Sequestration is Around the Corner

With the automatic spending cuts known as “sequestration” set to go into effect tomorrow, a clearer picture is emerging regarding what effects these cuts will have on healthcare. As NAHAM News pointed out last week, only Medicaid and the Children’s Health Insurance Program (CHIP) are totally insulated from the cuts. Besides those, virtually every program in the healthcare world has something to lose starting in March

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According to The Hill, doctors and hospitals are estimating that Medicare cuts included in the sequester will cost the industry 200,000 jobs this year. That cut to Medicare, totaling about two percent or $11 billion this year, is relatively small in comparison to the cuts that some other healthcare agencies are facing, but large enough to create a state of unease. A day away from the deadline, it is still unknown how the two percent cut will be implemented throughout Medicare. Across the board cuts are unlikely due to standing contracts and commitments, so some areas with more discretionary spending may get hit harder than others where money is tied up. Of the cuts being discussed, the most likely to be included is directly related to doctor’s fees. Under this plan, doctors will see their Medicare reimbursements cut by two percent.  Since 2001, Medicare payments have risen by four percent while patient cost has risen by 20 percent.

In other healthcare areas, the Food and Drug Administration (FDA) faces an eight percent cut. This may force layoffs and furloughs, resulting in delayed approvals for new drugs and a decreased number of food inspections. Sequestration will also affect funding for some parts of the Affordable Care Act, cutting state health insurance marketplace grants by $66 million and reducing the public health trust find by $76 million. Despite that, experts don’t expect the implementation of the law to be slowed.

In a post released a few days ago, The Washington Post turned a press release put out by the White House into an interactive feature detailing how states and public programs would be affected by the sequester. According the post, funds would be cut from public health in the areas of threat response, substance abuse and prevention, HIV testing, and other cuts to public health programs.

Not all of these cuts could happen overnight. Even though it does not seem likely that Congress and the President will come to an agreement today, many cuts can be spared if a compromise emerges in the near future. 

Some States to Implement Insurance Ratings Early

Even though federal law doesn’t require states to rate insurance companies until 2016, some states are ahead of schedule. Starting this fall, insurance companies in states such as Oregon, Minnesota, and California will begin to see themselves rated on quality measures, according to Kaiser Health News. These ratings are designed both to help consumers make better-informed decisions, and to improve the health system overall by creating a mechanism where insurance companies can be rated higher for several plan benefits. These benefits may include incorporating more doctors, covering more procedures, and providing good customer service.

One issue that the states are running into, however, is confusion over what criteria to include in the ratings system. Hundreds of potential measures exist, but these measures must be adjusted to account for differences among plans enrollees. For example, a plan with great pre-natal benefits may be highly desirable to an expectant mother enrollee, but bad for a single male enrollee. Additionally, many quality measures may mistakenly rate the performance of hospitals or physician groups, not insurance companies.

To deal with those issues, Oregon boiled down over 2,000 measures into 13. The specific rating measures being used by the state include how an insurer performs on screening for breast cancer and diabetes, vaccinating adults for the flu, and providing needed care “without delay.” These ratings will then be displayed to Oregon consumers in a “star” system, where plans will receive one to four stars depending on the ratings. Some of the methodology included is being borrowed from Medicare, which currently rates private insurance plans that offer coverage to seniors and uses quality data to rate nursing homes, home health agencies, and dialysis providers.

Some opponents of the ratings argue that despite the cost and effort that states will invest to create the system and compile the data, the information will be overlooked by many consumers. Consumers Union, which published Consumer Reports Magazine, contends that while consumers say they want ratings information, they are much more likely to focus on overall plan cost, and whether or not their current doctor is included in the potential plan. Additionally, the ratings could be moot if all plans end up being rated the same.

States will begin to tackle this issue more in the coming years as they prepare for implementation in 2016. In the meantime, many are likely to be watching the results from the early states. 

New Essential Health Benefits Rule Published

The Department of Health and Human Services (HHS) published a final rule on Monday outlining essential health benefits that must be covered by all insurers wishing to participate in the new health insurance marketplaces. The rule, first released to the public last week, had been long awaited by both insurance companies and states looking for guidance while preparing for the marketplaces to go live in October.

Within the rule, there are 10 categories of care that must be covered, including emergency services, maternity care, hospital and doctor services, mental health and substance abuse care, and prescription drugs. Kaiser Health News reports that these requirements apply both to individual and small group plans, including plans offered in the marketplaces, and to those newly eligible for Medicaid coverage.

HHS published the rule partly to standardize plans for ease of comparisons by consumers, and partly to prohibit discrimination based on age or pre-existing conditions, as stated in the Affordable Care Act.  The final version of the rule is also very similar to the earlier draft version, which received about 11,000 comments when it was published in November. One change, according to USA Today, was a shift to focus more on mental health. Some organizations are critical of the new emphasis, worried that the focus may have come out of the shooting in Newtown, Connecticut, and could prove pricey.

HHS Secretary Kathleen Sebelius fought back against this claim, however. In a written statement, she cited that the new regulations close a major gap in coverage for people suffering from mental health or drug problems. Prior to the rule, almost 20 percent of people purchasing insurance did not have access to mental health services, and nearly a third had no substance abuse disorder benefits. According to The Hill, the expansion of mental health and substance abuse benefits could benefit 62 million people.

Policies specified in the rule will go into effect in January of 2014. 

How Sequestration Would Effect Healthcare

Just a week away from the March 1^st deadline, it is looking more and more likely that automatic federal spending cuts known as the “sequester” will go into effect. The cuts, totaling $85 billion in 2013, will affect a wide variety of domestic and defense programs.

Medicaid and Children’s Health Insurance Programs (CHIP) would be spared from budget cuts, but the majority of other healthcare programs would not be. Areas such as medical research, mental health treatment, and new drugs trials could see budget reductions of five percent or more, according to Kaiser Health News.

In a letter to the Senate Appropriations Committee, Department of Health and Human Services (HHS) Secretary Kathleen Sebelius estimated that the cuts would also result in about 3,000 fewer inpatient admissions and 804,000 fewer outpatient visits in tribal hospitals alone.NPR reports that the letter went on to say that HIV tests done by the Centers for Disease Control and Prevention (CDC) would decrease by 424,000.

 Medicare would also be hit with changes. Beneficiaries would not be subject to benefits cuts, but providers may see a reimbursement decrease of up to two percent.

The White House put out a press release stating that if the sequester takes effect, up to 373,000 mentally ill adults and children could go untreated. You can see the full press release here.

The 2013 cuts are part of a larger package of $1.2 trillion in cuts scheduled to occur over the next decade. 

MLR for Medicare Advantage and Part D Proposed

The Centers for Medicare and Medicaid Services (CMS) has drafted a proposed rule specifying the Medical Loss Ratio, or MLR, for Medicare Advantage (MA) plans and Part D prescription drug plans. The MLR is a policy enacted under the Affordable Care Act that specifies what percentage of plan revenue must be used for patient care, and what percent can be used for administrative costs. The MLR for private plans went into effect in 2011 and resulted in $1.1 billion in rebates to customers last year.

The Medicare Advantage and Part D Prescription Drug MLR, according to the rule being published in the Federal Register on Friday, will be set at 85%-15%. This means that 85% of revenue must be spent on patient care, and no more than 15% can be spent on administrative costs. According to MedPage Today, the rule defines patient care costs to include clinical services, prescription drugs, quality improvements, and other direct patient benefits. The remaining 15% of revenue could be used to pay overhead expenses and generate profit.

This new MLR is the same the same as the ratio imposed on private insurance companies, who have to comply with an 85%-15% or 80%-20% ratio based on size. The Medicare Advantage and Part D prescription plans, which are handled through private plan managers and intermediaries as opposed to CMS, would face penalties for not adhering to the ratio. In addition to reimbursing funds to CMS, plans that do not comply with the ratio for three consecutive years would be prohibited from enrolling new members, and after five consecutive years the plans would see their contracts with CMS terminated.

Comments on the rule are due in mid-April, and must be received before the rule can be finalized. If everything goes according to schedule, The Hill reports that the rule is set to take effect in January 2014.  

Most States Opt for Federally Run Marketplaces

The deadline for states to decide on the route to take for their health insurance marketplace has come and gone without any last minute decisions. As NAHAM News reported last week, states had to decide by Friday whether they wanted to set up their Health Insurance Marketplace in partnership with the federal government, or if they wanted to take no action and allow the federal government to set up the marketplace without state input. According to Kaiser Health News, half the states— including the major population centers of Texas, Florida and Pennsylvania, opted to do nothing, and defaulted to the Federal option.

Alternatively, seventeen states and the District of Columbia have been given “conditional approval” by the Administration to set up their own marketplaces, without help from the federal Department of Health and Human Services (HHS). These states include California, Colorado, Connecticut, District of Columbia, Hawaii, Idaho, Kentucky, Maryland, Massachusetts, Minnesota, Nevada, New Mexico, New York, Oregon, Rhode Island, Utah, Vermont, and Washington.

An additional seven states have opted for a partnership exchange. Under this marketplace type, states would approve which insurance plans could participate in the marketplace, and handle consumer assistance duties such as setting up call centers to handle inquiries. The federal government would handle the more complex duties of running the website, marketing the site, and determining the eligibility of millions of people for government subsidies which will make prices more affordable. HHS and the Administration had hoped that sharing the responsibility through this type of marketplace would entice more states to take some form of an active role in the program. Partnership states include Arkansas, Delaware, Illinois, Iowa, Michigan, New Hampshire, and South Dakota.

The remaining twenty five states defaulted to a federally run marketplace, disappointing Administration officials who had hoped for more state involvement. The states that opted for a federal program cited concerns about cost, lack of autonomy, or political opposition to the healthcare law.

 You can view state by state marketplace statuses on the Kaiser Family Foundation website here. 

Health Insurance Marketplace Deadline Tomorrow

Friday, February 15, is the final day for states to decide on their role in setting up the health insurance marketplaces required under the Affordable Care Act. The law gives state the choice to set up their own marketplace, partner with the federal government, or take no action and default to a federal government-run exchange.  This is the last deadline until October, when the marketplaces are expected to open up for enrollment.

Despite the deadline, however, the Department of Health and Human Services (HHS) has shown flexibility on healthcare reform deadlines before, offering second, third, and fourth chances for states to choose to run their own marketplace for health insurance. Most recently, NAHAM News reported that HHS all but ignored deadlines in order to convince more states to take a part in setting up the marketplaces (States Will be Given Extra Time to Set Up Insurance Exchanges).

The decision on what to do with the marketplaces rests in the hands of state legislatures and governors, who don’t always see eye to eye. In New Jersey, for example, Politico reported that Governor Chris Christie (R) made it clear that he’s no fan of the healthcare law when he vetoed Democratic legislation that would have created an exchange. Virginia Governor Bob McDonnell (R) also rejected a fully state run exchange, but has recently said that he would sign legislation allowing the state to retain some control over the marketplace, similar to a partnership model.

Exchanges have long-term implications for the success of the healthcare law, not to mention political consequences for the governors and state legislatures that choose to either carry out the law or sit back while the federal government takes control.

As of now, according to a Kaiser Family Foundation tracker, 17 states have declared a state based exchange, 7 are planning a partnership exchange, and the remaining 26 would default to a federal exchange.

Healthcare Given Brief Mention in the State of the Union

On Tuesday, President Obama delivered his State of the Union address, and as expected, the main themes of the speech revolved around the topics of the economy, jobs, and the federal budget. There was, however, a brief mention of healthcare policy in the beginning of the speech.

President Obama identified healthcare for our aging population as the biggest driver of our long term debt. The President also conceded that programs like Medicare will need to be reformed in order to be sustainable for future generations.

Specifically, the President announced that he is willing to enact reforms to Medicare that will achieve the same amount of healthcare savings by the beginning of the next decade as the reforms proposed by the Simpson-Bowles commission. That bi-partisan commission came out with a number of suggestions in 2010 aimed at reducing the national debt.

Further, the President made some additional proposals aimed at reforming health care costs. President Obama suggested a reduction in taxpayer subsidies to prescription drug companies, and proposed that cost savings could be accomplished by “changing the way our government pays for Medicare.” The latter proposal was another way of highlighting a shift from the pay-per-procedure model to the pay-for-performance model – initiated through the Value Based Purchasing program in the Affordable Care Act. Obama also spoke about the need to avoid the automatic spending cuts known as sequestration, with would automatically cut Medicare reimbursements to doctors by two percent.

Finally, the President signaled that he was open to additional reforms from both parties, so long as they “don’t violate the guarantee of a secure retirement”. The big healthcare line in the address was “our government shouldn’t make promises we cannot keep – but we must keep the promises we’ve already made.”

After the State of the Union, Senator Marco Rubio (R-FL) gave the Republican response. In his speech, he spoke about how the Affordable Care Act had backfired by forcing companies to lay off employees or stop hiring altogether. Senator Rubio, and Senator Rand Paul (R-KY) who gave the Tea Party Response, warned against big government entanglement in health care.

The full text of President Obama’s speech can be found here, Sen. Rubio’s Republican Response can be found here, and a Medscape breakdown of healthcare issues in the State of the Union can be found here.

Will the State of the Union include Healthcare Proposals?

For those preparing to watch the State of the Union Tuesday evening, there will be many topics to listen for. Jobs, defense, bipartisanship, gun control, and the economy are all expected to get a mention as the President addresses Congress and the American people. The topic of healthcare, however, that has dominated news cycles in the past, is expected to be largely absent from the speech.

White House Press Secretary Jay Carney did not shed any light on the contents of the speech during Monday’s White House press briefing, but Carney has said that the President sees the State of the Union as a follow up to his inaugural address last month. President Obama’s inauguration speech focused mostly on domestic and international issues, and only hinted at the President’s commitment to health coverage in general and the Medicare and Medicaid programs in particular. Carney also told reporters that the President’s address would focus on a jobs plan to include proposals necessary to help the middle class and the economy grow. Both of these statements worked to bolster the idea that specifics about healthcare policies would not be discussed.

A healthcare expert with the American College of Physicians told Medpage Today that while the President may allude to some healthcare objectives in the State of the Union, any direct mentions or specific goals on the topic would be surprising.

There are many reasons that healthcare could be glossed over in the State of the Union. One reason is that reform has already been passed. Some experts believe that the President should use his political capital to influence reform in other areas. Another reason could be budgetary. Any statement that the President makes could limit his attempts to work out a budget deal with congressional leaders in the upcoming months. Finally, some conservative organizations are saying that President Obama wants to downplay his healthcare overhaul, the Affordable Care Act, in case there are negative effects from policies slated to go into effect this year.

Still, there are those who would like to see the President acknowledge the topic. There are still hot button issues to be resolved, such as looming changes to the Medicare or Medicaid programs or state health insurance marketplaces opening for enrollment later this year. Some are just hoping for a general statement by the President, continuing the dialogue about the importance of healthcare.

States Rethink High Risk Pools

When the health insurance marketplaces open next year, it will mean that plans will be available to everyone regardless of state of residence, pre-existing condition, or potential risk to the insurance company. This means that individuals with existing illness and those at higher risk of becoming ill will be able to participate in the marketplace plans.  From an insurance perspective, these are high risk participants whose costs need to be offset by participation of less-costly, healthier individuals.

In the long run, federal officials expect costs attributable to high risk participants to be mitigated by participation of younger, lower risk individuals who would also pay into the program. In the short term, however, there are concerns that the higher cost individuals will enroll en masse, while the lower cost participants hold back. This could cause premiums for plans in the marketplace to skyrocket and become cost prohibitive for the healthy participants needed to balance out the program. The law that established the marketplaces tried to anticipate the problem by including a number of mechanisms aimed at avoiding the so called rate shock.

One such provision is known as reinsurance; a $20 billion fund run by the Department of Health and Human Services (HHS). All insurers are required to pay into the reinsurance fund, which will then be used to pay back insurance companies that carry a large share of high risk participants. The thought is that the payments will ensure that insurance companies do not have to raise premiums in order to recoup short term losses.

One problem with the reinsurance approach is that the fund is temporary and will disperse all funds in three years, but the bigger problem is that all the funds will go to insurance companies, not state high-risk pools that are currently carrying about 200,000 high risk participants.

These state high-risk pools that were once planning on slowly moving their participants into the new exchanges are now likely to move them faster, before the $20 billion in funding runs out. States such as Wisconsin and Texas will cancel their plans or force participants to move to the new marketplace in 2014 when the Federal reinsurance fund is expected to dole out $10 billion to insurance companies. The fund will pay $6 billion in 2015 and the remaining $4 billion in 2016.

Estimates of the impact of suddenly shifting some 200,000 people from the state pools onto the exchanges vary. According to a Politico article “some actuaries say it won’t make much of a difference as millions of people start getting covered; other studies see this population boosting premiums significantly in the individual market. One Indiana study projected premiums would rise by up to 45 percent.”  Meanwhile, HHS contends that payments through the reinsurance program will keep premiums 10 to 15 percent lower than they would be without it. They also hope that three years will be enough time for low risk participants to enter the exchanges and naturally mitigate costs. 

New Superbug Treatment

A few months ago, NAHAM News reported on the spread of so-called “superbugs” in medical facilities across the county (Superbugs are invading U.S. Healthcare Facilities). These bugs, such as Staphylococcus and Clostridium difficile, are difficult to prevent and impossible to treat. The superbugs come into medical facilities without warning and infect patients regardless of the patient’s original illness. Try as they might, doctors have not been able to come up with a way to fight the infections; even the strongest antibiotics haven’t worked. Without a treatment method, hospital staffs have turned to a preventative approach with the strategy of stopping the bugs from infecting patients in the first place.

Doctors at Johns Hopkins Hospital in Baltimore are trying new technologies in their struggle to prevent these bugs, and for the past few years they have been using robots. According to NPR, the robots that the hospital is now using spray a toxic dose of hydrogen peroxide into hospital rooms to sanitize the room and kill any bacteria. This treatment could have been helpful in a case at the National Institute of Health in Bethesda, Maryland, where bacteria were found in the pipes below a patient’s sink.

In order for the treatment to be safe and effective, the room must be sealed and the hydrogen peroxide must touch all the surfaces. A technician prepares each room by sealing up air vents and opening drawers. The tech then tapes the door shut from the outside before staring the robot. For 30 minutes, the hydrogen peroxide mist is sprayed in the room. While the hydrogen peroxide mist is odorless and colorless, any person entering the room would be unable to open eyes or breathe. Once the hydrogen peroxide mist has done its work, the robot emits a second chemical that turns the hydrogen peroxide to water, making it safe to enter and prepare the room for the next patient.

The robots, comparable in appearance to a domestic washing machine or trash can, have proven effective. Johns Hopkins recently reported that the number of untreatable infections has fallen by 64 percent since the hospital began using the robots. While these robots are not a modern day cure-all, Johns Hopkins is hoping that other hospitals follow suit and start using their own hydrogen peroxide robots.

Administration Misses Health Law Deadlines

Several provisions of the Affordable Care Act that were supposed to go into effect on January 1^st have been delayed by the Obama Administration, according to an article by Kaiser Health News. The delayed parts of the law include provisions that increase fees paid to Medicaid primary care doctors, increase funding to states that eliminate co-pays for Medicaid preemptive services, and change how Hospitals and doctors are paid through Medicaid.

This is not the first time that provisions of the Affordable Care Act have been delayed. Doctors who treat Medicaid patients were due for a rate increase of about 73 percent starting this year, but that has yet to go into effect. State officials are claiming that they have not had time to carry out the pay change yet, since the Administration didn’t publish the rules governing the pay increases until November. The Centers for Medicare and Medicaid Services (CMS) has said, however, that when states do implement the provision, doctors will be able to get the higher fees retroactively to Jan. 1^st of this year.

CMS has also shown signs of movement on the preemptive services provision. Under the program, states would receive a 1 percent higher Medicaid matching rate if they eliminate co-pays for immunizations and other preventive services. On Friday, CMS published guidance on how to qualify for the payments.

The other provisions in the bill that were slated to go into effect on January 1^st could continue to be held up for the time being. This includes a provision for setting up a health program that would offer lower cost-sharing for people who make too much to qualify for Medicaid.

A former health policy aide to President Barack Obama said some delays are inevitable given staff turnover after the November election, and the focus on emergencies such as Hurricane Sandy. Some other health policy experts think that the provisions have gotten put on the back burner as the Administration focuses on setting up the Health Insurance Marketplaces (formerly Health Insurance Exchanges). These have to be open for enrollment in October, with coverage to start in January 2014.

A Department of Health and Human Services (HHS) spokesman said that rules for the cost-sharing program should be out soon. Meanwhile, the Administration announced on Thursday the start of a pilot program to change how doctors and hospitals are paid. The program will test how bundling payments for episodes of care can result in more coordinated care for beneficiaries and lower costs for Medicare.