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States — And 9M Kids — ‘In A Bind’ As Congress Dawdles On CHIP Funding

Kaiser Health News:Insurance - December 04, 2017

Last week, Colorado became the first state to notify families that children who receive health insurance through the Children’s Health Insurance Program are in danger of losing their coverage.

This story also ran on NPR. This story can be republished for free (details). Nearly 9 million children are insured through CHIP, which covers mostly working-class families. The program has bipartisan support in both the House and Senate, but Congress let federal funding for CHIP expire in September.

The National Governors Association weighed in Wednesday, urging Congress to reauthorize the program this year because states are starting to run out of money.

In Virginia, Linda Nablo, an official with the Department of Medical Assistance Services, is drafting a letter for parents of the 66,000 Virginia children enrolled in CHIP.

“We’ve never had to do this before,” she said. “How do you write the very best letter saying, ‘Your child might lose coverage, but it’s not certain yet. But in the meantime, these are some things you need to think about’?”

Children may be able to enroll in Medicaid, get added to a family plan on the Affordable Care Act’s health exchange or be put on an employer health plan. But the options vary by state and could turn out to be very expensive.

If Congress reauthorizes CHIP funding, states are in the clear. But they can’t bank on it yet, and states have to prepare to shut down if the funding doesn’t come through. Virginia would have to do so on Jan. 31.

“We’re essentially doing everything we would need to shut down the program at the end of January,” Nablo said. “We’ve got a work group going with all the different components of this agency, and there are many.”

For example, they will need to reprogram their enrollment systems, inform pediatricians and hospitals, and train staff to deal with an onslaught of confused families.

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Joan Alker, who runs the Georgetown University Center for Children and Families, said most states need to give families 30 days’ notice.

“But [state officials] are hearing rumors that Congress might get this done in the next couple of weeks, and they don’t want to scare families,” she said. “States are really in a bind here. It’s very tough to know what to do.”

Colorado was the first to send out a notice, and other states are close behind. There are a handful that are starting to run out of money in December, Alker said, such as Oregon, Minnesota and the District of Columbia.

The exact deadline for when CHIP funding runs out in each state is tricky to calculate, because the amount of money each has depends on how fast a state spends it — and how much stopgap help the federal government gives them.

Some states are getting creative. Oregon just announced it will spend state money to keep CHIP running, said Alker, “and they’re assuming that Congress will pass it and they’re get reimbursed retroactively. That’s what they’re hoping.”

Texas is set to run out of CHIP funds a lot sooner than was expected just a few months ago. And there’s a big reason for that: Hurricane Harvey, said Laura Guerra-Cardus with the Children’s Defense Fund in Austin.

“Natural disasters are often a way that individuals that never had to rely on programs like Medicaid and CHIP need them for the first time,” she said.

Guerra-Cardus said that after Harvey a lot of new families enrolled in CHIP and that there was also a higher demand for services. “When there is such a traumatic event, health care needs also rise. There’s been a lot of post-traumatic stress in children,” she said.

And to help those families out, Texas officials also waived fees they usually have to pay to join CHIP. So, lately there’s been less money coming in and more money going out. Like Virginia, without reauthorization, Texas would have to shutter CHIP by the end of January.

For Amy Ellis in Alpine, Texas, that’s something she’s dreading. “Losing a lot of sleep,” she said. “Still losing a lot of sleep.”

Ellis has an 8-year-old daughter who has been on CHIP since she was born. The girl has asthma and allergies, Ellis said, and health insurance is really important because her family doesn’t make a lot of money. Her daughter’s allergy medicine is expensive.

Ellis lives in rural West Texas, nearly four hours southeast of El Paso and “three hours from the closest city,” she said.

The isolation means that Ellis doesn’t have many options other than CHIP, she said. One would be enrolling her daughter in the insurance plan she and her husband have through the Affordable Care Act marketplace, but Ellis said that would be expensive.

“It would cost $300 to $400 a month for us to add her to our plan, which would be a huge chunk of our income,” she said. “That’s our grocery money and our gas money.”

A lot of families in Texas could find themselves in the same situation if Congress doesn’t act soon, said Guerra-Cardus. “Kids with chronic or special health care needs, this is going to turn their lives absolutely upside down.”

Roughly 450,000 children are covered by CHIP in Texas. Officials say they are asking the federal government to give them money that will keep CHIP alive through February.

But because officials must give families 30 days’ notice if the program will end, families in Texas could get letters right around Christmas that say their children are losing their health insurance.

This story is part of a reporting partnership with NPR, local member stations and Kaiser Health News. Selena Simmons-Duffin is a producer at NPR’s All Things Considered, currently on an exchange with Washington, D.C. member station WAMU.

California Winces At Trump’s Turn Back To ‘Bad Old Days’ Of Health Plan Associations

Kaiser Health News:HealthReform - December 04, 2017

Just a few decades ago, small businesses in California often banded together to buy health insurance on the premise that a bigger pool of enrollees would get them a better deal.

California’s dairy farmers did it; so did car dealers and accountants.

But after a string of these “association health plans” went belly up, sometimes in the wake of fraud, state lawmakers passed sweeping changes in the 1990s that consigned them to near extinction.

Now, President Donald Trump wants to promote a renaissance of these health plans and make it easier for them to operate across state lines — with less regulation. In a recent executive order, Trump directed the Department of Labor to look into ways to “allow more small businesses to avoid many of the [Affordable Care Act’s] costly requirements.”

Because the plans would do business in more than one state, they could “figure out a way to pull back some authority states have,” said Kevin Lucia, senior research professor at Georgetown University’s Center on Health Insurance Reforms.

That does not sit well in California, where key state policymakers warn that weaker regulation of these plans could destabilize the small-employer and individual markets, which have gained important consumer protections under the ACA and state health laws — including minimum benefit levels.

“President Trump is trying to loosen those rules, and return us to the bad old days” that were disastrous for consumers, said California Insurance Commissioner Dave Jones. Tens of thousands of consumers were “left in the lurch” without insurance when their associations folded, and millions of dollars in medical claims went unpaid, he said.

In the 1980s and 1990s, association plan failures hit a number of small businesses, affecting employees across industries. Thousands of farmworkers suffered when a plan created by Sherman Oaks-based Sunkist Growers collapsed. When Irvine-based Rubell-Helms Insurance Services went out of business, it reportedly left $10 million in medical claims unpaid.

In 1995, California banned a common form of health care associations known as multiple employer welfare arrangements, or MEWAs, in which small businesses jointly purchased health coverage in the same way Trump is now proposing. The plans that already existed at the time could remain in business as long as they met certain financial requirements.

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That ban followed “decades of bad experience,” said Jones.

But some business groups say that these plans offer companies flexibility in the face of state regulations that add cost and administrative burdens.

“Small-business owners are being pummeled,” said Tom Scott, California director of the National Federation of Independent Business. The looser regulations could save businesses thousands of dollars a year, he said.

Still, California lawmakers said they will do everything they can to prevent these plans from bypassing state regulations.

State Sen. Ed Hernandez (D-West Covina), chairman of the Senate Health Committee, said he will consider legislation to ban the sale of policies that don’t meet minimum benefit requirements.

“I’m committed to do everything I can to make sure we don’t go backward to having skinny plans in the state,” he said. Consumers need to be guaranteed coverage with robust health benefits and a cap on out-of-pocket expenses, he added.

Policy experts say the impact of Trump’s plan will depend on the precise details, which are still being considered by the Department of Labor. But Trump has suggested he wants the association plans to be treated the same as large-employer insurance, which would free them from regulations that govern the benefits they offer.

Supporters of the idea argue that the greater flexibility on benefits, plus the bargaining clout that comes with size, would lower the cost of these plans, providing relief to small employers hit by rising health care costs and state taxes.

“It’s very, very easy and it’s very competitive,” said Jack Stoughton, CEO of Los Angeles-based Stoughton Printing Co., which produces 12-inch record jackets for vinyl records by bands such as Led Zeppelin and Wilco.

His workers receive health benefits through one of the few remaining MEWAs in California.

The plan “saves me money; it certainly saves me time,” he said.

Printing plates are switched at Stoughton Printing Co. in City of Industry, Calif., in 2014. Stoughton, one of the largest printers of jackets for vinyl LPs, offers workers health insurance through one of the few remaining multiple employer welfare arrangements, or MEWAs, in California. (Jay L. Clendenin/Los Angeles Times)

But Beth Capell, a longtime health care consumer lobbyist, said these cheaper plans compromise the quality of health coverage for small-business employees and individuals.

“There was a fairly concerted outcry” to get rid of association health plans in the 1990s, and they should not be resurrected, Capell said. “They were a bad idea then; they are a bad idea now. It [feels] like déjà vu all over again.”

Deborah Kelch, director of the Insure the Uninsured Project in Sacramento, said state officials banned new MEWAs in the 1990s because they feared the associations would siphon off healthy people, leaving many small businesses with sicker and costlier enrollees — and higher premiums. The legislative changes from the 1990s helped ensure that the remaining MEWAs stayed afloat, she said.

Today, only four MEWAs remain in California, covering about 150,000 employees and their dependents. The enrollees say the model works.

Stoughton’s employees have received health benefits through a MEWA since the mid-1990s.

His roughly 50 workers have a choice of three insurance carriers — Kaiser Permanente, Health Net and Blue Shield — and the association acts as an intermediary between the employees and the insurers. (Kaiser Health News is not affiliated with Kaiser Permanente.)

The Printing Industries Association Inc. of Southern California, a trade association for printers, administers the insurance for Stoughton’s business. That allows him to limit his human resources staff to half of a full-time employee, he said.

“We want to be able to concentrate on what we do. We don’t want to shop around” for health insurance, he said.

The greatest number of association health plan members in California are in agriculture. Two farm trade groups, UnitedAg and Western Growers, offer farmers health care that they say caters to their unique workforce, which includes a large number of Spanish-speaking immigrants.

Kirti Mutatkar, CEO of UnitedAg, which covers 700 agricultural businesses and 43,000 members through its association, says her company doesn’t offer “cookie-cutter” health coverage.

UnitedAg offers free telemedicine and 10 free clinic visits in some of its plans, she said. It has bilingual customer support services and a network of doctors in Mexico. The members of the board include UnitedAg health plan enrollees, who have a say in what their health coverage looks like.

“This model works unbelievably well for us,” said A.J. Cisney, general manager of Rancho Guadalupe, which grows fruit and broccoli on California’s Central Coast. “If UnitedAg could take their brand of administering health care to other areas, I can’t see the downside.”

But that would be anathema to actuaries and health insurers, who worry about competing with more lightly regulated plans. They say the proliferation of such plans could undermine consumer protections and increase the potential for the kind of health insurance fraud that plagued many of the old association plans.

But Scott, of the National Federation of Independent Business, does not believe past is necessarily prologue.

“Times change, business models change,” he said.

Readout of Acting HHS Secretary Hargan's Visit to Mechanicsville, Virginia

HHS Gov News - December 01, 2017

Acting Health and Human Services (HHS) Secretary Eric Hargan traveled to Mechanicsville, Virginia today to meet with veterans representing multiple service eras and branches to thank them for their service and sacrifice to our country, and to discuss their experiences with the Veteran-Directed Home and Community Based Services (VD-HCBS) program.

Acting Secretary Hargan first met with local veterans to discuss the VD-HCBS program, a partnership between the U.S. Department of Veterans Affairs and HHS, and how its availability, and their ability to tailor their care to fit their individual needs, has affected their lives.

After meeting with these veterans, Acting Secretary Hargan delivered remarks to a group of local veterans, caregivers, and community members at American Legion Post 175. Mr. Hargan reaffirmed President Trump’s commitment to providing veterans the quality care they so rightfully deserve and noted that the VD-HCBS program “is also in accord with the patient-and-people first principles that this administration brings to healthcare and human services.”

Information on the Veteran-Directed Home and Community Based Services program can be found here.


With CHIP In Limbo, Here Are 5 Takeaways On The Congressional Impasse

Kaiser Health News:Insurance - December 01, 2017

Two months past its deadline, Congress has yet to fund the Children’s Health Insurance Program, leaving several states scrambling for cash.

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Lawmakers grappling with the failed repeal of the Affordable Care Act allowed authorization of the program to lapse on Sept. 30. Although CHIP has always had broad bipartisan support, the House and Senate cannot agree on how to continue federal funding. And the Trump administration has been mostly silent on the issue.

CHIP benefits 9 million children nationwide and 370,000 pregnant women a year. It helps lower- and middle-income families that otherwise earn too much to be eligible for Medicaid. Like Medicaid, CHIP is paid for with state and federal funds, but the federal government covers close to 90 percent of the cost.

To keep the program going, states with unspent federal CHIP money have seen their excess sent to a handful of states running low on funds. But that is a bureaucratic band-aid; some large states are warning families they may not be able to rely on CHIP for much longer.

All told, CMS has given out $1.2 billion in redistribution dollars since October. To keep the program going would cost the federal government $8.5 billion over five years, the Congressional Budget Office estimates.

Saturday marks the 25th anniversary of Pennsylvania approving the original CHIP program, which served as a model for the national law, established in 1997. Since then, CHIP has been left in the fiscal lurch only once before. In 2007, CHIP went several weeks without funding authorization from Congress.

Here’s a quick look at what the shortfall may mean to daily life.

1. Are any kids hurting because Congress has failed to fund CHIP?

No. But states such as California will run out of money within weeks. That state alone accounts for nearly 15 percent of all children benefiting from CHIP. Without federal money, state programs could freeze enrollment or suspend operation.

2. What are states doing since Congress missed the deadline?

Most states are doing little except looking for other unspent federal funds or asking the federal government to send some unspent funds from other states. But some, such as Colorado, are sending warning letters to beneficiaries to tell them that the program could soon end and to look for alternatives. This could mean exploring the ACA marketplace for coverage or researching if a child qualifies for Medicaid.

Colorado said it has only enough CHIP funding to last through January and then the program, without federal dollars, will end.

Arizona officials announced Thursday that it will use Medicaid funding to fill in the shortage of CHIP dollars to extend the life of its CHIP program.

Virginia officials plan to send out a similar notice to parents of CHIP members by early this month.

Minnesota is keeping CHIP alive by paying the federal share with state funds.

In Oregon, Democratic Gov. Kate Brown recently said that she is ready to spend $35 million in state funds to keep CHIP running through December.

Nevada this week announced it had been approved for extra funding from the Centers for Medicare & Medicaid Services — nearly $5.7 million — which could keep CHIP alive through December and possibly January.

California, which leads the nation in CHIP enrollment, has received the lion’s share of CMS redistribution funds since October: nearly $692 million.

“Approximately 98 percent of the 1.3 million population now covered using CHIP funding would continue to receive coverage under the Medicaid program because of a legal obligation to cover them through September 2019,” said California Medicaid/CHIP spokesman Tony Cava.  “If CHIP is not reauthorized, the governor and Legislature would need to deliberate on how best to address the population no longer eligible for federal CHIP funding.”

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3. When is Congress likely to act?

Not sure. CHIP reauthorization could be included in an appropriations bill that Congress must pass to fund the government into 2018. (Congress now has funded the government through next Friday.) A “continuing resolution” bill would have to be approved by then to avert a government shutdown.

But we’re journalists, not prognosticators — and we have been wrong before. Most Capitol Hill observers expected a deal by the end of September.

4. If CHIP is so popular among Republicans and Democrats, what’s the problem?

There is little debate about its worth and value, but the momentum on CHIP was lost amid disagreements over the Affordable Care Act. The House did extend authorization with a vote —mostly along party lines — on Nov. 3. The Senate itself has yet to vote. The Senate Finance Committee on Oct. 3 approved a bipartisan bill to extend the program for five years.

The sticking point is not whether to keep CHIP running but how to raise the cash needed.The House agreed to charge higher premiums to wealthier Medicare beneficiaries, cut money from the ACA’s preventive health fund and shorten the grace period for ACA enrollees who fail to make monthly premium payments.

Like the House bill, the Senate committee bill eliminated an ACA provision to increase CHIP matching funds — to states — by 23 percent. The increased funding would continue through fiscal year 2019 and fall to 11.5 percent in fiscal year 2020. It would be cut entirely in the following fiscal year.

5. How does CHIP differ based on where you live?

CHIP income eligibility levels vary by state. About 90 percent of children who qualify are from families earning 200 percent of poverty or less ($40,840 for a family of three). CHIP covers children up to age 19. But states have the option to cover pregnant women, and 18 states plus the District of Columbia do so.

And some states call CHIP by different names. For example, it is known as Hoosier Healthwise in Indiana, PeachCare for Kids in Georgia and KidsCare in Arizona.

Whistleblower: Medicaid Managed-Care Firm Improperly Denied Care To Thousands

Kaiser Health News:Marketplace - December 01, 2017

In early October, an executive at one of the nation’s largest physician-practice management firms handed her bosses the equivalent of a live grenade — a 20-page report that blew up the company and shook the world of managed care for poor patients across California.

For years, she wrote, SynerMed, a behind-the-scenes administrator of medical groups and managed-care contracts, had improperly denied care to thousands of patients — most of them on Medicaid — and falsified documents to hide it.

The violations were “widespread, systemic in nature,” according to the confidential Oct. 5 report by the company’s senior director of compliance, Christine Babu. And they posed a “serious threat to members’ health and safety,” according to the report, which was obtained by Kaiser Health News.

Days later, someone sent the report — labeled as a “draft” — anonymously to California health officials. Within weeks, state regulators had launched an investigation, major health insurers swept in for surprise audits, the company’s chief executive announced the firm would close and doctors’ practices up and down the state braced for a tumultuous transition to new management.

Jennifer Kent, California’s health services and Medicaid director, said her agency received the whistleblower’s report Oct. 8 and, working with health plans, confirmed “widespread deficiencies” at SynerMed, which manages the care of at least 650,000 Medicaid recipients in the state.

“I think it’s pretty egregious actions on the part of that company,” Kent said in an interview this week.

Key dates in the SynerMed case:

Sept. 27: SynerMed’s compliance staff learns of falsified documents

Oct. 5: Company’s senior compliance director issues investigative report

Oct. 8: California health officials receive the report anonymously

Nov. 6: SynerMed CEO tells employees the firm is shutting down

Nov. 15: California Department of Managed Health Care confirms ongoing investigation

Nov. 17: California’s Medicaid program says patients under SynerMed management are in “imminent danger” of not receiving care

Sources: Kaiser Health News/California Healthline reporting, SynerMed

In a Nov. 17 order issued to insurers, state Medicaid officials said “members are currently in imminent danger of not receiving medically necessary health care services” due to SynerMed’s conduct. The state ordered insurers to determine how many enrollees experienced delayed or unfulfilled services.

Consumer advocates expressed alarm at the whistleblower’s findings and questioned why these problems went undetected for so long. Some said it underscores a lack of accountability among companies involved in Medicaid managed care — which receive billions in taxpayer dollars and have expanded significantly under the Affordable Care Act.

Linda Nguy, a policy advocate at the Western Center on Law and Poverty in Sacramento, called the situation “outrageous.”

“It raises questions about oversight by the state and the health plans,” she said.

Many states face regulatory challenges as they increasingly outsource Medicaid, handing over vast sums of public money to the private sector. Nationally, about 55 million Medicaid patients are enrolled in managed care, which represents nearly 75 percent of total enrollment, according to consulting firm Health Management Associates.

Besides managing care for Medicaid patients, SynerMed also oversaw managed care services for people on Medicare and commercial insurance — 1.2 million patients in all. Physician groups it managed have contracts with most of the state’s largest insurers, such as Health Net, Anthem and Blue Shield of California.

SynerMed, founded in 2001 and based in the Los Angeles area, served as a key middleman in the managed-care industry between health plans and independent physician practices, and its role only grew after Medicaid was expanded under the ACA. Most, if not all, of the patients whose care it managed were in California.

Under Medicaid managed care, the government pays a fixed rate per patient to health plans, whose job is to coordinate patient care effectively and efficiently. In this case, health plans passed a share of their money — along with the financial risk of a fixed budget —  to physician practices under SynerMed management.

As is typical in the managed-care industry, SynerMed and the physician practices could pocket whatever money they did not spend on patients and other expenses.

The whistleblower’s report does not address what the motivation was for falsifying denial letters to patients — except to note that the small team of employees felt intense pressure from their supervisors to clear a backlog of paperwork dating back months.

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But Babu made clear that this was not a rogue operation. The methods they used were outlined in written training materials and knowledge of the procedures extended at least as high as a senior vice president, she wrote. After her investigation, other top executives were informed of her findings.

According to the report, she became aware of the problems in late September when a compliance manager heard about an employee falsifying a patient letter for an upcoming health plan audit.

Through interviews with sometimes tearful staffers, Babu wrote, she learned that an overworked team routinely fabricated denial letters without supervision from doctors or others with clinical training. The report suggested some cases were reviewed by medical personnel, but “staff members who are not clinicians could drastically misrepresent the medical director’s instructions.”

Some employees interviewed said they did not know what they did was wrong and said they were fearful of their bosses. One supervisor told Babu that these practices at SynerMed had persisted for many years and “that it had become normal for her,” according to the internal report.

Patients in Medicaid managed care and commercial plans are entitled to a written denial notice within two business days of the decision, giving them the ability to appeal to their health plan and then to regulators. Industry-wide, treatment denials were overturned in nearly 70 percent of all medical review cases handled by the state last year.

But the compliance department found that affected patients were not properly informed, and the violations “resulted in thousands of members unaware of their appeal rights going back years past. As such, members may experience delays in care, lapse in coverage, delay in access to care and or financial hardship.”

The denial letters fabricated by employees to satisfy auditors often were not sent to patients, according to Babu’s internal investigation. Employees also used software to backdate faxes to doctors’ offices to suggest physicians were informed promptly and properly about the denials.

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The compliance investigation focused on activities at SynerMed and didn’t address what occurred at physician offices, so it is unclear what doctors knew and what patients actually were told when care was not authorized.

Babu said that “the severity of the conduct is magnified by the fact that a large number of SynerMed’s patient population is low-income, and likely unable to afford medical services not covered by their insurance.”

In her report, Babu said she felt threatened and pressured to drop the matter during conversations with her boss, the general counsel and chief compliance officer. That person is identified elsewhere in the report as Renee Rodriguez.

During a meeting in her office on Oct. 3, Babu said “it seemed as if [Rodriguez] was trying to convince me to drop the case.”

The following day, Babu wrote “there is a likelihood that they [leadership of SynerMed] would terminate me. … I indicated that I would not stop fighting for what is just, and that I was prepared to involve the authorities as I now felt uneasy about everything.”

Babu couldn’t be reached for comment. Rodriguez didn’t return calls.

In a Nov. 6 email to employees, SynerMed’s chief executive, James Mason, said the company was shutting downIn a statement Wednesday to Kaiser Health News, apparently in reference to Babu, he said: “It is unfortunate that one of our employees jumped the gun and disclosed confidential information regarding our clients and members.”

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Enriched By The Poor: California Health Insurers Make Billions Through Medicaid

Mason said the company suspended “this individual immediately so we could investigate exactly what information was transmitted,” including whether it included confidential patient information. That person and others were later laid off, he said, as health plan auditors stepped in and the company’s operations wound down.

He said the company took the allegations seriously and quickly investigated them.

In a separate statement, SynerMed’s chief medical officer, Dr. Jorge Weingarten, did not directly address whether rules were broken. Instead he emphasized that the company had protocols in which “all denials on the basis of medical necessity must be made by licensed physician or a licensed health care professional who is competent to evaluate the specific request.”

Health plans that contract with SynerMed’s medical groups condemned the alleged wrongdoing and said they were committed to helping any patients who may have been affected.

“There was a pattern of deception this organization was willing to engage in that raises integrity questions about the entire operation,” said John Baackes, chief executive of L.A. Care Health Plan. “For them it was better to cheat than follow the rules. We take it extremely seriously, particularly when lives are at stake in terms of getting timely access to care.”

Anthem Blue Cross, the nation’s second-largest health insurer, said some physician groups will be terminating their contracts with SynerMed due to the allegations. The company said it’s working closely with state officials and physicians “to ensure a smooth transition for all of our members affected by these changes.”

State Medicaid officials said health plans, at their own cost, also must collectively hire an independent firm to monitor activities at SynerMed during its shutdown to ensure an orderly transition and “retention of records.”

Nearly 11 million people in California’s Medi-Cal program, or 80 percent, are enrolled in managed-care plans, rather than the traditional fee-for-service system.

SynerMed billed itself as “one of the largest Medicaid/Medicare management service organizations in the nation.” Given its size and growing stature, insurers, doctors and regulators were caught off guard by the company’s sudden change of fortune.

“SynerMed has been at the forefront in how Medicaid expansion has moved forward in California,” said Bill Barcellona, senior vice president for government affairs at CAPG, a national trade group for physician organizations.

Unlike in private health insurance and Medicare Advantage, Barcellona said, Medicaid managed care is more dependent on smaller physician groups that are less organized.

“SynerMed figured out they could create scale to provide some of the necessary infrastructure,” he said. “It has grown tremendously, and this has been a shock and a real setback.”

Congress Isn’t Really Done With Health Care — Just Look At What’s In The Tax Bills

Kaiser Health News:HealthReform - December 01, 2017

Having failed to repeal and replace the Affordable Care Act, Congress is now working on a tax overhaul. But it turns out the tax bills in the House and Senate also aim to reshape health care.

Here are five big ways the tax bill could affect health policy:

1. Repeal the requirement for most people to have health insurance or pay a tax penalty.

Republicans tried and failed to end the so-called individual mandate this year when they attempted to advance their health overhaul legislation. Now the idea is back, at least in the Senate’s version of the tax bill. The measure would not technically remove the requirement for people to have insurance, but it would eliminate the fine people would face if they choose to remain uninsured.

The Congressional Budget Office has estimated that dropping the requirement would result in 13 million fewer people having insurance over 10 years.

It also estimates that premiums would rise 10 percent more per year than they would without this change. That is because healthier people would be most likely to drop insurance in the absence of a fine, so insurers would have to raise premiums to compensate for a sicker group of customers. Those consumers, in turn, would be left with fewer affordable choices, according to the CBO.

State insurance officials are concerned that insurers will drop out of the individual market entirely if there is no requirement for healthy people to sign up, but they still have to sell to people who know they will need medical care.

Ironically, the states most likely to see this kind of insurance-market disruption are those that are reliably Republican. An analysis by the Los Angeles Times suggested that the states with the fewest insurers and the highest premiums — including Alaska, Iowa, Missouri, Nebraska, Nevada, and Wyoming — would be the ones left with either no coverage options or options too expensive for most consumers in the individual market.

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2. Repeal the medical expense deduction.

The House-passed tax bill, although not the Senate’s, would eliminate taxpayers’ ability to deduct medical expenses that exceed 10 percent of their adjusted gross income.

The medical expense deduction is not widely used — just under 9 million tax filers took it on their 2015 tax returns, according to the Internal Revenue Service. But those who do use it generally have very high medical expenses, often for a disabled child, a serious chronic illness or expensive long-term care not covered by health insurance.

Among those most vehemently against getting rid of the deduction is the senior advocacy group AARP. Eliminating the deduction, the group said in a statement, “amounts to a health tax on millions of Americans with high medical costs — especially middle income seniors.”

3. Trigger major cuts to the Medicare program.

The tax bills include no specific Medicare changes, but budget analysts point out that passing it in its current form would trigger another law to kick in. That measure requires cuts to federal programs if the federal budget deficit is increased.

Because the tax bills in both the House and Senate would add an additional $1.5 trillion to the deficit over the next 10 years, both would result in automatic cuts under the Statutory Pay-As-You-Go Act of 2010, known as PAYGO. According to the CBO, if Congress passes the tax bill and does not waive the PAYGO law, federal officials “would be required to issue a sequestration order within 15 days of the end of the session of Congress to reduce spending in fiscal year 2018 by the resultant total of $136 billion.”

Cuts to Medicare are limited under the PAYGO law, so the Medicare reduction would be limited to 4 percent of program spending, which is roughly $25 billion of that total. Cuts of a similar size would be required in future years. Most of that would likely come from payments to providers.

4. Change tax treatment for graduate students and those paying back student loans.

The House bill, though not the Senate’s, would for the first time require graduate students to pay tax on the value of tuition that universities do not require them to pay.

Currently, graduate students in many fields, including science, often are paid a small stipend for teaching while they pursue advanced degrees. Many are technically charged tuition, but it is “waived” as long as they are working for the university.

The House tax bill would eliminate that waiver and require them to pay taxes on the full value of the tuition they don’t have to pay, which would result in many students with fairly low incomes seeing very large tax bills.

At the same time, the House tax bill would eliminate the deduction for interest paid on student loans. This would disproportionately affect young doctors.

According to the Association of American Medical Colleges, 75 percent of the medical school class of 2017 graduated with student loan debt, with nearly half owing $200,000 or more.

5. Change or eliminate the tax credit that encourages pharmaceutical companies to develop drugs for rare diseases.

Congress created the so-called Orphan Drug Credit in 1983, as part of a package of incentives intended to entice drugmakers to study and develop drugs to treat rare diseases, defined as those affecting fewer than 200,000 people. With such a small potential market, it does not otherwise make financial sense for the companies to spend the millions of dollars necessary to develop treatments for such ailments.
To date, about 500 drugs have come to market using the incentives, although in some cases drugmakers have manipulated the credit for extra financial gain.

The House tax bill would eliminate the tax credit; the Senate bill would scale it back. Sen. Orrin Hatch (R-Utah), chairman of the tax-writing Finance Committee, is one of the original sponsors of the orphan drug law.

The drug industry has been relatively quiet about the potential loss of the credit, but the National Organization for Rare Disorders called the change “wholly unacceptable” and said it “would directly result in 33 percent fewer orphan drugs coming to market.“

Desperate For Coverage: Are Short-Term Plans Better Than None At All?

Kaiser Health News:HealthReform - December 01, 2017

When one of Cindy Holtzman’s clients told the Woodstock, Ga., broker he was considering dropping his Affordable Care Act plan because next year’s cost approached $23,000 for his family of four, she suggested a new option: a back-to-back set of four, 90-day short-term plans, which would effectively give them a modicum of medical coverage for 2018.

An Obama administration rule limited short-term coverage to three months at a time because it was meant as a stopgap between more substantial policies. But several insurers, including big players Golden Rule and National General, now are sidestepping that rule by packaging three or four consecutive 90-day plans, with a one-time medical review upfront.

“I’m not pitching this to replace Obamacare, but when you’re telling me you’re going to get nothing,” Holtzman said, “I want to throw this into the arena.”

As premiums rise and some middle-class families feel they can’t bear the costs of a more secure Obamacare plan with its coverage guarantees, brokers and agencies have unveiled a slew of alternatives.

Interest has grown after the Trump administration stopped paying insurers subsidies they use to lower deductibles for lower-income ACA policyholders, which caused premiums to rise. The administration has also signaled it will soon loosen restrictions for alternative coverage, including ending the rule that limits short-term plans to 90 days.

But advocates warn shoppers to carefully read the fine print and understand what they’re buying. The plans might not cover what you think.

Most short-term coverage requires answering a string of medical questions, and insurers can reject applicants with preexisting medical problems, which ACA plans cannot do.

Because short-term plans fall short of ACA standards, policyholders are considered uninsured and face an IRS tax penalty, which could be hundreds of dollars for an individual or thousands for a family.

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“If you absolutely cannot afford [an ACA-compliant plan] — and you are sure you are healthy — look at other plans. But they all come with the caveat that if you get sick, they won’t give you much coverage,” said Joel Ario, a former Pennsylvania insurance commissioner and now a managing director at Manatt Health Solutions, a consulting firm.

To keep premium costs low, the policies set annual and lifetime caps on benefits. Many don’t cover prescription drugs, and most exclude coverage for maternity care, preventive care, mental health services or substance abuse treatment.

Also not covered are preexisting conditions, defined as anything treated — or for which a “prudent person” should have sought treatment — during the previous 12 months to five years, depending on the insurer.

Insurers can also bar coverage for any condition a patient develops after their initial enrollment period, even if they want to sign up again for another term with the same insurer.

Broker Kelly Rector in O’Fallon, Mo., cautions consumers: “Even if they’re healthy enough to get on the plan now, but have a heart attack in a month, they won’t be able to reapply and will be out of coverage for the rest of the year,” until the next ACA open enrollment.

Sold by a wide range of insurers, the plans usually pay a percentage of the cost for medical care, after the policyholder pays a deductible, which can range from $1,000 to $10,000 or more per contract term.

Already, insurers have begun offering plans that seem to anticipate that the Trump administration will restore the ability to hold short-term plans for 364 days.

National General’s package, for example, guarantees “eligibility for three more consecutive plans.” However, on those packages and similar ones offered by other insurers, the deductible resets every 90 days, so the patient would be on the hook for that amount every three months. That means a $5,000 deductible could grow to $20,000 if the policy were kept for the full year.

Premiums vary by insurer and other factors, including age, the deductible and how much coverage the plan provides.

Holtzman says a National General plan for her 46-year-old client, his wife and two children in Georgia with a $2,500 deductible every 90 days would cost $1,348 a month.

That’s appealing when compared with his current ACA plan, Holtzman said, for which the premium would be about $1,900 a month next year, with a $3,000 annual deductible.

Still, if the family enrolled in a different ACA plan than his current coverage, the differences narrow.

The least expensive ACA plan in his area would cost his family $1,335 a month, according to government website, which is about the same as the short-term plan by National. The ACA plan has a bigger annual deductible — $13,600 for his family — but the gap dwindles if someone falls ill and the family ends up meeting the deductible under the short-term plan in each of the four consecutive terms.

Consumer advocates say an ACA plan would cost the family more upfront but would include benefits for any preexisting conditions and would cover more, noting the short-term plan does not include coverage for prescription drugs and excludes benefits for chronic pain, congenital conditions and immunodeficiency disorders.

“People should be aware,” said Sabrina Corlette, a research professor at Georgetown University’s Health Policy Institute. “There’s a huge variety of plans out there — from true bottom feeders that are going to take your money and don’t provide any protection to legitimate products that are designed to meet a short-term need.”

Her advice: Find a reputable broker, read the fine print “and look for caps on amounts that they will pay per service, which can leave you holding the financial bag if you have to go to the hospital.”

Podcast: ‘What The Health?’ Taxes, Medicare And The Year-End Mess

Kaiser Health News:HealthReform - November 30, 2017


Weeks ago, the tax bill under consideration in Congress became a health bill, too. But now it could also trigger major cuts to the Medicare program.

This week’s “What the Health?” guests are:

Julie Rovner, Kaiser Health News
Joanne Kenen, Politico
Paige Winfield Cunningham,  The Washington Post

They discuss how a little-known law prohibiting federal deficits could force big cuts to Medicare and many other defense and domestic programs if the tax bill passes as currently configured in the House and Senate.

Among the podcast’s takeaways:

  • A possible delay in negotiating a year-end spending bill puts the fate of the Children’s Health Insurance Program in doubt. States are starting to run out of money for the program, whose federal authorization expired Oct. 1.
  • A Senate committee heard from Alex Azar, a former drug company executive and President Donald Trump’s nominee to head the Department of Health and Human Services. Much of the discussion was about what he might do to contain drug prices.
  • The National Academy of Medicine issued its own recommendations about how to make drugs more affordable, including the idea of letting government programs negotiate with drugmakers and possibly limit which drugs the government would pay for. Email Sign-Up

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Plus, for “extra credit,” the panelists recommend their favorite health stories of the week they think you should read, too.

Julie Rovner: ProPublica’s “A Hospital Charged $1,877 to Pierce a 5-Year-Old’s Ears. This Is Why Health Care Costs So Much,” by Marshall Allen.

Joanne Kenen:  The Atlantic’s “No Family Is Safe From This Epidemic,” by James Winnefeld.

Paige Winfield Cunningham: The Washington Post’s “597 days. And still waiting,” by Terrence McCoy.

To hear all our podcasts, click here.

And subscribe to What the Health? on iTunesStitcher or Google Play.

If Your Insurer Covers Few Therapists, Is That Really Mental Health Parity?

Kaiser Health News:Marketplace - November 30, 2017

It’s been nearly a decade since Congress passed the mental health parity act, with its promise to make mental health and substance abuse treatment just as easy to get as care for any other condition. Yet today, in the midst of the opioid epidemic and a spike in the rate of suicide, patients still struggle to access treatment.

That’s the conclusion of a report published Thursday by Milliman Inc., a national risk management and health care consulting company. The report was released by a coalition of mental health and addiction advocacy organizations.

Among the findings:

  • In 2015, behavioral care was four to six times more likely to be provided out-of-network than medical or surgical care.
  • Insurers pay primary care providers 20 percent more for the same types of care as they pay addiction and mental health care specialists, including psychiatrists.
  • State statistics vary widely. In New Jersey, 45 percent of office visits for behavioral health care were out-of-network. In Washington D.C., the figure was 63 percent.

The researchers at Milliman examined two large national databases containing medical claims records from major insurers for PPOs — preferred provider organizations — covering nearly 42 million Americans in all 50 states and the District of Columbia from 2013 to 2015.

“I was surprised it was this bad. As someone who has worked on parity for 10-plus years, I thought we would have done better,” said Henry Harbin, former CEO of Magellan Health, a managed behavioral health care company. “This is a wake-up call for employers, regulators and the plans themselves that whatever they’re doing, they’re making it difficult for consumers to get treatment for all these illnesses. They’re failing miserably.”

The high proportion of out-of-network behavioral care means mental health and substance-abuse patients were far more likely to face the high out-of-pocket costs that can make treatment unaffordable, even for those with insurance.

In a statement issued with the report, the coalition of mental health groups, including Mental Health America, the National Association on Mental Illness, and The Kennedy Forum, called on federal regulators, state agencies and employers to conduct random audits of insurers to make sure they are in compliance with the parity law.

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Harbin, now a consultant on parity issues, said the report’s finding that mental health providers are paid less than primary care providers is a particular surprise. In nine states, including New Hampshire, Minnesota, Vermont, Maine and Massachusetts, payments were 50 percent higher for primary care providers when they provided mental health care.

Because of such low reimbursement rates, he said, mental health and substance abuse professionals are not willing to contract with insurers. The result is insurance plans with narrow behavioral health networks that do not include enough therapists and other caregivers to meet the demands of patients.

For years, insurers have maintained that they are making every effort to comply with the Mental Health Parity and Addiction Equity Act, which was intended to equalize coverage of mental health and other medical conditions. And previous research has found that they have gone a long way toward eliminating obvious discrepancies in coverage. Most insurers, for example, have dropped annual limits on the therapy visits that they will cover. Higher copayments and separate mental health deductibles have become less of a problem.

Still, discrepancies appear to continue in the more subtle ways that insurers deliver benefits, including the size of provider networks.

Kate Berry, a senior vice president at America’s Health Insurance Plans, the industry’s main trade group, said the real problem is the shortage of behavioral health clinicians.

“Health plans are working very hard to actively recruit providers” and offer telemedicine visits in shortage areas, said Berry. “But some behavioral health specialists opt not to participate in contracts with providers simply because they prefer to see patients who are able to pay out of their pocket and may not have the kind of severe needs that other patients have.”

“This is a challenge that no single stakeholder in the health care infrastructure can solve,” she added.

Carol McDaid, who runs the Parity Implementation Coalition, countered that insurers have been willing and able to solve provider shortages in other fields. When there was a shortage of gerontologists, for example, McDaid said, insurers simply increased the rates and more doctors joined the networks. “The plans have the capacity to do this; I just think the will hasn’t been there thus far,” she said.

The scarcity of therapists who accept insurance creates a care landscape that is difficult to navigate for some of the most vulnerable patients.

Ali Carlin, 28, said she used to see her therapist in Richmond, Va., every week, paying a copay of $25 per session. But in 2015, the therapist stopped accepting her insurance, and her rate jumped to $110 per session.

Carlin, who has both borderline personality disorder and addiction issues, said she called around to about 10 other providers, but she couldn’t find anyone who accepted her insurance and was taking new patients.

“It’s such a daunting experience for someone who has trouble maintaining their home and holding a job and friendships,” said Carlin. “It makes me feel like no one can help me, and I’m not good enough, and it’s not an attainable goal.”

In Virginia, the Milliman report found that 26 percent of behavioral health office visits were out-of-network — more than seven times more than for medical care.

With no alternative, Carlin stuck with her old therapist but must save up between sessions. She has just enough to cover a visit once every few months.

“I make $30,000 a year. I can’t afford an out-of-pocket therapist or psychiatrist,” said Carlin. “I just can’t afford it. I’m choosing groceries over a therapist.”

Angela Kimball, director of advocacy and public policy at the National Alliance on Mental Illness, said she worries many patients like Carlin simply forgo treatment entirely.

“One of the most common reasons people give of not getting mental health treatment is the cost. The other is not being able to find care,” she said. “It’s hurting people in every corner of this nation.”

Hospitals With History Get A Second Life

Kaiser Health News:Marketplace - November 30, 2017

When Laura Kiker rented a new apartment in September a few blocks from the U.S. Capitol in Washington, she knew she was moving into a historical neighborhood.

She had no idea, though, that her new home at 700 Constitution Ave. Northeast was a former hospital dating back nearly a century.

Today, she loves living in what used to be a patient room, in a four-story building with wide hallways, high ceilings and restored post-World War II-style architecture. A spacious rooftop deck, yoga studio and indoor dog wash are added bonuses for Kiker, and her dog, Stella. “There is so much history in this town, it’s nice to live in a place that has its own,” said Kiker, 30, a management consultant.

Across the country, hospitals that have shut their doors are coming back to life in various ways: as affordable senior housing, as historical hotels and as condos, including some costing tens of millions in the heart of New York’s Greenwich Village.

When Laura Kiker rented a new apartment in September, a few blocks from the Capitol, she had no idea that her new home, at 700 Constitution Ave. in Northeast Washington, was a former hospital dating back nearly a century. (Katherine Frey/The Washington Post)

The trend of converting hospitals to new uses has accelerated as real estate values have soared in many U.S. cities. At the same time, the demand for inpatient beds has declined, with the rise of outpatient surgery centers and a move toward shorter hospital stays.

As health systems consolidate for financial reasons, they might prefer that patients visit their flagship hospital while buildings related to smaller hospitals in their orbit get sold off — especially if the latter have a disproportionate share of indigent patients.

The entryway to Laura Kiker’s apartment building features murals of iconic Washington sites. Kiker’s building previously was a section of Specialty Hospital Capitol Hill. (Katherine Frey/The Washington Post)

David Friend, chief transformation officer at the consulting firm BDO in Boston, noted that real estate is one of urban hospitals’ most valuable assets. “A hospital could be worth more dead than alive,” he said.

The number of hospitals in the U.S. has declined by 21 percent over the past four decades, from 7,156 in 1975 to 5,627 in 2014, according to the latest federal data.

Even when the conversions make medical sense, they pull at the heartstrings of communities whose residents have an emotional attachment to hospitals where family members were born, cured or died. But they sometimes create health deserts in their wake.

St. Vincent’s Hospital in New York treated survivors of the Titanic’s sinking in 1912, the first AIDS patients in the 1980s and victims of the 9/11 terrorist attacks in 2001, went bankrupt and closed seven years ago. Developer Rudin Management bought it for $260 million and transformed it into a high-end condo complex, which opened in 2014. Earlier this year, former Starbucks CEO Howard Schultz reportedly bought one of the condos for $40 million.


New York's St. Vincent's Hospital, a Greenwich Village institution for 160 years, closed permanently on April 30, 2010, after an unsuccessful search to find a way out of its estimated $700 million debt. It was transformed into luxury town homes. (Mario Tama/Getty Images)

Developers turned the old St. Vincent’s Hospital site into town houses, some of which sell for tens of millions of dollars today. (Courtesy of Greenwich Lane)

Jen van de Meer, an assistant professor at the Parsons School for Design in New York, who lives in the neighborhood, said residents’ protests about the conversion were not just about the optics of a hospital that had long served the poor being repurposed. “Now, if you are in cardiac arrest, the nearest hospital could be an hour drive in a taxi or 20 minutes in an ambulance across the city,” van de Meer said.

St. Vincent’s is one of at least 10 former hospitals in New York City that have been turned into residential housing over the past 20 years.

What’s next, a pet-icure? Leo gets pampered at the indoor dog wash at 700 Constitution, a hospital-turned-apartment house in Washington, D.C. (Phil Galewitz/KHN)

Closing a hospital and converting it to another use is not exactly like renovating an old Howard Johnson’s, said Jeff Goldsmith, a health industry consultant in Charlottesville, Va. “A hospital in a lot of places defines a community — that’s why it’s so hard to close them,” said Goldsmith, who noted that after Martha Jefferson Hospital closed its downtown facility in 2009 to move closer to the interstate highway, an apartment building took its place.

But many older hospitals are too outmoded to be renovated for today’s medical needs and patient expectations. For example, early 20th-century layouts cannot accommodate large operating room suites and private rooms, said Friend.

Real estate investors say the location of many older hospitals — often in city centers near rail and bus lines — makes them attractive for redevelopment. The buildings, with their wide hallways and high ceilings, are often easy to remake as luxury apartments.

Spurring Development

In some circumstances, a conversion provides a much-needed lift for the community. New York Cancer Hospital, which opened on Central Park West in 1887 and closed in 1976, was an abandoned and partially burned-out hulk by the time it was restored as a condo complex in 2005. Developer MCL Companies paid $24 million for the property, branded 455 Central Park West.

“The building itself is fantastic and a landmark in every sense of the word,” said Alex Herrera, director of technical services at the New York Landmarks Conservancy. He noted that it retained some of its original 19th-century architecture.

The Eastern Dispensary Casualty Hospital, shown here in 1936, was founded in 1888 in southeast Washington, D.C. It eventually was developed into Specialty Hospital Capitol Hill. (Courtesy Library of Congress)

Nicky Cymrot, president of the Capitol Hill Community Foundation in Washington, D.C., a neighborhood group, said that when Specialty Hospital Capitol Hill sold off a little-used 100,000-square-foot wing of its facility that became 700 Constitution, neighbors weighed in with concerns about aesthetics and traffic. The building was first known as Eastern Dispensary Casualty Hospital, which opened in 1905.

But by the time the condominium opened early this year after a five-year, $40 million renovation, the response was positive.

Sophie White, 28, who moved into 700 Constitution this summer, watched the building’s transformation and renovation from a rental property a few blocks away. “It used to be a blight on the neighborhood with unsavory people milling around it,” she said. “Now, it’s a bright spot and with its dog park out front, it’s really a cool place to live.”

Nearly half of the 139-unit building, where one-bedroom apartments rent for nearly $2,600 per month, is already leased. Asked why former hospitals are being bought and redeveloped as housing: “It’s all about location, location, location,” said Terry Busby, CEO of Arlington-based Urban Structures.

Columbia Hospital for Women, in the heart of Washington, D.C., was built in 1915 and shuttered in 2002. (Courtesy of Library of Congress)

The developer paid more than $30 million for the old hospital property and turned it into an upscale 225-unit luxury condominium community near George Washington University. (Courtesy of Trammell Crow Company)

Likewise Columbia Hospital for Women, which had delivered more than 250,000 babies since it opened shortly after the Civil War, closed in 2002 and reopened in 2006 as condos with a rooftop swimming pool in the city’s fashionable West End.

Some former hospitals are used for purposes other than housing.

In Santa Fe, N.M., St. Vincent Hospital moved into a new facility in 1977 and the old structure downtown was reborn as a state office building. Later, it was abandoned and locals listed it as one of the spookiest places in town. In 2014, the building reopened yet again as the 141-room Drury Plaza Hotel.

‘A Building With Tremendous History’

After Linda Vista Community Hospital, in L.A.’s Boyle Heights neighborhood, closed in the 1990s, the abandoned six-story building fell into disrepair — its empty patient rooms, discarded medical equipment and aging corridors serving as sets for movies such as “Pearl Harbor” and “Outbreak.” Amcal Multi-Housing Inc. bought the property in 2011 and redeveloped it into a low-income senior apartment house called Hollenbeck Terrace.

In 2011, the six-story Linda Vista Community Hospital in East Los Angeles was transformed into apartments for seniors. (Courtesy Amcal Multi-Housing Inc.)

The developer aimed to preserve some of the historical charm of the old hospital building in the Hollenbeck Terrace design. (Heidi de Marco/KHN)

“They really rescued a building with tremendous history … while providing really needed low-income senior housing,” said Linda Dishman, CEO of the Los Angeles Conservancy, a group dedicated to preserving and revitalizing historical structures. “It is such an iconic building in the neighborhood.”

Gorman reported from Los Angeles.

Patients With Rare Diseases And Congress Square Off Over Orphan Drug Tax Credits

Kaiser Health News:Marketplace - November 30, 2017

As President Donald Trump talked tax reform on Capitol Hill Tuesday, Arkansas patient advocate Andrea Taylor was also meeting with lawmakers and asking them to save a corporate tax credit for rare disease drug companies.

Taking the credit away, Taylor said, “eliminates the possibility for my child to have a bright and happy future.”

Taylor, whose 9-year-old son, Aiden, has a rare connective tissue disorder, spoke as part of a small rally thrown together this week by the National Organization for Rare Disorders (NORD) — the nation’s largest advocacy group for patients with rare diseases.

NORD advocate Andrea Taylor holds a picture of her sons, Aiden, 9, and Aaron, 11. Aiden has the rare connective-tissue disorder arterial tortuosity syndrome, which causes symptoms such as aneurysms and congestive heart failure. The syndrome has no treatment. Taylor says Congress is sending a message “that my child’s life does not matter” if the orphan drug tax credit is eliminated or reduced. (Sarah Jane Tribble/KHN)

Earlier this month, House Republicans proposed eliminating the orphan drug tax credits, which Congress passed as part of a basket of financial incentives for drugmakers in the 1983 Orphan Drug Act. The law, intended to spur development of medicines for rare diseases, also gives seven years of market exclusivity for drugs that treat a specific condition that affects fewer than 200,000 people.

The Senate Finance Committee, led by Sen. Orrin Hatch (R-Utah), put the tax credit back into the tax legislation. After some negotiations, the committee settled on reducing the credit to 27.5 percent of the costs of preapproved clinical research, compared with the current 50 percent. The committee also restored a provision that would have eliminated any credits for drugmakers who repurpose a mass-market drug as an orphan.

“As with any major reform, tough choices have to be made,” a Hatch spokesperson wrote in an emailed statement, adding that the senator will continue to work “to make the appropriate policy decisions” to deliver a comprehensive tax overhaul.

Hatch, a member of a rare-disease congressional caucus, received $102,600 in campaign contributions from pharmaceutical and related trade group political action committees in the first half of 2017, making him the top recipient of pharmaceutical cash in the Senate.

If the Senate provision remains untouched, reducing the tax credit would save the federal government nearly $30 billion over a decade, according to a markup of the bill released late last week.

Orphan drug development has become big business in recent years and advocates as well as critics of the industry say tax credits have been an important motivation for companies. Orphan drugs accounted for 7.9 percent of total U.S. drug sales last year, according to a report released by QuintilesIMS and NORD.

Because patient populations for rare-disease drugs are relatively small, companies often charge premium prices for the medicines. EvaluatePharma, a company that analyzes the drug industry, estimates that among the top 100 drugs in the U.S. the average annual cost per patient for an orphan drug last year was $140,443. Giant pharmaceutical companies such as Celgene, Roche, Novartis, AbbVie and Johnson & Johnson have led worldwide sales in the orphan market, according to EvaluatePharma’s 2017 Orphan Drug Report.

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Jonathan Gardner, the U.S. news editor for EvaluatePharma, said the orphan drug tax credit is “probably the most important incentive for developing an orphan drug.” Cutting the credit will force even the large companies to question development of drugs for rare diseases, Gardner said.

Dr. Aaron Kesselheim, an associate professor of medicine at Harvard Medical School, has been critical of the Orphan Drug Act’s incentives and of companies taking advantage of the law’s financial incentives for profit. But he warned against rushing to eliminate the tax credit.

“We need to think about ways we can improve the Orphan Drug Act and stop people from gaming the system and exploiting it,” Kesselheim said. But there “are a lot of rare diseases that don’t have treatments. So, we need to be careful in making changes.”

The battle over the tax credit is the latest controversy for the Food and Drug Administration’s orphan drug program. FDA Commissioner Scott Gottlieb announced a “modernization” plan for the agency this summer, closing a pediatric testing loophole and eliminating a backlog of corporate applications for orphan drug status. And, this week, the agency confirmed that Dr. Gayatri Rao, director for the Office of Orphan Products Development, is leaving.

Meanwhile, the Government Accountability Office confirmed this month that it recently launched an investigation of the orphan drug program. The GAO’s review was sparked by a letter from top Republican Sens. Hatch, Chuck Grassley (R-Iowa) and Tom Cotton (R-Ark.), asking the agency to investigate whether drugmakers “might be taking advantage” of the drug approval process.

When the 1983 Orphan Drug Act was passed, the law described an orphan drug as one that affects so few people that drugmakers might lose money after covering the cost of developing a drug. Congress added the 200,000-patient limit in 1984.

Today, many orphan medicines treat more than one condition and often come with astronomical prices. Many of the medicines aren’t entirely new, either. A Kaiser Health News investigation, which was also aired and published by NPR, found that more than 70 of the roughly 450 individual drugs given orphan status were first approved for mass-market use, including cholesterol blockbuster Crestor, Abilify for psychiatric conditions, cancer drug Herceptin and rheumatoid arthritis drug Humira, which for years was the best-selling medicine in the world.

More than 80 other orphans won FDA approval for more than one rare disease and, in some cases, multiple rare diseases, the KHN investigation showed.

The pharmaceutical industry has had a muted response to the tax bill, which includes a corporate tax cut. The powerful industry lobbying group PhRMA said it is pleased Congress is looking at overhauling the tax code but “encourages policymakers to maintain incentives” for rare diseases. BIO, the Biotechnology Innovation Organization that represents biomedical companies, said it was “gratified” the Senate committee chose to partially retain the credit but would prefer to keep the existing incentive.

The group that rallied Tuesday — wearing bright-orange shirts that read “Save the Orphan Drug Tax Credit” — planned to meet with a couple of dozen lawmakers, including Grassley, who is a member of the Senate Finance Committee.

Peter Saltonstall, president of the National Organization of Rare Disorders, speaks at a small rally Tuesday in support of tax credits for rare-disease drug companies. (Sarah Jane Tribble/KHN)

NORD, like many patient advocacy groups, receives funding from pharmaceutical companies, but the organization’s leaders say the industry does not have members on the board and does not dictate how general donations are spent.

On Tuesday, NORD leaders said they are open to discussions about the tax credit and whether the overall law is working as intended.

“We’re here to have that conversation, we’re ready to have that conversation,” said Paul Melmeyer, director of federal policy for NORD. “Sadly, that’s not the conversation we are having today.”

Abbey Meyers, a founder of NORD and the leading advocate behind passing the initial 1983 law, said she fears the high cost of the drugs will make it impossible to sustain the orphan drug program. Now retired, Meyers said she has followed the law’s success over the years and believes the tax credit should not be changed.

“There are other things that have happened since the law was passed where there wasn’t any logic to what they did,” Meyers said, adding “because somebody went to a senator and they put into the law.”

University Was Tipped Off To Possible Unauthorized Trials Of Herpes Vaccine

Kaiser Health News:Marketplace - November 29, 2017

WASHINGTON — The university that employed a controversial herpes vaccine researcher has told the federal government it learned last summer of the possibility of his illegal experimentation on human subjects. But Southern Illinois University did not publicly disclose the tip or its findings about researcher William Halford’s misconduct for months, according to a memo obtained by Kaiser Health News.

Last week, Kaiser Health News reported that Halford conducted an experiment in which he vaccinated patients in U.S. hotel rooms in 2013 without any safety oversight and in violation of U.S. laws, according to patients and emails they provided to KHN to support their allegations.

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They told KHN those injections occurred three years before Halford tested a herpes vaccine he created on human subjects in a house in St. Kitts in 2016, again without routine safety oversight. Halford died of cancer at the end of June.

While the university has refused to respond to questions about the 2013 injections, an Oct. 16 memo to the federal government obtained by KHN under open-records law shows that SIU learned of such possible activity at the end of July. According to the memo, Rational Vaccines, the company that Halford co-founded, and another SIU professor disclosed that “human subjects research might have occurred prior to the … clinical trial in St. Kitts.”

SIU reported in the memo to the Department of Health and Human Services and the Food and Drug Administration that its institutional review board, or IRB, found Halford’s activities to be a “serious noncompliance” and said it recommended the university conduct a “confidential” investigation to determine if he committed any other misconduct.

“Dr. Halford willfully and intentionally engaged in human subjects research without the approval and oversight of the IRB, in violation of IRB policies and in violation of applicable law and regulation,” SIU wrote in the memo.

Previously, the university had said it was not responsible for Halford’s St. Kitts trial because he conducted it independently through Rational Vaccines.

Before releasing the memo to KHN, the university blacked out some of the details. It’s unclear whether the “serious noncompliance” involved the 2013 injections or some other unauthorized human subject research.

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“This is a very serious matter for the university,” said Robert Klitzman, a doctor and director of the master’s program in bioethics at Columbia University in New York.

Klitzman said the Office for Human Research Protections (OHRP), the HHS division that oversees compliance with rules on human trials, could halt all of the university’s research as a result of the finding. The National Institutes of Health could also freeze its funding to SIU, he added, even though Halford’s research was not federally funded.

OHRP and the FDA said they have policies of not discussing potential or ongoing investigations. SIU did not respond to questions.

Several participants from both trials told KHN they have asked SIU for help. They said Tuesday that they felt the university should be informing them of its investigation into unauthorized experiments and its findings.

“Halford tested his vaccine on humans using SIU’s facilities and resources,” said one Colorado woman who has tried to talk to the university about her experience in the St. Kitts trial. “They [SIU] deny knowing anything about it. SIU hasn’t been very forthcoming.”

Klitzman said the university did have a responsibility to the participants who were injected with Halford’s vaccine. Two of them — including the Colorado woman — have filed so-called adverse event complaints with the FDA, saying that Halford’s vaccine may have caused side effects.

“Ethically, the university should contact the participants to let them know that some participants have developed adverse events,” he said.

Doctors Make Big Money Testing Urine For Drugs, Then Ignore Abnormal Results

Kaiser Health News:Marketplace - November 29, 2017

In April 2014, state and federal drug agents raided Jeffrey Campbell’s medical clinic in Jeffersonville, Ind. Police cars blocked the parking lot as bewildered patients scattered and the agents carted off boxes of records from the doctor’s office.

Some of the seized records would show that Campbell endangered patients by prescribing opiates without any medical need, according to federal prosecutors. Campbell, who collected millions of dollars from Medicare for urine tests run at his office lab, also failed to act when test results revealed patients were abusing prescription and illegal drugs, according to a government medical expert’s report.

Four patients died from drug-related causes under his watch, the report said. Others flunked two dozen or more urine tests, but the clinic kept prescribing them pills. One patient with a history of overdoses failed 46 urine tests and was never confronted about it. Campbell denied wrongdoing.

The nation’s opioid crisis has prompted an explosion in urine testing. The scourge has driven huge profits for many pain clinics across the U.S., an ongoing Kaiser Health News investigation shows. Spending on urine screens and related genetic tests quadrupled from 2011 to 2014 to an estimated $8.5 billion a year — more than the entire budget of the Environmental Protection Agency, according to a KHN analysis of billing data from Medicare and private insurance billing from the Mayo Clinic.

Medicare and other insurers pay for urine tests with the expectation that clinics will use the results to detect and curb dangerous abuse. But some doctors have taken no action when patients are caught misusing pharmaceuticals, or taking street drugs such as cocaine or heroin. Federal pain guidelines say doctors should discuss test results with patients and taper medication if necessary.

A lab technician inspects a urine sample at the Comprehensive Pain Specialists lab in Brentwood, Tenn., in February. (Heidi de Marco/KHN)

Medicare and private insurers acknowledge that they lack the resources to routinely verify that doctors who order a high volume of drug-related tests do so to improve patient care, not fatten the bottom line.

“This is a big issue,” said Louis Saccoccio, who heads the National Health Care Anti-Fraud Association, a group formed by private insurers and government officials. “There are abusive practices out there.”

­In nearly a dozen recent criminal cases, prosecutors have cited evidence that doctors supplied opiates to patients with repeated abnormal urine test results.

One such doctor was Alabama pain specialist Shelinder Aggarwal, who billed Medicare and private insurers over $9 million for urine tests solely “because he served to profit,” according to prosecutors in Alabama. He pleaded guilty to illegal prescribing and health care fraud. Earlier this year, a judge sentenced him to 15 years in prison.

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Theodore Parran, who has served as an expert witness for the federal government, predicted more doctors could face fraud charges, or discipline by state medical licensing boards, over lab testing that appears to be profit-motivated.

“This is certainly on their radar,” Parran, a professor of medical education at Case Western Reserve University School of Medicine, said in an interview. Ignoring repeated abnormal urine tests “is bad medicine” that “endangers the safety of the patients and the community.”

The KHN investigation earlier this year found that dozens of pain doctors with their own labs took in $1 million or more in 2015 from Medicare for running urine and, in some cases, genetic drug tests. Some doctors derived at least 80 percent of their Medicare income this way.

Campbell’s office was among the clinics billing Medicare the most in the country, according to KHN’s data analysis of Medicare billing records.

Campbell and his staff at Physicians Primary Care PLLC billed the government agency a total of nearly $6 million for urine testing during 2014 and 2015, according to the KHN analysis.

John Kuhn Jr., U.S. attorney for the Western District of Kentucky, in July announced a range of health care fraud indictments, part of a nationwide sweep that charged hundreds of defendants. (Courtesy of the U.S. Department of Justice)

In June, more than three years after the Indiana raid, a federal grand jury in Kentucky indicted Campbell and two associates. The charges — which were announced July 13 as part of a national health care fraud sweep — include multiple counts of illegally distributing prescription drugs and health care fraud; one fraud count accuses Campbell of ordering costly genetic tests through an outside lab that were “not medically necessary and never interpreted.” All of the defendants pleaded not guilty.

Neither Campbell nor his attorney, Page Pate, would comment for this story. However, in an interview with KHN several months before his indictment, Campbell said the government’s case was “without merit.” He denied he ran a “pill mill” and said he relied on his “state-of-the-art” lab, which serves the Jeffersonville clinic and a branch just across the Ohio River in Louisville, to help keep patients safe.

“We do a lot of drug testing for patients and we do it appropriately,” Campbell said.

Indeed, deciding how often to order these tests, and for which patients and drugs, can be a judgment call. Doctors also sometimes disagree over what action they should take against patients with “dirty” urine: Some doctors kick out drug abusers, while others argue that is unethical. Instead, doctors should counsel these patients and refer them for substance abuse treatment, they say.

(Garth Superville for KHN)

Donald White, a spokesman for the U.S. Department of Health and Human Services’ Office of the Inspector General, said if test results are disregarded, “why is the test being ordered in the first place?”

“When abnormal urine drug test results are not acted upon by the physician who ordered the test, it raises concerns not only that the testing itself is not medically reasonable and necessary, but also that the doctor’s treatment of the patient may fall below the standard of care,” White said.

Prosecutors say Campbell kept them at bay for years by asserting that records seized in the raid, including computers and emails, contained privileged attorney communications. Clearing that hurdle delayed them from sending medical records to an outside expert for review, prosecutors said.

KHN InvestigationLiquid Gold: Pain Doctors Soak Up Profits By Screening Urine For Drugs

Indiana anesthesiologist Timothy King, who wrote the government medical expert’s report in the Campbell case, examined 19 patient files this year for his report. He concluded that Campbell “fails to practice medicine according to generally accepted medical principles and standards of care,” and “routinely” prescribed opiates “without a medical purpose.”

King said Campbell gave four patients a brew of pills known as the “Holy Trinity,” which King called “a street-popular combination of opiate, sedative and muscle relaxant that produces a heroin-like euphoria.”

These four patients were prescribed refills despite repeated abnormal urine tests. Two failed two dozen or more urine screens, according to King’s report.

All 19 patients repeatedly failed their tests, which King described as an obvious warning sign that they were ingesting prohibited drugs, or possibly peddling unused pills on the street.

“Urine drug screens are routinely inconsistent— [which can indicate] medication misuse, abuse and diversion,” the expert concluded.

The four people who died showed telltale signs of trouble such as admitting they had diverted some of their medicine, or had been visiting other doctors to feed pill habits according his report.

A 25-year-old woman identified only by the initials “CM” had “vague” complaints of lower-back pain and used drugs “for purposes of abuse and diversion,” according to King. She died three days after the clinic issued her a prescription for painkillers methadone and hydrocodone, King wrote. “EL,” who was homeless and disabled, died from a drug overdose in July 2014, also three days after her office visit, according to the report.

King also said Campbell appeared to order unnecessary tests, including X-rays, “to optimize billing.”

Less than a month after prosecutors received King’s report, a federal grand jury in Louisville indicted Campbell and nurse practitioners Dawn Antle and Mark Dyer.

All have pleaded not guilty. No trial date has been set.

Indiana officials quickly suspended their licenses to practice.

Prosecutors also are seeking forfeiture of Campbell’s Jeffersonville office building and other proceeds.

Attorneys for Antle and Dyer also had no comment. In the earlier interview with KHN, Campbell argued his practice attracts many difficult patients who have “no other option” to seek relief from pain. “Nobody else will see these people,” he said.

He ordered tests for a slew of substances because none of his drug-abusing patients “ever just uses one drug. They use everything they can get their hands on.”

Heated And Deep-Pocketed Battle Erupts Over 340B Drug Discount Program

Kaiser Health News:Marketplace - November 28, 2017

A 25-year-old federal drug discount program has grown so big and controversial that it faces a fight for survival as federal officials and lawmakers furiously debate the program’s reach.

The program, known as 340B, requires pharmaceutical companies to give steep discounts to hospitals and clinics that serve high volumes of low-income patients.

The Centers for Medicare & Medicaid Services struck a blow to the program this month announcing a final rule to cut Medicare payments for hospitals enrolled in the program by 28 percent, or about $1.6 billion. The American Hospital Association, the Association of American Medical Colleges, America’s Essential Hospitals and others filed suit on Nov. 13, arguing that the agency lacks the authority to slash the payments and that the rule undermines the intent Congress had when creating the program.

Several federal reports in recent years from the Medicare advisory board, as well as the Government Accountability Office and the Office of Inspector General, have evaluated 340B’s explosive growth. About 40 percent of the hospitals in the U.S. now buy drugs through the program, according to the 2015 GAO report.

Richard Sorian, of the hospital lobbying group 340B Health, said that for some small, rural hospitals the funding cut “could actually be the difference between staying open and closing.”

Northeast Ohio’s largest safety-net hospital, MetroHealth System in Cleveland, said it would see an $8 million cut in Medicare reimbursements.

In trying to explain the importance of that funding, Dr. Benjamin Li, a MetroHealth cancer surgeon, said that if the 340B program were to disappear “some of our cancer patients will not be able to have lifesaving care.”

In contrast, those supporting the cut, including drugmakers, argue that the program has grown beyond its original intent because hospitals have pocketed the discounts to pad profits — not to help indigent patients.

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Stephen Ubl, president of the drug industry group PhRMA, said the program “needs fundamental reform” and that the latest rule change is merely a good first step. His group, which has deep pockets and an advertising campaign geared at pinpointing the program’s flaws, has a list of changes that Congress and the Trump administration could tackle. Those include limiting which hospitals should be eligible for 340B price breaks and making sure needy patients benefit when hospitals buy discounted drugs.

The day after the hospital groups filed suit, Joe Grogan, director of health programs at the White House’s Office of Management and Budget, called 340B “really screwed up,” according to Politico, and said the Trump administration isn’t afraid to take on the program. “We are not wimps.” Grogan led a White House task force last summer that proposed scaling back the program.

The hospitals — often the biggest employers in a congressional district — are ready for a fight. The American Hospital Association launched an advertising campaign. And hundreds of members of Congress signed a letter defending the program. On Nov. 14, two House lawmakers introduced a bill that would prevent CMS from implementing the proposed rule.

Under 340B, named after the section of the Public Health Service Act that authorizes it, eligible hospitals buy drugs at a discount from the pharmaceutical companies and then are reimbursed for those purchases from Medicare. The drugs are purchased under the Part B program, which covers expensive chemotherapy and other treatments in a hospital, doctor’s office and clinics.

The hospitals make money on the spread, using it to improve the financial stability of the hospital.

In comment letters to federal officials, a range of hospitals from St. Cloud, Minn., to Kalamazoo, Mich., said the new rule would cost them hundreds of thousands of dollars.

Yet, even as concerns arise around the impact of the cuts and a legal battle plays out, Congress has heightened scrutiny of the program. The House Energy and Commerce Committee held two hearings over the past few months, examining how hospitals use money made on 340B drugs. A key question for lawmakers was how much the patients benefited.

The new rule, according to CMS Administrator Seema Verma, addressed that concern — albeit indirectly.

While the actual price of drugs will not be lower under the rule, Verma said beneficiaries will save an estimated $320 million a year on copayments. Medicare patients typically are responsible for a percentage of coinsurance on their prescriptions. The lowered Medicare reimbursement means that an enrollee’s coinsurance would be lower at 340B hospitals because Medicare would pay hospitals less for the drug.

In one example the administration provided, if Medicare reimburses a participating hospital $2,000 a month for an individual drug, a beneficiary would save over $100 on their out-of-pocket share.

Dr. Peter Bach, director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center in New York, agreed.

“If Medicare reduces the reimbursement amount, that will directly reduce what the patients pay,” Bach said. “Patients will see lower prices.”

Allan Coukell, senior director for health programs at the Pew Charitable Trusts, said the change in how Medicare spends its money may have broader, unintended consequences for the health care system. Patients may change providers, seeking lower copays. Or, conversely, hospitals may drop out of the program because of lower reimbursements.

“The long-term impact of such a shift is unknown,” Coukell said, adding that one thing is certain: Fewer hospitals participating in the program simply “transfers the 340B revenue from the provider to the manufacturer.”

The 340B program wasn’t always so controversial. The bill, signed by Republican President George H.W. Bush in 1992, once had bipartisan support.

“Everyone loved the program. That’s why Congress expanded it on three separate occasions,” recalled William von Oehsen, who helped lobby for the initial law and is a founder of the hospital group 340BHealth. Most recently, the program was expanded under the Affordable Care Act in 2010.

“There was never any concern about its size until, basically, pharma decided it had gotten too big and started investing in a public relations and lobbying campaign to reform it,” von Oehsen said, adding, “We just don’t have the money they have, and it’s kind of discouraging.”

Parents Are Not Liable For Medical Debts Of Adult Children On Shared Insurance

Kaiser Health News:HealthReform - November 28, 2017

Are parents responsible for adult children’s medical debts? Should people squeeze in appointments and expensive procedures before year’s end because of changes that might come with the GOP tax bill? Should consumers pay a broker to help them enroll in a plan? I answer these questions from readers this week.

Q: My 25-year-old brother died in April, and now hospitals are calling my parents to cover his bills. He was covered under my parents’ employer-sponsored plan, but are they liable for his medical debt?

No, parents are not generally responsible for an adult child’s medical debts, said Richard Gundling, senior vice president at the Healthcare Financial Management Association, an organization for finance professionals in health care.

“Normally, if you’re 18 or older, you’re considered the responsible party, even if you’re insured under your parents’ policy,” Gundling said.

Under the Affordable Care Act, parents can keep their children up to age 26 on their insurance policy, even if the adult kids are financially independent and live on their own.

When young people turn 18, they can decide whether to receive medical care or check themselves into a hospital. Once there they typically would sign their own paperwork that says they consent to medical care and agree to pay any amounts that their insurer doesn’t cover.

Generally, parents would be responsible for their adult child’s debts only if they had signed an agreement with a medical provider to cover them.

The situation would be different if it were a minor child. Parents are generally responsible for those bills, Gundling said.

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Q: As a 78-year-old person with multiple sclerosis, I have many out-of-pocket medical expenses that I deduct from my income taxes. I heard that the new tax bill would eliminate this deduction. I am facing approximately $9,000 in dental expenses, and I planned to delay this dental work until early 2018. But now I wonder if I should have it done before year’s end. What’s the timing of this change?

You’re in a tough spot. Under current law, you can deduct from your income tax the amount of your medical expenses that exceeds 10 percent of your adjusted gross income. The big tax bill passed by the House earlier this month eliminated that deduction, effective in 2018. However, the Senate Finance Committee’s bill, which is headed to the full Senate, did not change the current deduction.

If the bill passes the Senate, legislators from both houses will have to hammer out a version that they think can pass Congress. All of this takes time. It likely would be mid- to late December before a final bill takes shape, said Timothy Jost, an emeritus professor of law at Washington and Lee University in Virginia who is an expert on health law.

There’s no way to predict if the provision eliminating the deduction will survive that process.

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“The medical expense deduction repeal is pretty controversial, and I would not be surprised if it does not end up in the final bill,” Jost said.

But that doesn’t help you decide what to do today. One option is to schedule your dental work to be done late in December. Then you can make a decision over the next month about whether to keep those appointments based on what, if anything, happens in Congress.

Q: I got an email from an insurance broker that says they’ll help me sign up for Obamacare, but they’ll charge a $200 fee. Why would I pay that? Aren’t there places I can go to get free help signing up?

Federal funding for health care navigators who provide free Obamacare enrollment help has been slashed in many areas. But those helpers are still available in every state, say experts. At, click on “find local help” to find an assister or navigator in your area. Community health centers are another option, said Karen Pollitz, a senior fellow at the Kaiser Family Foundation (KFF). (Kaiser Health News is an editorially independent program of the foundation.)

Navigators may be your best option if you qualify for subsidies on the marketplace or need to enroll in Medicaid, or if your situation is complicated because of your immigration status or a language barrier, for example.

If you don’t qualify for premium tax credits that are available to people with incomes up to 400 percent of the federal poverty level (about $48,000 for one person), you may want to work with a broker to search for policies not sold on the marketplace, said Sabrina Corlette, a research professor at Georgetown University’s Center on Health Insurance Reforms.

You don’t necessarily have to pay a fee for that, though.

As insurers have continued to reduce the commissions they pay brokers for selling Obamacare products, some say it appears more brokers are charging consumer fees. When KFF surveyed brokers in 2016, 49 percent said that at least some insurers had stopped paying sales commissions on all marketplace policies.

If you consider working with a broker who charges a fee, “your No. 1 question to ask is, ‘Is this it, or do you also get a commission?’” Corlette said.

Please visit to send comments or ideas for future topics for the Insuring Your Health column.

Putting Money Where Its Mouthpiece Is: Calif. Outspends U.S. To Market Obamacare

Kaiser Health News:HealthReform - November 27, 2017

The marketing blitz is on.

Californians are getting barraged with online pop-up ads, radio spots and television commercials, all aimed at persuading them to sign up for Affordable Care Act health plans during this year’s open-enrollment season.

Covered California, the state’s Obamacare exchange, is wielding a monster marketing budget that devotes $45 million to ads, including $18 million for TV and $8 million for radio. The agency is so flush with marketing dollars that it also spent $100,000 for a dozen freshly painted murals across the state, most of which have nothing directly to do with health insurance enrollment.

Covered California’s marketing riches contrast starkly with the advertising budget for the federal health insurance exchange, The feds have slashed ad dollars to $10 million, down from $100 million last year.

The huge discrepancy reflects conflicting attitudes toward the ACA, commonly known as Obamacare, said Gerald Kominski, director at the University of California-Los Angeles Center for Health Policy Research.

“A $10 million advertising budget for, which supports exchanges in 30-something states, is … in keeping with the goal of this administration to destroy the ACA,” he said. “California’s budget reflects a different approach to the ACA, which is that it is an important source of insurance.”

Other health care experts say marketing is not the best use of money now that the exchanges are a known commodity, especially in California. They suggest the dollars could be better used for things like reducing premiums.

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“It’s a waste of taxpayer money,” said Sally Pipes, the president and CEO of the Pacific Research Institute in San Francisco, which advocates for free-market policies.

“All of this money being used on murals and bus tours and TV ads, etc., it’s not going to change the number of enrollees that much. It would be better to save money and reduce taxes so that people have lower tax burden.”

California is one of 11 states, plus the District of Columbia, that operate their own health insurance exchanges. The remaining 39 states use the federal site.

In addition to cutting its ad budget, the federal government reduced grants for “navigators,” individuals and organizations that help people enroll, to $37 million, down from $63 million last year. Covered California will devote $6.5 million to navigators. It’s not a perfect measure, but judging purely by population, these investments in navigators do not seem significantly different.

Altogether, Covered California plans to spend $111.5 million on marketing in 2017-18, which includes navigators, ads, staff salaries and more.

Covered California leaders and consumer health advocates say the agency’s sizable marketing budget is necessary because of recent federal moves to undercut the Affordable Care Act. The Trump administration shortened the enrollment period to 45 days in most states and stopped paying insurers to provide a subsidy that helps many low-income consumers with their out-of-pocket medical costs.

“It sounds like a lot … but it’s a very legitimate expenditure,” said Betsy Imholz, director of special projects for Consumers Union.

The federal government’s $10 million investment in advertising is “ridiculously inadequate” by comparison, she said. Covered California will spend that amount on online ads alone.

There have been so many policy flip-flops in Washington, D.C., and so much misinformation that some people may be confused about whether the law is even in place anymore, she said.

Their confusion is magnified by the fact that consumers nationwide may be served by different Obamacare exchanges with different rules.

For instance, Californians who purchase their individual insurance through Covered California or on the open market will continue to have three months, until Jan. 31, 2018, to enroll in plans for next year. People who purchase their plans through have until Dec. 15.

Ed Haislmaier, a senior research fellow at the conservative Heritage Foundation, said the feds’ advertising cuts simply reflect the needed transition from promoting the exchange as a new option to maintaining it as an established program.

“Growing awareness is not going to magically get desired people to enroll,” he said.

The U.S. Department of Health and Human Services (HHS), which runs the federal exchange, explained that it cut advertising in part because it did not seem to be working to boost first-time enrollment. For 2017 plans, first-time enrollment declined by 42 percent and total enrollment fell by 500,000 people to 12.2 million. Covered California has about 1.4 million enrollees.

HHS plans to use its smaller budget on digital media promotion like YouTube videos and targeted ads on search engines, called search advertising. It will also focus on emailing and calling consumers directly to remind them of the Dec. 15 deadline.

So far, neither the confusion nor the smaller advertising investment seems to have stopped people from signing up. About 1.5 million people had selected plans as of Nov. 11, which represents a stronger start than last year, when about 1 million people picked plans during the first 12 days.

In California, 48,000 new consumers had signed up for exchange plans as of Nov. 14, slightly ahead of the same period last year, when 39,000 consumers picked plans. These figures don’t include existing enrollees who renewed their plans.

Kathy Hempstead, a senior adviser at the Robert Wood Johnson Foundation, said Covered California usually performs better than others in enrollment, which probably has something to do with its marketing efforts. “Covered California has become a brand,” she said. “ hasn’t.”

Peter Lee, Covered California’s executive director, said he believes that spreading the word about open enrollment creates a risk pool that includes both healthy and sick people.

“Yes, marketing costs money, but marketing means more people sign up, and the people that sign up are healthier and help lower premiums,” he said.

Covered California commissioned this Sacramento mural as part of its marketing and outreach efforts to promote the open-enrollment period for 2018 coverage. (Ana B. Ibarra/California Healthline)

Advertising likely helped lower premiums by 6 to 8 percent in 2015 and 2016 because it helped create a more balanced risk pool, according to a recent marketing report produced by Covered California.

Covered California’s $111.5 million marketing budget is nothing new. Last year, it spent $99 million on marketing, and $122 million the year before that.

This year, as in some previous years, Lee paraded across the state in a colorful charter bus promoting the start of open enrollment. He touted the 12 new murals, and echoed the primary message of Covered California’s ads: Life can change in an instant due to unexpected injuries, such as falling off a ladder.

One mural painted outside an AltaMed clinic in East Los Angeles features people dancing, running and exercising around a doctor. A mural painted outside La Familia Counseling Center in Sacramento shows a woman holding a bowl above her head, out of which flow children riding bikes and a basketball player.

How much the murals, the tour bus or the television ads will help cut through the confusion, let alone increase enrollment, is unclear.

“I don’t know if marketing will be able to address how complex this open enrollment will be,” said Kevin Knauss, an insurance agent in the Sacramento area.

Kaiser Health News senior correspondent Anna Gorman contributed to this report.

Taken For A Ride? Ambulances Stick Patients With Surprise Bills

Kaiser Health News:Marketplace - November 27, 2017

One patient got a $3,660 bill for a 4-mile ride. Another was charged $8,460 for a trip from one hospital that could not handle his case to another that could. Still another found herself marooned at an out-of-network hospital, where she’d been taken by ambulance without her consent.

These patients all took ambulances in emergencies and got slammed with unexpected bills. Public outrage has erupted over surprise medical bills — generally out-of-network charges that a patient did not expect or could not control — prompting 21 states to pass laws protecting consumers in some situations. But these laws largely ignore ground ambulance rides, which can leave patients stuck with hundreds or even thousands of dollars in bills, with few options for recourse, finds a Kaiser Health News review of 350 consumer complaints in 32 states.

Patients usually choose to go to the doctor, but they are vulnerable when they call 911 — or get into an ambulance. The dispatcher picks the ambulance crew, which, in turn, often picks the hospital. Moreover, many ambulances are not summoned by patients. Instead, the crew arrives at the scene having heard about an accident on a scanner, or because police or a bystander called 911.

Betsy Imholz, special projects director at the Consumers Union, which has collected over 700 patient stories about surprise medical bills, said at least a quarter concern ambulances.

“It’s a huge problem,” she said.

Here are ways to steer clear of exorbitant ambulance bills.

Forty years ago, most ambulances were free for patients, provided by volunteers or town fire departments using taxpayer money, said Jay Fitch, president of Fitch & Associates, an emergency services consulting firm. Today, ambulances are increasingly run by private companies and venture capital firms. Ambulance providers now often charge by the mile and sometimes for each “service,” like providing oxygen. If the ambulance is staffed by paramedics rather than emergency medical technicians, that will result in a higher charge — even if the patient didn’t need paramedic-level services. Charges range widely from zero to thousands of dollars, depending on billing practices.

The core of the problem is that ambulance and private insurance companies often can’t agree on a fair price, so the ambulance service doesn’t join the insurance network. That leaves patients stuck in the middle with out-of-network charges that are not negotiated, Imholz said.

This happens to patients frequently, according to one recent study of over half a million ambulance trips taken by patients with private insurance in 2014. The study found that 26 percent of these trips were billed on an out-of-network basis.

That figure is “quite jarring,” said Loren Adler, associate director for the USC-Brookings Schaeffer Initiative and co-author of recent research on surprise billing.

The KHN review of complaints revealed two common scenarios leaving patients in debt: First, patients get in an ambulance after a 911 call. Second, an ambulance transfers them between hospitals. In both scenarios, patients later learn the fee is much higher because the ambulance was out-of-network, and after their insurer pays what it deems fair, they get a surprise bill for the balance, also known as a “balance bill.”

The Better Business Bureau has received nearly 1,200 consumer complaints about ambulances in the past three years; half were related to billing, and 46 mentioned out-of-network charges, spokeswoman Katherine Hutt said.

While the federal government sets reimbursement rates for patients on Medicare and Medicaid, it does not regulate ambulance fees for patients with private insurance. In the absence of federal rules, those patients are left with a fragmented system in which the cost of a similar ambulance ride can vary widely from town to town. There are about 14,000 ambulance services across the country, run by governments, volunteers, hospitals and private companies, according to the American Ambulance Association.

(Heidi de Marco/KHN)

For a glimpse into the unpredictable, fragmented system, consider the case of Roman Barshay. The 46-year-old software engineer, who lives in Brooklyn, N.Y., was visiting friends in the Boston suburb of Chestnut Hill last November when he took a nasty fall.

Barshay felt a sharp pain in his chest and back and had trouble walking. An ambulance crew responded to a 911 call at the house and drove him 4 miles to Brigham and Women’s Hospital, taking his blood pressure as he lay down in the back. Doctors there determined he had sprained tendons and ligaments and a bruised foot, and released him after about four hours, he said.

After Barshay returned to Brooklyn, he got a bill totaling $3,660 — which is $915 for each mile of the ambulance ride. His insurance had paid nearly half, leaving him to pay the remaining $1,890.50.

“I thought it was a mistake,” Barshay said.

But Fallon Ambulance Service, a private company, was out-of-network for his UnitedHealthcare insurance plan.

“The cost is outrageous,” said Barshay, who reluctantly paid the $1,890.50 after Fallon sent it to a collection agency. If he had known what the ride would cost, he said, he would at least have been able to refuse and “crawl to the hospital myself.”

“You feel horribly to send a patient a bill like that,” said Peter Racicot, senior vice president of Fallon, a family-owned company based outside Boston.

But ambulance companies are “severely underfunded” by Medicare and Medicaid, Racicot said, so Fallon must balance the books by charging higher rates for patients with private insurance.

Racicot said his company has not contracted with Barshay’s insurer because they couldn’t agree on a fair rate. When insurers and ambulance companies can’t agree, he said, “unfortunately, the subscribers wind up in the middle.”

It’s also unrealistic to expect EMTs and paramedics at the scene of an emergency to determine whether the company takes a patient’s insurance, Racicot added.

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Ambulance services have to charge enough to subsidize the cost of keeping crews ready around-the-clock even if no calls come in, said Fitch, the ambulance consultant. In a third of the cases where an ambulance crew answers a call, he added, they end up not transporting anyone and the company typically isn’t reimbursed for the trip.

In part, Barshay had bad luck. If the injury had happened just a mile away inside Boston city limits, he could have ridden a city ambulance, which would have charged $1,490, according to Boston EMS, a sum that his insurer probably would have covered in full.

Very few states have laws limiting ambulance charges, and most state laws that protect patients from surprise billing do not apply to ground ambulance rides, according to attorney Brian Werfel, consultant to the American Ambulance Association. And none of the state surprise-billing protections applies to people with self-funded employer-sponsored health insurance plans, which are regulated only by federal law.  That’s a huge exception: 61 percent of privately insured employees are covered by self-funded employer-sponsored plans.

Some towns that hire private companies to respond to 911 calls may regulate fees or prohibit balance billing, Werfel said, but each locality is different.

Insurance companies try to protect patients from balance billing by negotiating rates with ambulance companies, said Cathryn Donaldson, spokeswoman for America’s Health Insurance Plans. But “some ambulance companies have been resistant to join plan networks” when insurance companies offer Medicare-based rates, she said.

Medicare rates vary widely by geographic area. On average, ambulance services make a small profit on Medicare payments, according to a report by the U.S. Government Accountability Office. If a patient uses a basic life support ambulance in an emergency, in an urban area, for instance, Medicare payments range from $324 to $453, plus $7.29 per mile. Medicaid rates tend to be significantly lower.

There’s evidence of “waste and fraud” in the ambulance industry, Donaldson added, citing a 2015 study from the Office of Inspector General at the U.S. Department of Health and Human Services. The report concluded Medicare paid over $50 million in improper ambulance bills, including for supposedly emergency-level transport that ended at a nursing home, not a hospital. One in 5 ambulance services had “questionable billing practices,” the report found.

Most complaints reviewed by Kaiser Health News did not appear to involve fraudulent charges. Instead, patients got caught in a system in which ambulance services can legally charge thousands of dollars for a single trip — even when the trip starts at an in-network hospital.

Devin Hall of Brentwood, Calif., is fighting a $7,110 bill from American Medical Response for an out-of-network ambulance ride. He has spent months calling the hospital, his insurer and the ambulance provider trying to resolve the matter. “These charges are exorbitant — I just don’t think what AMR is doing is right,” Hall says. (Heidi de Marco/KHN)

That’s what happened to Devin Hall, a 67-year-old retired postal inspector in Northern California. While he faces stage 3 prostate cancer, Hall is also fighting a $7,109.70 out-of-network ambulance bill from American Medical Response, the nation’s largest ambulance provider.

On Dec. 27, 2016, Hall went to a local hospital with rectal bleeding. Since the hospital didn’t have the right specialist to treat his symptoms, it arranged for an ambulance ride to another hospital about 20 miles away. Even though the hospital was in-network, the ambulance was not.

Hall was stunned to see that AMR billed $8,460 for the trip. His federal health plan, the Special Agents Mutual Benefit Association, paid $1,350.30 and held Hall responsible for $727.08, records show. The health plan paid that amount because AMR’s charges exceeded its Medicare-based fee schedule, according to its explanation of benefits. But AMR turned over his case to a debt collector, Credence Resource Management, which sent an Aug. 25 notice seeking the full balance of $7,109.70.

“These charges are exorbitant — I just don’t think what AMR is doing is right,” said Hall, noting that he had intentionally sought treatment at an in-network hospital.

He has spent months on the phone calling the hospital, his insurer and AMR trying to resolve the matter. Given his prognosis, he worries about leaving his wife with a legal fight and a lien on their Brentwood, Calif., house for a debt they shouldn’t owe.

After being contacted by Kaiser Health News, AMR said it has pulled Hall’s case from collections while it reviews the billing. After further review, company spokesman Jason Sorrick said the charges were warranted because it was a “critical care transport, which requires a specialized nurse and equipment on board.”

Sorrick faulted Hall’s health plan for underpaying, and said Hall could receive a discount if he qualifies for AMR’s “compassionate care program” based on his financial and medical situation.

“In this case, it appears the patient’s insurance company simply made up a price they wanted to pay,” Sorrick said.

In July, a California law went into effect that protects consumers from surprise medical bills from out-of-network providers, including some ambulance transport between hospitals. But Hall’s case occurred before that, and the state law doesn’t apply to his federal insurance plan.

Hall, a retired postal inspector in Northern California, receives radiation treatment for his stage 3 prostate cancer in October 2017. (Heidi de Marco/KHN)

Given his prognosis, Hall says he worries about leaving his wife with a legal fight and a lien on their Brentwood, Calif., house for a debt they shouldn’t owe. (Heidi de Marco/KHN)

The consumer complaints reviewed by Kaiser Health News reveal a wide variety of ways that patients are left fighting big bills:

  • An older patient in California said debt collectors called incessantly, including on Sunday mornings and at night, demanding an extra $500 on top of the $1,000 that his insurance had paid for an ambulance trip.
  • Two ambulance services responded to a New Jersey man’s 911 call when he felt burning in his chest. One charged him $2,100 for treating him on the scene for less than 30 minutes — even though he never rode in that company’s ambulance.
  • A woman who rolled over in her Jeep in Texas received a bill for a $26,400 “trauma activation fee” — a fee triggered when the ambulance service called ahead to the emergency department to assemble a trauma team. The woman, who did not require trauma care, fought the hospital to get the fee waived.

In other cases, patients face financial hardship when ambulances take them to out-of-network hospitals. Patients don’t always have a choice in where to seek care; that’s up to the ambulance crew and depends on the protocols written by the medical director of each ambulance service, said Werfel, the ambulance association consultant.

Sarah Wilson, a 36-year-old microbiologist, had a seizure at her grandmother’s house in rural Ohio on March 18, 2016, the day after having hip surgery at Akron City Hospital. When her husband called 911, the private ambulance crew that responded refused to take her back to Akron City Hospital, instead driving her to an out-of-network hospital that was 22 miles closer. Wilson refused care because the hospital was out-of-network, she said. Wilson wanted to leave. But “I was literally trapped in my stretcher,” without the crutches she needed to walk, she said. Her husband, who had followed by car, wasn’t allowed to see her right away. She ended up leaving against medical advice at 4 a.m. She landed in collections for a $202 hospital bill for a medical examination, which damaged her credit score, she said.

Ken Joseph, chief paramedic of Emergency Medical Transport Inc., the private ambulance company that transported Wilson, said company protocol is to take patients to the “closest appropriate facility.” Serving a wide rural area with just two ambulances, the company has to get each ambulance back to its station quickly so it can be ready for the next call, he said.

Patients like Wilson are often left to battle these bills alone, because there are no federal protections for patients with private insurance.

Rep. Lloyd Doggett (D-Texas), who has been pushing for federal legislation protecting patients from surprise hospital bills, said in a statement that he supports doing the same for ambulance bills.

Meanwhile, patients do have the right to refuse an ambulance ride, as long as they are over 18 and mentally capable.

“You could just take an Uber,” said Adler, of the Schaeffer Initiative. But if you need an ambulance, there’s little recourse to avoid surprise bills, he said, “other than yelling at the insurance company after the fact, or yelling at the ambulance company.”

KHN correspondent Chad Terhune contributed to this report.

Surprise Ambulance Bills: A Consumer’s Guide

Kaiser Health News:Marketplace - November 27, 2017

Q: What’s a surprise ambulance bill?

When the ambulance service that picks you up is out-of-network, your insurer pays what it considers fair. And then — surprise! — the ambulance service sends you a bill for the rest.

Taken For A Ride? Ambulances Stick Patients With Surprise Bills

Q: What can I do if I get one?

  • Ask your insurance company to pay more.
  • Call the ambulance service’s billing department. Do they have a financial assistance program? Can they offer you a discount or a monthly payment plan?
  • File a complaint with your state insurance commissioner’s office, state attorney general’s office or the Better Business Bureau.
  • Ask a consumer advocacy group to help you negotiate down the bill.

Q: Can I avoid these bills ahead of time?

Possibly, if it’s not an emergency. First, ask your insurance company: Which ambulance companies are in-network? What do you pay for in-network and out-of-network ambulance rides? If you’re on Medicare or Medicaid, you should be protected from surprise bills, though there are exceptions.

At the hospital

If you’re at a hospital and need to travel by ambulance to a nursing home or another facility, you may have time to identify an in-network ambulance company. Ask which ambulance services the hospital works with and if any take your insurance. Even if the hospital is in-network, don’t assume the ambulance will be.

911 calls

  • You can’t pick which ambulance service responds to an emergency call. But if you want to be proactive, you can figure out the likely scenario where you live.
  • Ask your local fire department which ambulance service responds to 911 calls in your town. Is it a government service, a company hired by the government or a combination?
  • Ask if the fire department regulates ambulance charges. Does it have a policy protecting you from a surprise bill, also called a “balance bill”?
  • If a private company serves your area, ask the company what its policies are.
  • If there are no local rules protecting you, your state insurance commissioner’s office can tell you if state law protects you from surprise bills. Keep in mind these state protections don’t apply if you have a self-funded, employer-sponsored insurance plan, which is common if you work at a large company.

Q: When I call 911, can I choose where the ambulance takes me?

Possibly. Most ambulances will take you to the “closest appropriate facility,” but protocols vary from town to town. If you’re not in dire condition, the ambulance crew may agree to take you to your preferred hospital. If you’re on Medicare, you may have to pay for the extra miles. If you’re set on going to a particular hospital, ask if they’ll take you there before you get in.

Sources: American Ambulance Association; USC-Schaeffer Initiative; Medliminal

Marketplace Confusion Opens Door To Questions About Skinny Plans

Kaiser Health News:HealthReform - November 27, 2017

Consumers coping with the high cost of health insurance are the target market for new plans claiming to be lower-cost alternatives to the Affordable Care Act that fulfill the law’s requirement for health coverage.

But experts and regulators warn consumers to be cautious — and are raising red flags about one set of limited benefit plans marketed to individuals for as little as $93 a month. Offered through brokers and online ads, the plans promise to be an “ACA compliant, affordable, integrated solution that help … individuals avoid the penalties under [the health law].”

Such skinny plans — sold for the first time to individuals — come amid uncertainty over the fate of the ACA and whether President Donald Trump’s administration will ease rules on plans for individuals. Dozens of brokers are offering the plans.

“The Trump administration is injecting a significant amount of confusion into the implementation of the ACA,” said Kevin Lucia, project director at Georgetown University’s Health Policy Institute. “So it doesn’t surprise me that we would have arrangements popping up that might be trying to take advantage of that confusion.”

Apex Management Group of the Chicago area and Pennsylvania-based Xpress Healthcare have teamed up to offer the plans, and executives from both companies say they don’t need approval from state regulators to sell them. They are selling the policies across the country, although their websites note one state — Massachusetts — where the plans are not offered.

David Shull, Apex’s director of business development, said “this is not insurance” and the plans are designed to meet the “bulk of someone’s day-to-day needs.”

Legal and policy experts have raised concerns that the new plans could leave buyers incorrectly thinking they are exempt from paying a penalty for not having coverage. Additionally, they say, plans sold to individuals must be state-licensed — and one regulator has already asked for an investigation.

“Generally speaking, any entity selling health insurance in the state of California has to have a license,” Dave Jones, the Golden State’s insurance commissioner, said earlier this month. “I have asked the Department of Insurance staff to open an investigation with regard to this company to ascertain whether it is in violation of California law if they are selling it in California.”

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Asked about a possible investigation, Apex owner Jeffrey Bemoras emailed a statement last week saying the firm is not offering plans to individuals in California. He also noted that the individual market accounts for only 2 percent of the company’s business.

“To be clear, Apex Management group adheres closely to all state and federal rules and regulations surrounding offering a self-insured MEC [minimal essential coverage] program,” he wrote. “We are test marketing our product in the individual environment, if at some point it doesn’t make sense to continue that investment we will not invest or focus in on that market.”

Price-Tag Appeal, But What About Coverage?

The new plans promise to be a solution for individuals who say that conventional health insurance is too expensive. Those looking for alternatives to the ACA often earn too much to qualify for tax subsidies under the federal law.

Donna Harper, an insurance agent who runs a two-person brokerage in Crystal Lake, Ill., found herself in that situation. She sells the Xpress plans — and decided to buy one herself.

Harper says she canceled her BlueCross BlueShield plan, which did meet the ACA’s requirements, after it rose to nearly $11,000 in premiums this year, with a $6,000 annual deductible.

“Self-employed people are being priced out of the market,” she said, noting the new Xpress plan will save her more than $500 a month.

The Xpress Minimum Essential Coverage plans come in three levels, costing as little as $93 a month for individuals to as much as $516 for a family. They cover preventive care — including certain cancer screenings and vaccinations — while providing limited benefits for doctor visits, lab tests and lower-cost prescription drugs.

There is little or no coverage for hospital, emergency room care and expensive prescription drugs, such as chemotherapy.

Harper said she generally recommends that her clients who sign up for an Xpress plan also buy a hospital-only policy offered by other insurers. That extra policy would pay a set amount toward in-patient care — often ranging from $1,500 to $5,000 or so a day.

Still, experts caution that hospital bills are generally much higher than those amounts. A three-day stay averages $30,000, according to the federal government’s insurance website. And hospital plans can have tougher requirements. Unlike the Xpress programs, which don’t reject applicants who have preexisting medical conditions, most hospital-only coverage often does. Harper says she personally was rejected for one.

“I haven’t been in the hospital for 40 years, so I’m going to roll the dice,” she said.  And if she winds up in the hospital? “I’ll just pay the bill.”

About 100 brokers nationwide are selling the plans, and interest “is picking up quick,” said Edward Pettola, co-owner and founder of Xpress, which for years has sold programs that offer discounts on dental, vision and prescription services.

Caveat Emptor

Experts question whether the plans exempt policyholders from the ACA’s tax penalty for not having “qualified” coverage, defined as a policy from an employer, a government program or a licensed product purchased on the individual market.

The penalty for tax year 2017 is the greater of a flat fee or a percentage of income. The annual total could range from as little as $695 for an individual to as much as $3,264 for a family.

Trump issued an executive order in October designed to loosen insurance restrictions on lower-cost, alternative forms of coverage, but the administration has not signaled its view on what would be deemed qualified coverage.

Responding to questions from KHN, officials from Apex and Xpress said their plans are designed to be affordable, not to mimic ACA health plans.

“If that is what we are expected to do, just deliver what every Marketplace plan or carriers do, provide a Bronze, Silver Plan, etc. it would not solve the problem in addressing a benefit plan that is affordable,” the companies said in a joint email on Nov. 14. “Individuals are not required to have an insurance plan, but a plan that meets minimum essential coverage, the required preventive care services.”

Bemoras, in a separate interview, said his company has been selling a version of the plan to employers since 2015.

“As we see the political environment moving and wavering and not understanding what needs to be done, the individual market became extremely attractive to us,” Bemoras said.

Still, experts who reviewed the plans for KHN said policies sold to individuals must cover 10 broad categories of health care to qualify as ACA-compliant, including hospitalization and emergency room care, and cannot set annual or lifetime limits.

The Xpress/Apex programs do set limits, paying zero to $2,500 annually toward hospital care. Doctor visits are covered for a $20 copayment, but coverage is limited to three per year. Lab tests are limited to five services annually. To get those prices, patients have to use a physician or facility in the PHCS network, which says it has 900,000 providers nationwide. Low-cost generics are covered for as little as a $1 copay, but the amount patients pay rises sharply for more expensive drugs.

“I’m very skeptical,” said attorney Alden J. Bianchi of Mintz Levin, who advises firms on employee benefits. “That would be hard [to do] because in the individual market, you have to cover all the essential health benefits.”

The details can be confusing, partly because federal law allows group health plans — generally those offered by large employers — to provide workers with self-funded, minimal coverage plans like those offered by Apex, Bianchi said.

Apex’s Shull said last week in an email that the firm simply wants to offer coverage to people who otherwise could not afford an ACA plan.

“There will be states that want to halt this. Why, I do not understand,” he wrote. “Would an individual be better off going without anything? If they need prescriptions, lab or imaging services subject to a small copay, would you want to be the one to deny them?”

Some consumers might find the price attractive, but also find themselves vulnerable to unexpected costs, including the tax liability.

Harper, the broker who signed up for one of the plans, remains confident: “As long as Xpress satisfies the [mandate], which I’m told it does, my clients are in good hands. Even if it doesn’t, I don’t think it’s a big deal. You are saving that [the tax penalty amount] a month.”