Jill Wechsler

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For now it seems employers will continue to offer health benefits, rather than shift workers to insurance exchanges to obtain coverage on their own. 

The  Government Accountability Office (GAO) stated in a July report that the Patient Protection and Affordable Care Act (PPACA) had little impact on the prevalence of employer-sponsored coverage in its first two years, and that this trend should hold for the near future. Although some firms might drop coverage, PPACA might prompt others to offer benefits. 

A Deloitte study of employer attitudes about healthcare and reform indicates confusion and even hostility about the specific requirements of PPACA. Even so, the vast majority of firms (81%) wish to continue coverage, says Paul Keckley, executive director of the Deloitte Center for Health Solutions, while supporting efforts to improve health system performance and lower its costs.  

The coverage picture is murkier in the small business community, which fought hard to kill PPACA and the individual mandate. Retailers and restaurant operators are particularly concerned about high costs and burdensome new requirements. The National Federation of Independent Business (NFIB) is focusing its efforts now on particularly onerous reform provisions, such as the excise tax on insurers that promises to push up premiums, and rules for defining whether a company has 50 employees or fewer, thus exempt from the coverage mandate.   

A main strategy for employers is to curb the cost of providing health benefits, which they predict will rise 7% on average in 2013, according to NBGH. Almost two-thirds of 82 companies responding to the NBGH survey said they will ask employees to pay a larger share of premiums, but cost-sharing will not rise as much in the coming year as in the past. Instead, employers are looking to rein in expenditures by adopting consumer-directed health plans and wellness initiatives, and to manage pharmacy benefits by adopting step therapy and mail order, particularly for high-cost specialty drugs.   

While large employers are fairly confident about offering health benefits for the next five years, they are less certain about coverage in 20 years, according to NBGH President Helen Darling. Employers will strive to avoid high-cost plans subject to the "Cadillac tax," and will offer at least one plan with some kind of flexible spending account. Companies also will promote more online price transparency to help steer employees to more efficient providers.  

Large employers worry how much essential health benefits will vary by state. If a long list of state mandates emerges, that will reduce employer flexibility.  

 a veteran reporter, has been covering Capitol Hill since 1994. 

Articles

Employers weighing coverage options will continue providing healthcare benefits.

Employers weigh rising costs, overall coverage options

 Republican presidential candidate Mitt Romney selected Rep. Paul Ryan as his running mate, putting Ryan's proposals for radical changes in Medicare and Medicaid at the center of the presidential campaign.  

As the debate continues, state governors and health officials are weighing their choices. Medicaid expansion may seem like an attractive course, as the Patient Protection and Affordable Care Act (PPACA) authorizes the federal government to shoulder 100% of added costs of coverage from 2014 to 2016.  

But state officials question whether the estimated $1 trillion will be there if the Romney/Ryan ticket wins, or whether Congress will reduce federal funding for Medicaid in any case. So far, only a dozen or so states have committed to expanding their Medicaid programs.  

To spur state action, Cindy Mann, director of the Center for Medicaid and CHIP Services and deputy administrator of the Center for Medicare & Medicaid Services (CMS), clarified last month that states can expand Medicaid to cover adults up to 133% of the federal poverty level (FPL) in 2014, and drop expanded coverage later if they wish. Mann also emphasized at the meeting of the National Conference of State Legislatures (NCSL) in August that there is no deadline for states to make decisions on Medicaid expansion, unlike requirements for establishing state-based insurance exchanges by Jan. 1, 2014.  

State officials also would like to be able to expand coverage to less than 133% of FPL, and the NCSL adopted a resolution urging Congress to provide states with such flexibility. But that possibility remains uncertain, along with a number of other issues. 

The most pressing need, according to Mann is for states to modernize Medicaid eligibility systems to interface with exchanges.  

"With or without expansion, states are moving from paper to data-driven systems and online applications," she said at the conference.  

And CMS is making "fundamental changes" in how it does business with states, simplifying the wavier process and moving business operations to the Web.  

States still face extensive requirements under PPACA to overhaul systems for determining Medicaid eligibility and for enrolling individuals and families. The new systems must coordinate enrollment across Medicaid, the Children's Health Insurance Program and state insurance exchanges. New methodology-modified adjusted gross income-must be used to determine income eligibility for Medicaid and health subsidies. CMS is providing states with additional funds to do this.  

Even with updated IT operations, the process of managing new enrollment will add to costs, according to an August 1 report by the Government Accountability Office on state Medicaid expansion. States are unclear how they will shift Medicaid enrollees into health benefit exchanges and how to plan budgets to cover new benefit packages and revised federal matching rates.  

Regardless, there will be more Medicaid managed care, according to Margaret Murray, CEO of the Association for Community Affiliated Plans, and MHE editorial advisor. She expects 90% of all Medicaid beneficiaries will be in some kind of plan by 2014. Kansas, for example, recently requested a waiver from CMS to shift all Medicaid patients in the state into managed plans.  

A main advocate for Medicaid expansion is hospitals and providers, which otherwise face severe rate cuts. PPACA phases out payments to hospitals to cover costs for providing care to the uninsured, on the assumption that broader Medicaid coverage will reduce uncompensated care. Hospitals provided about $40 billion for that purpose in 2010, according to the American Hospital Assn., and without expanded coverage will face huge revenue losses.   

The uncertainty surrounding Medicaid policies is an "incentive for delay in implementation, no matter who is elected president," said Dan Crippen, executive director of the National Governors Assn. A lot of states won't be ready for expansion by 2014, he predicted, even if they want to implement it.  

Ryan has opened the debate about the pros and cons of adopting his controversial "block grant" proposal, which would shift Medicaid away from a federal matching formula. Similar reforms have been proposed since the Reagan administration, and President Bill Clinton vetoed a Republican block grant plan when he was in office.   

Ryan describes his approach as providing flexibility for states to tailor a Medicaid program to fit the needs of "their unique populations." 			

Ryan's proposals for radical changes in Medicare and Medicaid are at the center of the presidential campaign.

States seek Medicaid flexibility, guarantee on federal support

Since the foes of "Obamacare" failed to kill health reform in the courts, they're looking to gain control of the White House and Congress to accomplish the job. Many state governors are holding off on decisions until after the November elections.  

Payers and providers say they are moving forward to implement programs established by the Patient Protection and Affordable Care Act (PPACA), but are concerned about severe funding cuts on the horizon.  

While states are eager to gain federal support for broader Medicaid programs, they likewise don't want to expand without assurance on funding. Those that prefer to hold off on expansion are uncertain if they can seek support for broader programs in the future.  

The House approved legislation in July to repeal PPACA in its entirety-an action universally regarded as an empty gesture because it stood no chance of consideration by the Democratic-controlled Senate.  

More significant damage could come from Congressional Appropriations bills that eliminate federal funding for agencies and offices charged with implementing health reform programs. The Labor/Department of Health and Human Services (HHS) spending bill for 2013 approved by the House Appropriations Committee in July cuts billions from HHS operations, namely: the Agency for Healthcare Research and Quality (AHRQ); and the Centers for Medicare & Medicaid Services (CMS).  

But those cuts were put on hold for six months just before Congress left Washington for its August recess. A rare agreement by Democrats and Republicans aims to continue funding government operations at current levels through March 2013, largely to avoid a government shut-down just before the national elections. Congress will approve the funding extension in early September.  

Congress faces a packed "lame duck" session in November and December, as a combination of higher taxes and additional cuts in federal government spending threaten to fuel another political and economic crisis. Federal Reserve Chairman Ben Bernanke warned Congressional committees last month that failure to avoid these developments could send the nation back into a recession, with loss of jobs, wage cuts and reduced investment.  

Legislation enacted in 2011 to curb the federal budget deficit sets the stage for automatic spending cuts totaling $109 billion for the coming year unless Congress offers an alternative cost-cutting process by Jan. 2, 2013.  This budget "sequestration" provision cuts Medicare funds by 2% and will hit hospitals, providers and plans doubly hard, coming on top of rate reductions already authorized by PPACA.  

At the same time, most Americans face a sharp rise in income taxes and paycheck withholding if Congress allows a set of tax cuts enacted during the Bush administration to expire at year-end, as scheduled. Efforts to reach a compromise on tax policy has been stymied by Democrats' insistence on retaining higher taxes for the wealthy (incomes over $250,000), and unanimous Republican opposition to any tax increases.  

The federal government "fiscal cliff" has become a prime campaign issue, with both sides claiming to be best positioned to deal with the political stalemate and economic implications.  

The federal budget crisis has strengthened calls to curb spending on healthcare. PPACA cuts costs primarily by reining in insurance premiums and seeks more revenues by imposing premium taxes on health plans. Consumers may applaud rich "essential benefit" requirements, but these policies threaten to make plans more costly.  

Mark McClellan of the Brookings Institution said at a Health Affairs briefing in July, even if health reform is fully implemented, it's not clear if exchanges will offer plans that are affordable to young, healthy individuals. The penalty for not purchasing coverage is also a subject of debate. 

There was much discussion at the briefing about adopting value-based purchasing strategies and changing systems for paying providers. 

The GOP is looking to gain control of the White House and Congress to restructure healthcare.

Elections determine healthcare's future

Analysts are examining how the Patient Protection and Affordable Care Act (PPACA) curbs Medicare spending by some $400 billion over 10 years through system reforms, rate cuts to plans and providers and revenue increases. Medicare now covers almost 50 million people, 13 million through private Medicare Advantage (MA) plans.  

Policy makers thus are examining a range of reforms that could make Medicare more sustainable, even though none of the proposals are very popular among seniors or the public at large; even half of Republicans prefer to "keep Medicare as is," noted Juliette Cubanski, associate director of the Kaiser Family Foundation Program on Medicare Policy, at a seminar last month.  

The problem is that many reforms largely shift costs to individuals, payers and states, Cubanski explained.  

This includes proposals to raise the eligibility age for Medicare from 65 to 67, boost premiums on Medicare Part B, expand high-income-related premiums, and increase copayments for home healthcare, Part B services and other programs.  

More substantial changes would combine Part A and Part B deductibles or eliminate Medigap first dollar coverage to curb unnecessary care. And there's considerable interest in integrating Medicare and Medicaid coverage of high-cost dual eligibles.  

A more radical proposal is to shift Medicare to a "premium support" program, moving from a defined-benefit package to defined contribution from the federal government. Equally controversial is the prospect that the Independent Payment Advisory Board (IPAB) authorized by PPACA will make flat cuts in Medicare spending. IPAB is at the top of the Republican hit list, and analysts on all sides are doubtful that the board will ever become operational.  

Although the role of MA plans expands under many initiatives, lower rates also are likely. So far, PPACA-authorized MA rate cuts have been offset by bonuses under a more generous MA star-rating scheme, but that is scheduled to end in another year.  

Changes in benchmarks and rates over five years impose "a very big hit" on the average MA plan, but the plans will survive, said consultant John Gorman, at the seminar. He believes they must master risk adjustment and the star-rating system. 

Policymakers examine Medicare reform proposals in an attempt to control spending.

Medicare reform remains high on policy agenda

Efforts to reduce federal and state outlays for healthcare are generating a host of initiatives to better manage the care for some 10 million dual eligibles. This population comprises only 18% of Medicare fee-for-service beneficiaries, but more than 30% of program spending. Similarly, they account for about 15% of Medicaid enrollment and 40% of state healthcare spending.  

Various programs over the years attempted to improve care coordination for these high-cost patients, but have failed to attract enrollees, reduce costs or effectively integrate Medicare and Medicaid payments and requirements. The provider-based Program of All-Inclusive Care for the Elderly (PACE) has few participants, and most dual-eligible special needs plans are not fully integrated with the states.  

Many hope that a large demonstration program being launched by the Centers for Medicare and Medicaid Services (CMS) in collaboration with state Medicaid agencies will establish more effective programs for managing needy patients. One test approach is a capitated model that involves negotiating contracts between CMS, the state and health plans. An alternative managed fee-for-service (FFS) program calls for states to finance care coordination for duals that remain in Medicare FFS.  

Savings from either model will be shared by CMS and the state in order to reduce some of the conflicting financial incentives for coordinating coverage.  

The CMS Coordinated Health Care Office is working with 26 states interested in participating in the demonstration, most looking to adopt the capitated model.  

The process involves negotiating memoranda of understanding with each state and posting them for public comment. The agency also promises to improve state access to Medicare patient data, including profiles on each state's dual population. The goal is to improve quality of care, reduce costs, ensure duals have full access to services and improve coordination between federal and state initiatives.  

However, a number of analysts have raised concerns about the demonstration, which is much larger and more complex that the usual CMS pilots. Hospitals and physicians fear that efforts to eliminate duplication of services could curb access to care for needy patients, along with revenues. The Alliance of Specialty Medicine and other interest groups propose that CMS scale down the pilot and delay the Jan. 1, 2013, implementation date to better resolve these issues.  

Robert Berenson of the Urban Institute similarly says that the size and scope of the demonstration makes it more like a waiver program. Evaluation will be difficult, he says, because shifting a state's entire dual population into the demo without any controls means that the approach can only be compared to the previous program. 

MedPAC also raises concerns about whether enrolling a state's entire dual-eligible population into a health plan will yield useful information on alternative means for caring for the beneficiaries. Many health plans lack experience with capitated systems that assume risk for providing both Medicare and Medicaid benefits, the Commission says, and the large size of the initiative makes it more like a broad program change than a way to test a new coverage approach.  

Larger, commercial plans stand to gain from this new initiative, despite broad uncertainty about how three-way contracts will be negotiated, how upfront savings will be calculated, and what standards and quality measures will apply. Insurers support the proposed "passive enrollment" process, but others fear it will be confusing to patients and providers. 

Efforts to reduce outlays are generating initiatives to better manage the care for some 10 million dual eligibles.

Ambitious programs aim to manage duals

A recent report from the Kaiser Family Foundation (KFF) documents how government outlays for Part D have been about 30% lower than originally projected by the Congressional Budget Office in 2003, during a period when overall Medicare spending has skyrocketed. The savings arise from a number of factors, said analyst Jack Hoadley of Georgetown University at a KFF briefing: lower enrollment in Part D than expected; a general slowdown in total spending on prescription drugs; fewer new drugs; and, most notably, a huge rise in generic utilization.  

Karen Ignagni, president of America's Health Insurance Plans (AHIP), credited the savings to the ability of Part D plans to apply a range of tools to drug utilization, including tiered formularies. Even economist Marilyn Moon, an advocate for consumer protection, acknowledged that private plans have been able to use financial incentives to push beneficiaries into generics, which would be hard for the federal government to do. 

Part D plans have "a very good deal," according to Moon, because the program's "donut hole" structure relieves insurers from covering high-cost patients. The program's reinsurance system, plus subsidies for seniors also on Medicaid, reduce pressure on plans to manage spending on high-cost medicines. The approval of more costly critical therapies, though, could raise overall spend, prompting further changes in benefit design.   

A broader policy issue is whether the ability of drug plans to offer choice while managing costs provides a model for shifting the entire Medicare program to a "premium support" system, as advocated by Republicans. Instead of the current fee-for-service, government-run health program, conservatives want to provide seniors with a voucher to purchase private coverage. 

But market competition might not be responsible for lower Part D spending, according to Hoadley, noting that high initial cost estimates and lower drug trends might be more responsible for savings.  

Yet former Health and Human Services Secretary Mike Leavitt, now health advisor to Mitt Romney, regards Part D as a model for a reformed Medicare system. Conservative analyst James Carpetta credits Part D's success on the ability of plans to offer many options, noting that reasonable government oversight of the program, with rules governing plan bidding and basic drug coverage, still provides flexibility for changes over time. 

Jill Wechsler, a veteran reporter, has been covering Capitol Hill since 1994. 

Medicare Part D plans apply a range of tools to control costs and provide quality care.