States Fight Back On Health Care Reform

When the nation’s governors came calling at the White House last week, President Obama greeted his guests with the offer of new flexibility toward implementation of the Patient Protection and Affordable Care Act (PPACA). The President said he is willing to give states an earlier opportunity to opt out of certain key requirements of the law, but only if the states can find their own way to cover as many people without added costs. If Congress agrees to the new approach, states could gain exemptions by 2014 rather than 2017. But a number of governors expressed skepticism that the proposal offers them any real benefits, given the difficulty states would have meeting the President’s caveats. Some prefer to continue to pursue outright repeal. Still, the change in timing means exemptions could be earned in the same year that some of the most controversial provisions of the law go into effect. And, with the governors’ immediate focus on rising Medicaid costs, the proposal reportedly would let states send HHS officials a combined request to alter Medicaid and their approach to health care reform.

Last week a Florida federal judge clarified (at the request of the Obama Administration) his earlier decision back in January 2011 in which he ruled that the PPACA’s individual health insurance mandate is unconstitutional. He also wrote that the mandate could not be severed from the rest of PPACA and, therefore, the whole law had to be set aside as unconstitutional.  In last week’s rather colorful ruling, the judge chided the government for sitting on its hands for weeks before asking for the clarification. He re-emphasized that the mandate and the whole law are unconstitutional and chastised the government both for failing to appreciate, as a matter of law, that the prior Declaratory Judgment was the “functional equivalent” of an injunction (meaning that the government could not proceed with implementation) and for having the temerity to suggest otherwise. The judge did not stop there, which would have halted all implementation of the PPACA had he done so. He instead decided that the government’s motion to clarify was also a motion to “stay” the imposition of the original ruling, and he granted the stay.  But he conditioned it with the requirement that the government file an appeal within seven days seeking an expedited “fast-track” appellate review, either in the Court of Appeals (11th Circuit) or the U.S. Supreme Court. This filing requirement is the major takeaway from last week’s ruling because it accelerates the timeline for the litigation, to the applause of the state and others who oppose the law. The Administration and the proponents of the law are less happy, since stringing out the ultimate decision would make it more difficult, if not impossible, to dismantle.

With House approval (314 to 112) last week, Congress is well on the way to repealing the 1099 provision of the PPACA, which imposes a costly and burdensome reporting requirement on employers.  Earlier this year, the Senate also voted to repeal the 1099 provision; however, the two chambers are worlds apart with respect to paying for the repeal. While the House version pays for the repeal by revising the rules for repayment of excess premium subsidies down the road, the Senate version doesn’t directly pay for it and only gives OMB the authority to go find the money. A House-Senate Conference (or an unofficial compromise) will be needed to resolve this impasse.

The anticipated government shut-down on March 4 was put off last week when both chambers passed (and the President signed) a two-week extension of a continuing resolution to keep the government officially funded until March 18.  This particular resolution actually cuts federal spending for the current fiscal year by $4 billion, which means that the House Republican savings target of $60 billion for FY 2011 is now down to $56 billion. Congress could very well bump along with such short-term resolutions throughout the spring. But at some point, the Republicans in the House and the Democrats in the Senate will have to permanently fund FY 2011 and get on with the FY 2012 budget, which is supposed to be in the works right now.
Multiple health-care-related hearings were held on Capitol Hill last week. In testimony before the House Energy and Commerce Committee, Mississippi Gov. Haley Barbour voiced support for funding Medicaid with block grants, under which the federal government would give states a set dollar amount for Medicaid rather than paying a percentage of costs. Under this system, states would have “total flexibility” to manage their Medicaid programs, according to Barbour.  The panel’s Democrats were quick to dismiss the idea of block grants, saying the change would harm vulnerable beneficiaries. Karen Ignagni, the President and CEO of America’s Health Insurance Plans, testified before the House Ways and Means Committee Subcommittee on Oversight Health Plan Programs to Combat Fraud, Waste, and Abuse. Her testimony addressed two issues: how health plans’ fraud detection units are using cutting-edge techniques to identify practices leading to substandard care – including overuse, underuse, or misuse of medical treatment; and suggestions for improving fraud detection and prevention in both public and private programs.  Part of her testimony also focused on the medical loss ratio (MLR) regulation, which she said will hurt the insurance industry’s efforts to detect and prevent fraud.

The Government Accounting Office (GAO) last week released a study that shows “nearly 10 percent all Medicare payments are fraudulent or otherwise improper, and the government isn’t doing enough to stop them.”  The Medicare “fraud margin” is 9 percent, nearly triple the profit margin for the health plan industry (3.58 percent). The GAO also provided correspondence to the Hill on Medicare Private Sector Initiatives to Bundle Hospital and Physician Payments for an Episode of Care.  As one of the five largest national payers, Aetna insuranceae was interviewed and provided relevant materials. The GAO found that ongoing private sector bundling initiatives that achieve savings are an important consideration, in light of Medicare’s financial challenges. Bundled payments are feasible for Medicare, but there are several obstacles to overcome — such as manual claim processing systems, resistance to limiting provider choice and the lack of standard definitiions.


With the California health insurance deadline for the introduction of legislation during the 2011 session looming, and now passed. several health care-related measures were reintroduced, such as a single payer/universal care bill, prior approval and rate regulation, and mandatory autism coverage. In addition, a host of bills are in play that take another step toward implementing federal reform but appear to be inconsistent with PPACA. As in past years, legislators have proposed a host of new mandated benefits – 15 in total. They include several new ones, including the proposed elimination of step therapy for pain medications, fertility preservation services and forensic medical evaluations. The state’s mandate commission is reviewing the cost and public benefit of each of these proposed mandates and will issue a report that should be publicly available by the end of March.

Democratic Senator Irene Aguilar, the sponsor of a Colorado health insurance single-payer bill, engaged in a verbal confrontation last week with a representative of the Colorado Association of Industry and Commerce regarding the potential impact of her bill on employment in the state. Subsequent to a rally on the steps of the Capitol, the bill was voted out of committee, 4 to 3, along party lines. The bill has little hope in the Republican-controlled House and may not reach the Senate floor without some Republican support.

As in the past two years, the Connecticut Health Insurance Committee approved Speaker Chris Donovan’s bill called An Act Establishing the Connecticut Healthcare Partnership. This bill would open the expensive state employee health plan to small businesses, nonprofits and other groups. The goal is to attract a number of new employee groups to the state employee plan – nearly all of whom already have health insurance. In addition, the new state-run health plan would compete directly against the private marketplace. Given the high benefit levels, state employee plans are among the most expensive in the state. As such, this bill would not offer small businesses any real cost relief, achieve intended cost savings or increase the number of people with insurance. It could lead to substantial cost increases for taxpayers. The 11-9 committee vote was mostly along party lines, with most Democrats supporting the measure (except Sen. Joan Hartley and Rep. Linda Schofield), and all Republicans opposing it. This bill passed in 2008 and again in 2009, but was vetoed both times by former Governor M. Jodi Rell.

The Governor and Commissioner of Georgia Health Insurance are considering issuing an executive order that would create an Exchange Review Board. The Board would then consider and possibly develop legislation to implement a state insurance exchange in 2012. A bill is expected to be filed creating this advisory committee and is supported by the Governor’s office. The Governor may then follow with an executive order. Also, Aetna insurance expects an MLR waiver request to be filed by the DOI sometime this month.

The Department of Louisiana Health Insurance has indicated it will file an MLR waiver request this week despite indications from the Governor’s office that he does not approve of the request.

The Senate Appropriations Subcommittee on Oklahoma Health Insurance and Human Services passed a bill last week that would create a website to permit Oklahomans to see approximate pricing information for medical procedures and pharmaceutical products. The bill requires the Insurance Department, in collaboration with the State Department of Health, to establish and maintain an online health care information system that permits consumers to see pricing information from different types of providers and pharmaceuticals. The bill states that the purpose of the website is to serve as a resource for insurers, employers, providers, purchasers of health care and state agencies to continuously review health care utilization, expenditures and performance. It would also enhance the ability of consumers and employers to make informed, cost-effective health care choices. The bill would require that the presentation of data in the system allow for comparisons in the context of geography, demographics, general economic factors and institutional size.

Also of interest is a bill passed by the Senate Rules Committee last week that would allow Oklahoma to opt out of federal health care reform requirements. The bill asserts state control in the regulation of health care, would create a compact between certain states and would set forth formulas for figuring the right to federal funds for each member state. The bill also would create the Interstate Advisory Health Care Commission and establish membership requirements and duties of the commission. Primarily the commission would assist the legislatures of member states in the regulation of health care. It states the formation of this compact is contingent upon approval from the U.S. Congress. Democrats in Oklahoma’s Senate opposed the bill, some saying that it would force Oklahoma to rely on other states for regulating Oklahomans. Both bills will continue through the legislative process, which is scheduled to end in late May.

Rep. John Zerwas’ bill authorizing the creation of a state Texas health insurance exchange encountered mostly smooth sailing last week when it was heard by the House Insurance Committee. Going by the name of the Connector in the bill, the primary purpose of the exchange is to prepare Texas for changes in health insurance markets set to roll out in three years as part of federal health system reform. One important change in the new bill language presented at the hearing was the absence of an individual mandate to buy an insurance product. Groups expressing support for the bill included the Texas Association of Business and the Texas Hospital Association, among others. The bill was left pending by the Committee and will likely see more changes before it is brought to a vote. The Texas legislature continues in its regular session until June 1, 2011.

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