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Healthcare Reform Update - March 25-31, 2010


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Compiled by Scott Mertie*

March 31, 2010

Primary Care Crisis Has Been A Long Time Coming
By Andrew Villegas, KHN Staff Writer
March 29, 2010

This story also appeared on NPR's health blog, Shots.

For decades, just about everybody who has looked at the supply of primary care doctors in this country has warned of trouble ahead.

But despite the urgency of report after report, including another recent one from the Josiah Macy Jr. Foundation, the primary care physician workforce of the future looks like it will lag behind the need.

Medical students generally prefer the bigger paychecks and greater prestige of specialties.

"There's been 50 years of turning away from primary care in this country," said George Thibault, president of the Macy Foundation, in a recent conference call announcing the foundation's findings, which say, among other things, that medical schools should create primary care tracks for educating students.

Some evergreen recommendations call for paying primary care doctors more and, recently, using primary care offices as medical homes to coordinate all of a patient's care to manage costs and care.

The doctors' shortage is looking more problematic as the nation faces an influx of patients after insurance coverage is extended through the new health overhaul law, said Ann O'Malley, with the Center for Studying Health System Change. "Time will tell" whether that will make a difference, O'Malley said. "I don't know how bad things have to get before the support required is given to primary care."

The notion that decades of blind eyes turned toward the warnings prompted us to dust off a few highlights from days gone by. Here goes:

  • The Journal of the American Medical Association called for more primary care all the way back in 1933 when an editorial recorded "the overgrowth of specialism, now so bitterly complained of, and the fadeout of the general practitioner."

  • Fast forward to a 1961 JAMA paper, in which one researcher said, "There is a shortage of general practitioners, family doctors, generalists, call them what you may. This is true in our urban as well as our rural areas. It is true throughout this great country of ours. I do not mean that there is a shortage of physicians, but there is a need for physicians who are interested in the total and continuing care of the patient."

  • Two decades later and the calls to action included a proposal from Republican Sen. Dan Quayle, in 1985, for states to meet quotas for primary care residencies.

  • In 1992, just before President Clinton's attempt at health overhaul, the Council on Graduate Medical Education released a report in 1992 that found: "The Nation has too few generalists and too many specialists." The group again called for more primary care doctors in a 1994 report that called on officials to steer at least 50 percent of graduating doctors to primary care.

  • In 2008, The Physicians' Foundation released a report that physicians themselves--78 percent of those surveyed--said they thought there was an existing shortage of primary care doctors.

This is one of KHN's "Short Takes"--brief items in the news. For the latest news from KHN, check out our News Section.

Closing Medicare Drug Gap Helps Democrats Sell Reform
By Christopher Weaver, KHN Staff Writer
March 29, 2010

Now that the health overhaul has passed Congress, Democratic lawmakers are hoping to highlight its most immediate benefits. Chief among them: a plan to help millions of elderly and disabled Medicare beneficiaries pay for their medications by gradually eliminating a drug-coverage gap commonly known as the "doughnut hole."

"Who among us will not be more secure knowing that our parents will be protected from the Medicare Part D 'doughnut hole' which has made life-saving medications so unaffordable for those that need them most?" Rep. Lucille Roybal-Allard, D-Calif., said after the House vote on the legislation.

But the doughnut hole is a complicated contraption, and filling it is far from simple. Here's a close look at how the doughnut hole works and how it would be closed.

What is the doughnut hole?

In 2003, Congress passed legislation creating the Medicare drug benefit, which went into effect in 2006. The benefit is offered by private insurers through free-standing drug plans and Medicare Advantage plans, which also offer medical benefits.

The Part D plans have some leeway in how they design their coverage. But under the typical benefit for 2010, beneficiaries have to pay a deductible of $310 and monthly premiums averaging $38.94. After meeting the deductible, beneficiaries are required to pay 25 percent of their drug costs; their drug plans, which are subsidized by the government, pick up the rest.

Once total spending by the patients and their drug plans exceeds $2,830, the beneficiaries hit the coverage gap, in which they must pay the full cost of their medications. After they spend another $3,610, they're eligible for what's called "catastrophic" drug coverage, under which they pay only 5 percent of their drug costs.

What will the new legislation do to close the gap?

Beginning this year, any Medicare beneficiary who crosses into the doughnut hole will receive a $250 check to help pay for their drugs.

Then, starting in January, patients in the coverage gap will get a 50 percent discount on brand-name drugs. The price reduction will be financed by the drug companies as part of a deal with the White House, under which the industry made tens of billions of dollars in price concessions.

The federal government will play a big role, too, in closing the doughnut hole. Beginning in 2013, the government will begin providing subsidies for brand-name drugs bought by seniors who hit the coverage gap. The government's share will start off small, at 2.5 percent, but will increase to 25 percent by 2020. At that point, the combined industry discounts and government subsidies will add up to 75 percent of brand-name drug costs.

Generic drugs--which cost far less than brand-name drugs--will be dealt with separately. Beginning in 2011, government subsidies will cover 7 percent of generic drug costs. Washington will pick up additional portions each year until 2020, when federal dollars will cover 75 percent of generic drug costs.

At that point, the doughnut hole will effectively be closed.

Who will be affected?

The agency that runs Medicare reported this month that 29 million seniors and disabled people are enrolled in Medicare drug plans, or about two-thirds of the total Medicare population. Of those, roughly 3.4 million people entered the doughnut hole in 2007, the most recent year for which estimates are available. An additional number spent enough to enter the doughnut hole, but didn't have to pay for their medications out of pocket because they have low incomes and receive separate subsidies.

"This is a very vulnerable population," said Hilary Dalin of the National Council on Aging, that many in the doughnut hole suffer from multiple chronic conditions and take many medications. Once they enter the coverage gap, "they're really thinking about cost versus care, which is a terrible proposition for anybody," she said.

A study by the Kaiser Family Foundation found that, of those who entered the coverage gap, 15 percent stopped taking their medications altogether. Among diabetics, 10 percent stopped taking their medicines, a decision that can have severe health consequences. (KHN is an editorially independent part of the foundation.)

"With the cost of prescription drugs continuing to skyrocket, closing the 'doughnut hole' will help millions of older Americans afford their needed medications and avoid more intensive and costly care later in life," Barry Rand, the AARP's top executive, said in a statement.

Why did Congress create the doughnut hole in the first place?

The doughnut hole is all about the money. The Republican-controlled Congress in 2003 ponied up $400 billion for the Part D benefit over 10 years--but that wasn't enough to construct a benefit that didn't have a gaping hole.

"There is no policy justification for the doughnut hole," said Gail Wilensky, a former head of the Medicare agency and an adviser to numerous Republican lawmakers. "The politicians wanted to keep the deductible low enough to touch a lot of people."

Indeed, even among opponents of the current legislation, filling the doughnut hole remains uncontroversial. "Nobody ever liked it," said Robert Moffit, a policy analyst at the conservative Heritage Foundation. "It was literally a product of the congressional imagination created in order to meet budgetary requirements."

How much will it cost to fill the doughnut hole?

An estimate by the Congressional Budget Office says closing the coverage gap will cost the federal government $42.6 billion by 2019.

But, the federal subsidies that will help close the doughnut hole will be phased in slowly. The full subsidies will not be in effect until 2020, after the period captured in the cost estimates. And the cost of filling the hole would increase in the following years.

The First Test Of New Health Law: Covering Hard-To-Insure People
By Mary Agnes Carey, KHN Staff Writer
March 26, 2010

It's the first and one of the hardest tests of the Democrats' ambitious plan to overhaul the nation's health care system: in the next 90 days establishing a federally funded program to cover people turned down by private insurers because they have a preexisting medical condition.

The effort, to provide immediate relief to people who have no insurance options, will be closely watched as an early gauge of the Obama administration's ability to turn a complex new health care law into a smooth-running program.

While 34 states currently operate such programs, called high-risk pools, some are closed to new entrants and most struggle to finance coverage for approximately 200,000 enrollees nationwide. Most tend to be sicker and older than the general population, and to qualify they must have been unable to obtain coverage through other sources.

About two million people might be eligible for the new pool, analysts predict, though how it would operate is unclear--complicating a daunting timetable for implementation.

The health care law President Barack Obama signed Tuesday offers only general guidance, making the Department of Health and Human Services responsible for creating the program. It would last until 2014 when health insurance exchanges, marketplaces where companies compete for business, are scheduled to be up and running.

While people will still have to pay premiums to buy coverage, the federal government will add $5 billion to pay claims. The law allows the secretary of HHS to administer the pool or contract it out to states or a nonprofit entity. Under the new law:

  • Applicants must be U.S. citizens who are not covered by another form of insurance, have been denied coverage due to a preexisting condition and have been without health care coverage for at least six months.

  • Older people can't be charged more than four times younger ones.

  • The plan must cover at least 65 percent of participants' health costs and follow annual out-of-pocket limits set in the bill.

  • Premiums will be based on "standard rates," which states define as average premiums charged by private insurers for similar coverage.

Among the questions to be answered: How much will the coverage cost? Will enrollees have a choice of plans? What medical services will be covered? What hospitals and doctors and other health care providers will participate in the networks to be created? How will the new entity interact with already established state-run high-risk pools?

HHS spokesman Nicholas Papas said "It would be premature for us to discuss many of these details as this work is ongoing, but we will be working closely with states as we establish these pools and are committed to meeting the deadlines set out in the law. We are confident that the high risk pool will offer affordable insurance to Americans who are uninsured because of pre-existing conditions."

Some health care analysts wonder if HHS can pull off such a complex process of setting up a high-risk pool in just three months. "That doesn't feel like a 90-day process. It will take a lot of work to get there. This is going to be a heavy lift," said Peter Harbage, a Democratic health policy consultant.

There's speculation that several risk pools will result. "It is most likely there will be not one national program and that the secretary will go through a very quick bidding and contracting process to get national coverage through states and non-profit entities, but that's a pretty short order in that amount of time," said Bonnie Washington, a vice president at the health care consulting firm Avalere Health.

The National Association of State Comprehensive Health Insurance Plans, a trade group representing state-run high-risk pools, has said that existing programs could be expanded quickly "with an infusion of relatively modest interim federal funding."

Some state risk pool officials are ready to help implement the national risk pool. Richard Popper, executive director of the Maryland Health Insurance Plan, said his agency could operate the new national pool as it continues to operate its state pool which now has about 18,000 members. "It would be seamless," he said.

But Jerry Ashford, executive director of the Florida Comprehensive Health Association, the state's high-risk pool, said his state would have trouble taking on new customers.

That's because his pool has been closed to new members since 1991 and any changes would have to be approved by the state legislature, which meets only in March and April of each year. Another possible complicating factor: Florida's top political leaders, including Florida Attorney General Bill McCollum, have been among the most vocal critics of the health reform law and have vowed to try to overturn it.

"Given the short term nature of it, the more practical solution is to have a federal pool," Ashford said. "It would be simpler than operating a different pool in every state."

The state programs vary in terms of who is eligible, what benefits are covered and how much premiums cost, according to the Kaiser Family Foundation (KHN is a part of the foundation). Typically, they offer four to eight health plans through contracts with private health insurers.

Karen Pollitz, a health insurance market expert and a research professor at Georgetown University, said how the risk pool is designed and administered is an important first test of a law that is expected to provide coverage to 32 million additional Americans over the next decade.

"Because this is the first thing out of the box, the first in a long series of implementation steps . . . you need to make sure that coverage works for people," she said. "This is a great opportunity to begin to build transparent coverage and to really see what happens."

KHN staff writer Phil Galewitz contributed to this report.

Consumers Guide To Health Reform
By Phil Galewitz, KHN Staff Writer
March 26, 2010

The health-insurance overhaul package signed into law by President Obama is the most far-reaching health legislation since the creation of the Medicare and Medicaid programs.

The following is a look at the impact of the law, which will extend insurance coverage to 32 million additional Americans by 2019, but which will also have an effect on almost every citizen.

Here's how you might be affected:

Q: I don't have health insurance. Will I have to get it, and what happens if I don't?

A: Under the legislation, most Americans will have to have insurance by 2014 or pay a penalty. The penalty would start at $95, or up to 1 percent of income, whichever is greater, and rise to $695, or 2.5 percent of income, by 2016. This is an individual limit; families have a limit of $2,085. Some people can be exempted from the insurance requirement, called an individual mandate, because of financial hardship or religious beliefs or if they are American Indians, for example.

Q: I want health insurance, but I can't afford it. What do I do?

A: Depending on your income, you might be eligible for Medicaid, the state-federal program for the poor and disabled, which will be expanded sharply beginning in 2014. Low-income adults, including those without children, will be eligible, as long as their incomes didn't exceed 133 percent of the federal poverty level, or $14,404 for individuals and $29,326 for a family of four, according to current poverty guidelines.

Q: What if I make too much for Medicaid but still can't afford coverage?

A: You might be eligible for government subsidies to help you pay for private insurance that would be sold in the new state-based insurance marketplaces, called exchanges, slated to begin operation in 2014.

Premium subsidies will be available for individuals and families with incomes between 133 percent and 400 percent of the poverty level, or $14,404 to $43,320 for individuals and $29,326 to $88,200 for a family of four.

The subsidies will be on a sliding scale. For example, a family of four earning 150 percent of the poverty level, or $33,075 a year, will have to pay 4 percent of its income, or $1,323, on premiums. A family with income of 400 percent of the poverty level will have to pay 9.5 percent, or $8,379.

In addition, if your income is below 400 percent of the poverty level, your out-of-pocket health expenses will be limited.

Q: How will the legislation affect the kind of insurance I can buy? Will it make it easier for me to get coverage, even if I have health problems?

A: If you have a medical condition, the law will make it easier for you to get coverage; insurers will be barred from rejecting applicants based on health status once the exchanges are operating in 2014.

In the meantime, the law will create a temporary high-risk insurance pool for people with medical problems who have been rejected by insurers and have been uninsured at least six months. This will occur this year.

And starting later this year, insurers can no longer exclude coverage for specific medical problems for children with preexisting conditions, nor can they any longer set lifetime coverage limits for adults and kids. The Obama administration insists that the law also would bar insurers this year from turning away children with preexisting conditions. But some insurers and children's advocates say the law isn't clear on that point, and the administration has said it will draft clarifying regulations.

In 2014, annual limits on coverage will be banned.

New policies sold on the exchanges will be required to cover a range of benefits, including hospitalizations, doctor visits, prescription drugs, maternity care and certain preventive tests.

Q: How will the legislation affect young adults?

A: If you're an unmarried adult younger than 26, you can stay on your parent's insurance coverage as long as you are not offered health coverage at work. This benefit will begin later this year, but will require regulations clearly spelling out eligibility criteria.

In addition, people in their 20s will be given the option of buying a "catastrophic" plan that will have lower premiums. The coverage will largely only kick in after the individual has $6,000 in out-of-pocket expenses.

Q: I own a small business. Will I have to buy insurance for my workers? What help can I get?

A: It depends on the size of your firm. Companies with fewer than 50 workers won't face any penalties if they don't offer insurance.

Companies can get tax credits to help buy insurance if they have 25 or fewer employees and a workforce with an average wage of up to $50,000. Tax credits of up to 35 percent of the cost of premiums will be available this year and will reach 50 percent in 2014. The full credits are for the smallest firms with low-wage workers; the subsidies shrink as companies' workforces and average wages rise.

Firms with more than 50 employees that do not offer coverage will have to pay a fee of up to $2,000 per full-time employee if any of their workers get government-subsidized insurance coverage in the exchanges. The first 30 workers will be excluded from the assessment.

Q: I'm over 65. How will the legislation affect seniors?

A: The Medicare prescription-drug benefit will be improved substantially. This year, seniors who enter the Part D coverage gap, known as the "doughnut hole," will get $250 to help pay for their medications.

Beyond that, drug company-discounts on brand-name drugs and federal subsidies and discounts for all drugs will gradually reduce the gap, eliminating it by 2020. That means that seniors, who now pay
100 percent of their drug costs once they hit the doughnut hole, will pay 25 percent.

And, as under current law, once seniors spend a certain amount on medications, they will get "catastrophic" coverage and pay only 5 percent of the cost of their medications.

Meanwhile, government payments to Medicare Advantage, the private-plan part of Medicare, will be frozen starting in 2011, and cut in the following years. If you're one of the 10 million enrollees, you could lose extra benefits that many of the plans offer, such as free eyeglasses, hearing aids and gym memberships. To cushion the blow to beneficiaries, the cuts to health plans in high-cost areas of the country such as New York City and South Florida--where seniors have enjoyed the richest benefits--will be phased in over as many as seven years.

Beginning this year, the law will make all Medicare preventive services, such as screenings for colon, prostate and breast cancer, free to beneficiaries.

Q: How much is all this going to cost? Will it increase my taxes?

A: The package is estimated to cost $938 billion over a decade. But because of higher taxes and fees and billions of dollars in Medicare payment cuts to providers, the package will narrow the federal budget deficit by $143 billion over 10 years, according to the Congressional Budget Office.

If you have a high income, you face higher taxes. Starting in 2013, individuals will pay a higher Medicare payroll tax of 2.35 percent on earnings of more than $200,000 a year and couples earning more than $250,000, up from the current 1.45 percent. In addition, you will face an additional 3.8 percent tax on unearned income such as dividends and interest over the threshold.

Starting in 2018, the law will also impose a 40 percent excise tax on the portion of most employer-sponsored health coverage (excluding dental and vision) that exceeds $10,200 a year for individuals and $27,500 for families. The tax is often referred to as a "Cadillac" tax.

The law also will raise the threshold for deducting unreimbursed medical expenses from 7.5 percent of adjusted gross income to 10 percent.

The law also will limit the amount of money you can put in a flexible spending account to pay medical expenses to $2,500 starting in 2013. Those using an indoor tanning salon will pay a 10 percent tax starting this year.

Q: What will happen to my premiums?

A: That's hard to predict and the subject of much debate. People who are sick might face lower premiums than otherwise because insurers won't be permitted to charge sick people more; healthier people might pay more. Older people could still be charged more than younger people, but the gap couldn't be as large.

The bigger question is what happens to rising medical costs, which drive up premiums. Even proponents acknowledge that efforts in the legislation to control health costs, such as a new board to oversee Medicare spending, won't have much of an effect for several years.

In November, a Congressional Budget Office report on how the legislation--which at that point had a tougher Cadillac tax--would affect premiums said big employers would see premiums stay flat or drop
3 percent compared to today's rates. It also noted that employees with small-group coverage might see their premiums stay the same. And Americans who received subsidies would see their premiums decline by up to 11 percent, according to the CBO.

*We would like to thank Scott Mertie, Esquire (Kraft Healthcare Consulting LLC, Nashville, TN), for selecting the articles for this week's update.

This information was reprinted from with permission from the Henry J. Kaiser Family Foundation. You can view the entire Kaiser Daily Health Policy Report, search the archives and sign up for email delivery. © Henry J. Kaiser Family Foundation. All rights reserved.

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