Lacking congressional action, the federal government has essentially halted a 21.2% Medicare pay cut for physicians that was to go into effect today.
The Centers for Medicare and Medicaid Services has ordered contractors to hold claims for 10 days, which temporarily shelves the Medicare pay cut. CMS expects that provider cash flow will not be interrupted.
The CMS took the action after the Senate failed to extend the pay cut plan and went home for the weekend on Friday, says CMS spokesman Peter Ashkenaz.
Physician organizations are furious at the Senate for failure to vote to delay the pay cut and opting for adjournment instead. The Senate may attempt to take up the issue again on Tuesday, according to physician organizations. Last Thursday, The House passed a bill to delay the pay cut for 30 days.
"I appreciate that CMS will not be processing claims [today]," says Lori Heim, MD, president of the American Academy of Family Physicians. "Obviously, CMS thinks they will be able to have this fixed within the 10-day period. A lot of physicians are barely making anything on Medicaid [related practices]," she says. "Our members can't survive on a 21% pay cut that would be totally unacceptable.'"
After the Senate recessed Friday, CMS issued a guidance acknowledging potential congressional action.
"We believe Congress is working to avoid the negative update that will take effect March 1, 2010," the guidance stated. "Consequently, CMS has instructed its contractors to hold claims containing services paid under the [Medicare Physician Fee Schedule] for the first 10 business days of March."
The guidance added: "The holding of MPFS claims will only affect claims with dates of service March 1, 2010 and forward. This hold should have a minimum impact on provider cash flow because, under current law, clean electronic claims are not paid any sooner than 14 calendar days [29 for paper claims] after the date of receipt."
The physician pay cut issue has been dependent continually on congressional action, much to the consternation of physicians. On Dec. 19, Congress voted to delay the scheduled payment cut until March 1.
Specifically, the Medicare payments were scheduled to be cut across the board in accordance with the sustainable growth rate (SGR) formula. The proposed delay ostensibly is to give Congress time to adjust the SGR formula. SGR links Part B Medicare reimbursement to the gross domestic product (GDP). The formula has required large cuts annually over the most decade and physicians have worked to continually oppose them.
"The practical impact of the cut taking effect will be serious but not devastating as long as the Congress addresses this untenable situation the week of March 1 as expected," wrote Bob Doherty, vice president of governmental affairs for the American College of Physicians (ACP) on the ACP blog Friday following the Senate's failure to act.
"If Congress acts promptly to extend the current rates—and specifies that the extension is retroactive to claims for services from March 1, ACP understands that Medicare contractors will pay claims the correct, continued-rate amount the first time," Doherty said.
"The downside is that many physicians will likely notice that Medicaid payments for services provided in early March will arrive a few days later than typical," according to Doherty.
Doherty said the ACP continues to urge Congress to enact a permanent fix to the SGR problem, noting the "short-term patches" have a disruptive impact on physician practices. He said the SGR formula is "unworkable" and triggers the Medicare payment cuts whenever spending on physicians and related services grow faster than the economy.
The Senate's failure to act Friday came after Sen. Jim Bunning (R-KY) held up passage of legislation to stop the Medicare payment cut. Bunning also stopped unemployment benefit extensions and other provisions over concerns about the federal deficit. Democrats accused Bunning, a former pitcher in the Hall of Fame, of dropping the ball.
The House overwhelmingly approved a measure Thursday night to postpone a proposed 21.2% pay cut to physicians, which was scheduled to go into effect on Monday, for at least 30 days.
The action—at least temporarily—is a reaction to physicians who have been upset over the failure of Congress to permanently deal with the payment issue. Physicians say the pay cut would force large numbers of doctors to stop seeing Medicare patients.
The House vote on the Medicare Physician Payment Reform Act was 315-to-97, with 87 Democrats and 10 Republicans opposing the measure. There were 20 abstentions.
Despite the House action, the physician pay cut will go into effect Monday, unless the Senate acts, according to Joe Stubbs, president of the American College of Physicians.
"It doesn't seem like the Senate will act in time, maybe Tuesday," he says. "This is very disturbing to physicians. It's just an ongoing battle to deal with this inequitable problem."
The American Medical Association criticized the Senate for not voting on the pay cut delay before leaving for the weekend. The Senate "left early for the weekend, abandoning seniors military families and baby boomers," said the AMA.
By failing to repeal the Medicare physician payment formula, a "Medicare meltdown now seems certain," the AMA stated in a release.
The pay cut will force physicians to consider whether to limit the number of Medicare and TRICARE patients they see in order to keep their practice doors open, said the AMA.
"Our message to the U.S. Senate is stop playing games with Medicare patients and the physicians who care for them," said AMA President J. James Rohack, MD. "It is shocking that the Senate would abandon our most vulnerable patients, making them the collateral damage of their procedural games."
One in four Medicare patients seeking a primary care physician is having trouble finding one, according to MedPAC, Congress' advisory body on Medicare. Physicians have told AMA that steep Medicare cuts will force them to limit the number of Medicare patients they treat.
A new 2010 survey of neurosurgeons found that 60 percent are already reducing the number of Medicare patients in their practices, and cuts will force nearly 40% to decrease the number of new Medicare patients they see, according to the AMA. More than 18% of neurosurgeons will no longer take new Medicare patients.
There could be a temporary solution to the issue this weekend. Stubbs says there is a possibility that the Centers for Medicare and Medicaid Services may be able to delay federal payments act for several days, or at least until the Senate takes action.
"Maybe CMS can delay the process and the Senate a little more time," Stubbs says.
CMS officials could not be reached for comment Friday.
While Congress has focused on healthcare reform, it has been relatively inactive on the pay cut issue, as the deadline approaches. The inaction has prompted sharp rebukes from organizations representing physicians.
The American Academy of Physicians said in a statement that it was "deeply angered at congressional failure to avert the mandated 21.2 % Medicare physician pay cut. This inaction—in the face of virtually universal calls by the medical community and advocates for Medicare beneficiaries—has put elderly and disabled patients at risk of losing access to care and imposed potentially devastating fiscal hardship on physicians."
HHS Secretary Kathleen Sebelius announced $100 million in grants this week for health IT projects in 18 states for children enrolled in Medicaid and the Children's Health Insurance Program (CHIP).
Different states and combinations of states will develop a variety of programs, including a pediatric electronic record format and health IT strategies in children's health data.
"We all have a stake in the health of our nation's children," said Sebelius in a statement. "Exploring new technologies and initiatives will help ensure our kids get the high quality care they need and deserve."
The goal for the grant program, according to HHS officials, is to demonstrate "that the quality of children's healthcare can be improved across states with new technologies and improvements in the way healthcare is delivered."
The CHIP Reauthorization Act of 2009 provided funding for the five-year grants, which aim to establish a national quality system for children's healthcare.
"These grants will test the most current theories of how to improve the quality of care delivered to children," Cindy Mann, director of the Center for Medicaid and State Operations, said in a statement. "These awards will help create the foundation for a more responsive and effective national system of high quality healthcare for children."
States receiving the five-year grants include Colorado, Florida, Maine, Maryland, Massachusetts, and North Carolina.
One partnership example is Maryland will coordinate with Georgia and Wyoming to focus specifically on improving treatment outcomes—the quality and cost of care—for children with serious behavioral health needs. The three states will incorporate features of a model developed by the federal Substance Abuse and Mental Health Services Administration (SAMHSA), which had been used with adults, to demonstrate its effectiveness with children and adolescents with serious mental health issues, according to HHS.
Oregon, meanwhile, will partner with Alaska and West Virginia to test the use of quality measures that have "widely varying healthcare delivery systems and use of healthcare technology," HHS said in a statement. The three states share rural and low-income populations.
The number of uninsured patients treated at public hospital systems increased 23% from 2008 to 2009, resulting in a severe financial strain on the system that may force hospitals to close their doors, according to the National Association of Public Hospitals and Health Systems.
A NAPH survey of 41 healthcare systems reported a 10% increase in uncompensated care costs, on average, with $2.3 million per member. Some members incurred more than $16 million in costs. The average member reported an increase of at least 2,600 additional uninsured patients in its healthcare system in 2009.
"Increases in utilization by uninsured patients continue to stretch the health systems' limited resources; more than half of all patients seeking care at these health systems are uninsured or covered by Medicaid," the report stated.
The U.S. public hospitals have been left in a "precarious position and Medicaid cuts at the state level will hinder their ability to continue serving as our nation's healthcare safety net," NAPH President Larry Gage said in a written statement. "The impact will weaken the fragile viability of the nation's safety net and force public hospitals to close their doors due to inadequate financing.";
The safety net system refers to facilities that provide a significant level of care to low-income, noninsured or vulnerable populations, often the largest metropolitan systems in the country. These so-called safety net systems in California, Colorado, Florida, Louisiana, Kentucky, New Mexico, Virginia, Washington DC, and Washington State had higher than average increases in uncompensated care costs.
Since early 2008, the Virginia Commonwealth University Health System has seen a demand by uninsured patients for inpatient hospitals services by almost 30%.
"As the current economic crisis continues to threaten the financial viability and health security of families throughout the country, Americans have turned to safety net health systems in increasing numbers," the report stated.
"These hospitals are facing cutbacks and the demand for services is unprecedented," says Lynne Fagnani, senior vice president of the National Association of Public Hospitals and Health Systems. "So these hospitals are the safety net, and when people are down on their luck, this is where they go—the safety net hospitals; and it shows where the demand for hospital is significant. Yet, nationally, hospitals have seen declines in volume [for inpatient and elective services]."
Indeed, fewer patients are seeking inpatient and elective services at hospitals nationwide, but the economic downturn has resulted in a greater proportion of patients without insurance coming through their emergency departments, according to an American Hospital Association survey of hospitals in 2009. People covered by Medicaid and other public programs for those in need are also increasing, the AMA stated.
"With higher unemployment, more folks are losing their insurance coverage and there are more uninsured overall," says Matt Fenwick, spokesman for AHA. "We have a broken healthcare system. You face cuts, you cut administrative staff, there's nothing more you can do. If we don't have reform, hospitals will be facing fundamental issues to keep the doors open. At some point, there's nothing more you can do."
The NAPH survey also found:
An 18% percent increase of uninsured patients who visited emergency rooms—with 1,200 additional visits per member. The health systems in California, Colorado, Massachusetts, Ohio, and Washington DC reported higher than average increases in emergency room visits by uninsured patients.
A 15% increase of uninsured patients also accessing non-emergency outpatient hospital services, including primary care. Systems in Alabama, California, Washington DC, Illinois, Missouri, Ohio, and Virginia all reported higher than average increases. The report noted: "These increases in utilization by uninsured patients continue to stretch the health systems' limited resources—more than half of all patients seeking care at these health systems are uninsured or covered by Medicaid."
In its report, NAPH recommended that Congress "enact comprehensive healthcare reform to ensure universal access to care" and provide additional funding to safety net hospitals and states.
NAPH includes more than 140 hospitals within 81 health systems, such as the New York City Health and Hospitals Corp., and the Cook County Bureau of Health Services. NAPH members represent 2% of hospitals nationwide, but provide 21% of all hospital-based uncompensated care.
A Cabinet secretary and two congressional committees are increasing pressure on health plan leaders to justify premium rate hikes as the Obama administration steps up its fight for health reform proposals.
HHS Secretary Kathleen Sebelius has invited leaders of insurance companies she has criticized for proposed rate hikes to a meeting March 3 at HHS, saying she is "eager to hear the justifications for these increases."
Sebelius made her announcement as the Senate Finance Committee reported it would launch an investigation into insurers. On Wednesday, a House Energy and Commerce Committee oversight panel began hearing testimony about proposed individual insurance rate hikes in California. The actions came on the eve of President Obama's scheduled bipartisan summit on healthcare reform at the White House on Thursday.
In a statement, Sebelius said CEOs of UnitedHealth Group Inc., WellPoint Inc., Aetna Inc., Health Care Service Corp., and CIGNA Healthcare have been invited. Officials of the National Association of Insurance Commissioners have also been asked to attend.
Noting what she termed "significant premium increases, " Sebelius said she wants to see what "steps we can take to create a more stable system that keeps premium costs down for all Americans."
In a House hearing on Wednesday, the head of the nation's largest insurer, WellPoint, indicated it would continue its rate hike plans, referring to proposals to raise premiums for its Anthem Blue Cross individual insurance customers in California to cover higher charges from healthcare providers. WellPoint's Chief Executive Officer Angela Braly said in a statement that recent increases in premiums reflect "general medical inflation" and changes in the risk pool, leaving fewer policyholders to spread the risk. Some Anthem members will see as much as a 39% rate hike.
Committee Chairman Henry Waxman, D-CA, said thousands of pages of documents reviewed by the committee "raise the possibility that WellPoint may have manipulated its actuarial assumptions to keep its medical loss ratio, a key measure reviwed by California regulators—flat."
A committee memo stated: "Internal company documents appear to call into question WellPoint's assertion that increasing profits was not a factor in the proposed rate increase." It added that WellPoint "padded its rate increase" and suggest that WellPoint's "business plan includes moving consumers into less generous plans."
Meanwhile, Senate Finance Committee chairman Max Baucus, D-Mont, and ranking member Sen. Chuck Grassley, R-IA, sent letters to California's largest insurers seeking "detailed answers" about increases in health insurance premiums. They sent letters to the WellPoint CEO, as well as Aetna, HealthNet, Blue Shield of California, Kaiser Permanente, and UnitedHealth Group.
"Policymakers need to be informed about the reasons for the increases and understand the effects on consumer affordability and access," Grassley said.
Amid the controversy of insurance plans seeking large rate hikes, one company stands out, and that's Michigan Blue Cross Blue Shield (MBCBS). It stands out because it had the largest proposed increase for the individual market—56%—mentioned by HHS Secretary Kathleen Sebelius as an example of why health reform is needed.
A few days later, in his Saturday radio address, President Obama clarified the MBCBS situation, noting that the company raised rates by 22% after unsuccessfully seeking the 56% rate hike. (MBCBS had complained to Sebelius that she focused on the 56% proposal.)
I'm not going to be an apologist for MBCBS, but like everything else, there's a lot more behind the curtain of political statements and instant numbing number tallying, whether it's about proposed rate hikes or actual.
MBCBS is an interesting case study because nearly everyone agrees it's fiscal situation has been a mess for years, and it's only going to get worse, unless the state acts, with or without healthcare reform from Washington, DC. Only facts truly provide transparency, the point that politicians of all stripes say they want.
When Michigan Blue Cross Blue Shield was proclaimed by the state as the "insurer of last resort" several decades ago, the Cadillac was king of cars and General Motors ruled Detroit. From the company standpoint, you could almost look at the nonprofit MBCBS as a corporate Statue of Liberty, standing on the edge of the Great Lakes. Give me your tired, your poor, your uninsured.
And it was fairly smooth in the beginning for MBCB taking in all the unwanted, all the uninsured, because there weren't that many people who needed help, generally speaking, not during the relative boom times.
Specifically, since 1980, BCBSM has been the designated nonprofit insurer in Michigan selling residents insurance despite their medical histories, even if the people are the costliest to insure, and are regularly rejected by for profit companies.
BCBSM runs under the state Nonprofit Health Care Corporation Reform Act, better known in Michigan as Public Act 350. Within the past decade, however, the economics and demographics changed, as the recession grew, cutting down factories and automakers, sending people to the unemployment line, and seeking their own individual insurance. In the process, more people were forced to buy the BCBSM "last resort" insurance, and the cost of healthcare services soared, reflecting what is occurring nationwide.
As of last year, some 400,000 people in Michigan purchased their own individual health coverage through BCBS. It seems the more people bought, the more BCBSM lost.
When Michigan Blue Cross Blue Shield initially asked for the 56% rate hike, the company announced it would lose $1 billion on individual health plans from 2009 through 2011. The state eventually rejected the proposed rate hike and agreed on a 22% figure. The losses still stand.
"The broken system at the heart of Michigan's individual health insurance market guarantees no winners," says Andrew Hetzel, vice president for corporate communications for Blue Cross Blue Shield of Michigan. In part, he blames the "practices of profit insurance companies who routinely deny coverage to people with medical conditions—without having to accept any financial responsibility for the full-time cost of their medical care."
As MBCBS's debts mounted, the company strongly supported a measure in the Michigan legislature to spread some of its burden to other insurers by creating a pool among insurers to take on some of the uninsured. The measure, which was debated in December 2008, failed.
"What's going on is the need to create a fair and balanced and equitable situation where all insurance [companies] in the state are held to the same standard," Hetzel says. "Here, the problem is a fundamentally unsustained, bifurcated system, where one carrier [MBCBS] takes on high costs."
Some critics say MBCBS shouldn't have stayed nonprofit all these years, and that has hurt state residents.
Frank Webster, a healthcare advisor for the Mackinac Center for Public Policy, suggested several years ago that the legislature should strip BCBSM of its government protection, and then it would have the same advantages that other plans have, namely more access to capital and flexibility.
In the long run, that would benefit consumers, he wrote. But Hetzel insists the corporation wants to stay as a nonprofit, so it can spend millions for charitable activities, such as subsidizing premiums for senior citizens.
"Blue Cross Blue Shield of Michigan stands at a crossroad. Continuation of the status quo will threaten the affordability of an access to healthcare coverage in Michigan," then-state Insurance Commissioner Frank Fitzgerald told the legislature in 2002. "Indeed, the status quo will threaten the ability of the corporation … to act as the insurer of last resort for individuals who cannot find insurance elsewhere."
"Nothing has changed" since Fitzgerald made that statement, Hetzel says.
For now, MBCBS is one unhappy insurer, blaming what it terms a lousy antiquated system in Michigan for its large rate hikes. MBCBS doesn't see the end of seeking increases for individual insurers.
"We cannot continue to sustain the losses," Hetzel says.
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Facing criticism about Medicare's Physician Quality Reporting Initiative (PQRI), Centers for Medicare & Medicaid Services (CMS) officials acknowledged that the PQRI is "difficult and time consuming." Medicare officials say they are working to make the PQRI easier to use.
The CMS responded to a Medical Group Management Association (MGMA) survey of physicians that showed widespread frustration about reporting and feedback report requirements, and an "unreasonable lag time" to receive PQRI results. The MGMA includes more than 22,000 members, who are professional administrators and leaders of medical group practices.
The CMS "continues to improve both the claims-based reporting mechanisms and feedback reports, which are the focus of the MGMA’s survey," according to CMS spokesman Joe Kuchler.
CMS made "significant improvements for 2008 that included detailed information as to measures submitted and the degree to which these were satisfactorily reported," Kuchler says. "These improvements were based upon suggestions we received from specialty and multi-specialty medical societies following release of 2007 reports."
Kuchler adds: "We continue to look for ways to improve the content of the feedback reports and invite any specific suggestions."
The PQRI was established under the 2006 Tax Relief and Health Care Act (TRHCA) to provide an incentive payment for eligible professionals, who satisfactorily report data on quality measures for professional services furnished to Medicare beneficiaries.
The MGMA targeted mostly group rather than individual requirements for PQRI. The program released the critical research survey about PQRI at a time Congress is considering how to continue the program.
A bill proposed in the Senate imposes penalties on physicians who fail to participate in the PQRI, but the House bill does not. The program is currently voluntary.
In 2008, CMS established an alternative delivery system that allows individuals, whether members of groups or not, to use call their carriers and have the reports e-mailed "because of the difficulty of some experienced in 2007," Kuchler says.
This has proven to be a "much easier and less time consuming process for physicians," Kuchler says.
For 2010, CMS has added two reporting options—electronic health records and group practice reporting. The EHR often has a built-in a capacity of generating contemporaneous performance reports, Kuchler says.
"The tool will calculate performance information for the group practice without the necessity for CMS to do this and then send the feedback," Kuchler says.
The CMS added: "Many physicians and physician groups are now using registry based reporting, which present fewer technical issues for physicians, and physician groups are now using registry based reporting, which present fewer technical issues for physicians and provides another option for feedback information."
In 2009, physicians could earn a PQRI incentive payment equal to 2% of their billed Medicare charges. In 2007, a much lower payout was reported, with $630 the average amount, according to the American Medical Association.
Robert Bennett, a spokesman for the MGMA, says he is pleased that the CMS has responded to its report, but he adds that there are still considerable delays in processing reports involving PQRI that must be addressed.
Mercy Medical Center in Springfield, MA, agreed to pay almost $2.8 million to settle claims it failed to document, or failed to provide the minimum number of hours of rehabilitation therapy between 2005 and 2006, which are required under Medicare guidelines, the Justice Department said today.
Medicare rules require that inpatient hospitals must provide a minimum number of rehabilitative therapy for their patients. Justice officials said the settlement resulted from a disclosure made by Mercy Hospital to the Department of Health and Human Services Office of Inspector General that it could not demonstrate that it had provided the required level of therapy.
"This settlement demonstrates the Justice Department's commitment to ensuring that Medicare patients get all of the care that Medicare pays for," Tony West, assistant attorney general for the Justice Department's civil division, said in a prepared statement. "As this settlement shows, those who come forward to disclose their violations and cooperate with the government will be dealt with fairly."
Justice Department officials said the settlement "is part of the government's emphasis on combating healthcare fraud."
The department used the False Claims Act in negotiating its case. Using the False Claim Act, the Justice Department has recovered $2.2 billion since January 2009 in cases involving fraud against federal healthcare programs, according to the department.
Mercy Medical Center says it has worked to fix documentation problems related to its rehabilitation program that cost the hospital $2.8 million in fines.
There was "misinterpretation and misunderstanding of the documentation," says Mark Fulco, senior vice-president for strategy and marketing for the Sisters of Providence Health System, which operates the hospital.
"We self-reported the problems," Fulco says. "The services were provided, but some of the documentation was not maintained at the level it should have been."
"Once we identified the problem, we took immediate steps to notify the government and [carry out] the policies," Fulco says. "We're confident all the current documentation meets the requirements."
The hospital has a five-year plan to pay the fines, Fulco says.
Fulco adds that the hospital's actions that led to the settlement could be a lesson to other healthcare facilities facing similar issues. To avoid higher penalties, Mercy Medical Center immediately came forward when it saw problems with the documentation. By reporting the problem to the Justice Department and taking steps to fix the problems, the hospital avoided larger penalties, Fulco says.
Still, the government fine was larger than expected, he says.
"We want to do the right thing—we feel a strong compliance program is the best cure," Fulco says. "This could have been a deal breaker. We feel our compliance program is aligned with our values."
"It's always better to take the high road," he says.
Acknowledging a tough economy, HHS Secretary Kathleen Sebelius said Thursday the government plans to grant $4.3 billion to states to reduce their prescription drug costs.
Sebelius said the government's action "will help states as they struggle to maintain Medicaid and other budget priorities in these difficult economic times."
"This relief will help states continue to provide critical healthcare services to the nearly 60 million beneficiaries who depend on it," Sebelius said in a prepared statement after calling the states about the federal plan.
Under the plan, HHS will apply the financial boost through the American Recovery and Reinvestment Act of 2009. The law granted a "significant, yet temporary" increase in the amount that states receive from the government to help pay for their Medicaid programs, Sebelius said. The federal share of Medicaid costs is known as the federal medical assistance percentage payments (FMAP) and refers to so-called clawback payments of the states.
The clawback payment is the amount states pay to the federal government as required by the Medicare Prescription Drug Improvement and Modernization Act of 2003 (MMA). It is intended to offset some of the added expense of assuming Medicare Part D drug costs for residents dually eligible for Medicare and Medicaid. The Obama administration has asked Congress to extend the increased FMAP in his 2011 budget proposal, Sebelius said.
HHS Secretary Kathleen Sebelius on Thursday criticized what she termed the "shocking" and "skyrocketing" proposed individual coverage rate hikes in seven states, from 23% in Maine to 56% in Michigan.
Touting healthcare reform, Sebelius unveiled a new report, Insurance Companies Prosper, Families Suffer: Our Broken Health Insurance System, which she said pinpointed "wildly excessive" profits among the country's largest insurers and the lack of competition that will "lock people out and throw them out of the marketplace."
Premium rate increases have left thousands of families struggling in a recession "with an unpleasant choice between fewer benefits, higher premiums or having no insurance at all," Sebelius said at a news conference in Washington D.C.
The insurance industry fired back.
"It's time to stop the politics of vilification and focus on what Americans need most: real health care reform that addresses the serious and urgent problems facing our nation," said Karen Igagni, America's Health Insurance Plans President and CEO, in a statement.
Daniel J. Loepp, president and CEO of Blue Cross Blue Shield of Michigan, wrote a letter to Sebelius after she spoke to the press, saying he was "disappointed" that Sebelius simply mentioned the company's proposal to raise rates by 56%.
"Without context, the story is not complete," he wrote. "Our regulators granted us a 22% increase last year after lengthy negotiations. Despite that granting of the increase, BCBSM sustained losses on individual lines of business of $280 million in 2009."
Sebelius took the opportunity to again push for health reform plans a week before the bipartisan summit called to salvage the teetering legislative plan.
Sebelius has been a key mouthpiece for the administration, a week ago lambasting Anthem Blue Cross after the insurer announced plans to raise rates on its customers in California as much as 39%. Sebelius criticized Anthem's move partly in light of its parent company, WellPoint, taking in a profit of $2.7 billion in the previous quarter. Following her initial criticism, Anthem Blue Cross postponed the rate hikes until May 1.
Chastising insurance company profits, Sebelius said "recent economic data show that profits for the 10 largest insurance companies increased 250% between 2000 and 2009, 10 times faster than inflation."
She targeted individual insurance premium increases. Sebelius called individual insurance the "most vulnerable part" of the health insurance marketplace. Less than 10% of Americans are covered by individual plans, according to HHS.
In response to Sebelius' criticism, AHIP cited medical cost increases as the prime culprit in increasing insurance costs in the individual market.
"Health insurance premiums are increasing in the individual market because of soaring medical costs and because younger and healthier people are dropping their coverage due to the economy," Igagni said. "Increases in the cost of coverage in the individual market spotlight on the urgent need to reduce the growth of underlying medical costs and to bring everyone into the system."
Rejecting the claims of medical costs, however, Sebelius said, "While rising healthcare costs is a known problem with our broken healthcare system, some of the premium increases requested by insurance companies are five to 10 times larger than the growth rate in national health expenditures. All the while, insurance companies and their CEOs continue to thrive."
While in a recession last year, the nation's five largest insurance companies?WellPoint, UnitedHealth Group, CIGNA, Aetna, and Humana?took home profits of $12.2 bilion, up 56% over 2008. The CEOs of the five largest insurers were each compensated up to $24 million in 2008, Sebelius said.
With proposed healthcare reform, "insurance companies will have to report how they spend the premium dollars that they collect from their customers," Sebelius said.
Sebelius also cited insurers in seven states that are proposing premium rates hikes. Besides the California and Michigan proposed hikes, she cited proposed increases by Anthem of Maine (23%;); Regency Blue Cross Blue Shield of Oregon (20%); and UnitedHealth, Tufts, and Blue Cross (16 to 23%) in Rhode Island. She said individual rates increased in Washington state by 40% until it imposed stiffer premium regulations.
The proposed Michigan rate hike of 56% was the highest that Sebelius cited. The figure was accurate as a proposal, but never carried out, according to Michigan Blue Cross Blue Shield.
"We are the insurer of last resort and seeing an influx into the individual market." says Andrew Hetzel, vice president for corporate communications for Blue Cross Blue Shield of Michigan. "Everything about our business is what Congress is talking about what it should be. Unfortunately, our plan is lumped into this political discussion and it's not helping the debate. It's emotional and angry and it doesn't lend itself to careful consideration and analysis of the real problems."
