As the new head of CMS, Donald Berwick will play a pivotal role in implementing this year’s sweeping health care overhaul. Berwick’s selection to run the agency is “probably the most significant domestic-policy personnel decision in a generation,” according to a Wall Street Journal editorial writer.

However, the White House’s decision to use a recess appointment to install Berwick at CMS has complicated matters. The appointment allowed the White House to get a key official in seat and avoid a potentially bruising Senate confirmation battle, which Republicans were expected to use as “a proxy for the entire health care overhaul,” CQ Today reports. At the same time, the decision has provoked a share of the hearings’ expected controversy, reigniting debate on the reform.

Even without the controversy, Berwick would have had his hands full as a high-profile nominee to head a high-profile agency — with CMS’ $800 billion-plus annual budget larger than all but 15 of the world’s economies. The reaction to the recess appointment further forces Berwick to navigate political winds while trying to implement new policies. Moreover, Berwick may have fewer than 18 months to head CMS, which sets up further questions for health reform implementation, and he could face added opposition when reporting to Congress on reform’s rollout.

Berwick Known for Health Care Provider Reforms

Berwick, who reportedly agreed to be the CMS nominee last year if Obama was able to win passage of his health overhaul, had been best known for co-founding the Institute for Healthcare Improvement in 1991. IHI aims to identify best practices by implementing pilot projects and convening teams of hospital-based care providers to collaborate and improve outcomes for problems ranging from asthma to hospital-acquired infections. Through IHI’s website, providers can enroll in two- to four-month Web-based courses to learn best practices and share experiences. The group also launched a campaign aimed at saving 100,000 lives per year by standardizing hospital procedures.

Policy analysts expect Berwick to press health care providers on quality, safety and utilization. Berwick also has discussed the need to “bring total spending on health care down…way down,” CQ HealthBeat notes, with Berwick in December 2009 challenging hospitals and health systems to reduce “total resource consumption” by 10% across three years.

Importance of Political Appointee

Berwick is the first appointed head of CMS in nearly four years; the agency had relied on acting administrators since Mark McClellan resigned in October 2006.

That lack of political leadership complicated health care industry groups’ efforts to work with CMS on policy changes, according to Alexander Vachon, a health care consultant and former Senate Finance Committee staffer.

Political appointees also have added authority to change the agency given they wield the “perception and reality of having the president’s…support,” Thomas Scully, who was CMS’ Senate-confirmed administrator between 2001 and 2003, told California Healthline. While acknowledging the expertise of CMS’ cadre of career staff, Scully noted that a political appointee is more free to make radical decisions that shift policy or break from tradition, citing his unconventional approach to securing payment for drug-eluting stents in 2001. Providers had worried that they would lose millions of dollars buying the stents — which were on track for FDA approval — while waiting as long as one year for CMS to set Medicare and Medicaid reimbursement rates. Under Scully, CMS quickly created new payment codes for the stents and shifted practice with devicemakers to expedite future decisions. The agency also took the unusual step of reviewing drug-eluting stent prices in Europe before setting U.S. payment rates.  

Berwick will have to make his own share of difficult decisions, such as balancing $400 billion in planned cuts to Medicare spending with initiatives to sustain the program and improve outcomes. He also will play a pivotal role in launching the new Center for Medicare and Medicaid Innovation, which will help shape the long-term trajectory of the U.S. health care system. The challenges now facing CMS call for thoughtful reforms, and “Berwick is as good as anybody” in thinking through transformative changes, according to Bob Berenson, senior fellow at the Urban Institute.

Recess Appointment Complicates Long-Range Planning

Although Berwick will have all the powers of a permanent appointee, he can serve only until the end of the 111th Congress in 2011. He then must be re-nominated and confirmed by the Senate. The White House did re-submit Berwick for Senate confirmation this week, which would allow him to serve a term at Obama’s discretion, but the submission was “just a formality,” according to an administration spokesperson.

While recess appointments have been on the rise since President Clinton — seen as an outgrowth of an increasingly partisan Congress — many appointees ultimately serve out their term without being confirmed. The closest recent analogue to Berwick may be John Bolton, who in 2005 — amid heavy scrutiny of the nation’s foreign policy — was installed as the U.S. ambassador to the United Nations via recess appointment. With congressional Democrats criticizing the move, Bolton never received a Senate hearing and left his position after 17 months.

Former CMS administrator Gail Wilensky warns that by waiting to nominate Berwick until April and using the recess appointment this month, the White House “for sure, limited [Berwick’s] tenure to 17 months.”  Wilensky adds that the shortened term could restrict Berwick’s ability to execute quality improvement initiatives because he will be focused on implementing the new reform law.

Meanwhile, Vachon notes that Berwick’s “quickest way to build bridges” with Congress — as many  members, disgruntled over the lack of confirmation hearings, may plan on using future hearings with CMS to grill Berwick on allegations that he supports rationing care — is to be receptive to members’ requests for local favors. “The best thing he can do is return those calls within 10 minutes,” Vachon adds.

As Berwick settles in, here’s a look at what else is making health reform news.

On High-Risk Pools

• On Monday, Connecticut Gov. M. Jodi Rell (R) announced that the state will proceed with its plans to administer its own high-risk insurance pool for residents with pre-existing conditions, using $50 million in federal health reform funds. On July 1, Rell sent a letter to state health officials asking them to defer executing contracts with the federal government for the state’s pool amidst concerns that premiums for eligible state residents might be excessive. The state’s insurance and social services departments then developed a schedule of lower rates in collaboration with the federal government. The new rates are 35% lower than previously projected. Connecticut will begin accepting applications for the pool on Aug. 1, with coverage beginning as early as Sept. 1 (Gosselin, Hartford Courant, 7/19).
• Blue Cross & Blue Shield of Rhode Island will administer the state’s new high-risk insurance pool for residents with pre-existing medical conditions who have gone without coverage for at least six months. The high-risk pool, which is a key component of the new health reform law, would cover such residents until 2014, when a separate provision of the reform law will prohibit insurers from denying coverage to those with pre-existing conditions. The not-for-profit insurer will begin administering $13 million in federal funding for roughly 500 Rhode Island residents beginning Aug. 15 (Salit, Providence Journal, 7/12).
• Two health insurers have submitted bids to run Michigan’s new high-risk insurance pool. The insurers, Priority Health and Physicians Health Plan of Mid-Michigan, are subsidiaries of Spectrum Health and Sparrow Health System, respectively. Both insurers are proposing to serve counties where they do not currently have state authority to sell plans. State officials hope the selected insurer will begin enrolling individuals later this summer (Anstett, Detroit Free Press, 7/8).

In Other State Reform News

• Maine Insurance Commissioner Mila Kofman became the first state insurance commissioner to seek an exemption for her state from the medical-loss ratio rules contained in the new health reform law. The rules, which are scheduled to take effect Jan. 1, stipulate that large group plans must spend 85% of premiums on medical services and quality improvement and that small group plans must spend 80% on the services. Kofman wrote in a letter to HHS Secretary Kathleen Sebelius that the state market already is highly regulated and that the MLR rules could “have a serious destabilizing effect in our individual market” (Adams, CQ HealthBeat, 7/12).
• Some Massachusetts insurance brokers say that small businesses, faced with rising health costs, are dropping insurance coverage for employees and encouraging them to enroll in state-subsidized coverage programs. According to the brokers, the businesses dropping coverage tend to offer sufficiently low wages to qualify their workers for state subsidies for insurance. Meanwhile, employers likely would spend less to pay the state penalty for not covering their workers — roughly $295 annually per employee — than to pay several thousands of dollars more in premiums. However, Massachusetts officials say that they have yet to see evidence that dropping of coverage is a trend (Lazar, Boston Globe, 7/18).

On the Hill

• Last week, Sen. Mike Johanns (R-Neb.) introduced legislation (S 3578) that would repeal a requirement in the new health reform law that forces businesses to use 1099 forms to report purchases of goods totaling more than $600. The bill is a response to a recent report by the National Taxpayer Advocate that warned the provision “may present significant administrative challenges to taxpayers and the IRS.” According to Johanns, the measure would increase the number of 1099s filed by the average small business from 10 to more than 200 annually (Lillis, “Healthwatch,” The Hill, 7/14).
• Also last week, the House passed a measure (HR 5712) by voice vote intended to clarify several Medicare and Medicaid provisions included in the new health reform law. The legislation would allot $95 million to CMS for retroactively reprocessing claims affected by the overhaul, allow a new payment system for skilled nursing facilities and enact other changes. The bill’s cost would be offset by an annual reduction in funding for the Medicare Improvement Fund, which financially supports Medicare hospital and physician service improvements. The Congressional Budget Office has estimated that the bill would reduce the deficit by $12 million over a decade (Jarlenski/Symes, CQ Today, 7/14).

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