Since health reform became law, states have expressed a great deal of anxiety about expanding their Medicaid programs, releasing studies demonstrating that the state portion of the expansion (the law expands the program to 133% of the FPL) would run in the billions of dollars. But now, a new report from the Urban Institute finds that the expanded population may be healthier than current Medicaid enrollees and that states can lower their Medicaid price tag by expanding their enrollment efforts:

Results from our microsimulation model indicate that the adults who enroll in Medicaid under reform are likely to be more expensive to cover than those who remain uninsured but still not likely to be as expensive as those currently enrolled in Medicaid. [...]

The higher the Medicaid participation rate among the eligible population of adults and the less adverse selection that occurs, the lower the average costs will be under reform, and the broader the mix of new enrollees will be in terms of health status. This does not mean that the new population covered by Medicaid will be uniformly in good health since there are still relatively high percentages in fair or poor health and with two or more chronic conditions within the underlying population. But on average, those newly covered are likely to be healthier and less costly than those who are currently enrolled.

In other words, sates will have to expand their enrollment efforts to net healthier (and maybe younger) enrollees who are below the poverty line to balance the costs of covering the sicker population. But that may take some time. The study finds that “a high rate of adverse selection is especially likely in the initial period following implementation of the Medicaid expansion and the other major policy changes associated with health reform, as we expect that those with the greatest health needs will be among the first to enroll.”

Fortunately, states will receive the highest federal matching fund during that critical early period. The federal government picks up the entire tab of Medicaid expansion until 2016 and then pay for 95% of the expansion in 2017, 94% in 2018, and 93% in 2019. As we get into the out years, however, it will be critical for states to enroll more people if they wish to lower their per capita spending.

Whereas the overwhelming majority of states and governors who oppose the federal health care law are accepting its grants, Minnesota Governor and GOP Presidential hopeful Tim Pawlenty is only interested in the abstinence only portions of the law. Pawlenty has issued an executive order preventing the state from applying for any more federal funding, noting in campaign-like rhetoric that reform “represents a dramatic attempt to assert federal command and control over this country’s health care system” and “includes unprecedented federal intrusions into individual liberty“:

NOW, THEREFORE, I hereby order that:

All executive branch departments and agencies are directed that no application shall be submitted to the federal government in connection with requests for grant funding for programs and demonstration projects deriving from the Patient Protection and Affordable Care Act (“PPACA” or “the Act”) (Pub.L. 111-148) unless otherwise required by law, or approved by the office of the Governor.

The order puts Pawlenty out of sync with many cities, counties, and businesses in his state — 97 of which applied for the law’s reinsurance grants. But the sheer transparency of Pawlenty’s effort was not lost on HHS Secretary Kathleen Sebelius today, who when asked about the governor’s EO, visibly snickered before noting that Minnesota residents are already benefiting from reform:

SEBELIUS: I’m afraid of citizens of Minnesota may be the victims of whatever it is that’s coming their way. I know we have companies from the great state of Minnesota who have applied to be part of this plan.…I know that we have seniors in Minnesota who have received $250 checks for prescription drug coverage because they have reached the prescription drug doughnut hole…. So I have no idea if those are the kinds of benefits he intends to eliminate for the citizens of Minnesota.

Watch Sebelius’ reaction at :28:

In the order, Pawlenty also notes that he has already determined that Minnesota will “not participate in the early expansion of the Medicaid entitlement program offered by the federal government as part of the legislation” or apply for federal grants that could help the state review unreasonable premium hikes.

Earlier this month, 19 of the 22 states that are suing the federal government over the constitutionality of health reform applied for the rate review grants under the law, continuing the pattern of implementing the measure while also disputing it in court.
Today, HHS released the its first round of reinsurance grants to help states and employers provide coverage to early retirees who are not yet eligible for Medicare benefits. Cities, counties, and businesses in all 22 states applied for federal funds and at least 7 of the 22 state governments will receive federal funds from the law they oppose.

In the table below, the asterisk (*) denotes the state governments that applied for reinsurance directly, and the number to the right of each state is a count of the number of entities that applied for the grant in each state:

Nebraska*: 18	Florida: 69	South Carolina: 9	Texas: 94
Louisiana*: 16	Utah: 14	Alabama: 12	Colorado: 16
Michigan*: 97	Pennsylvania: 103	Washington: 35	Idaho: 20
Indiana*: 74	South Dakota: 2	North Dakota: 5	Mississippi: 5
Nevada*: 14	Georgia: 27	Virginia: 45	Missouri: 49
Arizona*: 20
Alaska*: 4

This kind of contradiction is becoming fairly common and as one Utah advocate involved in state health issues speculated, it seems that even the repeal and replace advocates realize that “this is how they have to do reform and it is important to get started and try out some of these ideas.” “I wonder if they’re not thinking well, the only way to prove reforms are wrong, is to give them a good college try,” this person told me.

Today, the Department of Health and Human Services announced the “first round of applicants accepted into the Early Retiree Reinsurance Program,” a $5 billion program established by the new health care law to help employers and states “maintain coverage for early retirees age 55 and older who are not yet eligible for Medicare.” According to the agency, “nearly 2,000 employers, representing large and small businesses, State and local governments, educational institutions, non-profits, and unions” applied and have been accepted into the program and “will begin to receive reimbursements for employee claims this fall.”

Ironically, one of those employers is the oil, chemicals, and manufacturing conglomerate Koch Industries, which as Lee Fang has reported, has also spent millions of dollars opposing reform:

The contradictory practice of opposing the health care law while applying for its funding has been a common practice among states. For instance, at least 19 of the 22 states that are suing the federal government over health care reform have applied for the law’s rate review grants and some — like Utah — are actively working with HHS to ensure that the law meets their needs. Still, Koch’s efforts to cash in from a law they’re so vehemently opposing may be the most stark example thus far.

Today, the Department of Health and Human Services is hosting what can only be described as a health wonk’s dream — a day long conference on the the new health insurance exchanges. These new markets won’t be operational until 2014, but as this panel on small employers demonstrates, establishing effective exchanges that attract enrollees and insurance companies, won’t be easy.

Below is just a glimpse at all of some of the suggestions and policy recommendations for how to implement the small business exchanges:

- WEBSITE IS NOT ENOUGH: “The previous panel said, ‘we’re just going to provide a website for everyone to go to.’ That’s impossible. We will not be able to communicate. The way we have structured our program is that we are very much technically invested…but we distribute our product through brokers because what we have found is that there needs to be a touching point to these small employers. They don’t have that HR department. They’re looking for somebody to help them. Because it’s something they don’t understand and they want to run their business. [Phil Vogel, Senior Vice President, Connecticut Business and Industry Association Service Corp]

- EMPLOYERS WILL NEED TO WRITE ONE CHECK: “The employer [will need to] send one check out to the exchange….They’re going to have employees with multiple plans, employees can buy up and there is going to be all kinds of costs and deductions for employers…they need to be able to write one check. [Terry Gardiner, National Policy Director, Small Business Majority.]

- REAL COST CONTROL STILL IN DELIVERY REFORMS: “We talked about the expense structure of the exchange, the administrative expenses or pulling people together. Those are getting at the small dollar amounts of the premiums paid today. What we really need to make sure is that we look at the cost of care….Just pooling people together is not going to reduce costs.” [Phil Vogel, Senior Vice President, Connecticut Business and Industry Association Service Corp]

- RULES SAME OUTSIDE/INSIDE EXCHANGE: “If you’ve got products offered outside that are a lot cheaper than products offered inside the exchange, those products are likely to be more attractive to healthier enrollees, businesses with healthier enrollees and you’re going to winde up with higher prices inside the exchange than outside the exchange.” [Michael Johnson, Director, Public Policy, Blue Shield of California]

Watch a compilation:

Indeed, insurance brockers have been actively lobbying for a larger role in the reformed market place, arguing they can help the newly insured find affordable coverage in ways that the automated website cannot. Vogel’s experience with running a small business exchange in Connecticut, suggests that their services may be need.

During the health care debate, Jon Kingsdale had argued that businesses would not participate in the exchanges if they had to send separate checks to different insurance issuers. But since the CBO said it would have to score any efforts by the exchange to process the checks as an addition to the government’s ledger, the law currently foresees employers sending separate checks. This is something that could potentially be changed in the regulatory process.

Finally, establishing regulations that prohibit insurers from luring healthier enrolles out of the exchanges and implementing successful delivery reforms will be critical to lowering health care spending. For the latest thinking on the former, check out Sarah Lueck paper here.

Florida gubernatorial candidate Rick Scott (R) bills himself as a political outsider, but when it comes to answering questions about his questionable stewardship of Columbia/HCA — a for-profit hospital chain that paid a record $1.7 billion in fines for massively defrauding the Medicare program during the 1990s — Scott has one of the most polished and rehearsed answers in the business.

The Wonk Room examined three different interviews with Scott on CNN’s John King Tonight (8/26), CNN’s American Morning (8/27), and FNC’s America Live (8/28), and noticed that Scott gave an identical, formulaic 5-part reply when questioned about his business record:

1. Notes that his primary opponent, Florida AG Bill McCollum, already attacked him for his record and he lost.

2. Mentions that he invested his life savings — $125,000 — in Columbia/HCA.

3. Recites the company’s achievements: high patient satisfaction, expanded company with 285,000 employees.

4. Then, when pressed on the fraud, he explains that business people make mistakes and that he’s taken responsibility for his.

5. Conversely, Politicians never take responsibility. He has and he will as governor.

Watch a compilation:

There may be ways for journalists to avoid listening to Scott’s polished recitations. For instance, Scott should be asked:

1. You’ve said that you want to do for hospitals “what McDonald’s has done in the food business” and “what Wal-Mart has done in the retail business?” Do you still believe this?

2. You’ve said, “Where do we draw the line? Is any fast-food restaurant obligated to feed everyone who shows up?” Do you believe hospitals should treat everyone who shows up?

3. After you were ousted by the HCA/Columbia board, you received “a $9.88 million severance package, along with 10 million shares of stock worth up to $300 million at the time.” Given that you’re now admitting to mistakes, do you think you deserved so much money?

4. You say you’ve taken responsibility, but then why did you invoke your Fifth Amendment right against self-incrimination 75 times during a 2000 deposition about your time as head of Columbia/HCA?

5. Since you’re running for governor on your admittedly less than stellar business record and asking people to trust that you’ve learned from your past mistakes, why don’t you release the deposition you gave on behalf of Solantic, a chain of urgent care clinics that have been accused of unsavory business practices?

Insurers became the target of the White House’s attacks in the closing days of the health reform debate and so perhaps it’s no surprise that they’re “backing Republicans with campaign donations by an 8-to- 1 margin, favoring the party that’s promised to repeal President Barack Obama’s health-care overhaul if it wins back Congress.” Bloomberg’s Drew Armstrong has the scoop:

WellPoint, along with Coventry Health Care Inc. and Humana Inc., gave Republican candidates $315,000 from May through July, according to U.S. Federal Election Commission records. That compares with $41,000 given to Democrats by the three companies as the parties near November elections that will determine who controls the U.S. House and Senate next year.

While Republicans aren’t likely to win the large majorities necessary to override a presidential veto and repeal the health law Obama signed in March, they may be able to slow or stall its implementation, said James Morone, a political science professor at Brown University in Providence, Rhode Island. At the same time, the turn to strongly favor Republicans may anger Democrats who had been receptive to insurers’ concerns, he said.

Recall that after initially coming to the table and supporting Obama’s efforts, insurers turned against reform, even after the public option had been taken off the table. They criticized the weak individual mandate and argued that the bill would lead to higher premiums for average Americans.

Since passage of the law, the administration and the President have reached out to insurers, inviting them to meetings with Obama and HHS Secretary Sebelius and weighing their concerns about the forthcoming regulations and the implementation process. But through it all, issuers — while nominally agreeing to assist the administration with implementation — have understood which party has its interests in mind. Issuers have watched as Democrats — led, most recently by the six Democratic Committee chairman with jurisdiction over health care — argued that insurers should have to abide by a strict interpretation of the law and spend 80 to 85% of premium dollars on health care and contrasted that approach to the likes of conservatives like Douglas Holtz-Eakin, who have gone to the mat to weaken the regulations.

Therefore, this donation imbalance shouldn’t be interpreted as an industry endorsement of the GOP’s repeal efforts or its attack on the individual mandate — which could make the industry millions. The industry is turning to the Republican party not so that it could repeal the entire law — that seems highly unlikely — but so that it can push for favorable regulations that don’t cut into industry profits. The want to ensure that Republicans hold their line, like they always have.

Sarah Palin’s appearance in Jacksonville, Florida may have been bumped to a smaller venue due to slow ticket sales, but that didn’t stop the Mama Grizzly from taking her shots against the health care law and Governor Charlie Crist for vetoing a piece of anti-abortion legislation:

In a speech that only ventured into politics on abortion issues, Palin criticized Obama’s health care overhaul as a plan that will lead to more abortions.
“The biggest advance of the abortion industry in America is the passage of Obamacare,” Palin said. “Elective abortions have nothing to do with health care. It’s about ending lives, not saving lives.”

Of course, anyone even remotely attune to the actual dynamics of the health care debate knows that the so-called “abortion industry” — by which I presume Palin means pro-choice activists who advocate on behalf of doctors who perform abortions — was quite disappointed with the law and the rash of anti-abortion activity in the states that followed its passage.

To refresh, health plans may offer abortion coverage in the exchanges, but only if their customers write two checks – one for the share of their premium that’s allocated for abortion services and one for all other health care coverage – even though both checks would come from the customers’ private funds, not from government coffers. The Nelson deal also included language that encourages states to pass their own version of the Stupak Amendment, which some have, thereby completely eliminating abortion coverage from the exchanges.

Pro-choice advocates saw the Nelson firewall requirement as an “unprecedented” restriction on “private insurance coverage for abortion care, making it much more cumbersome for insurers to offer coverage and for consumers to obtain it.” In the time since the law passed, moreover, conservative state lawmakers have gone even farther, using the law’s opt-out language as an opportunity to severely restrict women’s ability to purchase abortion services with private dollars and the administration has prohibited states from covering abortion in the high risk insurance pools. If that’s the “biggest advance” for the abortion “industry,” the the Gulf spill was the biggest advance for the oil industry.

Earlier this month, a judge in Virginia ruled that the state’s lawsuit challenging the individual mandate in the new health care law should proceed partly because the state’s recently enacted ‘Virginia Health Care Freedom Act’ — which protects Virginia citizens from the individual requirement — conflicts with the federal requirement and “therefore encroaches on the sovereignty of the Commonwealth and offends the Tenth Amendment of the Constitution.”

The lawsuit names HHS Secretary Kathleen Sebelius as the defendant, but now in an interesting wrinkle, Sebelius says Attorney General Ken Cuccinelli “got the list of defendants wrong.” In her response to the Judge’s ruling:

Deny, and separately aver that while the defendant, Kathleen Sebelius, in her official capacity as the Secretary of the United States Department of Health and Human Services, is responsible for administering many provisions of the ACA, the Secretary of the Treasury is primarily responsible for the administration of the minimum coverage provision that the plaintiff seeks to challenge in this action. [...]

The complaint should be dismissed for failure to join a necessary party, namely the Secretary of the Treasury, who, unlike the defendant, is charged with the implementation of Section 1501 of the ACA.

Cuccinelli may be able to amend his complaint and add the necessary party, but this could also force the judge to make a finding that the mandate is administered by the Treasury Department, which itself would undermine Cuccinelli’s claim that the mandate is not a tax.

The reply also argues that Congress has the authority to impose a minimum coverage provision — also known as the individual mandate –since it’s “essential to ensure the success of the ACA’s larger regulation of the interstate health insurance market.”

Significantly, Florida’s challenge mentions Sebelius, Treasury Secretary Tim Geithner and Labor Secretary Hilda Solis as defendants.

California has “passed two bills that provide the mechanisms and functions of the exchange” and separate legislation to boost adverse-event reporting among hospitals, leading the way in implementation of reform. The advances come in the midst of growing budget shortfalls and increasing number of uninsured, both of which are taxing the state’s health safety net programs.

A new report from the UCLA Center for Health Policy Research finds “8.4 million Californians were uninsured in 2009 — up from 6.4 million in 2007, a 31% surge in just two years.” “The sharp increase was driven by widespread job loss, as areas that reported higher unemployment figures corresponded to areas with the highest rate of uninsured residents.” A higher number of uninsured means that state funds will have to be stretched further, to cover more people. As California HealthLine points out:

However, state budget issues continue to raise red flags for health care stakeholders. The budget, which is now about two months late, currently threatens cuts to health and human services, which critics say would hamper access to Medi-Cal, reduce home health services and make other changes. The budget delay also means that community clinics are now going without Medi-Cal reimbursements, which represents 50% to 80% of their revenue, and could force clinics to scale back their hours and service.

But what’s interesting is that this ongoing economic crisis in the states may be motivating state governments to implement health care reform more quickly, apply for all of the available federal grants and pressure even reluctant politicians to comply with the law’s requirements. For instance, I’ve noted that at least 19 of the 22 states that are suing the federal government over health care reform are also applying for the law’s recently released rate review grants and some — like Utah — are actively working with HHS to ensure that the law meets their needs.

Shana Alex Lavarreda, Director of Health Insurance Studies at the UCLA Center for Health Policy Research tells me that California, which is currently setting up its high risk insurance pool program, is rushing to implement reform precisely because it would lessen the stress on state safety net programs. “It’s funny, politically they were talking about, the change was happening too quickly, we need to slow it down, we need to put it off, now that it’s actually passed, I’m hearing many more complains along the lines of, why isn’t this here yet, why isn’t it fully implemented, why aren’t we getting our subsidies now?” she observed.

Lavarreda said that from the federal prospective, an increase in the uninsured would result in higher costs, but argued that “from the state budget prospective, that’s actually a really good thing.” “More people might be going into the exchange, including the people that would otherwise be eligible for Healthy Families [the CHIP program]. If the adults are going into the exchange, they might not want their kids to be on Healthy Families — the CHIP program here in the state — and they might pull out their kids from that program, which would actually reduce state expenditures. It’s possible that the exchanges would pull people out of the public programs if they prefer to be in the private programs, receiving subsidies from the federal government instead.”

Some lawmakers have argued that implementation itself might stress the state budget, but for now, it’s still too early to tell if states will need more funding. “For us, [the economic downturn] has pushed it to the forefront of our current legislature’s agenda,” Lavarreda stressed. “The problem is not getting better, it’s getting worse right now and we’re going to be incredibly active in getting as much federal funding as possible given our budget situation right now.”

The Congressional Budget Office is out with a new letter saying that while the health care law could reduce the projected budget deficit by $30 billion in 2020, repealing it would increase the deficit by an estimated $455 billion:

On balance, the two laws’ health care and revenue provisions are estimated to reduce the projected deficit in 2020 by $28 billion, and the education provisions of the Reconciliation Act are estimated to reduce the projected deficit in 2020 by $2 billion. [...]

Finally, you asked what the net deficit impact would be if certain provisions of PPACA and the Reconciliation Act that were estimated to generate net savings were eliminated—specifically, those which were originally estimated to generate a net reduction in mandatory outlays of $455 billion over the 2010–2019 period. The estimate of $455 billion mentioned in your letter represents the net effects of many provisions. Some of those provisions generated savings for Medicare, Medicaid, or the Children’s Health Insurance Program, and some generated costs. If those provisions were repealed, CBO estimates that there would be an increase in deficits similar to its original estimate of $455 billion in net savings over that period.

If they were to repeal the law, Republicans would have replace it with something that makes up for the deficit increases (assuming, of course that they will still care about the deficits) and helps slow the growth rate in the Medicare program. The GOP’s old leadership backed plan and its reliance on medical malpractice reform as a money saver won’t be enough.

Separately, the CBO also estimated that preventing payment reductions to the physician fee schedule would cost some $330 billion over the 2011–2020 period.

Last night, during an appearance on CNN, Florida Republican gubernatorial candidate Rick Scott defended his stewardship of Columbia/HCA, a large for-profit hospital chain that pled guilty to 14 felonies and paid $1.7 billion in criminal and civil fines for defrauding Medicare. Scott explained that he invested his life savings in the business to “built the largest health provider in the world” and stressed that he “took responsibility for what went wrong”:

SCOTT: And what I tell people is, you know, when you’re in business, anything that goes wrong, you should take responsibility if you’re the CEO. I do. The difference is let’s think about where we are in the state. We have the highest unemployment on record. We have almost 50 percent of our home owns under water on their mortgages. We’re walking into a five-plus billion dollar deficit. Has any politician in the state taken responsibility for putting us in this position? No. What I tell people all the time is I’m a business person. I know, you know, you put up your money, you try to build your companies and you take responsibility for what goes wrong. I do. When I’m governor, I hope nothing goes wrong. If it does, I’ll show up, I’ll take responsibility and I’ll fix it.

Watch it:

Scott may certainly be sorry for what happened, but it seems that the only thing he took was “a $9.88 million severance package, along with 10 million shares of stock worth up to $300 million at the time” after he was ousted from the Columbia/HCA board. In fact, during a deposition Scott gave in 2000 about his time as head of Columbia/HCA, “he invoked his Fifth Amendment right against self-incrimination 75 times,” an issue Scott’s challenger, Attorney General Bill McCollum tried to use against him. McCollum “circulated a transcript in which Scott took the Fifth even when asked if he worked for Columbia/HCA Corp., in addition to questions about the firm’s accounting and billing practices.” According to the transcript, Scott was holding a card, which read “Upon advice of counsel, I respectfully decline to answer the question by asserting my rights and privileges under the Fifth Amendment of the U.S. Constitution.”

During the interview with CNN, Scott reiterated that he would not be releasing his deposition in a separate lawsuit against Solantic, a series of urgent care clinics he established across Florida. That business has also come under fire for engaging in the very same kind of practices that led to Columbia/HCA’s downfall. “Well, it’s a private matter. It’s something — it’s not — has nothing to do with this race,” he told CNN. “What I’m going to campaign on is what I’ve campaigned on in the primary. It’s about jobs.”

Scott also added that that he would not support changing the 14th amendment to revoke birthright citizenship and insisted that he would reject any federal stimulus dollars. “I think stimulus money is an absolute mistake. There’s no free money in those stimulus dollars. We’re going to have to pay those dollars back whether we pay it back, our children pay it back, our grandchildren pay it back. Stimulus does not work.”

Following a familiar pattern of blaming any unfavorable health care story on the recently passed health care law, the Senate Republican Communications Center has seized on an AP story about the consolidation of prescription drug plans to try and convince seniors that they won’t be able to keep the coverage they have. The AP article reports on “a new analysis by a leading private research firm estimates that more than 3 million beneficiaries will see their current drug plan eliminated as Medicare tries to winnow down duplicative and confusing coverage, in order to offer consumers more meaningful choices. Instead of 40 or more plans in each state, beneficiaries would pick from 30 or so.” Without missing a beat, the Senate GOP issues this release:

This really represents one of the most transparent and shameless attempts to scare seniors about health care in the post reform era. Consolidating Part D plans have nothing at all to do with Obama’s law and is actually a continuation of a Bush administration effort to ensure that seniors have meaningful choices of prescription coverage.

When Part D became law in 2003, lawmakers feared that seniors would not have enough prescription drug choices and established government back up plans that would go into effect in case private insurers failed to materialize. But private insurers did participate, offering some 1,400 plans nationally in the first several years and up to 1,800 plans in 2007. Insurers began offering a multitude of plans with an array of different co pays and deductibles in the hopes of attracting the largest possible market share. CMS officials in the Bush administration and senior advocacy groups like AARP, however, felt that seniors would become overwhelmed by the plethora of choice and began to set guidelines for how many plans a single issuer could offer. Several 100 plans, for instance, had fewer than 500 people enrolled in them and seniors themselves felt unable to compare all the choices adequately.

Beginning in 2005, CMS used its regulatory authority to narrow the number of plans a single sponsor could offer, eventually instituting a rule that any given sponsor could only offer three plans per region. The Obama administration has continued with this approach. In April, it published regulations saying that sponsors would have to demonstrate meaningful differences among plans and that plans with very low enrollments should be discouraged. The final list of plans to be offered for 2011 is still pending, but some don’t expect a great deal of coverage disruption. In fact, consolidation could proceed relatively smoothly, with insurers simply transferring policyholders to a different basic policy.

The larger point here is that all this has nothing at all to do with the health care law or Obama’s promise that you can keep the policy you have. The GOP press release relies on the party’s pre-reform tactics of literally lying to America’s senior citizens to discourage them from voting for Democrats.

Ben Smith observes that the GOP strategy of running against the health care bill (you know, suing the federal government or trying to pass nullification measures on the states) isn’t reaping in the kind of dividends that Minority Leader John Boehner (R-OH) had predicted:

This March, two attorneys general took the lead in lawsuits challenging the constitutionality of the health care overhaul: South Carolina’s Henry McMaster and Florida’s Bill McCollum. Another, Michigan’s Mike Cox, soon signed on.

The lawsuits made them national leaders on the central national issue, and seemed tailor-made for Republican primaries. But all three lost those primaries, as CNN’s Peter Hamby noted of the first two last night.

McMaster lost to Nikki Haley, whose reform message trumped his series of ads touting his health care fight. Cox, who also put his health care suit on air, lost to a wealthy businessman who ran on a non-ideological platform under the slogan, “one tough nerd.” McCollum lost to Rick Scott, and there the message may not be as clear — Scott was also a leading national foe of the health care bill.

Indeed, it’s hard to argue that opposition to the health care law sank the ship, but it is likely that a heavy repeal message — one that focused on the dangers of reform sometime after 2014 — moved the conversation away from more immediate economic concerns and on to some ill defined, yet to be determined, cost increases down the road. In this sense, the anti-health reform AGs would have probably been better off following the national party’s advise to Democrats throughout the last year and a half: stop and focus on jobs and the economy.

We’re also seeing some indication that the repeal message just isn’t selling right now. State lawmakers are having a great deal of difficulty in passing legislation to invalidate different parts of the measure, Republicans can’t convince their entire caucus to sign the various repeal petitions, and public support for the law is growing as the early reforms come out.

In his victory speech last night, Rick Scott, the 57 year old former health care executive and founder of the health care attack group Conservatives For Patients Rights, assured Republicans that the “party will come together” after a particularly bruising primary challenge against Florida Attorney General Bill McCollum. Scott entered the race in April and proceeded to spend approximately $50 million of his estimated $218 million fortune on a negative campaign that sought to deflect attention from his past business controversies and smear McCollum as a product of the establishment.

That outlandish sum, however, is not nearly as shocking as how Scott came to acquire it, as the chief executive of one of the largest and most controversial for-profit hospital chains in the country, Columbia/HCA.

In 1987, Scott, a mergers and acquisitions lawyer who “had cut his teen on deals involving radio stations, fast food businesses, and oil and gas companies before focusing in on the money to be made by acquiring hospitals,” didn’t enter the health care business for the sake of improving the quality of care, but rather wanted to “do for hospitals … what McDonald’s has done in the food business” and “what Wal-Mart has done in the retailing business.” The goal, as Maggie Mahar explains in Money Driven Medicine, “was to combine volume with low cost.” This quote is demonstrative: “Do we have an obligation to provide health care for everybody? Where do we draw the line? Is any fast-food restaurant obligated to feed everyone who shows up?” he asked.

Indeed, through an aggressive strategy of rapid acquisitions and consolidation, Scott turned Columbia/HCA into one of the largest health care companies in the world. Forbes magazine noted Scott ruthlessly bought “hospitals by the bucketful and promised to squeeze blood from each one.” HCA/Columbia executives saw health care as any other commodity. “This industry’s not any different than an airline industry or a ball bearing industry,” said David T. Vandewater, Columbia’s chief operating officer. “You run at 40 percent of capacity or at 60 percent of capacity you’re not getting the maximum value out of your assets.”

Under Scott’s leadership, Columbia/HCA plead guilty to a massive array of fraud charges – which resulted in a fraud settlement of $1.7 billion dollars, the largest in U.S history. Columbia/HCA systematically defrauded taxpayers, charging Medicare $15,000 for Tiffany pitchers and other luxury goods, “exaggerating the seriousness of the illnesses they were treating,” and engineering a program where doctors were granted partnerships in hospitals as a kickback for referring patients. In 1997, “disaster struck in the form of an FBI raid.” In July of that year, “federal agents swarmed Columbia/HCA hospitlas and offices in five states. Within weeks, three executives were indicted on charges of Medicare fraud, and the board had ousted Scott.” Scott left in disgrace, but not before walking away with “a $9.88 million severance package, along with 10 million shares of stock worth up to $300 million at the time.”

During Scott’s tenure at Columbia/HCA, his cost cutting methods threatened patient care and safety:

- Susan Marks, a technician at one of Scott’s hospitals, was forced to monitor 72 heart monitors by herself. Marks explained, “I have to. I’ve been told you either do it, or there’s the door.” [ABC News, 9/26/97]

- Scott downsized nursing staffs, created conditions where “babies were attended as infrequently as every three hours. Once, the only nurse caring for seven ill infants was so busy she failed to hear an alarm when a baby stopped breathing. A parent dashed to the baby and stimulated breathing, the state report said.” [New York Times, 5/11/97]

- Hospital workers in Florida complained, “gloves come in only one size, and rip easily.” In addition, California employees protested “filthy conditions,” and being “stretched to the limit” as Scott’s company slashed “the ratio of nurses to patients.” [Money Driven Medicine, pg. 119]

In 2001, Scott would return to health care and the ‘McDonalds model,’ with a chain of urgent care clinics all over Florida. And as Tristam Korten explained in this two part series for Salon, it quickly replicated many of Columbia/HCA’s favorite business practices.

CBPP’s Sarah Lueck has put out a paper detailing how the weak regulations surrounding the state-based exchanges could allow insurers to potentially game the system and undermine the effectiveness of reform. The fear is that insurers will lure younger and healthier people into less regulated policies outside of the exchange structure. This would result in the same kind of “death spirals” that occurred “in the small-business health insurance purchasing alliances of the 1990s. If healthy people tend to buy low-cost insurance outside of the exchanges, the increasing proportion of sick people in the exchanges could force rates up and induce carriers to withdraw from them.”

Now, the law does create incentives for people to purchase coverage within the exchanges (i.e. premium credits are only valid in the exchanges) but it’s up to the states to ensure that healthier applicants are not going elsewhere. Lueck explains what states can do:

- States can ensure that the rules for markets outside the exchange and rules for the exchange are consistent.

- States can simply apply the same standards that HHS sets for qualified health plans offered in an exchange to plans offered in competing markets outside the exchange.

- States should also ensure that rules that affect plan pricing are the same inside and outside the exchange so individuals and small businesses looking for coverage will not pay more to enroll through an exchange.

- It will also be important for states to ensure that insurers do not pay insurance-broker commissions in ways that provide incentives for brokers to steer healthier, lower-cost enrollees into plans offered outside the exchanges, such as by furnishing higher fees or bonuses to brokers who direct healthy individuals in that way.

- At the very least, states (including those using a selective or competitive process to pick plans for an exchange) can require insurers outside the exchange to offer products in at least the Silver and Gold coverage levels, as they must do inside the exchange.

- In addition, states should bar insurers from offering only Bronze plans or only catastrophic plans (as defined by the Affordable Care Act) outside of the exchange.

Naturally, some states — like California — will adopt these changes, and many others won’t. The paper foresees a patchwork system akin to Medicaid where states have different quality, eligibility, and program sizes. The federal government can certainly improve the risk adjustment mechanisms or create incentives for states to adopt some of these rules, but at the end of the day, the success of the exchanges, like much else in the law, will rest with the states and their ability to fend off the insurance lobbyists.

Former McCain campaign aide, CBO Director, and current GOP policy intellectual Douglas Holtz-Eakin has a provocative editorial in Kaiser Health News in which he completely dismisses the notion that health insurers should be prohibited from deducting taxes that have nothing to do with providing health care services before calculating their medical loss ratios. To step back, the ‘federal tax’ issue has become what some consumer advocates have described to me as the defining battle in the MLR debate. Under the new health care law, insurers are required to spend 80% to 85% of premiums on health care and issue rebates to consumers if they fail to meet this threshold.

Insurers have seized on a single mention of “federal taxes” in Section 2718 of the health law — the section that deals with MLR — to argue that they should be allowed to exclude all federal taxes from their revenue (the denominator in the MLR ratio), a move that would save issuers millions of dollars and allow them to meet the MLR requirements without necessarily spending more on care. Democrats are disputing their claim and insisting that they did not intend for issuers to exclude all federal taxes — only those that pertain to health care. Judging by the tone of his op-ed, Holtz-Eakin believes that this is simply untenable:

To begin, there is no defense for including taxes in any measure of available resources as part of an MLR. Whether used to measure dollars available for payments for medical expenses or devoted to administrative costs, taxes are simply not available for those purposes and must be excluded – six chairmen notwithstanding.

Worse, including taxes raises the threat of damaging and inappropriately double taxation. Most health plans are required to pay federal income taxes as well as payroll taxes. If these taxes paid to the federal government are not excluded from the premium revenue, the health plans’ MLR will be paying a potential double tax or rebate on the same net income: first paying taxes to the federal government and then a rebate to consumers using the same dollars. Double taxation is wrong in principle and in practice may be the death knell for smaller insurers.

During the election, Pat and I closely monitored Holtz-Eakin’s television appearances and joked that, judging by the veracity of his answers, the man was about to implode and was in desperate need of a vacation. I think, regrettably, that the same may be true now.

First of all, broad taxes were not part of the MLR prior to the health law and using investment taxes as a subtraction from premium revenue is just a way to circumvent the intent of the law — which is to keep insurer profits in check until 2014 — without improving efficiency. Secondly, an MLR rebate Is not a tax. It is the act of returning money to the consumer that was not spend on providing health care services — the opposite of a tax.

Further in his piece, DHE complains that the law “federalizes the MLR and employs a blunt one-size-fits-all approach that does not permit review and fine-tuning of its impacts.” But this too completely ignores the fact that the National Association of Insurance Commissioners (NAIC) — the organization tasked with defining the MLR — has gone out of its way to fine tune the MLRs to deal with smaller plans and different plans and has allowed a wide variety of quality improvement expenses and a procedure for adding more!

Finally, DHE argues that in order to satisfy the new MLR requirements, insurers would have to take steps that “may disqualify policies’ grandfathered status and violate the Obama administration’s promise” of keeping what you have if you like it. But again, this too demonstrates a complete misunderstanding of the MLR. The easiest way to meet the new standards is by lowering cost-sharing, which actually increases the likelihood of retaining grandfathered status.

Yesterday, I argued that given the pressure Medicare spending places on the federal budget, Republicans would be crazy to repeal the cost controls in the health care law and would probably maintain some version of the IPAB board if they actually regain power. But the Minnesota Start Tribune reminds me that the sponsors of the kill-IPAB bill are two Republican lawmakers — Sen. John Cornyn (R-TX) and Rep. Phil Roe (R-TN) — whose constituents would probably face the highest cuts:

No surprise that Texas is where many of these higher-cost providers are clustered. A high concentration is also in Tennessee, home of Republican Rep. Phil Roe, author of the House companion bill to Cornyn’s legislation. Both politicians disingenuously pitch their bills as getting bureaucrats out of health care. In reality, the bills are all about protecting special interests back home. In doing so, these bills would obliterate one of the most promising proposals to date to get the deficit under control.

This is a good point that’s worth reiterating. The IPAB was designed to free lawmakers from having to make the kind of decisions that could reduce health care costs by cutting someone’s paycheck back home. (As the old adage goes, the difficulty in controlling health care spending rests in the fact that one man’s waste is another man’s profit.)

Reforms that change the payment structure and encourage providers to deliver care in new, more integrated ways, may be the future of health care, but they’ll likely force providers in the highest spending areas to take the biggest cuts. Under the law, the board’s reports become law unless Congress enacts its own proposals to achieve the same level of cuts. With hospitals insulated from any reductions until 2018, doctors’ payments are likely to get hit. And that’s exactly why Cornyn and Roe are speaking out.

Several conservative commentators, including Byron York in this morning’s Examiner, have argued that Democrats are turning their back on their signature domestic accomplishment and running away from the health care law they worked so hard and staked so much to pass. Here is York:

It’s no mystery why the party is in retreat. The public’s disapproval of Obamacare hasn’t changed in the last five months. The RealClearPolitics average of recent polls shows 52 percent of Americans oppose the new law, while 39 percent support it. A variety of pollsters — Rasmussen, CNN, Pew, and CBS News — all find significantly more opposition than support. And there’s not just opposition but enthusiasm for outright repeal. “Overall support for repeal has ranged from 52 percent to 63 percent since the law was passed by Congress in March,” writes Rasmussen.

The story might be even worse than that for Democrats. Everyone knows the public’s top issue is the economy. It has been since before Obama took office. So when the president and Democratic congressional leadership devoted a year to passing national health care, Republicans charged they were ignoring the public’s wishes. Now, when Democrats admit that Obamacare won’t cut costs or reduce deficits, they open themselves up to a more serious charge: they spent a year working on something that will actually cost jobs and make things worse.

York has a small point — Democrats aren’t exactly tripping over themselves to defend the new health care law. But they’re not running away from it either. Obama’s HHS has maintained a fairly open and publicly visible implementation process and has often held news conferences with lawmakers to tout its success. Just yesterday, Kathleen Sebelius traveled to Montana to hold a town hall meeting with Sen. Max Baucus (D-MT), and the Obama administration called on doctors to rally behind the law and educate their patients about it. Speaker Pelosi has been lobbying Democrats to run on reform since at least July, “urging them to hold town hall-type meetings to highlight the law’s benefits, in the belief it could help Democrats avoid major losses in November.” Last month, Democratic leaders circulated a memo “pressing members to host meetings with constituents during this week’s recess to underscore the benefits of the reform law.”

And it’s partly because of these efforts that public opinion seems to be turning in favor of reform. “A late-July Kaiser Family Foundation survey found that 50% of the public views the new law favorably, up 9 points from May, while the proportion of Americans who view reform unfavorably has dropped from 44% to 35% in the same period. In late June, more Americans (49%) told Gallup that the law’s passage was ‘a good thing’ than those who disapproved — the first time the law showed a positive result in Gallup’s survey.”

On Friday, the News & Observer in North Carolina reported that Blue Cross Blue Shield of North Carolina — the largest insurer in the state — would be increasing premiums to keep up with medical inflation and the requirements of the new health care law:

“With everything that’s been added, you can’t really expect costs to go down,” he said.

The situation isn’t likely to improve any time soon. As more provisions of the health overhaul law take affect in 2014, Blue Cross officials said they expect rates to rise further.

“We do expect significant premium volatility in 2014 as the industry moves to an entirely new rating structure,” said Patrick Getzen, Blue Cross’ chief actuary.

But aside from allowing dependent coverage and eliminating annual limits, BCBSNC is also taking early steps to implement other provisions of the health law. The company is starting to move people into a single risk pool and is slowly eliminating the rating bands that many insurers are so infamous for. That sounds good, but it means that younger people who now pay relatively little for individual policies will pay substantially higher premiums, with some rates going up as much as 30%.

Adam Linker, a policy analyst with the N.C. Justice Center’s Health Access Coalition, doesn’t think that policy holders should have to bear the brunt of the issuer’s decision to adopt early changes, particularly since they’ll have to pay higher premiums without the added benefit of the law’s subsidies or Medicaid expansion (both of which don’t begin before 2014). He believes that if BCBSNC wants to institute a policy of early compliance, then it should pay for these changes itself. After all, the issuer does has an unusually high amount of money set away in its reserves and could certainly afford it.

“I’d like to see insurers take a small hit now and then figure out what adjustments they need to make in 2014,” when federal subsidies will help the uninsured afford coverage, Linker said. At that point, health insurers also will get a boost in business from new members.

But what’s really interesting about this approach is that BCBSNC is trying to get its policyholders to pay for its early compliance efforts and any “premium volatility in 2014″ — the very same kind of “volatility” that early compliance is presumably designed to reduce. The problem is that the health care law provides many insurers with an easy scapegoat, even if actuaries have estimated that the initial provisions (dependent coverage and eliminating annual limits) would increase costs by as little as 1%. They can raise premiums higher and blame all the increases on the taxes and coverage provisions of the new health law.