Reuters: U.S. Encourages Bundling Medicare Payments

 Aug. 23, 2011

WASHINGTON (Reuters) – The U.S. agency that runs government health insurance is launching a program that would bundle insurance payments for multiple procedures in the hope of improving patient care while also saving money.

The Centers for Medicare and Medicaid invited providers on Tuesday to help develop four models to bundle payments.

The program is meant to encourage hospitals, doctors and other specialists to coordinate in treating a patient’s specific condition during a single hospital stay and recovery.

“Today Medicare pays for care in the wrong way,” Health and Human Services Secretary Kathleen Sebelius told reporters on a press call.

“Payments are based on the quantity of care, and not on the quality of that care,” she said. “There is little financial incentive for the kind of care coordination that can help patients from returning to the hospital.”

The four models give providers flexibility on how they get paid and for which services, as well as give them financial incentives to avoid unnecessary or duplicative procedures.

“Hospitals and other providers recognize that they have to accommodate the current (fiscal) environment,” said Nancy Foster, vice president for quality at the American Hospital Association, an industry group that represents hospitals and other providers.

She said that while some hospitals or doctors may get less money overall in a bundled payment, they will still get their costs covered and perhaps earn rewards for better coordinating care.

The CMS Innovation Center, created under President Barack Obama’s healthcare overhaul last year, has been looking into bundling payments as part of a larger effort to improve patient care and reduce costs.

“From a patient perspective … you want your doctors to collaborate more closely with your physical therapist, your pharmacist and your family caregivers,” CMS Administrator Donald Berwick said in a statement. “But that sort of common sense practice is hard to achieve without a payment system that supports coordination over fragmentation.”

For more about the program and the four proposed models, please see a CMS fact sheet at

About 45 million elderly and disabled Americans are enrolled in federal Medicare plans, which have come under heightened scrutiny as Congress tries to cut the U.S. deficit ahead of a November deadline. The government’s soaring healthcare bill is one of the biggest contributors to the deficit.

Further cuts to the $427 billion Medicaid program also are likely at the federal level. The insurance program for the poor is funded jointly by federal and state governments, but administered by the states with federal oversight.

(Reporting by Alina Selyukh and Anna Yukhananov; editing by Andre Grenon, Gary Hill)

The Washington Post: Appeals court strikes down health-care law’s insurance mandate

By N.C. Aizenman and Robert Barnes, Published: August 12

A federal appeals court struck down a central provision of the 2010 health-care law Friday, ruling that Congress overstepped its authority by requiring virtually all Americans to obtain health insurance.

The divided three-judge panel from the U. S. Court of Appeals for the 11th Circuit in Atlanta is the first appellate court to rule against any portion of the statute. The decision marks a significant victory for the 26 Republican attorneys general and governors who challenged the health-care law on behalf of their states.

In June, a divided panel of the Court of Appeals for the 6th Circuit in Cincinnati upheld the health-care law in a separate case. A third challenge is pending in the 4th Circuit in Richmond, with a decision expected soon.

The Supreme Court will almost certainly decide the constitutionality of the act. Friday’s decision seemed to seal the deal, because the most important factor in whether the court accepts a case is whether lower courts are split on a constitutional question. But when the court could hear the case was not clear.

Opponents of the health-care law, which has become a political lightning rod since its passage in March 2010, are pushing for swift Supreme Court review. The administration said Friday it is considering its legal options. One of those would be to appeal Friday’s decision to the full 11th Circuit Court. That could delay any Supreme Court ruling until after the 2012 election.

Administration officials downplayed the importance of Friday’s decision, noting that other judges have supported the law.

“Today’s ruling is one of many decisions on the [health-care law] that we will see in the weeks and months ahead,” Stephanie Cutter, a senior White House official, said in a statement. “In the end, we are confident the act will ultimately be upheld.”

In its ruling, the 11th Circuit panel teed up many of the arguments likely to dominate a Supreme Court review.

The two judges in the majority called the law’s insurance requirement a “wholly novel and potentially unbounded assertion of congressional authority.” And they rejected the government’s contention that unique features of the health-care market justified the mandate.

The government had argued that, since nearly everyone will need health care at some point and since hospitals are legally bound to treat those who cannot pay, a person’s decision about whether to buy insurance amounts to a decision about how they will pay for that care. Those with insurance pay through premiums, and those without it either pay out of pocket or by passing on the cost to hospitals, paying customers and government agencies — all actions on which Congress can legislate through its constitutional authority to regulate commerce.

The judges said that logic could apply to any number of markets, ranging from nursing home care to burials. “We are unable to conceive of any product whose purchase Congress could not mandate under this line of argument,” wrote Chief Judge Joel Dubina and Circuit Judge Frank Hull.

However, Dubina and Hull upheld the constitutionality of the law’s expansion of Medicaid to cover a greater proportion of the poor. They also stopped short of accepting the full sweep of the lower-court ruling from Florida that was before them. U.S. District Judge Roger Vinson had ruled that the insurance mandate could not be separated from the rest of the statute, and that therefore the entire law should be invalidated. By contrast, Dubina and Hull held that all other provisions in the law can remain in effect.

The third member of the panel, Judge Stanley Marcus, said his colleagues ignored years of Supreme Court precedent. “I can find nothing in logic or law that so circumscribes Congress’s commerce power and yields so anomalous a result,” he wrote.

Generally, the Supreme Court must accept a case by January in order to hear arguments and make a decision before adjourning at the end of June. The challengers of the law who lost at the 6th Circuit already have a petition before the court asking for review, and the case decided Friday could also make its way through the process to be heard in the court’s term that starts in October. That would provide a chance to settle the law’s constitutionality before the 2012 election.

“I think this fast-tracks it,” said Cornell law professor Michael C. Dorf, who writes frequently about the court.

But other legal analysts thought the administration would want to ask the full 11th Circuit to review the three-judge panel’s decision, a process that could take months.

Opponents of the law seemed united in demanding the administration get the issue to the Supreme Court as quickly as possible.

Typical was the comment of Ilya Shapiro of the libertarian Cato Institute. “It’s time now for the government to take this case directly to the Supreme Court; any delays would be unfortunate election-year politicking,” Shapiro said. “In these difficult financial times, the country simply can’t afford any more uncertainty over the fate of this economically damaging piece of legislation.”

Bradley Joondeph, a law professor at Santa Clara University who has closely followed the litigation over the act, said the decision is “a bit of a double-edged sword for the White House.”

A Supreme Court ruling validating the law before the election could energize the Republican base to elect a Congress and president that promise to repeal it, he said. And a loss “looks like a huge defeat, the gutting of the centerpiece of the administration’s domestic agenda.”

Said Joondeph: “There are just too many variables here to have a good sense which way all of this points.”

At the lower-court level, decisions have split along notably partisan lines, with judges appointed by Democratic presidents siding with the law and those appointed by Republicans ruling against it. But the appellate level has been less predictably partisan.

One of the judges in the majority Friday, Hull, was appointed by President Bill Clinton. The judge in the minority, Marcus, was originally named to the federal bench by President Ronald Reagan, then was elevated to his current post by Clinton. Dubina was named by President George W. Bush.

On the 6th Circuit panel Judge Jeffrey S. Sutton, a Bush appointee and former clerk of conservative Supreme Court Justice Antonin Scalia, sided with the Obama administration.

Los Angeles Times: Hospitals not immune to rising insurance costs for their staffs

Money & Company

August 8, 2011 

Here’s an irony: California’s hospitals, the very places that care for the sick, are struggling to afford healthcare for their own employees.

Like other types of employers, the state’s hospitals are confronting soaring health insurance bills.

A new statewide survey shows that hospitals face average insurance costs this year of $10,992 per employee, an 11% increase over last year.

Because a majority of hospitals pick up the entire cost of insurance for their workers, the financial burden falls entirely on them, according to the healthcare benefits survey by Keenan HealthCare, the state’s largest independent insurance brokerage.

California’s troubled budget outlook and new requirements under national healthcare reform could drive up the costs even more, the survey of 231 hospitals found.

“Like every other enterprise, hospitals are facing increased health insurance costs and are actively looking for ways to stop or at least slow that trend,” Steve Richter, senior vice president of Keenan HealthCare, said in statement accompanying the survey. “Just because you are a healthcare provider doesn’t mean you get a break on your insurance.”

Los Angeles Times: Healthcare partnership pays big dividends

By working together, Blue Shield of California, Catholic Healthcare West and Hill Physicians Medical Group saved more than $20 million in costs last year in serving 41,500 HMO members in Northern California.,0,3537835.story

By Duke Helfand, Los Angeles Times

6:06 PM PDT, August 1, 2011

A rare alliance of healthcare rivals — a giant insurance company, a major hospital chain and a large doctors group — has managed to reduce healthcare costs through a radical new strategy: working together.

The collaboration among Blue Shield of California, Catholic Healthcare West and Hill Physicians Medical Group shaved more than $20 million in costs last year and prevented an insurance rate hike for public sector workers in Northern California.

The three partners cite evidence that the quality of care also improved: Hospital stays were shorter, readmissions dropped and doctors and nurses kept closer tabs on patients.

Relationships between these kinds of companies are typically adversarial, with doctors and hospitals trying to negotiate higher prices for their services as insurers strive to limit what they pay out.

But driven by a mutual interest to cut costs and to be more competitive, the three devised a strategy they believed would deliver medical care more efficiently.

Skeptics worry that the partnership and others like it will put cost-cutting ahead of patient care. Healthcare experts believe, however, that such experiments — including one being planned in Orange County — hold important lessons for an expected wave of similar “accountable care organizations” as part of the nation’s healthcare overhaul.

“The fact that they achieved substantial savings in the first year highlights the potential for the model,” said Dr. Elliott Fisher of the Dartmouth Institute for Health Policy and Clinical Practice in New Hampshire. “There are a lot of opportunities to achieve savings, even in the short term.”

The three partners began planning their experiment in early 2008 — well before President Obama and Congress opened a heated national debate over how best to control healthcare spending.

Their talks centered on 41,500 members of a Blue Shield HMO who were served by Hill Physicians, whose doctors are affiliated with Catholic Healthcare West, the state’s largest hospital chain.

All of the participants got their Blue Shield insurance through the California Public Employees’ Retirement System and lived in Sacramento, El Dorado and Placer counties.

Senior executives from the three healthcare companies said they had to overcome past quarrels to collaborate.

“Our staffs had a history of combating with each other through negotiations,” said John Wray, a senior vice president with Catholic Healthcare West. “We had to trust one another to make it happen. This was a very significant culture change between the organizations.”

The partners overhauled procedures for medical treatment and hospital care. They started by taking the extraordinary step of sharing closely guarded financial and medical information.

They discovered, for example, that a handful of elective procedures — including weight-control measures — were among the biggest cost drivers.

They took action to cut these costs. Overweight patients, for instance, were given an opportunity to enroll in a Hill Physicians weight-loss program in which a psychotherapist and dietitian teach how to manage food cravings and make healthier eating choices.

The efforts helped reduce the surgeries by 13% last year, the hospital system reported.

Emergencies were another target. When patients were taken to hospitals outside of Catholic Healthcare West, they were stabilized and then directed back to the hospital system for lower-cost “in-network” treatment. In all, 113 patients in the experiment went to emergency rooms outside the network last year. Of them, 85 were transferred back to Catholic Healthcare West hospitals once stabilized.

Medical centers and doctors also took aim at expensive repeat visits for hospital patients by paying greater attention to follow-up care. As part of the hospitals’ checkout procedures, nurses reviewed patients’ post-hospital instructions and then asked them to repeat it all back. The providers also made sure patients had made appointments with doctors before going home.

As a result, hospital stays overall were shortened and the numbers of patients who had to be readmitted dropped by 15% in 2010, the providers said. Both results, they said, were signs of improved care: Spending less time in the hospital meant less chance of getting infections, while fewer readmissions meant patients remained healthier after surgery.

Of the $20 million in savings, Blue Shield recouped $15.5 million for a pledge it had made to CalPERS not to increase insurance rates for the 41,500 people in the experiment. The remaining $5 million was divvied up among the three partners. They also had agreed to share the risk if the experiment didn’t pay off.

Blue Shield executives believe the rate cut helped attract about 1,000 new policyholders last year and gave the company a competitive edge as it vied for a new CalPERS contract. Blue Shield covers more than 400,000 CalPERS members, about one-third of those who get health insurance through the giant state pension fund.

“Clearly it was worth our while,” said Juan Davila, Blue Shield’s top executive who oversees provider contracting. “Our biggest client is happy with us.”

Some healthcare advocates question whether patient health will suffer as Blue Shield and its partners look for additional cost savings. Could procedures or tests be denied because they are too expensive, they ask.

“You want to make sure that people have access to the care they need,” said Anthony Wright, executive director of the consumer group Health Access California. “That’s part of the balancing act.”

The experiment’s three partners insist that healthcare quality is as important as saving money.

CalPERS, meanwhile, said it is pleased to see improvements on both fronts, even though most of the savings in Northern California went unnoticed by individuals because the money was shared among the agency’s entire statewide membership.

Blue Shield is joining with hospitals and medical groups for similar alliances in San Francisco, Modesto and Orange County. The insurer and St. Joseph Health System in Orange are gearing up to launch a collaboration in January for 30,000 Blue Shield HMO members. About one-quarter of them belong to CalPERS.

“We firmly think this is the right way to go,” said Ann Boynton, a CalPERS benefits executive. The cost-cutting strategy, she said, “will boost care for our members and moderate the long-term increases in cost.”

The Washington Post: Obama signs debt-limit bill into law

By Paul Kane, Lori Montgomery and William Branigin

Updated: August 2, 2011 2:35 PM

The Senate passed a landmark plan to raise the federal debt limit and reduce government spending Tuesday, ending a partisan stalemate that threatened to plunge the nation into default and destabilize the world economy.

The measure was approved by a vote of 74 to 26. It promptly went to President Obama, who signed it into law, giving the government the money to pay its bills ahead of a midnight deadline.

Speaking in the White House Rose Garden after the Senate vote, Obama called the legislation “an important first step” in ensuring that the nation lives within its means, and he said it avoids “cutting too abruptly while the economy is still fragile.” He vowed to keep working for a “balanced approach” to deficit reduction that includes “reforming our tax code so that the wealthiest Americans and biggest corporations pay their fair share.”

The Senate vote came a day after the House voted 269 to 161 to pass the plan, as recalcitrant Republicans and disappointed Democrats rallied around calls to avert the nation’s first default and rein in ballooning deficits. The measure immediately grants the Treasury $400 billion in additional borrowing authority, with more to follow.

Obama urged Congress to take “bipartisan, common-sense steps” after its August recess to boost job creation and spur economic growth, including extension of tax cuts for middle-class families. He also called for patent reform, congressional passage of trade deals with Asian and Latin American countries and the creation of an “infrastructure bank” to put construction workers and projects together.

“We can’t balance the budget on the backs of the very people who have borne the biggest brunt of this recession,” Obama said in appealing for measure to raise more revenue from the wealthy and corporations. “Everyone is going to have to chip in. It’s only fair. That’s the principle I’ll be fighting for during the next phase of this process.”

In the Senate, 28 Republicans joined 45 Democrats and one independent in voting for the bill. Nineteen Republicans, six Democrats and one independent voted against it. Those opposed included some of the most conservative senators and some of the most liberal.

In debate before the Senate vote, there was little enthusiasm for the bill — just a recognition that it had to be passed.

Senate Minority Leader Mitch McConnell (R-Ky.) told tea party-allied conservatives that “although you may not see it this way, you’ve actually won this debate.” He said the bill “represents a new way of doing business in Washington,” adding: “We have changed the debate. We’re headed in the right direction.”

Senate Majority Leader Harry M. Reid (D-Nev.) said in a floor speech, “Our country was literally on the verge of a disaster,” which he said has now been averted. But he took issue with McConnell’s boast of tea party victory. “The result of the tea party direction of this Congress . . . has been very, very disconcerting and very unfair to the American people,” he said. Because the bill does not raise new revenue, Reid said, most Americans, including Republicans, “think the arrangement we’ve just done is unfair, because the richest of the rich have contributed nothing to this.”

The immediate achievement of the legislation is that it “clearly avoids default,” Sen. Bill Nelson (D-Fla.) said in a floor speech. But he said it could eventually usher in “major tax reform” by forcing lawmakers to overhaul the tax code, which he said is filled with loopholes, tax breaks and special-interest preferences that will cost $14 trillion over the next 10 years.

In arguing against the plan, Sen. Orrin G. Hatch (R-Utah), the top Republican on the Senate Finance Committee, said it falls well short of the “cut, cap and balance” approach that House Republicans advanced but that was shelved in the Senate. He defended existing “tax expenditures” — as spending through the tax code is known — saying they provide “an opportunity for individuals and businesses to keep more of the money that they earn.” He cited the home interest mortgage deduction, which he said mainly benefits taxpayers who earn less than $200,000 a year.

“Seen in isolation . . . this is not a good bill,” said Sen. Carl M. Levin (D-Mich.). Yet, he added, “despite its many flaws, this legislation must pass.” He complained that by failing to increase revenue by ending tax cuts and loopholes for the wealthy while slashing domestic spending, “this legislation incorporates some policies that are profoundly unfair to middle-income Americans.”

Levin called on Obama to “lead the nation to accept the notion that everyone, including the wealthy, must play a role in reducing deficits.”

Unlike the scene in the House five days earlier, when Republican leaders were working furiously to round up votes in favor of Speaker John Boehner’s (R-Ohio) debt-limit proposal, both parties’ leadership teams in the Senate appeared to be relaxed.

After Tuesday’s vote, Reid and McConnell met in the center aisle of the chamber and shook hands, exchanging several words before going their separate ways.

At a news conference shortly after the vote – just as Obama was addressing reporters at the White House — Senate Democratic leaders emphasized to a crowd of reporters that they were determined to return to their message about job creation.

On Monday, Boehner persuaded more than two-thirds of his caucus to support the bill by assuring the lawmakers that few GOP priorities were in the line of fire and that Obama had retreated on his demand for higher taxes.

Angry Democrats largely shared that assessment. But after withholding their votes for most of the roll call, they split evenly for and against the proposal, which would cut at least $2.1 trillion from projected borrowing over the next decade without any immediate provision for new taxes.

A grueling battle that had consumed Congress for most of the spring and the summer ended with a large round of bipartisan applause shortly after 7 p.m. Monday, when the legislation secured a majority.

The lawmakers were brought to their feet again by the stunning appearance of Rep. Gabrielle Giffords (D-Ariz.), who cast her first vote — in favor of the debt deal — since she was shot in the head in early January in Tucson. The shooting prompted several weeks of soul searching on Capitol Hill about the hostile partisan rhetoric that often fills congressional debates and campaigns, a brief respite that soon passed as Congress dove into six straight months of warfare over federal budgets.

The debt plan prompted grumbling from some GOP defense hawks about proposed cuts to next year’s Pentagon budget. But Monday’s final hours were more notable for the cries from House liberals, who charged that the measure gave them little to support. Aside from potential military cuts, Democrats said the agreement calls on Republicans to sacrifice very few priorities, while asking Democrats to accept steep reductions in programs that benefit the middle class.

“It’s time for America to deal with its spending problem, and deal with the fact that we’ve made promises to the American people that our kids and grandkids just can’t afford,” Boehner said at a valedictory news conference 3 1 / 2 hours before he gaveled the vote to a close.

Just four days after Boehner suffered a humiliating defeat when he could not pass similar legislation solely on GOP votes, the speaker still saw 66 defections from his side of the aisle.

The agreement was sealed late Sunday after weeks of acrimonious debate. It will raise the $14.3 trillion debt limit by at least $2.1 trillion, including the immediate $400 billion released upon Obama’s signature. An additional $500 billion will come in the fall, unless two-thirds of both chambers of Congress vote to prevent it. The final increase, which will occur early next year, provides the Treasury with sufficient borrowing power to pay the bills into early 2013.

The deal also calls for sharp cuts in agency spending — about $917 billion over the next decade, according to congressional budget analysts, starting with a $25 billion reduction in the fiscal year that will begin in October. The agreement on agency spending next year makes it far less likely that a funding dispute will shut down the government before the 2012 presidential election.

Democrats took comfort in the fact that the cuts were less severe than House Republicans approved in their budget blueprint in April. Compared with the GOP budget, the agreement provides about $44 billion more for domestic programs, including Pell grants for college — and $10 billion less for defense.

Those security cuts created a last-minute issue for Boehner, whose closest allies include the top Republicans on committees that fund the military. But at an emotional Monday morning meeting of Republicans, several longtime GOP lawmakers spoke in support of the plan, aides said.

A second stage of reductions would come later this year, with the appointment of a special committee charged with wringing at least $1.2 trillion more out of the budget over the next decade. If the committee failed to act — or if Congress did not adopt its recommendations — government spending would be cut across the board by the same amount, with the reductions split 50-50 between domestic programs and defense.

House Minority Leader Nancy Pelosi (D-Calif.) emphasized that the “trigger” would exempt programs for the poor, including Medicaid, Social Security, food stamps, and health and nutrition programs for children.

One of the big victories by tea-party Republicans in the debt-ceiling measure was securing a requirement that Congress vote later this year on a balanced budget amendment to the Constitution.

The measure would need a two-thirds vote in each chamber, and then ratification by 38 states, to succeed. And most observers believe passage in the Democratic-controlled Senate is all but impossible.

But Sen. Mark Udall, the centrist Democrat from Colorado, has introduced an amendment proposal and said Tuesday that Democratic leaders have chosen his legislation to be considered in the fall.

Obama and other senior Democrats have opposed any balanced-budget amendment, but the idea is popular with many voters – particularly independents, who are growing more fiscally conservative.

Udall is up for reelection in 2014. Many of his Democratic co-sponsors – including Sens. Claire McCaskill (Mo.), Joe Manchin (W. Va.), Bill Nelson (Fla.) and Ben Nelson (Neb.) – are running this year and need support from centrists.

Republicans in the Senate will likely rally around their own proposal, sponsored by Utah Sens. Orrin Hatch and Mike Lee, which would limit spending to 18 percent of GDP and require congressional supermajorities to raise taxes.

But Udall’s amendment has a couple of provisions that might win over some Democrats. It creates a “Social Security lockbox” that his office says would “protects the revenue and outlays of Social Security from any balanced budget requirement.” And it prohibits Congress from providing income tax breaks for people earning over $1 million a year unless the country is enjoying budget surpluses.