Health Care Reform Memo: June 15, 2009

A Deloitte Center for Health Solutions publication

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.

President stumps for health reform in Green Bay; calls for Medicare and Medicaid cuts to fund reform

Thursday, President Obama told his Wisconsin audience that health reform is his number one domestic priority and strongly promoted a subsidized public plan and a national health insurance exchange. In his most definitive statement to date, the President said a public plan is necessary to create competition for commercial plans and an insurance exchange is one way to reduce administrative costs.

In his radio address Saturday, the President suggested budget cuts of $313 billion for Medicare and Medicaid in addition to his previously announced $634 billion health reform reserve fund to pay for health reform. The $947 billion total is expected to fall short of what analysts say might be its $1.2-$1.5 trillion price tag over 10 years. Other funding options are still on the table according to the White House, including taxing workers in higher income categories for the value of their health benefits above the cost of standard coverage ($162 billion generated over 10 years) or possibly eliminating or limiting the employer tax exclusion ($418 billion over 10 years).

NOTE: In the February 26 proposal for a health reserve fund, the White House suggested limiting the benefit of itemized deductions for American’s earning above $250,000, cuts by Medicare to Medicare Advantage Plans (Part C), increased rebates from pharmaceutical companies, and savings from avoidable hospital admissions.

Baucus, Conrad introduce comparative effectiveness bill

Tuesday, June 9: The “Patient Centered Outcomes Research Act of 2009” was introduced by Senator Max Baucus (D-MT), Chair of the Senate Finance Committee, and Senator Kent Conrad (D-ND), Chair of the Senate Budget Committee, to amend Title XI of Social Security Act and amend the Internal Revenue Code. It creates a non-profit organization called the Patient Centered Outcomes Research Institute “to assist patients, clinicians, purchasers, and policy makers in making informed health decisions by advancing the quality and relevance of evidence concerning the manner in which diseases, disorders, and other health conditions can effectively and appropriately be prevented, diagnosed, treated, monitored, and managed through research and evidence synthesis that considers variations in patient sub-populations, and the dissemination of research findings with respect to the relative clinical outcomes, clinical effectiveness, and appropriateness of the medical treatments, services…”.

NOTE: In the stimulus package (ARRA, February 17, 2009), $1.1 billion was designated for the development of a Comparative Effectiveness Research program. A 15-person panel with representation across most federal health agencies will issue its advisory to HHS Secretary Kathleen Sebelius later this month to suggest a mechanism for its implementation. On November 18, 2008, Senator Baucus introduced his “Call to Action” health reform plan that included creation of a new private entity, the Institute for Comparative Effectiveness Research, noting the need to reduce inappropriate variation and costs associated with non-adherence to evidence-based practices.

Kennedy’s American Health Choices Act provides baseline for subsequent bills

The 673-page bill circulated last week includes several notable features to which forthcoming bills from Senate Finance Chair Max Baucus and others are likely to be compared:

Individual mandate: Yes, with subsidies for the poor.
Public plan: Yes, with subsidies on a sliding scale up to 500 percent of the federal poverty level (FPL); immigrants not eligible.
Medicaid reform: Eligibility increased to 150 percent of the FPL with eligibility based solely on income rather than other factors.
Children’s Health Insurance Program eligibility: Increases eligibility from 18 to 26 years of age.
Insurance reform: Yes, through a national insurance exchange.
Comparative Effectiveness program: Yes, through a non-government agency with authority to oversee review of diagnostic and therapeutic discovery and recommend coverage to Medicare, Medicaid and the new public plan.
Federal Health Board: Yes, with oversight power.

House Democrats’ reform outline released

Last week, the Chairs of the three key committees responsible for a health care bill (Rep. Rangel (D-NY) of Ways and Means, Rep. Miller (D-CA) of Education and Labor, and Rep. Waxman (D-CA) of Energy and Commerce) released a four-page outline of their thoughts about a bill they’ll introduce later in June. It parallels the Kennedy bill in almost every feature with the notable difference of a lower threshold for the public plan—at 400 percent of the FPL compared to the Kennedy proposal at 500 percent of the FPL.

“Meaningful use" expected to be clarified this week

Much anticipated clarity about the "meaningful use" of electronic medical records will be provided Tuesday, June 16, by the HIT Policy Committee according to John Glaser, senior special advisor at the Office of the National Coordinator for Health Information Technology (ONCHIT). If the panel approves the recommendation, it will be submitted to ONCHIT for evaluation.

Medicare prescription drug program popular with seniors, enrollment growing

26 million seniors participate in Medicare’s prescription drug program (Part D) including nine million in Medicare Advantage programs. Recently released data suggest the Medicare Modernization Act (MMA) is costing less than budgeted and enrollee satisfaction is high. Among reform issues will be elimination of the “doughnut hole” in coverage, but in all likelihood the program will remain intact.

House, Senate approve tobacco industry regulation by FDA

Following the Senate’s 79-17 vote to impose Food and Drug Administration (FDA) oversight of the tobacco industry, the House voted Friday 307-97 to approve a near-identical measure to regulate the $89 billion industry and treat tobacco as a drug. The legislation gives the FDA widespread authority to regulate the advertising, marketing and manufacturing of tobacco products, such as increased labeling requirements to disclose health risks, elimination of the use of flavor enhancements and other ingredients (like cherry-flavored cigars) that attract first-time smokers, and others.

NOTE: In the FY10 budget, the FDA budget was increased $3 billion with the anticipation it would take on tobacco regulation and approve bio-similars as part of its overhaul.