First Edition: July 2, 2014

Today's early morning highlights from the major news organizations, including reports about a new audit's findings that the health law's online insurance marketplaces did not adequately screen applicants seeking subsidies:

Kaiser Health News: Mountainous Backlog Stalls Medi-Cal Expansion In California
Helen Shen, writing for Kaiser Health News in collaboration with the San Jose Mercury News, reports: "A massive backlog of Medi-Cal applications is well into its third month, and California officials have provided little information about how and when the largest such bottleneck in the nation might be cleared. The California Department of Health Care Services in Sacramento first reported 800,000 pending applications in April. By May, that number had grown by 100,000 and has not budged much since" (Shen, 7/2).

The New York Times: Eligibility For Health Insurance Was Not Properly Checked, Audit Finds
An independent audit of insurance exchanges established under the health care law has found that federal and state officials did not properly check the eligibility of people seeking coverage and applying for subsidies, the latest indication of unresolved problems at HealthCare.gov. In a report to Congress on Tuesday, the inspector general for the Department of Health and Human Services, Daniel R. Levinson, said that the exchanges, which enrolled eight million people, did not have adequate safeguards "to prevent the use of inaccurate or fraudulent information when determining eligibility" (Pear, 7/1).

The Wall Street Journal: Reports Fault Controls Of Health Exchanges
The federal health exchange and some state exchanges had problems resolving inconsistencies on applications and making sure people were eligible for their insurance plans, according to two inspector-general reports released Tuesday. The problems plagued the exchanges in the early rollout of the Affordable Care Act last fall. Between October and December, the federal exchange was unable to resolve about 90% of data inconsistencies on insurance applications-;2.6 million of 2.9 million-;because the system for determining eligibility didn't work, according to one of the reports by the Department of Health and Human Services' inspector general (Armour, 7/1).

The Washington Post: Health-Care Exchanges Are Not Properly Ensuring Applicants' Eligibility, Probe Finds
A pair of reports, issued Tuesday by the Department Health and Human Services' Office of Inspector General, conclude that "internal controls" for evaluating applications were not always effective at verifying people's Social Security numbers, their citizenship, and whether they are eligible to buy health plans through the marketplaces because they cannot find affordable insurance elsewhere (Goldstein, 7/1).

Los Angeles Times: Federal Audit Faults California Exchange For Lax Enrollment Practices
Federal auditors found that California's health insurance exchange was lax at times in verifying consumers' eligibility for Obamacare coverage. The report issued Tuesday by the Inspector General's Office at the U.S. Department of Health and Human Services also cited the federally-run exchange and Connecticut's insurance marketplace for similar deficiencies. Auditors said lax internal controls may have limited the exchanges' "ability to prevent the use of inaccurate or fraudulent information when determining eligibility of applicants for enrollment" (Terhune, 7/1).

Politico: Big Cyber Hack Of Health Records Is 'Only A Matter Of Time'
The health world is flirting with disaster, say the experts who monitor crime in cyberspace. A hack that exposes the medical and financial records of tens of thousands of patients is coming, they say -; it's only a matter of when. As health data become increasingly digital and the use of electronic health records booms, thieves see patient records in a vulnerable health care system as attractive bait, according to experts interviewed by POLITICO. On the black market, a full identity profile contained in a single record can bring as much as $500 (Pittman, 7/1).

Politico: Waste, Errors In Health Care Remain Huge Issues, Experts Agree
Despite health care industry concerns about wasteful and unnecessary care, it's nearly impossible for patients to overrule their doctors when they think they're getting a procedure they don't need, a prominent patient care advocate argued Tuesday. "I've had four unnecessary EKGs," Daniel Wolfson, executive vice president of the ABIM Foundation, said at a POLITICO Pro Health Care breakfast briefing at the Newseum. "I think it's an uphill battle for the patient to talk a physician out of a procedure." Overtreatment and preventable medical errors are huge drivers of health care costs and lead to thousands of unnecessary deaths every year, but action to reverse both continues to lag, noted Leah Binder, CEO of The Leapfrog Group, a health safety advocate that represents employers (Cheney, 7/1).

The Wall Street Journal: After Hobby Lobby Ruling, Contraception-Coverage Alternatives Face Hurdles
Two options the Supreme Court floated to extend contraception coverage after its Hobby Lobby ruling face steep opposition from religious groups and women's-rights advocates, setting up a clash over how regulators rework the contraception-coverage requirement. ... Many observers took the opinions as signaling courses available to the Obama administration. It will likely have to issue regulations tweaking the contraception rule to allow some employers to opt out, and to enable their workers to obtain coverage another way. The compromise arrangement that involves passing responsibility to an insurer, however, is considered unacceptable by religious groups (Radnofsky, 7/1).

The Wall Street Journal: Setbacks Cast Cloud Over Obama's Second Term
The demise of immigration legislation for the year and a Supreme Court decision creating a religious exception to the health-care law are the latest setbacks casting clouds over President Barack Obama's agenda (McCain Nelson and Lee, 7/1).

Los Angeles Times: Democrats Pick Up GOP Tactic: Campaign Against Supreme Court
Half a century ago, Richard M. Nixon and other Republicans boosted their political prospects by running against the Supreme Court. Now it's President Obama's turn. Within hours of the high court's decision Monday that at least some companies can use religious rights to exempt themselves from paying for health insurance covering contraceptives, Democrats were seeking to energize voters, raise money and attract support by highlighting the case (Lauter, 7/1).

The Washington Post: Robert McDonald, Obama's VA Nominee, Faced Own Challenges At Procter & Gamble
Robert A. McDonald's last big challenge was to push a proud, slow-moving and sometimes bureaucratic company to change. He resigned under pressure as chief executive of Procter & Gamble amid criticism from investors and former executives that he wasn't moving fast enough. Now McDonald is President Obama's choice to run the Department of Veterans Affairs. His new job: Push a proud, but battered, slow-moving bureaucracy to change (Jaffe and Mufson, 7/1).

The Associated Press: New VA Secretary Nominee Not A Health Care Expert
Veterans groups worry that the longtime corporate executive, nominated by President Barack Obama to lead the VA, may have trouble adjusting to a far-flung bureaucracy of more than 300,000 employees, where hundreds of hospital directors and other career executives wield great power far from the agency's Washington headquarters. "Procter & Gamble is going to feel like a Ferrari compared to the VA," said Paul Rieckhoff, CEO of Iraq and Afghanistan Veterans of America (Daly, 7/2).

The Washington Post: Poll: Most Veterans Say Getting Access To VA Care Is Difficult
More than half of American veterans say it is "very" or "somewhat" difficult to get access to health care through a Department of Veterans Affairs facility, according to a new Gallup poll released Tuesday (Sullivan, 7/1).

Politico: Veterans Poll: Most Say VA 'Difficult'
A majority of veterans say they find it difficult to access medical care through the Department of Veterans Affairs, according to a new poll from Gallup. Asked to rate their opinion of the VA's medical care, 55 percent of veterans polled said it was either "very difficult" or "somewhat difficult" to access services made available by the embattled federal department. Thirty percent of respondents said they find it very or somewhat easy to access VA care, and 14 percent had no opinion (Sneed, 7/1).

NPR: VA Offers Doctor's Appointment To Man Who Died In 2012
Nearly two years after her husband died, a Massachusetts woman received a letter saying that a Veterans Affairs hospital was ready to see him. Suzanne Chase's husband, Doug, was a Vietnam veteran who died of a brain tumor; the agency is apologizing over the mistake (Chappell, 7/1).