Reform Update: Insurance exchanges in line of fire

The U.S. Senate's HHS appropriations bill that started to advance this week, which includes much of the healthcare funding sought by the Obama administration, is likely headed for a series of partisan political battles, including over funding for the new state health insurance exchanges.

The bill was approved Tuesday by the Senate Labor, Health and Human Services, and Education, and Related Agencies Appropriations Subcommittee. The full Appropriations Committee will consider it Thursday.

The bill provided $72.81 billion for HHS, which is 2% more than the $71.08 billion for HHS requested by the President Barack Obama's budget, according to charts provided by the committee.

The Senate panel's bill would provide a $1.4 billion boost in the CMS administrative budget that the administration had sought to run the exchanges during their 2014 inaugural year.

“I understand that the two parties have their differences on healthcare reform,” Sen. Tom Harkin, (D-Iowa), chairman of the panel, said at Tuesday's vote. “But the Affordable Care Act is the law of the land, and as long as I am chairman of this subcommittee, I will work to ensure that HHS has the funding it needs to implement that law. Therefore, this bill fully funds the president's request for that purpose.”

After Congress, driven by Republican opposition, did not provide exchange implementation funding last year, the White House this year cobbled together a one-time shift in funds from other sources to prepare the exchanges for an Oct. 1 enrollment launch. The exchange funding in the appropriations bill would become available Oct. 1—the start of the 2014 fiscal year.

The new money to implement the exchanges is among the most contentious issues in the bill that will have to be reconciled with a House funding bill for HHS, which has not yet been introduced.

Other contentious issues that will arise at Thursday's full committee vote include votes related to the administration's July 2 delay in the requirement that large employers provide qualifying health insurance to their employees or face tax penalties. Sen. Jerry Moran (R-Kan.) plans to offer amendments to delay for a year both the employer mandate and the requirement that individuals obtain qualifying coverage.

The individual mandate enforcement funding for the IRS was cut Wednesday from the House Financial Services appropriations bill. That makes it likely House and Senate conferees will wrestle with that issue when they try to reconcile their must-pass spending bills.

The two chambers also are likely to battle over the HHS' overall funding levels, since the Senate bill ignored the fiscal impacts of the Budget Control Act, which required nearly $1 trillion in 9-year cuts from across the federal government. The law's so-called sequester required 2% cuts to Medicare providers and up to 8% in cuts each year in the budgets of most federal departments.

The Senate panel's HHS “funding levels will be achieved only if Congress and the administration can agree on a balanced plan that eliminates the damaging spending caps imposed by sequestration, and if Congress works in a bipartisan manner to approve the Labor-HHS bill through regular order as quickly as possible,” Dr. Darrell Kirch, president and CEO of the Association of American Medical Colleges, said in in a written statement.

Hospitals were pleased that the Senate measure restored $179 million in children's hospital graduate medical education funding that was cut under Obama's budget. Without the funding that is used to train about half of the nation's pediatricians each year, children's hospitals would likely have to cut some of those training slots, said Jim Kaufman, vice president for public policy at the Children's Hospital Association.

Other funding watched by hospitals included the money provided for the National Institutes of Health. The Senate bill would provide $30.9 billion to NIH, or $147 million less than the administration requested.

Both the NIH and children's hospital GME funding have broad bipartisan support.

The Senate committee matched the $1 billion administration request for the Prevention and Public Health Fund authorized by the Patient Protection and Affordable Care Act. In addition, the subcommittee added $79 million for a preventive health block grant, which the administration did not request. Harkin is a strong advocate for public and preventive health efforts.

Harkin has battled the White House over previous cuts in prevention funding, including briefly blocking the confirmation of Marilyn Tavenner as CMS administrator earlier this year as a way to underscore his concerns.

Among the major initiatives in the bill is doubling the funding for Medicare and Medicaid anti-fraud enforcement sought by the administration, to $640 million.

“We know that every dollar we spend on combating fraud and abuse in Medicare and Medicaid generates $7.90 in savings,” Harkin said. “At that rate, this bill will return about $5 billion to the U.S. Treasury.”

A notice from the Internal Revenue Service issued Tuesday has provided a more formal explanation for the Obama administration's decision to postpone the healthcare reform law's employer mandate.

The new IRS notice goes slightly farther than prior statements on the delay by describing information reported by employers as “integral” to carrying out the penalty enforcement, he said. Identifying which employers owe penalties without information provided under postponed reporting requirements would be “impractical,” the notice said.

Employers can postpone reporting information needed to enforce the law, which will give federal officials more time to get input on how to simplify reporting rules expected this summer, the new notice said.

Some hospitals have aggressively employed doctors as part of strategies to prepare for new healthcare policies and changing markets. That hiring spree may be contributing to rising healthcare costs, Modern Healthcare's Andis Robeznieks reported. Roughly one out of three respondents to an American College of Physician Executives' poll said costs increase after hospitals acquire physician practices.

Differences in population health may be behind the geographic variation in Medicare spending, a new study said. But the research also suggests that differences in how physicians practice medicine may also contribute to health spending variation. Researchers found a mix of high- and low-cost spending across 10 conditions in nearly every community included in the study, even those communities with low overall costs. “These results suggest that even high-performing ACOs with respect to overall costs will be able to identify specific area of care where they may be potential savings because even low spending regions were high spending for some types of care (and vice versa).” The study was published by the journal Health Services Research.

Follow Rich Daly on Twitter: @MHrdaly

—Melanie Evans contributed to this report