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Healthcare Reform Update - April 1-7, 2010


Email Alert

Compiled by Brian Betner*

April 7, 2010

Sebelius Vows Implementation Of Health Law Will Be Clear, Transparent
April 6, 2010

"U.S. health officials aim to move swiftly and clearly to implement newly enacted healthcare reforms, the nation's health secretary said in remarks on Tuesday aimed at selling Americans on the benefits of the controversial changes," Reuters reports. In excerpts of a speech to be delivered today at the National Press Club, Health and Human Services Secretary Kathleen Sebelius explained health officials would work "to be as clear and transparent as possible" as the law is implemented. "Calling the U.S. Health Department 'a nationwide health insurance reform Help Desk,' Sebelius pledged to help consumers wade through the new reforms recently passed by the Democrat-controlled Congress" (Heavey, 4/6).

MarketWatch: "Sebelius used the Press Club speech to explain the sprawling, 10-year law, which aims to remake the U.S. health-care system. . . . Republicans, meanwhile, continue to urge a repeal of the health-care law. So far, 67 lawmakers have signed the Club for Growth's pledge to 'Repeal It!'" (Schroeder, 4/6).

The Associated Press: Also on Tuesday, in letters to state insurance commissioners and state attorneys general, Sebelius warned of "a proliferation of scams involving phony health insurance policies," in the wake of the passage of the new health insurance law. "Some of the hustlers are going door to door claiming there's a limited open-enrollment period to buy health insurance now. But the big expansion of coverage won't come for another four years, and door-to-door salespeople are unlikely to be part of the plan then" (Alonso-Zaldivar, 4/6).

Sebelius: High Risk Health Insurance Pools To Begin Soon
April 5, 2010

PBS Newshour: "In one of the first moves the Obama administration has taken under the new health care reform law, Health and Human Services Secretary Kathleen Sebelius on Friday sent a letter to state governors and insurance commissioners intended to gauge interest in a new insurance high-risk pool program. The health care reform bill provides $5 billion in funding to create a network of insurance pools for people with pre-existing medical conditions who do not have insurance. The pools are intended to open within 90 days, and are a stopgap measure that will last until 2014, when insurance companies will no longer be able to deny coverage to anyone based on pre-existing conditions" (Winerman, 4/2).

The Wall Street Journal: "Beginning July 1, the pools will provide insurance for adults with pre-existing health conditions who lack insurance through an employer and can't get affordable coverage on their own. By 2014, the health law will replace them with new state-run insurance exchanges. . . . About 35 states currently operate their own high-risk pools. In her letter to states, Ms. Sebelius gave five options for participating in the new program. States that already have such pools can add a new pool; those that don't can start a risk-pool. States also can build on other existing programs to cover high-risk adults or contract with a so-called carrier of last resort to provide subsidized coverage. If a state chose to do nothing, HHS would carry out its own coverage program in the state" (Adamy, 4/2).

The Associated Press: The administration is under pressure to turn the health care bill from a political negative into a positive ahead of the fall elections and to undercut Republican calls to repeal the law. . . . Some details about the new buying pools remain fuzzy, including how many people might qualify, how much they will have to pay in premiums, how existing state programs would be affected and whether $5 billion will be enough. Some experts have said the money will fall far short and will likely run out in the next couple years. The program is available to people with pre-existing conditions who have been uninsured for at least six months" (Werner, 4/3).

The New York Times: "Premiums in the new program will be set at 'standard rates,' based on the average premiums charged by private insurers for similar coverage in the individual market. . . . Ms. Sebelius may establish a minimum set of benefits. The law specifies a limit on out-of-pocket medical costs, which cannot exceed $5,950 a year for an individual in the pool. . . . State high-risk pools, all of which operate at a loss, paid a total of $1.9 billion in claims in 2008, according to a recent report by the Government Accountability Office, an investigative arm of Congress." (Pear, 4/2).

Bloomberg: "The high-risk pool expansion is a federal program, though much of the implementation is being left up to state governments that are on the front line of regulating insurance companies and providing health care services like Medicaid. While many of the benefits in the federal law have been billed as immediate, it may take months for states that lack a high-risk pool to figure out how to get them up and running, federal officials have said." 'Our health-care system wasn't broken in a day, and it won't be fixed in a day either,' Jenny Backus, a spokeswoman for Sebelius, said earlier this week" (Armstrong, 4/2).

Omaha World-Herald: "Nebraska and Iowa may end up with two separate high-risk health insurance pools in each state for people with pre-existing medical conditions. One would be the pools already operated by the state governments, which provide health insurance to about 5,000 people in Nebraska and 3,000 in Iowa. . . . The two states are among 34 that already operate high-risk insurance pools, which provide high-cost coverage for people turned down by private insurers" (Jordan, 4/3).

Chicago Sun-Times: "Michael McRaith, director of the Illinois Department of Insurance, said Friday that the state is well-positioned to meet the federal requirements. . . . Enrollees in the state's two existing high-risk pools, both offered under the Illinois Comprehensive Health Insurance Plan (ICHIP), shoulder two-thirds of the cost, which translates to 'cost-prohibitive' annual premiums of $12,000 to $16,000, McRaith said. 'National reform will reverse that equation so premiums constitute no more than 35 percent of the cost of the program,' he said" (Thomas, 4/4).

Modern Healthcare: "Governors and independent state insurance commissioners have until April 30 to respond to the letter. . . . Members must be U.S. citizens who have been uninsured for at least six months. Some Republican governors have said they plan to sue the federal government to block the health reform law's implementation. But officials at the HHS said they hope the governors will cooperate with this new program" (Vesely, 4/2).

Medicaid Expansion Now Could Save Some States Money
By Christopher Weaver, KHN Staff Writer
April 1, 2010

Starting today, states can choose to take the first steps toward the massive expansion of insurance coverage that is the health overhaul's chief goal. And for some states, that move could have the benefit of reviving funding for state-run programs that insure low-income adults.

As of April 1, states can apply for federal funding to expand their Medicaid programs to cover low-income people earning up to 133 percent of the poverty level, or $14,404 for an individual and $29,326.50 for a family of four. If implemented nationwide, this vast increase would bring 15 million more people into the safety-net program, according to the Congressional Budget Office.

Typically, Medicaid covers kids from families that earn less than the poverty level, and in some cases, their parents. Adults without children are usually not eligible, although some states include them.

States that choose to take the federal government up on this offer would still have to pay their share of the new Medicaid costs until increased federal support begins in 2014, when the expansion is required of all states. On average, states pay more than 40 percent of the Medicaid tab. For states such as Nevada and West Virginia, which are struggling to meet their existing obligations, that requirement would be tough.

But, for a few states, the early expansion could provide a needed windfall. Maine, Washington, Minnesota, and a handful of others already offer coverage for low-income people who earn too much to receive federal help under traditional Medicaid rules--and the states pay for it out of their own coffers. For them, the provision could mean the federal government for the first time would pick up a portion of the tab for those enrollees.

These states could take a variety of approaches. Washington state officials said they will suggest an alternative to expanding the traditional Medicaid plan. They would ask the Obama administration to waive some Medicaid rules--not an uncommon request--and subsidize their Basic Health Plan, a state-financed program that helps insure people earning up to twice the poverty level.

If the administration agrees, the federal government could cover more than 60 percent of the cost for participants in that plan who earn less than 133 percent of the poverty line, the cut-off for the Medicaid expansion. The state would probably continue subsidizing some higher earners on its own. State officials said it was not yet clear whether Basic Health would provide benefits to more people with the addition of federal funding.

The new federal subsidy could be worth $52 million to $60 million a year for Washington state, according to Democratic Gov. Christine Gregoire's office. The state would also ask the federal government to subsidize a separate state health plan, known as General Assistance-Unemployable, with up to $40 million. Sen. Maria Cantwell, D-Wash., who promoted the provision during the congressional debate as a way of supporting Basic Health, had earlier estimated the federal contribution as high as
$180 million a year.

Under Medicaid rules, states have always been allowed to make changes to benefits to expand access, but they must first get approval from the federal government. Federal officials normally don't allow changes that would cost more overall.

Washington state could argue that extending the subsidies would be budget neutral for the federal government because it would otherwise be poised to pick up more Medicaid costs under the new health law, said Jonathan Seib, Gregoire's health policy adviser.

"Given this budget environment, it would be very helpful" for the state, Seib said. "We are trying to take an existing commitment of state dollars and stretch it further." Under one budget proposal, the state has already considered eliminating the Basic Health Plan to make up for revenue shortfalls.

It's unclear whether the federal authorities that oversee the Medicaid program will approve the Washington state proposal. The Basic Health Plan has different rules than Medicaid and the federal officials would have to sign off on those. It charges premiums and requires patients to pick up some of the costs, contrary to normal Medicaid rules. Also, the state limits enrollment, even for people whose incomes make them eligible.

"They haven't promised anything, but clearly are interested," Seib said.

If the proposal got a green light, the money wouldn't flow immediately because of review and oversight procedures. But, Seib says, state officials hope to get fresh funding by January, if not sooner.

"Each state has to do its own math"

Other states that finance their own health care programs for low-income people are exploring options, too. They are all waiting for further guidance from the Centers for Medicare and Medicaid Services, which runs the federal component of Medicaid, and expect more information by next week.

"It's a little unclear how Maine will benefit," said Trish Riley, the director of the state-funded Dirigo health program. Still, she said, "We're reading this as a net plus for the state."

Maine has already made changes to Medicaid to offer coverage to some higher earners. But the separate Dirigo program covers people who earn even more, up to 300 percent of the poverty line. In theory, the state could shift adults without children who earn up to 133 percent of the poverty line from its Dirigo health plan to the Medicaid program.

Under such an approach, the new federal matching funds would ease the burden on Dirigo, which the state pays for through a combination of fees on health firms and patient premiums.

In Minnesota, a different issue has come up. Last week, state Rep. Tom Huntley, a Democrat, said the federal health law would allow the state to shift enrollees in two state-financed plans, General Assistance Medical Care and MinnesotaCare, into Medicaid, to take advantage of the new funding.

But, Brian Osberg, the state's top Medicaid official, said that's probably not realistic. Recent budget cuts, including to the General Assistance program, and projected deficits for a trust fund that pays for some MinnesotaCare enrollees, may leave the state without the required funds to match federal contributions.

"The biggest issue is how do we finance the state share going forward," Osberg said. "With the reductions in the funding, we no longer have money that we can use for the match."

Connecticut, the District of Columbia, Massachusetts, Pennsylvania, Tennessee, Vermont and Wisconsin all have state-financed programs as well, and may be able to use the early Medicaid expansion to their fiscal advantage.

For those states, "It may work out to switch people to Medicaid under the early expansion," said Ann Kohler, the health director for the American Public Human Services Association. "Each state has to do its own math."

True or False: Seven Concerns About The New Health Law
By KHN Staff
April 6, 2010

The sweeping health care overhaul signed into law his month by President Barack Obama is more than 2,000 pages long and has been dissected by analysts, politicians and pundits. It's no wonder that some consumers are confused--and perhaps frightened--about how the law might affect them. Some concerns were raised during the congressional debate or have been swirling around the Internet.

KHN staff writers checked out some of the claims:

Comparative effectiveness research will lead to the rationing of care for the elderly.

Not true.

The law creates a nonprofit Patient-Centered Outcomes Research Institute charged with examining the "relative health outcomes, clinical effectiveness, and appropriateness" of different medical treatments by evaluating existing studies and conducting its own. The institute would be governed by a 19-member board that includes patients, doctors, hospitals, drug makers, device manufacturers, insurers, payers, government officials and health experts.

The law states that the institute does not have the power to mandate or even endorse coverage rules or reimbursement for any particular treatment. Medicare may take the institute's research into account when deciding what procedures it will cover, so long as the new research is not the sole justification and the agency allows for public input.

This is a shift from Congress' position when it created the Medicare
Part D drug benefit in 2003; back then it banned any use of comparative effectiveness research in determining what would be covered.

Many experts believe that as health costs continue to mushroom, Medicare and private payers will incorporate the institute's work into their coverage decisions. Others say history suggests that's unlikely. "The graveyards of Washington, DC, are littered with government agencies that tried to do comparative effectiveness research," said Michael Cannon, director of health policy studies at the Cato Institute, a libertarian think tank in Washington.

--Jordan Rau

Cuts in the Medicare Advantage plans under the health care overhaul "will cause massive disruption for the more than 10 million seniors" and many of them will lose coverage.

Partially true.

That was the warning in a statement from America's Health Insurance Plans, a lobbying group, days before the health overhaul cleared Congress, echoing a Republican criticism.

The new health law will cut $136 billion in spending on the Advantage program by 2019, which currently pays private plans to administer Medicare benefits and pays them about 14 percent more than the per-patient cost of the traditional Medicare program. Plans use that subsidy to lure members with lower premium costs or extra benefits not normally paid for by Medicare, such as vision care or better prescription drug coverage. Some Democrats and analysts have argued the higher rates are wasteful.

Even experts who support the change concede that the impact of the cuts could be evident. Robert Berenson, a scholar at the Urban Institute and former Medicare official, said some Advantage plan members will notice skimpier benefits, "but the Republicans have really exaggerated that this will wipe out the Advantage plans."

Marsha Gold, a health policy analyst for the private research group Mathematica, said, "Over time, there will be less rich benefits or higher premiums, but it's going to be gradual," noting that the largest cuts do not begin until 2015.

The three-quarters of beneficiaries who receive traditional Medicare benefits would not be affected by the change. However, for those in Advantage plans, they may have fewer to choose from. "You are going to start seeing companies dropping out," said Robert Moffit, a policy analyst at the Heritage Foundation.

--Christopher Weaver

The IRS will be hiring thousands of new agents to check that people have health insurance and people who don't will be sent to jail.

At least partially not true.

These claims arise from a provision of the healthcare law that would require Americans to purchase health insurance or else face penalties. The Internal Revenue Service will be tasked with enforcing this provision, as well as collecting some new fees and overseeing government subsidies to help small businesses and lower income people buy insurance.

The Congressional Budget Office said the number of new employees the IRS will need has not been determined, though it did estimate the agency's cost could reach approximately $10 billion over the next 10 years.

House Ways and Means Committee Republicans used the CBO estimate in a report on the bill's effect on the IRS. In that report, Rep. Dave Camp, R-Mich., said, "the IRS could have to hire more than 16,000 additional agents, auditors and other workers just to enforce all the new taxes and penalties." Camp called such an increase in personnel, "a dangerous expansion of the IRS' power." The IRS currently has about 93,000 employees.

Others have raised concerns about IRS sanctions and the possibility of jail time. Rep. Ron Paul, R-Texas, in an interview with Fox Business Network about the new health law, said, "If it was a good program, and everybody liked it, you wouldn't need 16,500 thugs coming with their guns and put me in jail if you didn't follow all the rules."

The CBO report, however, identifies the $10 billion as needed for "administrative costs," and does not state that all of the funds will be used for new employees.

IRS Commissioner Douglas Shulman told a March 25 House Ways and Means Committee hearing that his agency will report back to Congress on the number of additional staff members or funds it will need "to serve the American people." He noted that under the new law, the IRS will not place any liens against taxpayers and there will be no criminal punishments, including jail time, for failing to report insurance information to the IRS. The Department of Health and Human Services, he said, will work "with the insurance companies to determine" if consumers have "acceptable coverage." Consumers will then get a form to file with their tax returns.

In remarks at the National Press Club on April 5, Shulman added more detail. He said that since the remedies available to the IRS are limited, people who fail to provide the proper paperwork to show they have insurance may likely have part of their refund withheld.

--Maggie Mertens

When health care reform kicks in, consumers will have longer waits to see a primary care doctor.

Partially true.

With estimates that 32 million more people will have health insurance by 2019, concerns that there will be longer waiting times to see doctors are not entirely unfounded. Even before health reform legislation passed, the U.S. faced a shortage of family doctors that was expected to grow to around 40,000 by 2020, according to the American Academy of Family Physicians. Lori Heim, president of the AAFP, says that number is likely to increase significantly.

The new legislation contains several incentives aimed at curbing the shortage by encouraging medical students to go into primary care rather than choosing other specialties, such as cardiology or orthopedics, which are generally more lucrative. In addition, the legislation temporarily raises Medicaid reimbursement rates for primary care doctors and offers special loan repayment programs to students who choose primary care. Heim said these incentives should help but won't eliminate the impact of the new patient load. "All of them fall short for what it's going to take to truly build a primary care workforce that's going to take care of everyone," she said.

Patients most likely to be affected by the shortage are those seeking a primary care physician for the first time, said Stuart Altman, a professor of national health policy at Brandeis University's Heller School. Those who already have an established doctor--and some uninsured patients do have relationships already with physicians--are not likely to see much of a change unless they have to shop for a new one.

Altman points to the recent experiences of Massachusetts, which approved universal health care in 2006. The state was already facing a primary care shortage when the law was implemented. By 2009, a survey by the Massachusetts Medical Association found that more than half of internists and 40 percent of family doctors were not accepting new patients, the lowest acceptance rates since the survey was started eight years ago.

Fitzhugh Mullan, a professor of health policy and pediatrics at The George Washington University, agreed that in the short term, the influx of newly insured patients will put pressure on the health care system. But he said that in the long term, "it will cause us to increase and rebalance our workforce" to make it more efficient. He says the rebalancing will include an increase in the number of physician assistants and nurse practitioners, who can be trained more quickly than doctors, to fill the primary care gap and reduce wait times.

--Jenny Gold

The new health law will end TRICARE and force military families to buy different insurance.

Not True.

The future of TRICARE, the health care system for about 9.6 million active duty military and retirees, their families and survivors, was a hotly debated issue before the March 21 House vote on health overhaul legislation. Conservatives, Republican members of Congress and at least one prominent veterans group said the bills did not guarantee that TRICARE's benefits would be considered "qualifying coverage" and thus meet the requirements for a health plan under the bill. They argued that military beneficiaries might have to leave the plan or pay penalties if TRICARE was not deemed to meet the new law's standards.

Thomas J. Tradewell Sr., the national commander of the Veterans of Foreign Wars of the U.S., accused President Barack Obama and congressional Democrats of "betraying America's veterans."

But the White House, Pentagon, Department of Veterans Affairs, congressional Democratic leaders and other military associations say TRICARE meets all the law's requirements and military personnel and their families can continue to get full benefits under the familiar military health plan. Even some opponents of the health reform bill agreed that TRICARE would not be jeopardized.

Some of the confusion appears to stem from the different approaches taken to TRICARE in the competing Senate- and House-passed reform bills. The Senate measure, which passed on Christmas Eve and was sent back to the House for a final vote, did not mention TRICARE by name, though the original House bill did.

Five House committee chairman issued a letter saying that TRICARE coverage "would satisfy the requirements" of the bill. Kathleen Sebelius, secretary of Health and Human Services, also sent a letter to Sen. Max Baucus, D-Mont., reassuring him that TRICARE coverage meets "the minimum essential coverage definition."

The united defense brought a letter of apology from Tradewell. "I apologize for using too harsh a word . . ." he said. "But I did not apologize for our strong advocacy on the issue."

--Lexie Verdon

Federal government employees will be forced to switch their health insurance coverage and participate in the exchanges.

Mostly not true.

President Barack Obama has repeatedly stated that people who like their health insurance can keep it. However, that doesn't apply to a small group of federal employees.

Currently, government employees and qualified retirees can get health insurance through the Federal Employees Health Benefits Program (FEHBP), a "marketplace" with more than 250 plans, with at least 10 national fee-for-service plans. Government employees, including members of Congress, the president, vice president, cabinet members and White House staff all participate in FEHBP. That won't change--except for members of Congress and their personal staffs. In 2014, they will instead have to enroll in the new insurance exchanges.

Some Republicans, led by Sens. Charles Grassley of Iowa and Tom Coburn of Oklahoma, argued that all members of Congress and staff should be subject to the same coverage that they set up for other Americans.

The provision has provoked confusion, sparked emotions and even caused the White House to announce that the president will voluntarily participate in the exchange, although he would not be required to do so by the new law. Walton Francis, a health economist and main author of "CHECKBOOK's Guide to Health Plans for Federal Employees," said the requirement will be controversial and may come up again for consideration: "My guess is the FEHBP exclusion for these members and their staff will probably not survive." he said.

--Jessica Marcy

Illegal immigrants will get free health care.

Mostly not true.

Illegal immigrants already are generally barred from receiving Medicaid benefits, and the new health law excludes them from receiving premium subsidies. They are also explicitly banned from purchasing insurance with their own funds on the exchanges created in the legislation. Anyone trying to purchase health insurance through those marketplaces must provide proof of citizenship or legal resident status.

But some commentators have argued that undocumented immigrants will get free or subsidized health care when the reforms are in place, that the enforcement provisions are weak, and undocumented immigrants might find ways to circumvent the law. Dan Vale of the Federation for American Immigration Reform said that while the bill prohibits undocumented immigrants from buying insurance from the new exchanges, it uses "a 'loosey-goosey' verification policy" that "doesn't require a photo ID."

However, Sonal Ambegaokar of the National Immigration Law Center said the process outlined in the Senate bill is likely to be similar to what officials currently use in the Medicaid program. According to Amebegaokar, "There is a history of verification processes for public programs; we've had this for many years in Medicaid and we have strict citizenship requirements. And we have yet to see a flood of immigrants in Medicaid."

The Pew Hispanic Center estimates that of about 12 million undocumented immigrants live in the United States and more than half of them don't have insurance. Nonetheless, the vast majority--nearly
80 percent--of the uninsured are U.S. citizens, according to the Kaiser Family Foundation. (KHN is a program of the foundation.)

Advocates for immigrants argue that many undocumented residents will simply remain uncovered. The Congressional Budget Office estimates that of the 23 million people who will continue to be uninsured in 2019,
8 million will be undocumented immigrants. Without health insurance, many of them will continue to receive care in free or subsidized community clinics. In addition, the new law doesn't change the requirement that hospitals offer emergency services to all patients, including illegal immigrants.

--Kate Steadman

*We would like to thank Brian C. Betner, Esquire (Hall Render Killian Heath & Lyman, Indianapolis, IN), 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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