What's New At Bucks Voices?

May 21, 2010

1.	Putting the Insurers on Notice
2.	The "Middle Men" Take a Hit Too
3.	Some Changes Are Quickly Moving Ahead
4.	Pennsylvania Efforts to Support Reform
5.	Parents' Plans Cover Young Adults Up To Age 26
6.	The Ongoing Battle
7.	Changes for Doctors
8.	We Don't Want to Save Money Unless It's Our Idea
9.	Targeting the $65 Billion Annual Medical Fraud Cost

1. Putting the Insurers on Notice While some may want to call it "socialism," "communism," or the "Invasion of the Freedom Snatchers," the Affordable Care Act (which the health care reform bill is now being called) is essentially a package of subsidies, administrative mechanisms, minimum standards and regulations. While most articles about the Act focus on the coverage benefits and requirements for individuals, small employer subsidies, and insurance policy rules, let's look at a couple of additional improvements that everyone will benefit from.

1. One of the more immediate benefits we are starting to see is challenging insurance companies to justify rate increases and "administrative costs" (including profits) in excess of a certain percentage of premiums. What this means is more savings for individuals and small employers who have to buy fully insured plans (vs. the self-insured plans that large employers can get).

As the AMA reported on May 17th on their web-news site (click here):

Following a state review in California that found math errors behind Anthem Blue Cross' infamous hike of up to 39% for individual policies, Dept. of Health and Human Services Secretary Kathleen Sebelius is asking other states to take another look at the most recent premium rate increases by other WellPoint-owned plans.

.... Anthem, WellPoint's plan in California, withdrew a planned rate increase, scheduled to take effect May 1, after an independent actuary commissioned by the California Dept. of Insurance found "numerous errors" in how Anthem calculated its rate increases. The full review was released May 5.

As a result, the report said, many of Anthem's individual products were out of compliance with a mandated minimum medical-loss ratio -- the percentage of premium dollars spent on care -- of 70%. The report said Anthem could cut its average rate hike across all individual plans from 25.4% to 15.2% and still meet the 70% medical-loss ratio threshold.

2. Another article in the AMA news website (click here) notes:

"...the law also could dramatically change the way that care is delivered, according to experts on patient safety and quality.

For example, the overhaul uses pay bonuses and penalties to physicians and hospitals to incentivize the care coordination and safety interventions that can help prevent nosocomial infections [those resulting from treatment in a health care facility] and unnecessary hospital readmissions. It also requires an unprecedented level of public reporting on hospital and physician quality performance, and could hasten implementation of care improvement practices, experts said."

At the end of the article is a list of 9 measures (representing just a sample) that are aimed to improve patient safety and care quality.

2. The "Middle Men" Take a Hit Too As we've reported before, one of the reasons why insurance premiums are so high for smaller employers and individuals is that insurance companies rely on agents and brokers to market the coverages and provide account services. But as a May 18th Wall Street Journal article indicates (repeated here from a broker blog site: (click here), the health care law requirement that at least 80% of insurance premiums go towards directly paying for medical care (and 85% for larger employers) will force insurance companies to pay lower commissions.

"The commissions typically run between 4% and 6% of a policy's premium, but can be as high as 30% for the first year.

A recent Senate report found that companies targeting the market for individual policies paid only 74% of their premiums for medical expenses in 2009..."

The expectation is that commissions will switch from being paid as a percentage of plan costs (which provides no incentive for agents to control costs) to flat fees. Some may argue that these changes will hurt jobs in this industry (and not surprisingly brokers were among the strongest opponents of the President's reform effort, and represent a large segment of other opponents, such as the US Chamber of Commerce). But many of these jobs were needed only because the insurance industry is so unnecessarily complicated, unregulated, and lacking in standards and consumer protections. Health reform promises to change this for the better and gain efficiencies that save costs, which means cutting some jobs or incomes in industries that only existed due to the inefficiencies.

3. Some Changes Are Quickly Moving Ahead As noted in the online news site, Politico, the administration is trying to speed up implementation of some of the promised changes in advance of their official target dates, since others won't be ready until 2014 (click here). The efforts "have so far focused on expediting and amplifying four key areas of the new law: expanding coverage to young adults, covering sick people with pre-existing conditions or high medical costs, providing tax breaks to small businesses and helping a select group of seniors pay for prescription drugs."

Further quick hits noted by the article:

"Another target was stopping insurance companies from canceling coverage when a person becomes sick, a practice called rescission, which companies claim is rare. Democratic committee leaders sent a letter to health insurers demanding that they end any such practices immediately - nearly four months before any law would require insurers to do so. The insurers ultimately went along, giving the administration something else to announce.

Another benefit officials got going early was help for employers in funding health coverage for early retirees. Originally set to begin in late June, HHS accelerated the regulatory process to permit implementation by June 1.

Similarly, the administration has moved up from December to June the process of putting in place restrictions designed to control the proportion of premium revenue insurance companies actually spend on medical costs, as opposed to administrative overhead."

Sure part of this has a political motive, but the public is still confused about reform, continuing to hear the usual negative clichés about reform from the usual jaded sources, and opponents are continuing to spend big bucks ($3.8 million, vs.$2.0 million by pro-reform forces).

4. Pennsylvania Efforts to Support Reform States of course need to cooperate with the federal reform legislation, by setting up high risk pools (if they do not already have them and if they do not plan to default to using a new federal pool), having their insurance commissions gear up to provide more oversight of insurance companies, expanding Medicaid coverage, setting up a health exchange by 2014, and other changes. Despite Republican gubernatorial candidate (and state attorney general) Tom Corbett's hope to halt implementation, Governor Rendell has issued a press release indicating his administration is moving "full speed ahead," based on his executive order as of May 19th. You can read the release here: click here. But the Governor's statement (with backup calculations included) says, "Over the next eight years, the Commonwealth will save from a low of $280 million to a high of $650 million in direct general and lottery fund payments for health care expenditures."

A state representative from Montgomery County, Josh Shapiro, has proposed a bill for the statehouse to move ahead with implementation, which is discussed here: click here. Please encourage our own county legislators to support this bill and the Governor's efforts.

5. Parents' Plans Cover Young Adults Up To Age 26 As reported in the New York Times, Secretary of HHS, Kathleen Sibelius's office estimates that 1.2 million young adults will gain coverage because of the new rule that "an employer-sponsored health plan or a company selling individual insurance policies must offer coverage to subscribers' children up to the age of 26, regardless of whether a child lives with his or her parents, attends college, is a dependent for income-tax purposes or receives financial support from the parents." The coverage includes both married and unmarried children. (click here)

While the rule is to take effect generally for insurance "plan-years" that begin on or after this coming Sept. 23rd, many carriers are now beginning to offer it already. But there is a catch: "the rules allow an exception for employer-sponsored health plans that were in existence on March 23, when President Obama signed the health care bill. In general, such health plans can exclude adult children of workers until 2014 if the children have access to insurance through another employer-sponsored health plan."

6. The Ongoing Battle Implementing health care reform, which affects one 6th of the economy, would not be easy under any circumstances. But opponents are doing their best to try to turn back the clock (just as they tried for a while with the passage of Social Security and Medicare). As the May 12th Washington Post reported (click here), "Efforts to block a key provision of the new health-care overhaul law are underway in 33 states, as a growing roster of mostly Republican officials have mounted legal and legislative challenges to an eventual requirement that virtually all Americans buy health insurance or pay a penalty tax...This Friday, seven more states will formally join a lawsuit originally filed by Florida and 12 other states in late March."

According to the article:

"Many constitutional scholars have said the suit has slim chances. But activists say they view the lawsuit as the first of what they hope will be a slew of challenges mounted by state governments, legislatures and individuals, ultimately narrowing the law's scope and possibly unraveling it altogether...

Supporters of the overhaul argue that if insurance were not mandated, costs would rise to prohibitive levels: Since the law will bar insurers from excluding people with pre-existing conditions the sick and elderly would be vastly over-represented in the insurance pool if other people held back. They also point to the Supreme Court's long record of upholding congressional authority to regulate the economy by imposing taxes, to impinge on personal freedoms in the national interest and to supersede conflicting state laws.

The private lawyer advising the states, David B. Rivkin Jr., a former Justice Department official under Presidents Ronald Reagan and George H.W. Bush, said he anticipated that the judge would hear arguments on the case as soon as mid-September. "

A May 10th New York Times article provides additional insights on the lawsuits (click here), noting that "several lawyers involved said they wanted the first review to rest with the United States Court of Appeals for the 11th Circuit, a generally conservative bench that handles cases from Florida." The New York Times further published an editorial on May 19th citing the 20-state opposition suit and why it should not fly constitutionally (click here).

As we've stressed many times before, the individual mandate is critical for both spreading the cost of coverage around fairly and to requiring insurance companies to remove their onerous penalties and restrictions. The following article by Shannon Spillane on May 4th on the web site of the Center for Budget Policy and Priorities convincingly lays out the case (click here). The author cites an expert's finding that without the mandate, but with the insurance company liberalizations, premiums for those who do elect coverage in the health exchanges would increase by another 40%, since the healthier would skip enrollments.

Besides challenging the individual mandate, the other requirement driving the opposition is that the reform bill imposes a new unfunded mandate on states to expand Medicaid. However, according to a study by the Center for Budget Policy and Priorities (click here):

"the federal government will shoulder nearly all of the cost of the expansion, which will cover 16 million low-income children and adults while raising state Medicaid spending by just 1.25 percent compared to what states were projected to spend without health reform. And health reform as a whole, by greatly expanding health coverage, will result in some reduction in states' costs for providing care to the uninsured.

...the federal government will pay 96 percent of the cost of expanding Medicaid over the next ten years.... This is much higher than the federal government's normal share of Medicaid costs (57 percent, on average)."

Opponents are overlooking that state and local costs for supporting free clinics and hospitals covering the uninsured will be reduced substantially. Further, some states are simply trying to exaggerate their cost impact, such as Indiana, which "estimated that Medicaid enrollment would jump by 495,000. But Census data show the state has only 264,000 uninsured people who could newly qualify for Medicaid under the new law."

Maybe those resisting the implementation of the Affordable Care Act should take heed of a poll cited in a May 19th Politico article (click here):

"In last week's Wall Street Journal/NBC News poll, 55 percent of respondents said they would be more likely to vote for a candidate who says "give it a chance/make changes" versus the 42 percent who gravitate to a candidate who would "repeal entirely/start over." Previous polls show voters as equally opposed to health reform repeal lawsuits. The evidence continues to mount: ‘repeal and replace' is just not that popular."

7. Changes for Doctors A critical group that we should not overlook in healthcare reform is the physician community. Overall, the changes brought by reform will benefit them significantly. Soon after passage of the Affordable Care Act, the American Medical Association (AMA) summarized some of the major changes (click here):

Medicare payment changes

All physicians in family medicine, internal medicine, geriatrics and pediatrics whose Medicare charges for office, nursing facility and home visits comprise at least 60 percent of their total Medicare charges will be eligible for a 10 percent bonus payment for these services from 2011–16.
All general surgeons who perform major procedures (with a 10- or 90-day global service period) in a health professional shortage area will be eligible for a 10 percent bonus payment for these services from 2011–16.
For 2010, Medicare will increase payment for psychotherapy services by 5 percent.
The national average "floor" on Medicare's geographic payment adjustment (commonly known as the GPCI) for physician work expired at the end of 2009. The law re-establishes that floor in 2010. In 2010 and 2011, Medicare will also reduce the GPCI adjustment for physician practice expenses in rural and low-cost areas. And, beginning in 2011, the practice expense GPCI adjustment will be brought up to the national average for "frontier" states (Montana, North Dakota, South Dakota, Utah and Wyoming). Physicians in 56 localities in 42 states, Puerto Rico and the Virgin Islands will benefit from these geographic payment adjustments.
Incentive payments of 1 percent in 2011 and 0.5 percent from 2012–2014 will continue for voluntary participation in Medicare's Physician Quality Reporting Initiative (PQRI). An additional 0.5 percent incentive payment will be made to physicians who participate in a qualified Maintenance of Certification Program (quality practice-based learning programs through specialty boards). Following the practice now in place for hospitals, beginning in 2015 physician payments will be reduced if they do not successfully participate in the PQRI program. In 2015, the penalty will be 1.5 percent; in subsequent years it will be 2.0 percent.

Medicaid payment changes

The law raises Medicaid payments to family medicine physicians, general internists and pediatricians for evaluation and management services and immunizations to at least Medicare rates in 2013 and 2014. The legislation also provides 100 percent federal funding for the incremental costs to states of meeting this requirement.

Administrative simplification

Beginning in 2010, national rules will be developed and implemented between 2013 and 2016 to standardize and streamline health insurance claims processing requirements. Physicians should benefit from the changes because it will be easier to track claims and, in many cases, should improve physician revenue cycles and lower overhead costs.

Medical liability protection and grants

The Secretary of Health and Human Services (HHS) is authorized to award five-year demonstration grants to states to develop, implement and evaluate alternative medical liability reform initiatives, such as health courts and early offer programs, beginning in 2011. Medical liability protections under the Federal Tort Claims Act will be extended to officers, governing board members, employees and contractors of free clinics.

[The following changes will enable physicians to provide more complete care for patients and help ensure that patients can afford preventive care and obtaining or renewing prescriptions when enrolled in Medicare – Bucks Voices.]

Preventive and screening benefit expansions

Beginning in 2010, Medicaid will be required to cover tobacco cessation services for pregnant women. In 2011, cost-sharing for proven preventive services will be eliminated in Medicare and Medicaid. Medicare payments for certain preventive services will be increased to 100 percent of payment schedule rates (that is, co-payments will be eliminated), and incentives will be available to encourage Medicare and Medicaid beneficiaries to complete behavior modification programs.
In the private sector, beginning in 2010, health plans will be required to provide a minimum level of coverage without cost-sharing for preventive services such as immunizations, preventive care for infants, children and adolescents, and additional preventive care and screenings for women.

Medicare prescription drug coverage

Medicare patients whose prescription expenses reach the so-called Medicare Part D coverage "doughnut hole" ($2,700 to $6,150) in 2010 will receive a $250 rebate. During the next 10 years, the beneficiary co-insurance rate for this coverage gap will be narrowed in phases from the current 100 percent to 25 percent in 2020.

8. We Don't Want to Save Money Unless It's Our Idea Apparently the opposition by Republicans to the President's nomination of Dr. Donald Berwick to head the increasingly important Centers for Medicare and Medicaid Services is because he might save the government some money. As noted in Kaiser Health News (click here):

"CQ Health Beat reports, "In an exchange that presages a bruising confirmation battle, the White House hit back hard Wednesday night against Republican attempts to cast Donald M. Berwick, the president's nominee to lead the Centers for Medicare and Medicaid Services, as someone who would deny patients necessary care." The White House said remarks by Sen. Pat Roberts, R-Kan., and others were meant to "trot out the same arguments and scare tactics they hoped would block health insurance reform."

9. Targeting the $65 Billion Annual Medical Fraud Cost We all know about the debate over the cost of the health reform bill (gross cost projected at about a trillion over ten years, but netting about $150 billion in savings for the federal government). But as we've indicated over the past 16 months or so, there are huge opportunities for savings in our system—beyond what the reform bill will get us. Kaiser Health News (KHN) reports that the federal government loses $65 billion per year on Medicare and Medicaid fraud, some of it due to organized crime (click here). KHN recently interviewed the Executive Director of the National Health Care Anti-Fraud Association, Lou Saccoccio, who made the following points:

Fraud is rampant because of our overly complex system of providers, payers, plan contracts, etc. "The health care system in this country is very convoluted. You have private payers and public payers. You have all the different insurance companies and Medicare and Medicaid, well over a million health care providers of some type."
It's not just against government programs but "a lot of the same schemes are being committed on the private side as well."
To better combat fraud, he "...would put resources into having CMS [the Center for Medicare and Medicaid Services] take the data that they have available and work with their contractors and the states that pay the Medicaid claims (to combine data). If you ... start analyzing it, you [could] identify where problem areas are. CMS does some of that now, but they do it more on an ad hoc basis than on an all-claims-federal/state database where they could analyze all of those claims in that real-time way to identify potential fraud and stop that money before it goes out the door."

It's another instance where it takes federal and state cooperation - and some seed money - in order to save money over the long term.

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Bucks Voices for Health Care Reform
Tam St. Claire, George Faulkner, and the Leadership Team