AHLAlerts: American Health Line’s Blog

A debt deal that may or may not cut Medicare and Medicaid spending was signed this week, another survey was released on how employers will react to the federal health reform law, and states have started to lower premiums for the Pre-Existing Condition Insurance Plan created by the overhaul in the hope that it will spur more enrollment.

Here’s what you need to know from the last week in health policy news.

BUDGET DEAL BEGETS LOBBYING BONANZA: President Obama on Tuesday signed the fiscal year 2012 budget and deficit reduction agreement (S 365), ensuring that the U.S. will not default on its debts. Under the agreement, federal discretionary spending will be cut by a total of about $2.4 trillion over the next decade, while the debt ceiling will be raised in two stages.

The measure will:

• Enact an immediate debt-limit increase of $400 billion, followed by another $500 billion increase this fall and a further increase of between $1.2 trillion and $1.5 trillion next year, at the president’s request;
• Require a new 12-member bipartisan, bicameral congressional panel to develop another deficit-reduction package with $1.5 trillion in cuts, which Congress would have to approve by late December; and
• Trigger $1.2 trillion in automatic spending cuts, which would be evenly distributed between defense and non-defense purposes, should the federal government reach certain spending caps.

The immediate debt-limit increments — totaling $900 billion — will be offset by $917 billion in federal spending reductions over 10 years that will not affect Medicaid or Medicare. A House GOP summary of the debt deal clarified that the automatic spending cuts will apply to Medicare, not Medicaid, other entitlement programs or civil or military spending. A White House fact sheet also indicated that the cuts to Medicare will be limited to 2% of the program’s total cost.

Although the debt deal shields Medicare from immediate spending cuts, failure by Congress to enact further spending reductions at the end of this year would trigger a series of automatic cuts of as much as $1.2 trillion. Under the deal, Medicaid is exempted and Medicare is protected from deep spending cuts if the triggers are engaged. However, the congressional deficit-reduction advisory committee that the deal creates is not bound by those stipulations.

The potential for cuts to Medicare and Medicaid spending elicited promises for a frenzy of future lobbying activity, both from advocates for the entitlement programs and those who see the programs as an albatross around the neck of the economy.

Leaders of the tea party movement believe they now have an opportunity to renew their efforts for significant changes in Medicare. Tea partyers are planning to attend town hall meetings nationwide.

Meanwhile, advocacy groups have begun mobilizing grassroots campaigns to lobby lawmakers on the issue. Groups including Health Care for America Now, the Medicare Rights Center and Families USA are expected to work to shield Medicare and Medicaid from cuts. Conservative groups looking to cut entitlement spending are using similar tactics to mobilize their supporters. Both sides are expected to rely on partnerships, letter-writing, coordinated phone calls to congressional offices, emails and opinion pieces to rally support.

CONFUSING NUMBERS ARE CONFUSING: A survey of 894 employers by Mercer released this week found that about 2% of businesses said they are “very likely” and 6% are “likely” to drop health benefits for their employees in 2014 because of the federal health reform law.

The survey also found that businesses have seen an average increase of about 2% in enrollment as a result of a provision in the overhaul that extended eligibility to dependents under age 26. Employers expect an additional 2% growth in 2014 when the law will require them to enroll new full-time employees who do not opt out of health coverage.

We’ve covered several similar surveys before, all of which have come to contrasting conclusions.

First, there was the McKinsey survey, which said that nearly one-third of employers say they likely will stop offering workers health insurance beginning in 2014. This, of course, raised the hackles of lawmakers and health reform advocates alike.

Then there were a pair of reports (#1, #2) released by the Robert Wood Johnson Foundation that found fewer U.S. workers received health insurance benefits through their employers over the last decade but that the federal health reform law likely will reverse the trend.

A separate analysis conducted by Avalere Health suggested that the health insurance market will remain “fairly stable” under the overhaul, as large employers likely will continue offering plans to workers.

The only conclusion we can make is that studies will find what you want them to find.

PRE-EXISTING PROBLEM SOLVED?: It’s no secret that enrollment in the Pre-Existing Condition Insurance Plan — also known as high-risk pools — created by the federal health reform law has been lagging.

As of May 31, a total of 24,712 U.S. residents had enrolled in PCIPs, nearly double the number of people who has enrolled as of the end of January. However, enrollment has been slower than initial projections, which estimated that 375,000 people would enroll during the first year.

However, federal officials are hoping that the cost of the program is the reason for the slow enrollment. In early July, HHS officials announced that a review of premium rates in the 23 states and the District of Columbia found that the rates will drop by between 2% and 40% in D.C. and 17 of the states, bringing individual payments closer to the rates in each state’s individual insurance market.

This week, two states — California and Connecticut — announced they were lowering premiums for their PCIPs. California said it will reduce premium costs by an average of 18%, while Connecticut Gov. Dannel Malloy (D) said the state has received federal approval to begin charging a flat $381 monthly premium for certain enrollees.

While it looks as if the program never will reach the enrollment numbers federal officials originally predicted, the reduced premiums might help further push up enrollment rates that already have shown signs of slow-but-steady improvement. The lower premiums will be an interesting experiment, because they could show whether cost was the primary barrier to enrollment. There are other reasons, of course — people are unaware of the program or don’t like the health reform law, for instance — but if enrollment has a significant uptick, it could show how hard the health reform law will have to work to get people to purchase insurance once the individual mandate kicks in. If insurance is so costly that even people who really need it don’t buy it, then what will people who see the mandate’s penalty as a cheaper option do?

by Anthony Wilson, Editor

TELL US WHAT YOU THINK: Will the debt deal end up cutting Medicare or Medicaid? How do you react to all the contrasting survey results on employers’ responses to the health reform law? Why is enrollment so low in the high-risk pools? Give us your take in the comments.