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Healthcare Reform Update - August 5-11, 2010


Email Alert

August 11, 2010

Compiled by Jennifer Hansen*

Health Law Expands Medicare Coverage Of Preventive Care

By Michelle Andrews
August 10, 2010

Preventive health care is important at any age, but never more so than as we get older. Many of the major cancers that can be screened for—such as breast and colorectal cancer—are typically diagnosed at about age 70. After age 55, people have a 90 percent chance of developing high blood pressure, putting them at higher risk for heart disease and stroke.

"The payoff in terms of prevention in geriatrics is more upfront and more immediate," says geriatrician Peter Hollmann, chairman of the public policy committee for the American Geriatrics Society.

Starting in January, the new health-care law will make it easier and cheaper for seniors to get preventive care. Medicare beneficiaries will be able to receive for free all preventive services and screenings that receive an A or B recommendation for seniors from the U.S. Preventive Services Task Force. That includes mammograms and colorectal cancer screening, bone mass measurement and nutritional counseling for people at risk for diet-related chronic diseases such as diabetes.

Medicare beneficiaries will also get a free annual wellness visit under the new law. The visit will cover a number of services, including a health risk assessment and a review of the person's functional and cognitive abilities.

The goal is to identify and to address declines in physical or mental capacity early on, say experts—before someone takes a fall, for example, or starts to forget to pay his bills.

Currently, seniors in traditional Medicare pay 20 percent of the cost for most covered preventive services. The new requirements for free preventive coverage don't apply to enrollees in Medicare Advantage plans, although many of those plans already offer free preventive services.

Cost can be a big stumbling block to getting preventive care.

A co-payment of just $12 for a mammogram in Medicare's managed-care plans resulted in screening rates that were 8 to 11 percentage points lower than those for women in plans that didn't require a co-payment, according to a 2008 study published in the New England Journal of Medicine. Another study found that an increase of $10 in a co-payment for physician office visits led to a 20 percent decline in appointments among elderly patients.

"A lot of these screenings aren't something somebody wakes up and says, 'Wow, I'm going to have a flexible sigmoidoscopy today,' " says Cheryl Matheis, senior vice president for health strategy at AARP.

To encourage seniors to get that test, one of a number of approved screenings for colorectal cancer, and other important preventive services, "we have to educate people about the value and then eliminate the cost and make it convenient," she says.

The new law envisions the free annual wellness visit as an opportunity for seniors to develop a "personalized prevention plan" with their physician and plot out appropriate services and screenings for the next five to 10 years.

There hasn't been much research on people in their 80s or older, so it's hard to calculate the risk/benefit ratio of preventive tests and screenings in this group, say experts.

"It gets a little murky when people get older," says Hollmann. Among other things, "you have to consider their practical life expectancy."

Many people who work with seniors hope the annual wellness visit will provide an opening to also discuss preventive activities not covered by Medicare.

"We can use it as an opportunity to educate people about community activities like healthy eating or falls-prevention programs," says Nancy Whitelaw, a senior vice president at the National Council on Aging.

Some insurance plans offer their own programs that encourage "healthy aging." Eight years ago, Tom Cajski joined the Kaiser Permanente Senior Summit program at a clinic near his home in Kailua, on the island of Oahu in Hawaii. Among other things, the program aims to stay in touch with seniors who are relatively healthy and don't visit clinics often to make sure they're getting the preventive care they need, says Sandi Brekke, who runs the program.

Every month, members attend lectures or demonstrations on health topics from foot care to acupuncture. Twice a year they get physical evaluations to test their strength, flexibility and balance, among other things.

Cajski, 73, says he thinks the program helps him take better care of his health.

"I'm surrounded by people who give me health hints and keep me thinking about something that would otherwise recede," he says.

Advocates for seniors say the new law's provisions make it clear that prevention is important at any age. And about time, too.

"It's awfully nice to see Medicare catch up to where the rest of the world has been for some time," says Hollmann.

From Florida To Oregon, Medicare Advantage's Benefits—And Cuts—Vary
By David Gulliver
August 6, 2010

This story was produced in partnership with Health News Florida.

For the 11 million people signed up for Medicare Advantage plans, their future with the popular program may depend on where they live.

To help finance health reform, Congress cut $136 billion over 10 years from the program, in which private insurers provide Medicare health plans for seniors. The private plans, which are paid a flat fee from the government for each enrollee were a likely target: They cost the government much more per beneficiary, on average, than does traditional Medicare, according to Medicare's advisory commission.

But congressional Republicans and some advocates for seniors charged that the funding cuts would force insurers to slash benefits or close plans. Medicare's chief actuary said the reduced benefits would cause Advantage plans' enrollment to fall to 7.4 million seniors.

The reform law's architects, including the Obama administration, say it will level the playing field between traditional Medicare and the Advantage program, while rewarding plans that operate efficiently.

Yet some leading Medicare experts suggest that the effect of the new funding formula used to make reductions may surprise lawmakers and consumers. Among their predictions:

—The fallout from the new funding formula will vary considerably by area. The cuts—and the impact on beneficiaries—will not be uniform.

—Although Congress set the highest funding rate for those counties where the government spends the least on traditional Medicare in which doctors and hospitals charge specific fees for individual services, the trims in the new payment system could still cause plans in those areas to reduce benefits or shut down.

—At the same time, plans in higher-cost markets where the government spends the most on traditional Medicare, which will get the lowest rate of federal funding, might continue to operate as they do today.

Complicated Funding System

Federal funding for Medicare Advantage currently is computed on a complex formula that sets a benchmark—or base payment—in each county. That is based on the cost of traditional fee-for-service Medicare in the county and other provisions established in laws such as incentives for plans in rural and some urban areas.

The benchmark system can allow Advantage plans to offer enrollees extra benefits, such as free eyeglasses or gym memberships. Enrollees generally are limited to using the plan's network of doctors and health care facilities.

But the current benchmark system also results in the government paying the plans more to care for enrollees than does traditional Medicare. It paid Medicare Advantage plans an average of 13 percent above what traditional Medicare spends per person, although that is expected to fall to 9 percent this year, according to the Medicare Payment Advisory Commission.

Those benchmarks also have allowed some low-cost health care areas to have considerably higher rates of Medicare Advantage federal funding than some of the high-cost jurisdictions.

Some Florida counties, for example, have among the highest health care costs in the country. Yet in that state, the federal government on average paid $1.03 to Advantage plans for every $1 paid for traditional Medicare, according to 2009 data analyzed by Dr. Brian Biles, a George Washington University professor who has studied how the new health law will affect Medicare Advantage plans.

Yet in Oregon, where health care costs are considerably lower, the ratio is $1.24 for each dollar spent on traditional Medicare, Biles found. But because health care costs are so much higher in Florida, the federal government is still paying a higher yearly average to the Medicare Advantage plans in Florida for each enrollee, $10,641, than in Oregon, $9,212.

Under the health overhaul, the funding reductions also will be determined on a county-by-county basis. Counties like Florida's Miami-Dade, which has among the nation's highest fee-for-service costs, will have a federal benchmark of 95 percent of what traditional Medicare pays, per person, on average. The lowest-cost counties, like Oregon's, would get a 115 percent benchmark. Others closer to average costs would have rates set at 100 or 107.5 percent of fee-for-service spending.

The Medicare Advantage changes begin with a payment freeze in 2011 and then the funding cuts phase in starting in 2012.

But even the lowest tier of payments can allow plans to thrive in some areas, experts say.

Robert A. Berenson, a researcher at the Urban Institute, said that "paying (Medicare Advantage plans) 95 percent leaves plenty of room for benefit and profits." That's because insurers can use their clout to negotiate better deals from doctors and hospitals, and direct patients to the least expensive care, he said.

John Gorman, CEO of the Gorman Health Group, a consulting firm specializing in government health programs, recalled that in the 1990s federal funding was set at 95 percent of fee-for-service spending. "Lots of plans made money," he said.

Those plans focused on medical management to keep down costs, he said, and under the new funding formula, plans will need to do that again.

He called the new funding formula "congressionally-imposed Darwinism." Its intent is to "see which plans can lose pounds from the . . . subsidies the fastest," he said. Still, he said, the new funding formula appears to be fair—but that there "will be winners and losers."

Joseph Antos, a scholar at the American Enterprise Institute and adviser to the Congressional Budget Office, agrees that some plans will suffer. "Slowly, but surely," he said, "plans are going to be pulling back out of the marginal markets."

Gorman said the funding cuts' effect will be softened for some plans, because the law authorizes 5 to 10 percent bonuses to plans that rate exceptionally well in quality and satisfaction. (See related KHN story on Medicare Advantage ratings system.)

But Biles said his data model suggests the quality bonuses will have little overall effect. If the bonuses were in place this year, they would have increased plans' payments by $700 million, less than 1 percent of all Advantage spending.

Designed To Cut Costs

To understand the situation, you have to go back to the beginning. The idea that private firms could do what Medicare does, but better and for less money, dates back to the 1970s. These managed care plans generally limited enrollees to physicians and hospitals within the plan's network, which is supposed to keep people healthier and coordinate care more efficiently, holding costs down as a result. But they have never produced the anticipated savings.

"What we've discovered is that the view that managed care is always more efficient than fee-for-service Medicare is simply not true," said Biles.

Look at the case of two women enrolled in plans across the country from each other. Norma Noriega, 71, of Miami, enrolled in the Leon Cares plan, pays no additional premium beyond the standard Medicare monthly fee of $96.40 a month. She doesn't need a Medigap policy. Under traditional Medicare, she would have to pay a $1,100 deductible for her first 60 days in the hospital and 20 percent co-payment for a doctor visit or outpatient care. With her Advantage plan, she pays nothing.

She also gets free dental care, routine hearing or vision tests and two pairs of glasses a year.

That is hardly unusual. At least 66 of the 78 Miami-area plans charge no premium.

While Noriega generally likes her plan, she complains that she doesn't always get the type of services she wants—such as when she wanted a stress test for a heart problem but her doctor ordered an electrocardiogram instead—because the plan is rigid about what it will pay for.

Nancy Leyson, 68, who lives near Eugene, Ore., has a choice of 35 Medicare Advantage plans, and only two have no additional premiums.

She opted for a plan from MedAdvantage Enhanced from BlueCross BlueShield of Oregon. Her premium costs are $222 per month, which is more per month up front than traditional Medicare, but she says she saves money in the long term because it covers a treatment for spinal stenosis that she needs a few times a year.

Unlike Noriega, Leyson has a yearly deductible and co-payments for hospital care, physician appointments and outpatient surgery. There is no coverage for hearing exams and a $100 limit on eyeglasses.

Still, she said she is "really pleased with our plan."

Because Leyson contributes to her plan, it would seem to be more profitable to the insurer than Noriega's. And yet, experts say, in the complex world of how Medicare Advantage operates, Miami plans are in better position to survive under the new health law's upcoming cuts.

That is because in a market where traditional Medicare spending and the number of customers is high, such as the Miami area, an insurer has more opportunity to squeeze out savings. But in many of the low-cost areas, there is not the same flexibility in the system and because these areas often have fewer doctors and hospitals competing, insurance plans have less ability to bring down costs.

Biles' analysis, and one from the Congressional Budget Office, found that Medicare Advantage plans in expensive markets such as Miami will be getting more money relative to their expenses.

Conversely, the higher 115 percent benchmark in Oregon and other markets may be insufficient to keep the plans afloat.

So the reduction may put the plans in the red. "It doesn't do Medicare beneficiaries much good to pay 115 percent of Medicare if their costs are 116 percent," he said.

This story was corrected from its original version to reflect the fact that Norma Noriega pays a monthly premium to Medicare.

Payment Practices Investigated; Texas Docs Team With Hospitals On Payment Reform
August 10, 2010

The New York Times: The Obama administration is investigating widespread practices that don't pay nurses and other employees at hospitals and nursing homes properly for overtime they work. "Hospitals around the country have paid millions of dollars in back wages to settle claims by the government and their employees. And many more hospitals are fighting class-action lawsuits that raise the same issues." Settlements have been reached in St. Louis, Boston and California. "The Labor Department has hired 250 new wage-and-hour investigators, representing a staff increase of one-third. The government wants to make sure workers get 'every penny they earn,' said Kenneth Stripling, a Labor Department official leading enforcement efforts in Birmingham, Ala. In New York, the department said, fewer than 36 percent of health care employers investigated by its Albany office were in compliance with the federal wage-and-hour law" (Pear, 8/9).

In the meantime, doctors and hospitals are teaming in Texas to push for payment reform, The Texas Tribune reports. "Across Texas, hospital systems are scooping up physician groups and solo practitioners, scrambling to create the kinds of coordinated medical teams that federal health care reform puts a premium on. . . . But some health care providers say the gold rush-style push is too much, too soon. They say physician groups are cashing in their chips for fear of being left behind and that hospitals are going on doctor spending sprees without knowing how—or even whether—these new medical teams will work." Some worry it could be the end of private practice, but doctors are teaming with only other doctors to stay competitive (Ramshaw, 8/9).

Obama Administration Awards $159.1 Million In Grants For Nurses, Geriatric Care Workers
August 6, 2010

The Obama Administration awarded $159.1 million in grants for training of nurses and geriatric specialists.

The Washington Post: "The grants, which include new and continuing funding, build on multimillion dollar investments called for under the new health-care overhaul law in order to address a growing shortage of primary care workers." A 2008 report by the Council on Physician and Nurse Supply said schools would need to produce 30,000 nurses annually to offset the shortfall and the looming mass retirement of nurses, 45 percent of whom are 50 or older" (Aizenman, 8/5).

The Hill: "The grants include: $106 million for nursing education (including $42 million to train nurses as primary-care providers and/or nursing faculty); $29.5 million to fund three geriatric education and training programs; and $23.6 million to support Centers of Excellence programs designed to improve the recruitment and performance of underrepresented minority students preparing for careers in healthcare" (Pecquet, 8/5).

Several local newspapers report on grants for specific states.

Star Tribune: "Minnesota schools will receive nearly $2 million in federal funds as part of" the grant package. "[E]ight colleges and the Minneapolis School of Anesthesia will split the money for nurse education, retention and training, and geriatric training" (Marcotty, 8/5). "Work force training programs at several Oklahoma colleges and universities will get a boost from $2.1 million of grants from the U.S. Department of Health and Human Services . . . The University of Oklahoma Health Sciences Center will receive $1,162,114—more than half the total funds for Oklahoma programs" (8/6).

Missouri Voters Reject Health Reform Law's 'Individual Mandate' To Buy Insurance
August 4, 2010

The Kansas City Star: "Missouri law now contains a direct challenge to the federal health care law passed earlier this year. Primary voters approved Proposition C by a wide margin Tuesday. . . . The measure is intended to invalidate in Missouri a key element of the federal health care law passed by Congress and signed by President Barack Obama in March. That law requires individuals to purchase health insurance beginning in 2014."

"With Tuesday's victory, voters did two things, said state Sen. Jane Cunningham, a St. Louis County Republican. They protected their rights and signaled their displeasure with Congress and Obama." Critics "argue that the measure is more likely meaningless because courts have generally found that federal law overrules state law" (Noble, 8/4).

"Supporters of the measure said it would send a firm signal to Washington about how this state, often a bellwether in presidential elections, felt about such a law," The New York Times reports, adding that the referendum "was seen as a first look at efforts by conservatives to gather and rally their forces over the issue. In the end, though, the referendum seemed not to capture the general population's attention. Instead, Republican primary voters (who had the most competitive races on Tuesday) appeared to play a crucial role in the vote's fate" (Davey, 8/3).

The Wall Street Journal notes that 71 percent of voters supported the proposition. "Supporters of the state law said Congress was overreaching by requiring people to buy coverage, and they called the proposition a chance to stand up for states' rights. Opponents included the Missouri Hospital Association, which said that if the mandate isn't enforced some who can afford insurance will get a free ride and pass the costs on to those who are insured. The association spent about $400,000 on direct mail in connection with Proposition C, according to its filings" (Landers, 8/4).

The Associated Press: "Legislatures in Arizona, Georgia, Idaho, Louisiana and Virginia have passed similar statutes without referring them to the ballot. . . . Missouri was the first state to challenge aspects of the federal law in a referendum. The intent of the federal requirement is to broaden the pool of healthy people covered by insurers, thus holding down premiums that otherwise would rise because of separate provisions prohibiting insurers from denying coverage to people with poor health or pre-existing conditions" (Lieb, 8/4).

Reuters: The American Legislative Exchange Council "helped draft the legislation in Missouri and in many other states. The Missouri measure states that no rule or law can compel an individual or business to participate in any healthcare system, and prohibits laws that level penalties against people who do not buy health insurance" (Gillam, 8/3).

Los Angeles Times: "In November, voters in Oklahoma and Arizona will also consider amendments to their state constitutions that would attempt to head off the insurance mandate. . . . Public opinion in general remains divided on the law, with several recent surveys suggesting that support may be inching up even as substantial numbers of Americans still favor repealing all or part of it" (Levey, 8/4).

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.

*We would like to thank Jennifer Hansen, Esquire (Hooper Lundy & Bookman Inc., San Diego, CA), for selecting the articles for this week's compilation.

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