Health Policy Week In Review: Medicare Payment Cuts Delayed; New Regulations; Extra State Medicaid Funding In Limbo

After weeks of partisan and intraparty tussling, Congress resolved – at least for now – the Medicare physician payment problem. With doctors increasingly critical of a 21 percent cut in Medicare reimbursements that went into effect this month, the House Thursday accepted the temporary ‘fix’ passed by the Senate last week.

House Speaker Nancy Pelosi, D-Calif., threatened not to move the Senate bill because House Democrats wanted the fix included in a broader measure extending extend unemployment benefits and Medicaid aid to states. But Senate Democrats could not muster the necessary votes. President Barack Obama signed the bill Friday afternoon.

The Medicare bill, approved by the House on a 417-1 vote, would increase doctors’ reimbursements by 2.2 percent and put off any cuts for “six months while lawmakers work on a more permanent solution …,”  The Associated Press reported. “There was some urgency to approve the funding because Medicare announced last week it would begin processing claims it had already received for June at the lower rate” (Ohlemacher, 6/24).

Pelosi called the approved legislation “totally inadequate” but “said the House had decided to adopt after concluding that the Senate was hopelessly gridlocked and could do no better,” said The New York Times: “To get the short-term doc fix through the Senate, the cost of the measure was offset by changes in Medicare billing regulations, antifraud provisions and the tightening of some pension rules, eliminating Republican objections that it would put the federal government deeper into debt” (Herszenhorn, 6/24).

Doctors are limiting the number of new Medicare patients they see, concerned about reimbursements from the federal program, according to USA Today. “The American Academy of Family Physicians says 13% of respondents didn’t participate in Medicare last year, up from 8% in 2008 and 6% in 2004,” but the Centers for Medicare and Medicaid Services say that 97 percent of doctors accept Medicare (Wolf, 6/21).

KHN provided summaries of the coverage of the congressional debate on Medicare reimbursement MondayTuesdayWednesday and Thursday.

Senate Majority Leader Harry Reid was also clearly frustrated that the Senate could not push out the broader jobs bill. The legislation included extra aid to states for Medicaid and Democrats made major concessions, including stripping the bill of COBRA subsidies to help newly-laid off workers pay for health insurance. Still they did not draw any Republican support. “In the course of these talks, the size of the package was cut in half, and, to reduce the impact on the deficit, Democrats even went so far as to pay for state Medicaid assistance by cutting about $10 billion from future food-stamp benefits,” Politico reported (Rogers, 6/24).

Reid “blamed Republican intransigence for killing the measure and dismissed talk of continuing negotiations, saying the only path forward would require Republican compromise,” The Washington Post reported. Republican Minority Leader Mitch McConnell, R-Ky., countered, “The principle Democrats are defending is that they will not pass a bill unless it adds to the debt” (Montgomery, 6/25).

The fate of the bill was being watched around the country. The Wall Street Journal reported that state legislatures are grappling “with deficits totalling $127 billion over the next two fiscal years, according to the National Association of State Budget Officers. … Of immediate concern to states is the hit they will take if Congress doesn’t approve an additional $24 billion to help defray the cost of Medicaid, the federal-state insurance program for the poor.” Thirty states have already “budgeted for the Medicaid funds, which would provide additional money for six months beginning Jan. 1. Of those states, only nine have contingency plans in place if the money doesn’t arrive, according to the National Conference of State Legislatures. … Federal matching Medicaid funds are set to expire Dec. 31, 2010, just as states are seeing a growing number of individuals turning to the program” (Solomon, 6/23).

The Hill wrote: “The Medicaid funding at issue originated in last year’s stimulus bill, when Congress voted to increase the federal portion of Medicaid funding by 6.2 percent. The payments are known as Federal Medical Assistance Percentage (FMAP).  … states have warned they will be forced to lay off teachers and other public servants in order to increase their portion of Medicaid funding” (Heflin, 6/22). 

Kaiser Health News provided summaries of the coverage of the Senate’s negotiations on the bill Monday, TuesdayWednesday,  Thursday and Friday

Despite several non-health care major news events this week, the president kept up his campaign to draw attention to the new law. Obama, “whose vilification of insurers helped push a landmark health care overhaul through Congress, warned industry executives at the White House on Tuesday not to use the bill ‘as an opportunity to enact unjustifiable rate increases that don’t boost care and inflate their bottom line,’” The New York Times reported, adding: “The White House is concerned that health insurers will blame the new law for increases in premiums that are intended to maximize profits rather than cover claims.” Under the new law, states continue to regulate insurance but the federal government will have new powers to publicize insurance prices (Sack and Stolberg, 6/22).

“Karen Ignagni, president of the trade association America’s Health Insurance Plans, said she and other industry representatives found the meeting to be a ‘very constructive’ opportunity to make the case that the main cause of rising premiums is not industry greed but recessionary pressures and increasing medical and drug costs,” The Washington Post reported (Aizenman, 6/23).

The Wall Street Journal wrote that insurance executives cautioned that the legislation would inevitably raise rates to some extent, because it would require health plans to offer better benefits. “Ron Williams, chief executive of Aetna, cited the law’s rule that insurers allow children to stay on their parents’ plan until age 26. That rule ‘does increase costs, and that cost is going to show up in the premium increases,’ he said” (Adamy, 6/23).

The new federal regulations also released Tuesday could likely affect a small fraction of the country, Kaiser Health News reported, but address these key insurance concerns:
- Insurers would no longer be able to deny coverage to kids with pre-existing conditions.
- Certain annual and all lifetime limits on benefits would be prohibited.
- Insurers would no longer be allowed to drop coverage when policy holders get sick (Galewitz, 6/23).

The Los Angeles Times added that the regulations also would prohibit insurers from requiring policyholders to get prior authorization for emergency services (Levey, 6/23).

KHN provided a summary of coverage of the president’s comments and a summary of the regulations.

The pressure on consumers continues to grow. Monday, the Kaiser Family Foundation released a survey showing that people “who buy their own health insurance report the most recent rate increase requests have averaged 20 percent…,” Kaiser Health News reported. “The foundation surveyed just over 1,000 people who don’t get insurance from their employer, finding that 77 percent reported an increase with their current or previous insurer. Most paid the increase. But 16 percent switched to less expensive plans” (Appleby and Schiff, 6/21).  (KHN is a project of the foundation.)

According to the New York Times, health insurance officials said the “rate increases reflect the rapid growth in the underlying cost of medical care” (Abelson, 6/21).

Republicans marked the 90-day anniversary of the new health law by ramping up their opposition. House GOP leader John Boehner issued “a 43-page report ‘designed to chronicle ObamaCare’s three-month journey from hype to harsh reality,’” Politico reported. “The document outlines problems that Republicans say have been exacerbated or created by the reform law and forms the basis of their argument that the law should be repealed and replaced” (Haberkorn, 6/23).

The Hill: “Employers could lose their ability to change health plans or negotiate better rates and benefits under new healthcare reform regulations, the top GOP staffer on the Ways and Means Committee’s health panel said Wednesday. Dan Elling, the Republican staff director for the health subcommittee, raised the issue during a CQ-Roll Call policy forum.” In referring to the “grandfathering” provision (which exempts employer from complying with the new law), he “pointed out that in order to stay grandfathered, employers won’t be able to switch to a different plan even if it offers the same benefits as the existing plan at lower cost” (Pecquet, 6/22).

In the meantime, Ivan G. Seidenberg, the head of the Business Roundtable and a key Obama ally who backed the health reform legislation “accused the president and Democratic lawmakers Tuesday of creating an ‘increasingly hostile environment for investment and job creation,’” The Washington Post reported.

The Post writes that the Roundtable “has generally supported the president’s policies; it was the only major business group to back Obama’s successful push for an overhaul of the health-care system. In recent months, however, that relationship has begun to fray. First, Democrats included a provision in the health-care bill – over the Roundtable’s objection – that reduced corporate subsidies for drug coverage to retirees, a move that could cost big companies millions of dollars” (Montgomery, 6/23).

Obama appears to be losing a top aide who was pivotal in the health care debate. Peter Orszag, director of the Office of Management and Budget, will step down from his post in July, “according to two knowledgeable administration officials,” The Wall Street Journal reported. “Mr. Orszag helped steer through Congress a $797 billion economic-stimulus bill in his first weeks at the White House job before becoming one of the driving forces in shaping the health-care law” (Weisman, 6/22).

“Mr. Orszag, an economist who previously spent nearly two years as director of the Congressional Budget Office, somewhat reluctantly accepted Mr. Obama’s invitation to join the Cabinet after the 2008 election and never planned to stay more than two years. Typically, budget directors do not,” The New York Times noted. “A longtime scholar of health policy economics, Mr. Orszag also helped devise and sell the president’s signature initiative overhauling the health insurance system. He privately has told associates that having worked on two budgets, a stimulus plan and the health care law, it is time to leave while he is ahead” (Calmes, 6/21).

At the same time, the nomination of Dr. Donald Berwick to run the agency overseeing Medicare appears to be languishing. The New York Times reported: “Hospital executives who have worked with Dr. Berwick describe him as a visionary, inspiring leader. But a battle has erupted over his nomination, suggesting that Dr. Berwick faces a long uphill struggle to win Senate confirmation. Republicans are using the nomination to revive their arguments against the new health care law, which they see as a potent issue in this fall’s elections, and Dr. Berwick has given them plenty of ammunition. In two decades as a professor of health policy and as a prolific writer, he has spoken of the need to ration health care and cap spending and has confessed to a love affair with the British health care system” (Pear, 6/21).

The Hill reported that although Senate leaders are nearing an agreement to allow more than 60 Obama nominees to be approved to begin work, Berwick is not on the list. “‘He will not get unanimous consent,’ a spokesman for Senate Minority Leader Mitch McConnell (R-Ky.) told The Hill” (Lillis, 6/21).