Washington Update – August 5, 2011

August 5, 2011

Medicare News

CMS announced that 900,000 Medicare beneficiaries received a discount on their prescription drugs in the Part D donut hole this year. The savings for seniors amount to more than $460 million, including over $200m in June alone.

ACA Updates

Joel Ario is stepping down as head of the exchange group in HHS’ Center for Consumer Information and Insurance Oversight at the end of September (CCIIO runs health reform implementation within CMS). For now, exchange implementation will be led by Steve Larsen, CCIIO’s current director, and Tim Hill, who has held a variety of roles within CMS, including CFO for the agency, Deputy Director for the center running Medicare, and most recently, deputy director of CCIIO.

The Federal government announced that it is taking over health insurance rate review in 10 states that do not adequately regulate premiums. The ACA requires oversight and justification of health insurance premium increases over 10% in the individual and small group markets, beginning September 1, 2011.

The Feds also issued a preliminary determination of states’ readiness for meeting minimum criteria for external appeals review processes. According to this ruling, 17 states do not meet the minimum criteria and therefore the process could be taken over by the Federal government.

New Hampshire has enacted a law that allows for continued implementation of the ACA and simultaneously rejects exchange planning grant money from the Federal government. Governor Lynch (D) allowed the bill to become law but opposes the rejection of funds.

On the Hill

The House and the Senate have recessed until after Labor Day….

…but before they left, legislation was enacted on August 2nd to raise the Federal debt ceiling and cut Federal spending by $917 billion over 10 years. Although changes to Medicare were not part of the spending cuts, the program likely won’t escape scrutiny for long. The second round of deficit reductions, required to be $1.2 trillion over 10 years, will be made by a group of 12 lawmakers, knows as the “super committee”. Committee recommendations must be made by September 23rd and enacted by Congress by December 23rd. Otherwise, a series of automatic spending cuts—implicating entitlement and defense programs—will kick in. Payments to all Medicare providers would be automatically trimmed by 2%. The entire budget, including Medicare, is on the table for super committee recommendations, as well as revenue raised through the tax code.

Reports/Other News

A Mercer survey of employers finds that only 2% are “very” likely to drop employer-sponsored insurance and 6% are “likely” to, once health insurance exchanges are operational. This is virtually unchanged from one year ago, according to a similar survey conducted by Mercer just after the ACA was passed. Approximately one-third of employers are considering a defined contribution approach; within that, most consider making a fixed employer contribution for all plans offered and letting employees buy up for more generous coverage.

CMS actuaries’ annual report on national health spending projects that growth from 2010 to 2020 will be 5.8% per year, 1.1 percentage points faster than the average rise in GDP. Spending is projected to spike to 8.3% when health reform coverage provisions take effect in 2014. Growth in health spending over the past few years has been historically low due to the effects of the recession and slowed growth in payments to Medicare Advantage plans. Due to the makeup of the newly insured population (relatively young and healthy), CMS expects spending for prescription drugs and physician services to grow more quickly than hospital, or other more intensive, services.

The Government Accountability Office (GAO) testified before a committee in the US House of Representatives that the federal government wasted almost $48 billion in improper payments in Medicare last year, including for improper documentation, medically unnecessary services, coding and billing errors and payment calculation errors. Medicare’s improper payments amount to 38% of total improper payments made by the Federal government. It is not an estimate of fraud.

Visit Extend Health — the nation’s largest private Medicare exchange.

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