reform
• National health standard likely to meet or exceed most state mandates
• Unaffordability is reason families don't buy individual health insurance

CBO estimates Medicare savings In House reform bill

On July 7, the House Committees on Energy and Commerce and Ways and Means released a preliminary estimate from the Congressional Budget Office (CBO) on the Medicare portion of the House Tri-Committee health care reform discussion draft. The preliminary estimate indicates a savings of more than $150 billion to Medicare over 10 years while also extending the solvency of the Medicare trust fund and providing key payment and delivery system reforms.

The estimate released is limited to costs and savings associated with Medicare included in the discussion draft.

Ways and Means Committee chairman Charles B. Rangel (N.Y.) and Energy and Commerce Committee chairman Henry A. Waxman (Cal.) issued the following statement on the preliminary estimate of the Medicare provisions:

"The Committees have been working with CBO for several months, along with the Administration, developing policies that are both good for Medicare and provide funding for reforms. We have many savings items that were recommended by the Administration and the Medicare Payment Advisory Committee, and we are looking forward to working in our Committees to develop the final proposals.

"These estimates show our commitment to strengthening the Medicare program and advancing fiscally-sound health reform that will help all Americans gain access to affordable, quality care that meets their needs."

For more information, visit http://energycommerce.house.gov/.

Baucus Facing Increased Resistance on Taxing Health Care Plans

Senate Finance Committee Chairman Max Baucus, D-Mont., is scrambling to find ways to offset some $320 billion from the estimated $1 trillion dollar price tag of health care overhaul legislation after both Republican and Democrats, including Senate Majority Leader Harry Reid, D-Nev., publicly and privately expressed their reservations over plans to tax employer provided health benefits. And Reid is further pressuring Baucus to hold firm on inclusion of a public health insurance option, despite Finance Committee Republicans' resistance to such a proposal.

The brewing dissent left Baucus holding open the possibility of raising revenue outside of the health care system and backing down on an earlier pledge not to seek revenue in other areas. Back on the table is discussion of taxing sugared drinks, placing additional taxes on alcohol and tobacco, and levying a surtax on the wealthy, roughly paced at those earning more than $250,000 a year. Most lawmakers, however, downplayed those options, saying the Committee would continue to look for ways to cut costs through savings in other areas.

"The most difficult issue is paying for it," said Sen. Charles E. Schumer, D-NY, adding that "there are lots of options out there to fill the hole." He does not believe the tax on health care benefits is completely without merit, but he acknowledged that there will be resistance among Democrats if it cuts too deeply into middle class pocketbooks. One option is to cap the tax at benefits valued over $25,000, which would raise $90 billion over 10 years. The question now facing lawmakers is what constitutes the middle class, and Schumer was not convinced that the proposed cap would pass that test. "If that still includes the middle class there will be a lot of concern," he warned.

But Democratic leaders are apparently losing patience with the snail pace of Baucus' negotiations with Republicans and continued setbacks. Reid wants to complete action on the bill before the month long summer recess which is slated to begin for the Senate on August 7. In an effort to move the process forward he met July 8 with four Republican heavyweights on the Finance Committee; ranking member Charles E. Grassley, R-Iowa, Olympia J. Snowe, R-Maine, Orrin Hatch, R-Utah, and Michael B. Enzi, R-Wyo.

"We need to work with Republicans," said Reid the following day. "It's better that we do a bipartisan bill... we are committed to doing this." In an effort to deflect charges that he was strong arming Baucus and cutting Republicans out of the picture, Reid added that he was not going to "draw lines," but was standing by his timetable of completing a health care reform bill by the start of the August recess. As to the difficulties the finance panel is reportedly having over raising revenue to pay for the bill, Reid asserted that lawmakers involved in assembling the bill had already worked out 85 to 90 percent of the needed revenue, mostly through new cost cutting measures. "We will be able to pay for this in a bipartisan manner," he said.

Reaching final agreement in a timely manner, however, still seems elusive. Following a July 9 meeting with a small group of bipartisan Finance Committee members, Baucus acknowledged that lawmakers are resistant to raising revenue through taxation. "It's difficult, but there is no discouragement," he said. "We are moving the ball forward. We are discussing a lot of revenue options."

But Baucus also refused to offer a time frame for completion of his mark, saying only that meetings and discussions were ongoing. Other members were also unwilling to offer assurances that the job would be done anytime soon. "We are going through a laundry list and trying to see what is possible," said Snowe.

Updated Medicare Hospital Compare Web Site displays readmission rates

The Centers for Medicare and Medicaid Services (CMS) has announced that its Hospital Compare Web site now will report how frequently patients return to a hospital after being discharged, a possible indicator of a hospital's performance. The site is http://www.hospitalcompare.hhs.gov.

On average, one in five Medicare beneficiaries discharged from a hospital currently will be readmitted within one month. Reducing the rate of hospital readmissions to improve quality and achieve savings is a key component of President Barack Obama's health care reform agenda.

"The President and Congress have both identified the reduction of readmissions as a target area for health reform," said Health and Human Services Secretary Kathleen Sebelius. "When we reduce readmissions, we improve the quality of care patients receive and cut health care costs."

As updated, the Hospital Compare Web site will provide data on 30-day readmissions, as well as mortality rates for more than 4,700 of America's acute-care hospitals for heart attack, heart failure, and pneumonia. Previously, the Web site had provided only mortality rates for these three conditions. Both sets of measures are risk-adjusted and take into account previous health problems to "level the playing field" among hospitals and to help ensure accuracy in performance reporting.

Research has shown that hospital readmissions reduce the quality of health care and increase hospital costs. Hospital Compare data shows that the 30-day readmission rates for patients admitted to a hospital are 20% for heart attack patients, 25% for heart failure patients, and 18% for pneumonia patients.

The CMS has been tracking the outcomes of hospital care since 2007, when Hospital Compare began showing 30-day mortality rates for heart attack and heart failure patients. Thirty-day mortality rates for pneumonia and other features were added to the Web site in 2008).

This year, the CMS has changed the way that it calculates the mortality data. In 2007 and 2008, Medicare used only one year of claims data to compute mortality, while the rates now added to the Web site cover three full years of claims data (from July 1, 2005, through June 30, 2008). Although this means that consumers cannot compare data from last year's rate with this year's rate, the expanded data set should provide a clearer picture of how well hospitals are performing, the CMS noted. Using the three-year data method, the CMS estimates that the national 30-day mortality rate for patients originally admitted for heart attack care is 16.6%; for heart failure care is 11%, and for pneumonia care is 11.5%.

The Hospital Compare Web site will show a hospital's mortality or readmissions rate is "better than," "no different from," or "worse than" the U.S. national rate. This information includes each hospital's risk-standardized mortality rate (RSMR), an estimate of the rate's certainty (also known as the interval estimate); and the number of eligible cases for each hospital. "By posting hospital RSMRs, interval estimates, and the number of eligible cases, CMS is giving consumers and communities additional insight into the performance of their local hospitals in hopes that this will prompt all hospitals to work toward achieving the level of the top-performing hospitals in the country," the CMS indicated in a press release.

The CMS updates most of its Hospital Compare measures quarterly.

Senate HELP Committee approves long-term care section

On July 7, the Senate Health, Education, Labor and Pensions (HELP) Committee finished marking up long term care provisions included in the Affordable Health Choices Act. The committee approved a proposal that calls for a voluntary long term care insurance program that would pay $50 per day for adult care.

In order to be eligible for benefits, adults would have to pay a $65 monthly premium over the course of five years and work a minimum of three years during that period. The Congressional Budget Office estimated the cost of the program at $65 billion over 10 years.

Health and Human Services Secretary Kathleen G. Sebelius expressed the Obama Administration's support for the so-called Community Living Assistance Services and Supports (CLASS) Act. In a July 6 letter to HELP Committee chairman Sen. Edward M. Kennedy (Mass.), Ms. Sebelius said that the proposal was an "innovative voluntary program that will provide important benefits to people who need them."

Indiana health plans must cover care related to cancer trials

A new law in Indiana requires accident and sickness insurance policies, HMOs, state employee health plans and the state Medicaid program to cover routine care costs incurred in the course of a cancer clinical trial if the plan would cover those same costs if they weren't incurred in a clinical trial. "Routine care costs" include the costs of medically necessary services related to the care method under evaluation but excludes, among other things, the health care service that is the subject of the clinical trial and treatments that are not part of the usual and customary standard of care.

Coverage is subject to the terms, conditions, exclusions and limitations that apply generally under the plan, including participating provider requirements. Note that the law does not:

• Require or prohibit the plan from providing coverage for clinical trial services rendered by a participating provider; or
• Require reimbursement for services rendered in a clinical trial by a nonparticipating provider at the same rate applicable to services provided by a participating provider.

The new requirement applies to policies and contracts issued, delivered, amended or renewed after June 30, 2009 (Secs. 27-8-25, 27-13-7-20.2 and 5-10-8-15, as added by Ch. 109 (H. 1382), L. 2009, effective July 1, 2009).

Texas mandates health plan coverage for prosthetics, orthotics

Health benefit plans delivered, issued for delivery or renewed on or after January 1, 2010, must provide coverage for prosthetic devices, orthotic devices and professional services related to their fitting and use that equals the coverage provided for the aged and disabled under federal Social Security law. Repair and replacement of the devices must be covered as well, unless necessitated by an enrollee's misuse or loss.

Coverage may not be subject to annual dollar limits, but may be subject to annual deductibles, copayments, coinsurance and preauthorization requirements that are consistent with those imposed for other coverage under the plan. Managed care plans may require the devices and services to be rendered by designated providers. Also, if a plan provides in-network and out-of-network services, prosthetics and orthotics coverage provided through out-of-network services must be comparable to that provided through in-network services (Sec. 1371, as added by H. 806 (L. 2009), effective September 1, 2009).

Washington establishes minimum lifetime limit on coverage for organ, tissue transplants

Under a new law in Washington, health benefit plans that provide coverage for organ and tissue transplants may not permit a separate lifetime limit on transplants of any less than $350,000. Benefits are subject to all other terms and conditions of the plan, including applicable coinsurance, deductibles and copayments.

The new requirement applies to plans issued or renewed on or after January 1, 2010 (S. 5725 (L. 2009), effective July 25, 2009).

Hospitals pledge $155 billion in reductions for health reform

On July 8, Vice President Joe Biden announced an agreement, as part of the health reform effort, between three major hospital organizations, Finance Committee chairman Sen. Max Baucus (Mont.), and President Barack Obama, to cut by $155 billion over the next 10 years Medicare spending for hospital services. Mr. Biden was joined in the announcement by Rich Umbdenstock, president and chief executive officer of the American Hospital Association (AHA); Carol Keehan, president and chief executive officer of the Catholic Health Association of the United States (CHA); and Chip Kahn, president of the Federation of American Hospitals (FAH).

The AHA, CHA, and FAH agreed to the reductions only if coverage of the uninsured is increased under health reform.

Mr. Biden said that the hospital cost reductions "will be achieved through a combination of delivery system reforms, and additional reductions in hospitals' annual inflationary updates. All of these savings are based on the policies the Administration proposed in its budget to fund health care reform."

According to the CHA, the agreement holds hospitals to Medicare payment reductions and delivery system reforms, but "protects hospital payments until there is significant new coverage of the uninsured."

A joint statement issued by the AHA, the CHA, and the FAH notes that the agreement includes "restrictions on physician self-referral to hospitals in which they have an ownership interest, proposals to simplify administrative red tape, and no cuts to funding that teaching hospitals rely upon to train the next generation of physicians. In addition, the disproportionate share programs (DSH) that help hospitals care for the uninsured and underinsured and support important community resources would not be reduced until 2015, and reductions would only occur if coverage expansions actually took place. Roughly 60% of the existing DSH payments would be preserved to support our nation's safety net."

Reportedly, about $50 billion of the $155 billion in pledged savings would come from reductions in disproportionate share programs.

The agreement follows announcements by Wal-Mart and the Service Employees International Union to support an employer mandate; and an agreement by the pharmaceutical industry to reduce Medicare drug costs by $80 billion.

The text of Mr. Biden's July 8 remarks are at http://www.whitehouse.gov/briefing_room/Remarks/; the text of the AHA/CHA/FAH statement is at http://www.aha.org/aha/press-release/2009/090708-jointst-covreform.pdf.

Group proposes expanded Medicare tax to fund health care reform

As Congress and the White House consider several options to finance health care reform, the Citizens for Tax Justice proposed expanding the Medicare payroll tax on individuals to include unearned income and adding a 2.5 percent Medicare tax rate on earned and unearned income of individuals earning more than $200,000 and married couples earning more than $250,000 a year.

The CTJ, in a report released on July 7, recommended exempting the first $50,000 in investment income for moderate-income seniors and $100,000 in investment income for married seniors from the expanded Medicare tax, According to the study, these proposals would raise $40.5 billion in 2011 and $500 billion over 10 years, without disproportionately affecting low- and middle income taxpayers. Most taxpayers would see either no increase in their taxes or less than $100 annually, according to the report.

Ann Kempski, SEIU director of health policy, called the revenue options a fair and fiscally responsible way to pay for the overhaul of the current health care system. Delaying action would result in significantly higher premiums and out-of-pocket expenses and lead many employers to drop their employee's health care coverage, Kempski asserted.

Public health insurance plan option could make market more competitive

The central reason for including a public plan as a component of health care reform is that health insurance markets currently are not competitive, according to John F. Holahan and Linda J. Blumberg, economists and respectively director and senior fellow at the Urban Institute's Health Policy Center. Consequently, "these markets are not providing the benefits one would expect from competition, including efficient operations and consequent control over health care costs." The authors discussed this and other premises in their research paper, Is the Public Plan Option a Necessary Part of Health Reform? released on June 26.

A major contributor to the lack of competitiveness in the health insurance market is the consolidation in the past several years of insurers and hospital markets, the authors noted. In 2003, in 36 of the 50 states, three or fewer health insurers accounted for 65% of the commercial market, a 2004 study found. In addition, a 2008 review conducted for the American Medical Association found that the consolidation has continued: in 89% of the 314 metropolitan statistical areas studied in 42 states, one health insurer had at least 30% of the commercial health insurance market and one insurer had at least half of the insurance market in 15 states.

"The role of the government plan is to counter the adverse impacts of market concentration and, in doing so, slow the growth in health care costs," the authors explained. "Contrary to opponents' claims, with a public health plan option, private insurance plans would survive, but operate more efficiently and effectively to control spending."

Another indicator of the lack of competition in health insurance markets is the industry's increasing profits-in the period from 2000 to 2007, privately insured spending rose 6.7% annually, but insurance premiums rose 8.9% and 9.5% annually for individual and family coverage, respectively. During that same period, health insurers reported large profits.

Similar problems with consolidation and anticompetitiveness are found in the medical industry, particularly for hospitals. In markets controlled by a few concentrated hospitals, prices for services are substantially higher and hospitals have greater price negotiation leverage. Price variation is wide and not necessarily reflective of quality of care. "The lack of effective competition and demand-side market power has contributed to the medical arms race and health care costs growing considerably faster than the economy," the authors noted.

"There are at least two strong arguments for a competing public plan," the authors added. "The first reason is that there is a strong need for cost containment both to lower the growth in health care costs for all Americans and to lower the cost of providing government subsidies for the purchase of insurance to lower-income people. The public plan would have lower administrative costs than private plans and could establish or negotiate provider payment rates at lower levels than private payers are able or willing to do today. The second reason is that some private insurers have denied claims and delayed payments to individuals with high health care needs as a way to control costs."

A public plan such as what the Urban Institute authors envision would be similar to the Medicare fee-for-service (FFS) program, but managed FFS, using prospective payment systems for different types of providers. The public plan would be a national plan following national "policies" but competing in local or regional exchanges using local prices. Insurance market rules would be reformed to require guaranteed issue and modified community rating while prohibiting preexisting condition exclusions or benefit riders. The range of insurance benefits packages would be limited and standardized nationally, perhaps varying in the levels of cost sharing.

For more information, visit http://www.urbaninstitute.org.

Employers prefer incremental approach to health care reform

A survey of 329 US employers conducted by Mercer has found that a significant majority (67 percent) favor a phased-in approach to national health care reform. Only 11 percent said they favor the enactment of comprehensive reform this year, and the remaining 12 percent said they are not sure.

Employers are signaling strong concern over the initial cost estimates for implementing health care reform, said Linda Havlin, a Mercer worldwide partner. Uncertainties about how and when employers will emerge from the recession have heightened their concern about the unknown cost impact of a complex industry restructuring effort. If there is a shortfall, will employers be expected to close the gap?

Quality improvement, market reform. Survey respondents were asked to assign high, medium or low priority ratings to 11 components that have been prominent in comprehensive health reform proposals. The range of elements included mandates for individuals and employers, changes in tax treatment of employer-sponsored health coverage, investments in improving quality and cost efficiency, creating new public health insurance plans and exchanges, insurance market reforms and expanding eligibility for coverage under existing public programs.

The surveyed employers selected quality and market reform as their top priorities. Increased incentives to improve health care quality and efficiency, such as adopting provider pay for performance and health information technology, was the reform element selected as a high priority by the most respondents (60 percent).

Putting health reform aside, quality improvement is the best option employers have for controlling the trend of rising costs, suggested Havlin. Government can support this need through funding and aligning government-sponsored programs with private sector initiatives. Improving quality encompasses building more credible databases for evaluating provider performance, paying providers for outcomes, improving patient compliance, continuing support for electronic medical record adoption, improving coordination of care for people with complex illnesses and increasing primary care resources, particularly for underserved locations.

Second on the survey respondents' list of high priorities was to enact insurance market reforms, including requiring insurance companies to offer individual coverage and eliminating pre-existing condition exclusions and lifetime benefit limits, with 50 percent of respondents citing it as a high priority.

Employers remain most opposed to limits on the favorable tax treatment of employer-sponsored health benefits and to a mandate for employers to offer coverage (59 percent and 52 percent, respectively, believe these initiatives should not be part of reform). While respondents clearly reject curbing the favorable tax treatment of employer-sponsored health benefits, their responses were less uniform when asked how they would be likely to react if a hypothetical reduction in the current tax exclusion for employer-sponsored coverage resulted in an average increase of $3,000 in taxable income to their employees.

Limited support for other reform proposals. The survey indicated there is no clear consensus on several aspects of reform legislation that would potentially increase cost and regulatory requirements. Such elements include increasing dependent eligibility to age 26, individual coverage mandates, expansion of Medicaid eligibility and subsidies, and the creation of insurance exchanges and navigators, which would be new government structures. Despite the considerable media attention given to the creation of a public health plan, just 24 percent of all respondents said they consider it a high priority for reform.

The public plan has emerged as a contentious issue, said Havlin. Health plans are concerned that the public plan's ability to use government rates for paying providers will make it impossible for them to compete against the plan and that it will potentially set a course for a single-payer system. Providers are concerned about having a higher percentage of their patient revenue based on government rates. Employers are concerned about the potential for more cost shifting if they retain private plans.

SOURCE: www.mercer.com.

National health standard likely to meet or exceed most state mandates

Most of the proposed health care reform proposals would establish a national minimum benefits standard, where the federal government would require an essential level of benefits to be offered by all health care plans. The Federal Employees Health Benefits Program (FEHBP) often is used as an example of a minimum creditable coverage plan. The Commonwealth Fund compared the level of benefits offered by the FEHBP to the varying state mandates across the country and found that the benefits offered through the FEHBP either meet or exceed the majority of state mandates.

Currently, benefit mandates for health insurance coverage are set at the state level; these vary greatly across states and generally target specific areas rather than set an overall standard for what qualifies as health insurance. Furthermore, the state health insurance mandates do not apply to self-funded group health plans, which are instead governed by ERISA. State mandates include requirements for services, providers, and eligibility for coverage.

The Commonwealth Fund found that most of the state-mandated benefits would be included in a national standard for benefits that is broad in scope and includes preventive care, mental health care, care for women and children, and prescription medications. The study found only two state-mandated benefits that would not be covered --(1) in-vitro fertilization (mandated by nine states); and (2) treatment of temporomandibular joint (TMJ) syndrome (mandated by 20 states).

"Policymakers proposing a federal minimum benefit standard must keep in mind how it would interact with existing state mandates," the Commonwealth Fund noted. "While the national standard should serve as a floor for benefits, states could be permitted to mandate more generous benefits than the national standard, if they elect to do so." For more information about the study, visit http://www.commonwealthfund.org/Content/Publications/Issue-Briefs/2009/Jun/Setting-a-National-Minimum-Standard-for-Health-Benefits.aspx.

Unaffordability is why families do not buy individual health insurance

The majority of uninsured Americans not covered by employer-sponsored group health insurance cannot afford to buy health insurance, according to a recent study conducted by the Agency for Healthcare Research and Quality (AHRQ) researchers Didem M. Bernard, Jessica S. Banthin, and William E. Encinosa.

The AHRQ study determined that measuring a family's net worth (the value of their savings plus other assets minus debt) rather than just income most precisely estimates the percentage of American families who could afford to purchase health insurance policies if they chose to do so. Most studies of uninsured families have considered income as the main (or sole) determinant of a family's decision whether or not to purchase health insurance.

Using 2002 and 2003 national data from the AHRQ's Medical Expenditure Panel Survey (MEPS), the researchers found that the median net worth of insured families was $105,819 nearly 35 times greater than the median net worth of only $3,057 for uninsured families. Those figures contrast with those families with median income of $41,086 who purchased health insurance, which are only 2.3 times greater than the $17,690 in median income for families who were uninsured.

The study also found that 4.1% of families with access to employer-based health insurance were poor (family income below 100% of the federal poverty level) (FPL) and 11.1% were low-income (family income less than 200% of the FPL). In contrast, among families without access to employer-based health insurance, 33.8% were poor and 28.4% were low-income.

According to Dr. Bernard, an economist who led the research, the standard model based on income alone used by economists works well for estimating who will enroll in employer-based health insurance. However, it does not work well for estimating who will purchase nongroup coverage because it overestimates health insurance enrollment for people with low net worth and underestimates it for people with high net worth.

Details of the study, Wealth, income, and affordability of health insurance, were published in the May/June issue of Health Affairs. Reprints of AHRQ Publication No. 09-R059 also are available from AHRQpubs@ahrq.hhs.gov.