Hospitals are using longer observation stays instead of admitting patients, due in part to audit fears, Medicare advocates and hospital representatives say, and that is leading to many patients having to pay out-of-pocket for drugs and skilled nursing services that would have been covered had those patients been admitted. The overuse of observational stays also makes a key quality measure in pay-for-performance programs less useful, Toby Edelman of the Center for Medicare Advocacy told Inside Health Policy.

The National Association of Insurance Commissioners is concerned that multi-state plans could end up not being subject to state insurance regulations because the health reform law says the federal government will implement those plans' contracts in a similar way as it does for carrier contracts under the Federal Employee Health Benefits Program, which are exempt from state regulations. The NAIC, fearing that this "loophole" would give multi-state plans significant regulatory advantages over the plans it will compete with in state exchanges, is urging the Office of Personnel Management to avoid this by requiring multi-state plans to operate under the same rules and standards that all other plans are subject to under state law and regulation.

Health policy sources tell Inside Health Policy that House Minority Leader Nancy Pelosi's (D-CA) appointments to the debt limit law's joint committee, while not surprising, reinforce earlier speculation that the panel will have a difficult time crafting a $1.2 trillion budget-cutting deal, a scenario that carries major implications for the health care industry. Her picks -- Budget Committee Ranking Member Chris Van Hollen (MD), Assistant Democratic Leader James Clyburn (SC) and Democratic Caucus Vice Chair Xavier Becerra (CA) -- are all Democratic leaders and close Pelosi allies, giving her important influence over the committee -- and potentially giving her enough clout to scuttle a package that doesn't dovetail with her goals as she aims to retake the House next November.

If the super committee fails to propose a $1.2 trillion savings package that's enacted by Dec. 23, Congress could still pass a smaller debt-reduction bill, and that amount would be reduced from the sequestered cuts under the trigger scenario, but experts say the trigger's across-the-board 2 percent cuts to Medicare providers would remain untouched unless Congress achieves well more than half of its savings target.

Nursing homes owned by private investors and other for-profit homes had more deficiencies than nonprofit homes reviewed by the Government Accountability Office, though GAO did not find significant differences among homes in the number of serious deficiencies that would harm residents. Democrats who requested the report said it shows that private-investor skilled nursing facilities (SNFs) are inappropriately targeting care to patients who receive higher reimbursement from Medicare and other payers, rather than to all patients needing skilled nursing services.

The August recess is shaping up to feature heated political battles and put brewing narratives to the test as the health care spotlight turns to the debt limit law's super committee and the Medicare and Medicaid savings it's expected to look for -- all of which occurs as Democrats and Republicans jockey to position themselves for the 2012 elections. Talking points obtained by Inside Health Policy outline the competing messages the parties prepare to tout over the recess.

Business groups are welcoming news that the Department of Treasury intends to propose an employer "affordability safe harbor" that will shield them from the health reform law's penalties in certain cases if the coverage they provide is unaffordable. The policy was briefly mentioned in the recently released proposed rule on premium tax credits and comes after stakeholders have said they have worked closely with the administration on developing employer standards for offering affordable coverage.

CMS on Friday (Aug. 12) unveiled a regulation that officials say will make it easier for states to determine who is eligible for Medicaid, which is slated to add millions of beneficiaries in 2012 when the program begins covering people earning up to 133 percent of poverty. The regulation reduces the number of eligibility categories to four, simplifies eligibility standards, updates eligibility-verification systems and allows states to choose from several options for identifying newly eligible beneficiaries without tracking them individually.

A nursing home stakeholder tells Inside Health Policy that today's Avalere study showing industry could face $79 billion in cuts over 10 years -- in addition to potential cuts from deficit reduction -- means that Congress should phase-in the 11.1 percent cut CMS set for FY 2012. The phase-in would allow the new CMS innovation center time to test a new payment system based on improved care coordination, Avalere Health CEO Dan Mendelson said.

In a 2-1 ruling Friday (Aug. 12), an 11th U.S. Circuit Court of Appeals panel declared the health reform law's individual mandate to purchase insurance unconstitutional, bringing the case one step closer to the Supreme Court, where it is likely to end up, according to the conservative Heritage Foundation. The 11th Circuit is the second federal appellate court to rule on the mandate -- the 6th Circuit Court of Appeals decreed it constitutional late June. Also on Friday, the administration caught a victory as another federal appellate court tossed out a challenge to the mandate.

A consumer advocate will join CMS Administrator Don Berwick and a Department of Labor official Wednesday to unveil the long-awaited proposed rule on provisions in the health reform law that will simplify language on insurance forms in an effort to improve public understanding of insurance benefits and coverage explanations. The reform law requires the Secretary of HHS to develop standards for use by group and non-group health plans in compiling and providing a summary of benefits and coverage explanation to enrollees and potential enrollees that accurately describes plans' benefits and coverage.

Hospital groups are pushing legislation that would eliminate the controversial 25 percent rule for long-term acute care hospitals (LTCHs) slated to go into effect in 2012 and create a new "70 percent" rule that ensures LTCHs are caring for very sick patients -- a bill that a hospital source says assuages concern about industry growth. The legislation, introduced in the Senate by Pat Roberts (R-KS) and Bill Nelson (D-FL), also establishes criteria that facilities would need to follow in order to be considered an LTCH.

The clinical laboratory trade organization is telling its members to meet with lawmakers over the August recess to lobby against a 20 percent coinsurance on lab services that debt-limit negotiators considered prior to reaching a final debt deal that passes off budget-cutting decisions to a soon-to-be-formed congressional "super committee." Labs worry that the coinsurance proposal could come up again in either the super committee's work to cut $1.2 trillion from the deficit or as a way to pay for fixing Medicare's physician pay formula.

Rep. Michael Burgess (R-TX), Vice Chair of the Energy and Commerce Subcommittee on Health and one of a handful of physicians in Congress, is using the deficit reduction debate to push for postponing implementation of the Affordable Care Act until the Supreme Court renders a decision on the law's constitutionality -- which it is widely expected to do eventually, especially after two federal appellate courts reached split rulings on the individual mandate. In an interview Tuesday afternoon (Aug. 16), Burgess said delaying the law's spending measures that begin 2014 would save money, though like other Republicans he would like total repeal of the law.

The proposed premium tax credit regulation released today affirms that a self-only employer-sponsored plan will be deemed affordable if the cost to an employee does not exceed 9.5 percent of the their household income, even if it costs employees more than that to buy insurance for their families, according to a Treasury Department proposed rule released Friday (Aug. 12) on tax credits that help people with lower incomes afford health insurance in the exchanges. Business groups praised the proposed rule for basing affordability on self-only coverage, but consumers advocates want Treasury to make businesses offer affordable insurance to both individual employees and their families because people with coverage deemed affordable do not get the tax credits.

Former House Speaker and presidential candidate Newt Gingrich is proposing to reform the Congressional Budget Office to mandate utilization of outside experts and scoring delineation between expenditures and other potential budgetary impacts, with the changes possibly demonstrating that his idea to create a federally funded brain research center to develop cures for various illnesses -- such as Alzheimer's Disease -- would actually save healthcare costs and is not solely an outlay, he says in an exclusive interview with Inside Health Policy. Gingrich is also positing creating bonds to fund his brain research center, while also suggesting a slew of FDA reforms.

California's exchange board is opposing the establishment of a "Basic Health Plan" in the state because of concerns about the impact such a plan would have on the state's exchange -- the first established post-health reform. The board opposed a state Senate bill that would have created the plan, which proponents say would provide more affordable coverage and reduce the "churn" between Medicaid and the exchange.

The Office of Management and Budget is reviewing a draft regulatory proposal that would require nursing homes to disclose information about ownership. CMS proposed the rule after GAO reported last fall that the private investor takeover of nursing homes left ownership of those firms mostly secret, and key lawmakers in both parties at that time said they would be closely watching how CMS handled the GAO recommendations.

A senior House aide and Washington lobbyists say that the HHS Office of Inspector General's report finding that Medicaid receives substantially deeper rebates on most brand named drugs than the Part D program means that the deficit reduction "super committee" could give serious consideration to legislation that would extend the rebates to the Part D program. OIG was mandated to release the report by October under a provision in the health reform law that lobbyists tell Inside Health Policy was put in to conciliate Rep. Henry Waxman (D-CA), who was unable to extend the rebates into Medicare during health reform due to a White House backed agreement with the drug industry.

Medicare drug premiums will fall next year, 900,000 beneficiaries have received the half-off discount on drugs in the doughnut hole and 17 million people have received preventative services, CMS Administrator Donald Berwick said Thursday morning (Aug. 4), but he declined to say whether cuts in the debt-limit deal would jeopardize that progress. The average monthly Part D premium of $30 will drop by one dollar, resulting in a $29 premium that is 44 percent lower than the Congressional Budget Office predicted premiums would be when Congress passed the drug benefit in 2003, Berwick noted in a call with reporters.

The physician community is not giving up on getting long-term Medicare payment reform tied to the debt limit super committee's upcoming deficit reduction package, despite what Washington insiders agree are bleak odds that a "doc fix" will be wrapped into the committee's recommendations. The day before the super committee's final three members were appointed, the American Osteopathic Association (AOA), which boasts that it represents 78,000 U.S. osteopathic physicians, sent a letter to super committee co-chairs Rep. Jeb Hensarling (R-TX) and Sen. Patty Murray (D-WA) on Wednesday (Aug. 10) urging the panel to fix SGR "in a meaningful and long-term manner."

CMS on Friday (Aug. 5) formally launched a new Quality Care Finder Web page that will serve as a one-stop shop for Medicare beneficiaries to get information on hospitals, nursing homes, dialysis facilities, physicians, home health agencies and Medicare plans in their specific geographic region. Additionally, CMS will be adding to the database the latest information on hospital readmissions, mortality rates and imaging experience, a CMS official said.

Kansas will return to HHS the $31.5 million "early innovator" grant it received to help in its development of an exchange, Gov. Sam Brownback (R ) revealed Tuesday (Aug. 9), citing a need to ensure state flexibility due to uncertainty surrounding future federal funding. The decision comes nearly a month after HHS released a proposed rule on exchanges and makes Kansas the second state, following Oklahoma earlier this year, to give back the multi-million-dollar grant.

Medicare drug premiums will fall next year, 900,000 beneficiaries have received the half-off discount on drugs in the doughnut hole and 17 million people have received preventative services, CMS Administrator Donald Berwick said Thursday morning (Aug. 4), but he declined to say whether cuts in the debt-limit deal would jeopardize that progress. The average monthly Part D premium of $30 will drop by one dollar, resulting in a $29 premium that is 44 percent lower than the Congressional Budget Office predicted premiums would be when Congress passed the drug benefit in 2003, Berwick noted in a call with reporters.

As health spending remains a focal point of ongoing debt reduction efforts, bipartisan legislation aimed at increasing pharmaceutical benefit manager transparency has fueled the long-running acrimony between the Pharmaceutical Care Management Association (PCMA) and National Community Pharmacists Association (NCPA), which represent PBMs and independent pharmacies, respectively. The bill would impose several PBM transparency measures, require that PBMs promptly pay pharmacies, and limit both PBM audits of pharmacy providers and PBM sales of claims and utilization data.

CMS' recent letter to state Medicaid directors about the controversial "maintenance of effort" requirement's relationship to level-of-care requirements and home and community-based services addresses Medicaid directors' concerns by clarifying how MOE applies and giving states options to make some changes, a Medicaid source told Inside Health Policy. The source said the guidance is not exactly straightforward but it is helpful to have something in writing telling states what they can do within their programs without violating MOE.

CMS' latest results of the Physician Group Practice Demonstration Program, upon which the Accountable Care Organization project is based, reveals that four of the 10 participants will split $29.4 million in bonuses in the final year of the five-year demonstration, although all participants achieved all or almost all of the quality benchmarks. CMS also announced that all 10 groups will continue to participate in the new PGP transition demonstration -- a two-year supplement to the original demonstration.

The Patient Centered Outcomes Research Institute (PCORI), a new comparative effectiveness research board created by the health reform law, is said to be underspent, behind schedule and largely undefined, still searching for its niche less than one month away from ending its public comment period and opening up grant applications. Consumer advocates want PCORI to succeed while some industry insiders hope it withers on the vine. The board is believed by proponents and even some skeptics to have potential to save money in the long-run, but it's expected to face challenges in getting established.

A new Avalere Health analysis has found that people who are newly eligible for Medicaid under the health reform law report poorer health than Medicaid's current enrollees, suggesting Medicaid health plans need to prepare for increased rolls of these types of patients when Medicaid is expanded in 2014, the health care advisory company said. Avalere's analysis comes as sources wait for HHS to release a set of draft regulations on the Medicaid eligibility expansion, and is bolstering calls for inclusion of preventive services in CMS' upcoming essential health benefits package.

Insurers and beneficiary advocates warn that limiting Medigap's ability to provide first dollar coverage, which policymakers had been considering in debt limit talks and will likely be back on the table as part of the upcoming super committee's work, would impact current policyholders if designed in the way the Congressional Budget Office has suggested would save $53 billion through 2021. If enacted, an insurance industry source says, the Medigap reform would mark an unprecedented move by lawmakers who typically hold current beneficiaries harmless.

CMS has determined that state Medicaid agencies may upwardly adjust their Institutional Level-of-Care criteria for long-term care to promote community-based care and to achieve cost savings in ways that would not violate the current "maintenance of effort" requirement that prohibits states from lowering their Medicaid eligibility levels, according to a letter the agency sent to state Medicaid directors on Friday (Aug. 5). The letter responds to one the National Association of Medicaid Directors wrote in May asking CMS to work with them to find "more workable interpretations of the MOE," a controversial provision that states say has exacerbated their budget difficulties.

Numerous Medicare and Medicaid cost-saving measures identified in the Vice President Biden-led phase of the debt limit negotiations were eventually excluded from the legislation, but those reforms are now ripe for consideration by the bill's bipartisan "super committee," which is tasked with finding $1.5 trillion in long-term deficit reduction by Nov. 23. Republicans are establishing a firm negotiating posture early by calling for major entitlement reforms and no tax increases, while Democrats aren't drawing any lines in the sand and simply touting the need for a balanced approach.

A coalition of children's advocates, health care providers and consumers is urging HHS to reject pieces of Utah's Medicaid Accountable Care Organization proposal largely out of concern that children are the largest group that would be adversely affected by the state's request that beneficiaries be allowed to opt-out of the ACO to purchase coverage in the state's exchange, according to a source who helped spearhead a recent letter to HHS.

Certain provisions of the health care law could be subject to the debt limit deal's sequestration that would kick in if the "super committee" doesn't come up with the required $1.2 trillion in cuts, though sources say which pieces are far from clear and the Obama administration has some flexibility with regard to the sequestration mechanism. The Office of Management and Budget and Congressional Budget Office will have some say in terms of what would be included in a sequester, and some suggest that OMB may have some flexibility albeit it would be limited.

HHS' essential health benefits package should contain strong patient protections that will safeguard those navigating and enrolling in qualified health plans, recommend stakeholders who represent patients with chronic conditions and disabilities. The National Health Council, in recommendations for HHS on the much-anticipated package, emphasizes that specific patient protections are necessary but refrains from addressing the specific services or categories that should be included.

Senate leadership's decision to tap Senate Finance Chair Max Baucus (D-MT) and Democrats John Kerry (MA) and Patty Murray (WA) to the debt limit law's "super committee" charged with finding at least $1.5 trillion in cuts has health care lobbyists buzzing over the potential implications, with Baucus' unexpected appointment viewed as good news for Medicare and Medicaid advocates, Kerry bringing with him years of support for teaching hospitals, home health and medical devices, and Murray entering as a strong reproductive rights and drug reimportation supporter.

House Republicans' selections Wednesday (Aug. 10) for the debt limit law's super committee are generating mixed reactions among stakeholders, with two of the members -- Ways and Means Chair Dave Camp (MI) and Energy and Commerce Chair Fred Upton (MI) -- viewed as "pretty reasonable" to health care providers up to now, according to one lobbyist, but House Republican Chair Jed Hensarling's (TX) appointment generating unease among some who fear he may be willing to entertain Medicaid and children's health program cuts.

Some hospital advocates are upset with the Aug. 1 Inpatient Prospective Payment System (IPPS) final rule that subjects hospital-owned practices to payment rules currently applicable to practices not owned by hospitals, in an effort to recoup overpayments. The rule requires hospitals to bundle, in inpatient claims, outpatient services performed for Medicare beneficiaries three days before admission -- including outpatient services provided by physician practices that are "wholly owned or wholly operated" by the hospital. Under the regulation, hospital-provided outpatient nondiagnostic services given on or up to three days prior to admission must be billed as Medicare inpatient claims.

In response to the formation of the debt-reduction super committee, the American Medical Association has launched a lobbying offensive to push Congress to replace the Medicare sustainable growth rate (SGR) formula -- an expensive proposition whose timeline coincides with the committee's work -- and address medical malpractice reform. The campaign, detailed in a Friday (Aug. 12) memo obtained by Inside Health Policy, involves investing "significant resources" in a multifaceted media, grassroots and lobbying effort that aims to seize on opportunities and avoiding risks posed by the super committee.

Insurance industry sources are concerned about administrative burden and say that the administration should push back the date that insurers must provide new benefit and coverage summary and uniform definition forms to potential buyers beyond March 2012 because the rule was unveiled five months later than statutorily required. Consumers advocates, however, are welcoming the proposed rule and associated templates, saying that the short, concise forms, allows consumers to really compare plans and make better educated decisions when shopping for insurance.