News in brief - May 30, 2011

HHS finalizes rule on insurance premium reviews

Large proposed increases in insurance premiums will be scrutinized by government reviewers starting on Sept. 1 under a final regulation issued by the Dept. of Health and Human Services in May.

The new rule doesn't provide states with the authority to reject rate hikes deemed excessive by state boards or HHS. Only those states with laws requiring prior approval authority can block large rate increases. But the rule does require states to review any proposed increases of 10% or more through a public process that provides consumers with information on why the higher premiums are deemed to be necessary.

"States are going to be, and should be, the primary reviewers," said Steve Larsen, director of the HHS Center for Consumer Information and Insurance Oversight. "And only where we need to fall back on HHS will [the department] be conducting reviews."

HHS has awarded 43 states about $44 million in grants to strengthen their oversight of health insurance premiums. The responsibility to review proposed rate increases will be handed back to HHS when states lack the resources or decline to conduct the reviews.

HHS proposed the rule in December 2010 and finalized the regulation on May 19. Several commenters had advocated that the 10% threshold should be moved higher or lower, but the department kept the benchmark as proposed, Larsen said.

However, the nationwide threshold is only temporary. Starting in September 2012, state-specific thresholds would be implemented.

Insurance plans operated by associations and large group insurers are excluded from the rule, but HHS requested comments on the possibility of reviewing large rate hikes by association plans in the future.

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Study blames contractors for Medicare fraud

The system Medicare uses to pay for physician services and claims for medical equipment invites fraud and waste, according to a study from the Center for American Progress, a public policy research and advocacy organization.

An estimated $34.3 billion in improper Medicare payments were made in 2010. At the same time, the majority of program integrity funding went to Medicare administrative contractors, the firms that actually paid out for the fraudulent claims. These contractors perform several functions that the study's authors believe are in conflict with one another.

"The government should not allow the same contractors to screen and enroll beneficiaries, and also review their claims," the study said. "The Obama administration is now beginning to rebid conflicting MAC contracts, so the time is ripe to create a new class of truly independent contractors who will review providers and suppliers before they ever submit a single claim."

The study argues that Medicare also should hold contractors accountable for making improper payments. Other recommendations include implementing better integrated claims payment databases and conducting targeted reviews of high-cost patients and high-risk health care professionals.

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House medical liability bill would reduce deficit by $57 billion

A medical liability reform bill approved by the House Energy and Commerce Committee on May 11 would reduce the federal deficit by $57 billion over a decade, according to a Congressional Budget Office cost estimate released on May 23. The measure would cap noneconomic damages in medical lawsuits at $250,000, establish a three-year statute of limitations for most medical lawsuits, and exempt products approved by the Food and Drug Administration from being subject to punitive damages in lawsuits, among other changes.

The deficit reduction would arise from reduced medical liability premiums and more limited use of health care services by physicians and others who feel less pressure from potential medical lawsuits.

The CBO deficit reduction estimate for the Energy and Commerce bill is $17 billion higher than for the version of the measure approved by the House Judiciary Committee on Feb. 16. That's primarily because the Energy and Commerce version would allow defendants to introduce in court evidence of the plaintiff's secondary income, bypassing a restriction known as the collateral source rule.

The House measure -- introduced by Rep. Phil Gingrey, MD (R, Ga.) -- is known as the HEALTH Act. The bill has 134 co-sponsors.

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Georgia high court blocks vaccine lawsuit

The Supreme Court of Georgia on May 16 blocked an Atlanta couple's lawsuit seeking damages against vaccine maker American Home Products Corp., reversing its 2008 decision allowing the case to move forward (www.gasupreme.us/sc-op/pdf/s07g1708_sub.pdf).

The lawsuit was filed by Marcelo and Carolyn Ferrari, who claimed that a round of vaccines made by the drugmaker and administered to their young son caused neurological problems. In 2007, the Court of Appeals of Georgia said the family could challenge the vaccine maker because a federal law preventing lawsuits against drugmakers was unclear. The state Supreme Court upheld the appellate decision in 2008.

But in February, the U.S. Supreme Court ruled in a separate case that federal law preempts all design-defect claims from being pursued against drugmakers. In light of the decision, the Ferrari case was sent back to the state Supreme Court, which reversed its prior decision.

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