Partnership Exchange Deadline Looms, SGR Debate Heats Up, WH Ramps Up Sequester Pressure

Posted: February 11, 2013

The health reform law's health insurance exchanges are front and center this week as the Feb. 15 application deadline approaches for states wanting to run exchanges in partnership with the federal government. Friday will bring a clearer picture of states' exchange plans: After that date, any state that has not told CMS it wants to run a state-based or a partnership exchange in 2014 will likely default to a federally-run marketplace. Stakeholders are watching to see if Mississippi will be in that category, as CMS last week rejected the state insurance commissioner's application for a state-run exchange due to his split with the governor, but the agency urged the insurance department to apply for the partnership option.

The Senate Finance Committee also hopes to get a handle on the exchanges outlook at a Thursday hearing featuring CMS insurance oversight chief Gary Cohen -- who last week said the federal government will be ready to stand up exchanges in October and flatly rejected rumors that a delay is in the works. So far, 17 states and DC have had state-based exchanges conditionally approved, two states have already had their partnership exchanges conditionally approved – Arkansas and Delaware – and Iowa, North Carolina and Illinois have applied for that model. Sources are eying Tennessee, Mississippi, West Virginia, New Jersey, New Hampshire and Ohio as additional states that might seek to have partnership exchanges, which lets states run plan management, consumer assistance or both.

Debate over replacing the Sustainable Growth Rate also will continue this week at a Thursday House Energy and Commerce health panel hearing that comes as that committee and Ways and Means jointly float a plan to replace the embattled physician pay formula. The SGR will be the subject of great focus as physicians convene in Washington for the American Medical Association's annual conference, set for Tuesday and Wednesday.

And Washington insiders will look to the president's State of the Union address on Tuesday for any clues on entitlement reform and budget cuts to replace the Budget Control Act sequester, which was averted for two months but is slated to go into effect in March if Congress does not act. The White House increased pressure on Congress last week to at least temporarily avert the sequester by passing a short-term package of new tax revenue and spending cuts, with the president referring once again to the health care cuts contained in his last budget proposal.

Exchanges

CCIIO's Cohen last week shut down rumors that HHS will delay implementation of the health insurance exchanges, pledging the markets will be ready to enroll people by the Oct. 1 open enrollment date. That message will be coming out loud and clear from the administration in coming weeks, Cohen said at a National Association of State Health CO-OPs conference in Dallas, adding that he intends to stress the point when he testifies before the Senate Finance Committee this week.

Senate Finance's exchange hearing will take place the day prior to HHS' partnership exchange application deadline, after which the mix of states planning to run their own exchanges, partner with the federal government or default entirely to a federally-run exchange in 2014 will be clear.

In other exchange news, Mississippi's application for a state-run exchange in 2014 was denied by the Obama administration, yet CMS said the state would be an “excellent candidate” for the partnership model and encouraged Mississippi to submit an application by Feb. 15. The state was seeking to operate its exchange through the association that runs its existing state high risk pool, but over the course of several weeks a dispute over authority escalated between state Insurance Commissioner Mike Chaney – who, with the backing of the state's attorney general, said he had authority to establish an exchange without the governor's approval – and Republican Gov. Phil Bryant, a staunch opponent of the health reform law.

The exchange update for Senate Finance Committee members also comes shortly after the Congressional Budget Office upped its cost estimates of the health law's private insurance subsidies by $32 billion between 2013 and 2022. CBO said the increased cost is mostly due to higher projected enrollment in the exchanges, because lower marginal tax rates from the “fiscal cliff” legislation will reduce the attractiveness of employer-sponsored health care for low-income workers and for their employers.

Insurers are in the process of weighing their exchange plans – insurance giant Humana said on a recent earnings call that it was rethinking its strategy due to a surprise provision in recent HHS guidance that requires plans aiming to participate in a federally-facilitated insurance exchange to also join federally-run small group market (SHOP) exchanges if those plans currently offer products in the state.

New Movement On The Doc Fix

The buzz related to several high-profile developments on fixing the Sustainable Growth Rate will continue this week as stakeholders offer feedback on House lawmakers' newly unveiled plan for developing a new Medicare physician payment system.

The House Energy and Commerce Health Subcommittee will hold an SGR hearing at 10:15 a.m. Thursday, after having floated an SGR replacement plan with the House Ways and Means Committee last week. The GOP-led committees made it clear that SGR repeal will be a top priority this year and are seeking comments until Feb. 25 on their initial proposal.

Potentially making the committees' job easier, an unexpected score from the Congressional Budget Office found that SGR repeal would cost $138 billion. The new figure, which was more than $100 billion less than the previous estimate, buoyed physician groups, who argued that now is the time to get rid of the formula before the costs of repeal escalate again. A year ago, CBO estimated that the 10-year cost of repealing the SGR would be $316 billion, and more recently it was estimated to be $243.7 billion.

While the new CBO score was touted as “welcome” news by the American Medical Association, physician lobbyists acknowledged that it still will not be easy to find that amount of savings from Medicare. But they said it makes a task that was nearly impossible seem doable.

Meanwhile, Ways and Means Committee Democrat Allyson Schwartz (PA) and Rep. Joe Heck (R-NV) also introduced SGR repeal legislation, with the main change in the reintroduced legislation being a decision to drop war savings as the offset. The move is meant to gain GOP support for the bill, Schwartz and Heck said Wednesday. While they don't identify alternative offsets – and the joint plan from Ways and Means and Energy and Commerce Republicans also didn't include offsets – Schwartz and Heck said repealing the physician pay formula should be paid for and urged lawmakers to pass the measure soon.

Positioning On Looming Sequester

President Barack Obama's call Tuesday (Feb. 5) for Congress to temporarily delay the budget sequester, set to kick in next month, by passing a mini-package of spending cuts and revenue raisers is scant on specifics, but the president suggested the plan draw from the fiscal cliff offer he put on the table in December which included $400 billion in health care savings without shifting costs to beneficiaries -- though the White House has said the Medicaid cuts floated earlier are now off limits because it wants states to expand Medicaid.

The president left it to Congress to decide how long to delay the sequester but said he hopes to put off any cuts for “a few months” until a federal budget can be worked out that permanently lifts the threat.

The White House in late December offered $400 billion in health savings, another $200 billion in non-health mandatory and $200 billion in discretionary cuts, half of which would be from defense. The offer also included moving to “chained” CPI for Social Security. The president said at the time that his health care savings were based on proposals included in his 2013 budget, which would glean $267 billion from cuts to Medicare providers, $32 billion from structural changes, $51 billion from Medicaid cuts and another $14 billion from pharmaceutical policies, such as restricting drug “pay for delay” agreements and accelerating the introduction of biosimilars. But these cuts only totaled $364 billion, and included enacting a “blended rate” in 2017 for Medicaid and CHIP that would save $17.9 billion over 10 years, Medicaid cuts that the administration has since backed away from. And even those who support extending Medicaid rebates to Part D, which the president included in his budget, say the policy has little, if any, chance of passing Congress.

Meanwhile, House Majority Leader Eric Cantor (R-VA) specifically pointed to redesigning Medicare fee-for-service cost-sharing and reforming Medigap in a speech last week outlining the House GOP's agenda. While failing to touch on controversial Medicare proposals such as raising the eligibility age and incorporating a premium support model,Cantor made a push to modernize the Medicare program and suggested doing so primarily by pursuing Medigap reform and redesigning the cost-sharing structure for Parts A and B. The two ideas have frequently been included in deficit reduction proposals but have faced criticism from seniors advocates and insurers.

Cantor said that Medicare should be modernized so that it is not complicated for seniors or health care providers. “We should begin by ending the arbitrary division between Part A, the hospital program, and Part B, the doctor services. We can create reasonable and predictable levels of out-of-pocket expenses without forcing seniors to rely on Medigap plans,” he said. Cantor added that seniors who choose to receive health care through new arrangements where hospitals and physicians work together to control costs should also share in some of the savings. Such cost sharing would lower Medicare premiums and out-of-pocket spending, he said.

On Medicaid, Cantor said states should be allowed to offer health coverage through “patient-directed health care or flexible benefit programs” and the federal government should make it faster and simpler for states to gain approval of waivers that modify their programs.

Two States Drop Duals Demo

Tennessee recently decided against moving forward with a high-profile CMS demonstration project focused on aligning reimbursements for so-called “dually eligible” beneficiaries due to concerns about plan rates and timing issues, and Hawaii also dropped out of the program, IHP's Amy Lotven reports. Tennessee's biggest concern was that plans involved in the demo would be paid less and face stricter quality and care coordination requirements than existing Medicare Advantage plans serving the dual eligible population, according to a letter. The state also feared the recent court settlement ending CMS' improvement standard could drive up utilization, an issue that other states may also be facing. Hawaii made its decision this month after realizing that it would be unable to start the demonstration until 2015, which is counter to current rules of the demonstration.

A CMS Medicare-Medicaid Coordination Office (MMCO) official affirmed that 23 states still plan to pursue the financial alignment demonstration, and the office hopes to enter into a Memorandum of Understanding with California on that state's duals demo as soon as a few outstanding issues are ironed out.

Twenty-six states originally voiced interest in pursuing the financial alignment demonstration announced by MMCO in July 2011, which allows states to align payments for their dually eligible residents using one of two alternative pay models -- capitation or managed fee-for-service. New Mexico formally withdrew from the demonstration last August after realizing it would be unable to carve out payments for beneficiaries with developmental disabilities per the state’s plan.

CMMI Launches Kidney Care ACOs

In a break from its traditional policy requiring primary care physicians to lead ACOs, CMS is testing a new way of paying for dialysis in a demonstration that creates kidney care accountable care organizations that are responsible for broad-based care offered to a group of matched beneficiaries. The End-Stage Renal Disease demo – which sources had expected for CMMI to release by the end of January – offers three payment tracks, depending on the size of the dialysis facility participating in the model, and ACOs that include at least one large dialysis facility must take part in the one “risk based” model that penalizes ACOs for not meeting cost and quality measures in exchange for bigger bonuses when they do achieve those benchmarks.

IHP's John Wilkerson reports that CMS says the new kidney care ACO model includes several patient protections, chief among them: choice. Beneficiaries matched to “ESRD seamless care organizations” are free to see any provider who accepts Medicare and are not locked into the networks of providers who form ACOs. CMS will routinely assess the use of services in the ACOS to ensure they are not scrimping on services. Also, the ACOs will include both a patient representative and consumer advocate on their governing board.

The kidney care ACOs must report a variety of care delivery and health outcome measures, not merely for ESRD services. The quality measures will fall under five areas: preventative health; chronic disease management; care coordination and patient safety; patient and caregiver experience; and patient quality of life.

MHPA Crafts Strategy On Health Insurance Tax

As Joe Moser takes the helm at the Medicaid Health Plans of America, the interim president and CEO said he must figure out how to convince Congress to repeal the ACA insurance fee on Medicaid managed care plans without shifting the cost to other insurance companies. Repealing the fee, which takes effect Jan. 1, 2014, is MHPA's top priority this year, but Medicaid managed care plans have not determined how they would pay for a fee repeal.

The health reform law requires that the fee generate $8 billion in the first year, rising to $14.3 billion in 2018, after which the growth of the fee will be linked to growth in premiums. That funding level would remain the same if Congress were to exempt Medicaid plans from the fee so other private plans would have to make up the share of the fee, Moser said. Thus, the group hopes to come up with a proposal that would not shift that cost onto others in the commercial market, Moser said, adding that he has some ideas that he might discuss publicly later this year.

While MHPA supports legislation to repeal the fee for all private plans, Moser said the group particularly wants to repeal the fee for Medicaid plans, no matter how that's accomplished, as long as other insurance plans do not pay the cost of that repeal. Moser also said the fee could cut private Medicaid plans out of business because it puts them at a disadvantage compared to non-profit plans that are exempt from all or part of the fee.

Other Headlines

Personnel

Organizations representing more than 60 accountable care organizations have formed the National Association of ACOs. The group says membership is expected to exceed 100 ACOs by April.

Dean Rosen, a partner at Mehlman Vogel Castagnetti, and Julie Barnes, the former health policy director of the Bipartisan Policy Center, have formed Breakaway Policy Strategies to advise on health care.

The Federation of American Hospitals named Katie Tenoever as the group's vice president for legal and policy issues.

Calendar

Monday

10:30 a.m. Medical students from the American Medical Association-Medical Student Section hold a lobby day.

12:15 p.m. Alliance for Health Reform briefing on Medicare policy.

Tuesday

Start of the AMA's National Advocacy Conference.

President Obama's State of the Union address.

10:30 a.m. Senate Budget Committee hearing on CBO's updated budget outlook, featuring CBO Director Douglas Elmendorf.

10:45 a.m. Medicaid and CHIP Payment and Access Commission February meeting.

Wednesday

AMA National Advocacy Conference continues.

10 a.m. MACPAC meeting continues.

10:30 a.m. Senate Budget Committee hearing on impact of budget decisions on American families.

Thursday

9:30 a.m. Senate Finance Committee hearing on exchanges.

10:15 a.m. House Energy and Commerce health subcommittee hearing on SGR.

Friday

Deadline for states wanting to have a partnership exchange in 2014 to submit an application to HHS.

-- Rachana Dixit (This e-mail address is being protected from spambots. You need JavaScript enabled to view it )

Health Insider -- February 11, 2013