Government News
of the Week:
Medicare Compliance, Medicare Advantage and Part D, and Other Federal and State Developments

1. A staggering 91,675 Oregonians signed up to receive one of the 3,000 available applications for the Oregon Health Plan's Standard benefit package. The Standard benefit, which now covers 17,700 enrollees, is for low-income residents who otherwise aren't eligible for Medicaid. The applications were assigned by lottery and sent to winners on March 10. About one in six Oregon residents, or about 600,000 people, lack health coverage.

On March 12 a Families USA report estimated that one working-age Oregonian dies each day because he or she did not have health insurance. It found that, based on figures reported by the Institute of Medicine and the Urban Institute, nearly 1,900 people between the ages of 25 and 64 died between 2000 and 2006 because they lacked health coverage.

Bruce Goldberg, M.D., director of the Oregon Department of Human Services (DHS) said the report emphasized the need for comprehensive health care reform. "It's important to understand and document the consequences of lack of health coverage. It's more important that we do something to assure people get the health care they need." he says.

Oregon Health Plan, the state's Medicaid program, is offered through DHS. The Medicaid program covers a total of more than 300,000 residents, says department spokesperson Jim Sellers. The Standard benefit can support a monthly average of 24,000 enrollees, and enrollment has been closed since July 2004. The coverage has no premium for those with incomes less than 10% of the Federal Poverty Level, but about 63% of enrollees are responsible for a monthly premium of between $9 and $20, for which beneficiaries are billed every six months.

In its heyday, the program covered nearly 132,000 people, Sellers says. That was in July 1995. Since then, he tells AIS, enrollment has fallen by attrition that the department allowed to occur. The state, which originally funded the program through the general state fund, changed its funding structure some years ago, Sellers explains. He says the benefit package is now funded through a tax that Medicaid managed care plans and hospitals in the state agreed to pay. But "the money derived from those two industry groups is significantly less than what the state fund formerly [funded] it at," he says.

Those who receive applications will have to return them to the department within 30 days, according to Sellers. The department will then review them and enroll the eligible persons. After that, the department will hold another lottery drawing for 3,000 more applications, based on the original list of those who are interested in coverage. The process will continue until the plan adds up to 10,000 new enrollees during the remainder of the program's two-year budget, which is about eight months old, he explains.

Sellers says the 2009 legislature, which will convene next January, is likely to consider new legislation to address the issue of health care reform in Oregon.

Reprinted from the March 17, 2008, HEALTH PLAN WEEK.

2. The federal government will pay more than 600 hospitals about $666 million in Medicare back payments stemming from shifts in payment policies during the 1980s, The Wall Street Journal reported on March 13. The settlement has been in the works since 2006 and is one of the largest paid to providers, the newspaper reported. Federal officials changed reimbursement rules to exclude some low-income patients from calculations that determined whether facilities qualify as disproportionate-share hospitals and therefore receive greater compensation. Several hospitals sued to have the rule amended, and they won in 1997, the Journal said. Many then sued for back payments, and a federal judged ruled in their favor in 2004. The government appealed, but lost in 2005. A CMS spokesperson told the Journal he had no comment.

Reprinted from the March 17, 2008, REPORT ON MEDICARE COMPLIANCE.

3. Iowa's House of Representatives approved by a vote of 97-0 HF 2539, which would reform the state's health care system in an attempt to cover all residents. According to state Rep. Lisa Heddens (D), the bill sets a goal that every Iowa child will have health insurance by the end of 2010. It establishes that "every Iowan will have a patient-centered medical home," under which a medical provider will focus on prevention and chronic care management for each of its patients in an attempt to reduce costs. The bill would allow young adults to stay on their parent's insurance policy until they reach age 25 or they graduate from college, whichever is later. State residents with pre-existing conditions also would continue to receive insurance coverage if they leave group insurance and enter the individual insurance market. The bill now goes to the Senate, which had passed its own version of health care reform. Funding has not yet been identified for the bill.

4. As coalitions join forces on either side of a legislative reform package that could radically alter the Michigan health insurance market, the chairman of the state Senate committee considering the controversial bills says he is drafting alternative legislation that could be introduced within a week or two. The bills primarily address how Blue Cross Blue Shield of Michigan (BCBSMI) does business.

"I'm working on a substitute" to the package of legislation, state Sen. Tom George (R) tells AIS.

Last fall, four bills introduced in the state House were passed by overwhelming margins after just one public hearing on the subject. The bills were sent to the state Senate, where they were referred to the Health Policy Committee chaired by George.

The legislation is necessary to level the playing field and "put stability and structure in the individual [health insurance] market in Michigan," BCBSMI spokesperson Helen Stojic tells AIS.

Critics of the proposals charge that the bills, if enacted, would result in higher health insurance premiums throughout the state and give BCBSMI an unfair advantage over its competitors.

The bills would establish a high-risk pool primarily paid for and administered by BCBSMI and would change the formula used for setting the plan's rates for insurance products (HBs 5282 and 5283) and lift restrictions on the types of products sold by its for-profit subsidiaries (HB 5284 and 5285).

As the health insurer of last resort in Michigan — and the largest health plan in the state — BCBSMI provides health benefits for more than 4.6 million members.

According to consolidated financial results released Feb. 29, BCBSMI lost $245 million on individual health insurance policies in 2007. Those losses are of particular concern to BCBSMI, since the plan reports that the proportion of its business in the individual market is expected to rise from its present level of 6% to between 15% and 25% of its subscriber base within five years.

Under the terms of proposed legislation, the Michigan Blues' for-profit subsidiary, The Accident Fund, would be permitted to market products beyond its present portfolio of workers' compensation insurance, expanding into lines including home and auto insurance.

The provision that has provoked the most vocal opposition would allow BCBSMI to change its formula for setting rates to individual writing from the current "community rating" system that spreads risk according to a formula based on a person's age, health status and other individual characteristics.

Several consumer groups and professional organizations have protested the bills, charging that they will result in higher premiums. In December 2007, state Attorney General Mike Cox (D) urged lawmakers to reject the legislation.

Other health plans object to how the bills structure the high-risk pool. As envisioned, BCBSMI would retain its designation of insurer of last resort — and the tax benefits that go with it — while for-profit competitors would contribute to the high-risk pool.

"As long as they remain the insurer of last resort and get all the benefits that accrue with that, this is unacceptable," Richard Murdock, executive director of the Michigan Association of Health Plans, tells AIS.

"We all share the objective of leveling the playing field," he says. "Their solution is one that benefits Blue Cross Blue Shield at the expense of other carriers in the industry. This is self-serving legislation."

Since the four bills were received by the Health Policy Committee, the panel has held several public hearings on issues related to the proposals. George says that he will draft new legislation to introduce as an alternative, but would not disclose specifics. He adds that his bills may be ready for introduction by mid-March.

"The goal here has to be how to make insurance as affordable and accessible as possible in Michigan," he explains. "The bills before us are more about a fight between insurance companies. But in fact the stakes are much higher than that. We don't want to screw things up. We have the fourth lowest average premium for individual coverage in the country, according to an AHIP [America's Health Insurance Plans] study. If we muff this and our rates go up, and our uninsured rates go from 10% to 15%, that's not good."

Stojic declined to discuss George's comments.

5. Eleven large pharmaceutical companies on March 7 agreed to pay $125 million to settle a nationwide lawsuit that claimed the companies intentionally inflated the average wholesale price (AWP) on certain prescription drugs, according to law firm Hagens Berman, LLC, plaintiffs' co-lead counsel in the case. The suit, filed in 2002, alleges that consumers and third-party payers such as health plans paid more than they should have because of the false AWP reporting. Under the settlement, 82.5% of the fund is designated for third-party payers' claims, while 17.5% is designated for consumers' claims.

Reprinted from the March 14, 2008, DRUG BENEFIT NEWS.

6. CMS implemented a new Advance Beneficiary Notice (ABN) on March 3 with a title change and a new option for patients to pay for non-covered services out of pocket.

Providers must obtain patient signatures on ABNs in order to bill patients for services that Medicare does not consider medically necessary but were ordered by the physician. The patient's signature on the ABN represents acceptance of financial liability for services that Medicare or the fiscal intermediary has deemed medically unnecessary. The forms also give patients a chance to forgo the service if they don't want to pay for it.

The ABN now will be known as the Advance Beneficiary Notice of Noncoverage "in order to more clearly convey the purpose of the notice," CMS says. Also, "while previously the ABN was only required for denial reasons...the revised version of the ABN may also be used to provide voluntary notification of financial liability. Thus, this version of the ABN should eliminate any widespread need for the Notice of Exclusion from Medicare Benefits (NEMB) in voluntary notification situations."

Using the new ABN in place of the NEMB is "great because people would get really confused about which [form] to use when," says Nancy LeGros, an attorney with the law firm of Vinson & Elkins. The ABN is used when a service is not reasonable or necessary, while the NEMB is for services that are excluded like routine foot care, she explains. "The [NEMB] was voluntary…but it was still useful to document the understanding to people that something is not covered, and they are going to have to pay for it," she says.

The revised ABN contains a mandatory field for cost estimations of the items and services at issue. And in a new beneficiary option, the patient can choose to accept the item or service and pay for it out-of-pocket rather than have a claim submitted to Medicare.

The new form also combines the general ABN (ABN-G) and the laboratory form (ABN-L) into one notice. The form is available now, and all providers should be using the form by Sept. 1.

For more information, www.cms.hhs.gov/BNI/02_ABNGABNL.asp#TopOfPage.

Reprinted from the March 17, 2008, REPORT ON MEDICARE COMPLIANCE.

7. Anthem Blue Cross Blue Shield of Colorado refunded $3.2 million to members affected by errors that cropped up when the insurer upgraded its claims-processing software two years ago. Paid by Anthem in the fourth quarter of 2007, the $3.2 million represents refunds to members and interest, according to Colorado Division of Insurance (DOI) officials.

In February 2006, Anthem, a WellPoint, Inc. plan, began a complete conversion of its claims-processing system, a process that lasted for the rest of the calendar year, plan spokesperson Sally Vogler explains to AIS.

As it was being implemented, the new system failed to keep track of the previous claims histories of members, Vogler says. Consequently some members had claims denied, benefits miscalculated, or deducible histories incorrectly reset to zero. All of the problems were resolved by Anthem by December 2006, she adds.

"The magnitude of this conversion was huge, because it was a whole system," Vogler says. "Conversions are notoriously difficult on a scale of this magnitude. It wasn't so much an issue of [faulty] systems as it was information transferred. It was a quantity issue, not a quality issue."

In all, about 7,200 Anthem members were affected, according to DOI.

Vogler says that most of the affected members were enrolled in Anthem's consumer-directed health plans (CDHPs). In total, Anthem has about 800,000 covered lives in Colorado. Vogler declined to specify the number of those enrolled in a CDHP.

State officials say that they received several complaints from Anthem members during the transition period, but could not provide a specific number.

"It was a temporary situation," Vogler says. "We corrected the claims payment and fixed the majority of the problems as quickly as we could. We reimbursed money to members and reported it to DOI."

Vogler declined to identify the vendor of the claims-processing software, which she says was not defective and is still in use. No other Anthem plan reported similar problems with claims-processing software, according to Vogler and Anthem parent company spokesperson James Kappel.

Reprinted from the March 2008 The AIS Report on Blue Cross and Blue Shield Plans.

Reprinted from the March 17, 2008, REPORT ON MEDICARE COMPLIANCE.

Additional government news appears in
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