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Under Questioning From Cantwell, Administration Official Reaffirms Commitment for Monday Release of Federal Basic Health Plan Guidance

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Location: Washington, DC

Today during a U.S. Senate Committee on Finance hearing, U.S. Senator Maria Cantwell (D-WA) received a commitment by President Obama's nominee for Administrator of the Centers for Medicare and Medicaid Services (CMS), Marilyn Tavenner, to release Monday a 2013 timeline for guidance on implementation of the Federal Basic Health Plan Option (FBHPO).

The release of this timeline is the first step laid out in a new Administration blueprint to launch the FBHPO in 2015. The Department of Health and Human Services (HHS) first unveiled this blueprint in a March letter to Cantwell.

Cantwell wrote the FBHPO into the Patient Protection and Affordable Care Act of 2010 and has advocated for its timely implementation. The FBHPO was supposed to launch in 2014, but HHS delayed its start by failing to provide implementation guidelines to states for 2014. The program encourages states across the country to adopt Washington state's successful model of managed care, which could cut costs for consumers and states.

In response to questioning by Cantwell, Tavenner, current Acting Administrator of CMS, also stated that the FBHPO is "innovative and it's obviously a cost-effective strategy as well."

"I recently received a letter from Secretary Sebelius saying that no later than April 15th of 2013 you would issue a timeline for guidance for how the program would be implemented as the law states," Cantwell said during today's hearing. "I mean as fully operational with states being able to receive 95 percent of the tax credit value in 2015. First I wanted to ask you, in general I wanted to ask you about your beliefs about the Basic Health Plan. What do you think is valuable about it and your commitment to that 2013, April 15th deadline?"

Tavenner responded: "Yes, we are committed to the April 15th deadline and I realize that's Monday. So we will have information to you then and we started to work informally with the states on this issue. And we certainly understand that the Basic Health Plan is an important piece of the Affordable Care Act. And so you have our commitment to implement by January."

In response to a later question from Cantwell about the FBHPO's importance, Tavenner said: "I think it gives states options for those states who want to try something innovative and it's obviously a cost effective strategy as well."

The Urban Institute projected in 2011 that there could be $1.3 billion per year in health care savings if enough states implement the FBHPO, by shifting eligible consumers above 138 percent of the federal poverty level to the program and saving their share of costs associated with lack of insurance. The study projected that Washington state could save $173 million per year.

Compared to the exchange, a consumer would pay far less in average annual out-of-pocket costs under the FBHPO: $96 compared to $434, according to 2011 estimates by the Urban Institute. Premiums would also be significantly cheaper: $100 under the FBHPO compared to $1,218 on the exchange. See related chart. The FBHPO could provide coverage to over 75,000 Washingtonians, according to 2011 estimates by the Urban Institute, and could also reduce the number of uninsured in the state by 15,000 more people than the exchange, due to its greater affordability.

The FBHPO gives states the option of providing coverage to a small segment of the population, those ineligible for Medicaid with incomes between 138 and 200 percent of the federal poverty level. Consumers with incomes between 200 and 400 percent of the federal poverty level would be eligible for insurance coverage on the state exchange. For states that choose not to implement the FBHPO, consumers with incomes between 138 and 400 percent of the federal poverty level would be eligible for insurance coverage on the exchange.

In recent months, Cantwell has been pushing Administration officials to explain why the program will not be implemented at the same time as state exchanges, as the law advises.

On February 13th, during a Finance Committee hearing, Cantwell questioned President Obama's Treasury Secretary nominee and former White House Chief of Staff, Jacob Lew, about the delay and urged him to help expedite its implementation. The following day, February 14th, during another Finance Committee hearing, Cantwell questioned an HHS official on the agency's support of the program.

Modeled after Washington state's successful Basic Health Plan, the FBHPO enables states to negotiate directly with health insurers to provide high-quality health care coverage at a lower cost to those ineligible for Medicaid but unable to afford the cost of private insurance. Money that would otherwise go to these individuals for cost-sharing and subsidies on the exchange would go to cover the FBHPO-eligible population. Washington's state-funded program has successfully operated for more than two decades, providing quality and cost-effective managed care to qualified participants.

A complete transcript of Cantwell's entire exchange with Tavenner today follows:

Senator Maria Cantwell: Thank you Mr. Chairman. Ms. Tavenner, great to see you. Thank you for our previous conversations. You know I've been very concerned about the failure to implement the Basic Health Plan as part of 2014. I recently received a letter from Secretary Sebelius saying that no later than April 15th of 2013 you would issue a timeline for guidance for how the program would be implemented as the law states. I mean as fully operational with states being able to receive 95 percent of the tax credit value in 2015. First, I wanted to ask you, in general I wanted to ask you about your beliefs about the Basic Health Plan. What do you think is valuable about it and your commitment to that 2013, April 15th deadline?

Marilyn Tavenner: Yes, we are committed to the April 15th deadline and I realize that's Monday. So we will have information to you then and we started to work informally with the states on this issue. And we certainly understand that the Basic Health Plan is an important piece of the Affordable Care Act. And so you have our commitment to implement by January.

Senator Maria Cantwell: What do you think is so important about it?

Marilyn Tavenner: I think it gives states options for those states who want to try something innovative and it's obviously a cost-effective strategy as well.

Senator Maria Cantwell: So you think it save money?

Marilyn Tavenner: I think it certainly can. But I think that's not the only reason for doing it. But I think it's an important reason. I think it can also provide a coordinated approach and quality care to…

Senator Maria Cantwell: Managed care. Is that what you're saying? When you said coordinated care, you mean managed care?

Marilyn Tavenner: No I mean coordinated care but…

Senator Maria Cantwell: Okay. We'll look forward to seeing those guidelines then by next Monday. Just to be clear the Basic Health Plan for individuals -- so let's take somebody who's making just over 17,000 dollars a year who applies for this. They would save about 1,161 dollars in health care costs for an individual. So that versus the exchange -- huge savings for the individual. The Urban Institute says that if all states implemented this, this is a report that they did in 2011, if all the states implemented this, we would save 1.3 billion dollars a year. So there's obviously a lot at stake for the federal government in the savings and individual states. For example, our state would save something like 173 million dollars per year, this is the Urban Institute who has done this analysis. What we've accomplished here is to be able to bundle up that population that is just above the Medicaid rate, bundle them up and make them interesting where insurers weren't interested in them before. And the success of that is we are able to get a better rate for individuals and to get a better, obviously, cost-effective rate both for providers, and that's why they have participated, and to get a cost-effective rate for us, the tax payers. I'll certainly look forward to seeing that on Monday. I certainly would love to support your nomination throughout the process but definitely want to see this information. So thank you very much.


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