Health Care Reform Memo: August 10, 2009

A Deloitte Center for Health Solutions publication

Health Care Reform Memo: August 10, 2009 The health care reform memos are issued on a weekly basis, highlighting news from the previous week's activities in the new administration and implications for the C-suite and various stakeholder groups.

Co-op model is focus of Senate Finance alternative to public plan option; adjourns for recess without offering bill

The Senate Finance Committee adjourned for the August recess Friday without announcing its bill despite a meeting late last week with President Obama to resolve outstanding issues. A key focus is the co-op option, an alternative to the public plan favored by the White House and included in the House and Senate Committee on Health, Education, Labor and Pensions (HELP) bills. Senate Budget Chairman Kent Conrad (D-ND) favors the co-op option citing Group Health Cooperative (WA) as a model. He proposes a state-run network of co-ops serving 500,000 covered lives each with initial federal funding of $6 billion. Despite opponents’ suggestions that co-op models have a limited track record in health care, Senate Finance Chairman Baucus (D-MT) appeared to throw his support behind the co-op alternative.

Areas of Senate Finance Committee potential agreement appear to be:

Use of health insurance cooperatives in lieu of a public insurance option—state-run, targeted enrollment of 500,000 in each
Health insurance industry regulation—no pre-existing conditions, changes in risk-rating policies and procedures
Employer pay-or-play mandate (6-8 percent of payroll for companies above 25 employees in one proposal; others pending)
Individual mandates (though the amount and funding of subsidies is still being debated)
Expansion of Medicaid eligibility to 133 percent of the federal poverty level (FPL) with federal funding provisions to assist states
A new 35 percent tax on “gold plated” insurance plans (applied to policies above $21,000 for family and $8000 for individuals)
Changes in Medicare payments in line with overall needs for slower expenditure growth (to be overseen by an Independent Commission; expected to include co-payments for clinical lab procedures and increased premiums for wealthier seniors)
A $2,000 cap on flexible savings accounts (current flex accounts have no limit)

Public option in non-competitive markets: AMA analysis

The House Tri Committee bill (HR 3200) includes a provision for a public option the President believes necessary to stimulate competition among plans. An American Medical Association (AMA) study found that a single insurer controls more than half the market in 16 states and a third of the market in 38 states.

HR 3200 public option: CBO assessment

The Congressional Budget Office (CBO) says the HR 3200 public option would save $150 billion over 10 years and cover 10 million of 30 million eligible—mostly employees of small businesses and individual policy-holders.

IT Update: 45-65 grants available to accelerate workforce HIT career pathways

The Department of Labor announced $220 million in grant funds, authorized by the American Recovery and Reinvestment Act (ARRA), to provide training and placement services in health care (Nursing and Allied Health professionals) and health information technology (HIT). Specifically, the Employment and Training Administration (ETA) is "interested in projects that design state-of-the-art training and support progression in career pathways for the health information workforce using a variety of learning strategies for individuals who want to specialize in the management of health information, as well as workers who must use HIT to perform the duties of their job”. Proposed projects must provide direct training and/or education, placement, and related activities that prepare individuals for employment. ETA intends to fund 45-65 grants ranging from approximately $2-5 million and will not accept grant applications exceeding $5 million. Eligible applicants are public entities or private nonprofit entities.

CMS announces 2.1 percent increase for hospitals

Last Monday, CMS announced it will pay hospitals a 2.1 percent increase in FY10, according to the fiscal year 2010 inpatient prospective payment system (IPPS) final rule. Previously, CMS had proposed a documentation and coding adjustment to account for the "effect of increases in aggregate payments due to changes in hospital coding practices that do not reflect increases in patient's severity of illness” resulting in a 1.9 percent cut.

Quotable

“There are lots of valid criticisms that can be made against the health reform plans moving through Congress – I've made a few myself. But there is no credible way to look at what has been proposed by the President or any congressional committee and conclude that these will result in a government takeover of the health care system. That is a flat-out lie whose only purpose is to scare the public and stop political conversation. First of all, that's not a trillion every year, as most people assume – it's a trillion over 10 years, which is the silly way that people in Washington talk about federal budgets. On an annual basis, that translates to about $140 billion, when things are up and running. Even that, however, grossly overstates the net cost to the government of providing universal coverage. Other parts of the reform plan would result in offsetting savings for Medicare: reductions in unnecessary subsidies to private insurers, in annual increases in payments rates for doctors and in payments to hospitals for providing free care to the uninsured. The net increase in government spending for health care would likely be about $100 billion a year, a one-time increase equal to less than 1 percent of a national income that grows at an average rate of 2.5 percent every year.”

– Steven Pearlstein, Columnist, Wall Street Journal, Friday, August 7, 2009

Fact file: Canadian consumers more satisfied with their system than U.S. consumers

	All Canadian Adults 18+ N = 2,304	All U.S. Adults18+ N = 4,001
Overall, how would you grade the performance of the Canadian/US Health system: A, B, C, D, F?	A/B: 43.1 percent D/F: 14.9 percent	A/B: 20 percent D/F: 38 percent
How well do you think you understand how the Canadian/US health care system works? (1-10 scale with 10 highest)	8-10: 37 percent	8-10: 27 percent

Sources: 2009 Survey of U.S. Health Care Consumers, Deloitte LLP and 2009 Survey of Canadian Health Care Consumers, Deloitte Canada

C-Suite action items

All stakeholders: Ongoing briefings about health reform and potential implications for business should be held. It is likely a bill will be debated in both houses in September and a final bill proposed in November.

Health care providers: Hospitals should investigate workforce IT training grants for possible participation. In addition, hospitals and medical staffs should develop pilot programs around key diagnoses (hip replacement, CABG, others) to evaluate optimal coordination of care under an episode-based payment model.

Health plans: The likely impact of increased regulatory oversight combined with employer benefits design changes and cuts in Part C payments suggests a need for strategic planning to assess (1) potential for retail strategies, (2) development of enhanced services such as concierge services and others, (3) implementation of value-based purchasing options for employers and individuals, and (4) strategies to support episode-based payments to providers.

Employers: Design of health benefits programs to increase price sensitivity of enrollees and encourage value-based purchasing by plans should be reviewed.

Life science companies: FDA regulatory reforms should be watched carefully as well as its administrative overhaul.