Health Care Reform Memo: September 28, 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.

Senate Finance Committee deliberation likely to stretch into October

At 11:53 a.m. Friday, after meeting for 35 hours over four days, the Senate Finance Committee adjourned having considered 50 of 564 amendments members had proposed during the markup. The Chairman’s mark came to the committee Tuesday morning with more than 100 changes from the version circulated late last week, including slightly reduced cuts to Medicare Advantage programs and an increase to 40 percent for the insurance surtax on “Cadillac” plans combined with language excluding union workers, miners, and retirees. Among the more notable votes last week were:

• Amendment by Sen. Jay Rockefeller (D-WV) to create a Congressionally appointed independent commission to review and set payment rates for Medicare PASSED with two Republican Senators joining Democrats in support.
• Amendment by Sen. Bill Nelson (D-FL) to increase rebates by drug companies to Medicare paralleling rebates in Medicaid FAILED 13-10 with three Democrat Senators joining Republican members in opposition. Note: the $80 billion deal between the White House and PhRMA is viewed by key Senate staffers as the industry’s participation in cost reduction. The Nelson amendment would have doubled the drug industry’s cost reduction.
• Amendment to eliminate the individual mandate on constitutional grounds proposed by Sen. Jim Bunning (R-KY) FAILED along party lines 13-10.

The committee will resume deliberation Tuesday after Yom Kippur. The headline issue will be debate about the public option. Senators Schumer (D-NY) and Rockefeller (D-WV) wish to replace the co-op with a strong public option. Citing consensus among party leaders that a bipartisan bill is not likely, Democrats believe a bill with a public option has a better chance of passage in the Senate by a majority than without. However, a few Senate Finance Committee moderate Democrats, including Sen. Blanche Lincoln (D-AR), Sen. Kent Conrad (D-ND) and Sen. Baucus (D-MT), might vote with Republican members to keep the public option out of the Finance bill.

NOTE: In the past week, three major labor unions weighed in on the public option: the AFL-CIO says its members will reject a bill lacking a public option, while the Teamsters and SEIU indicate they might accept a bill that achieves increased access to affordable insurance without a public option.

Deloitte Center for Health Solutions Pulse Survey: Half are familiar with the public option

How familiar are you with the following health reform terms and what they mean? (percent very familiar)

(Telephone survey of 1,010 U.S. adults September 10-13, 2009, 3.1 percent error margin at .95 confidence interval)

CBO analysis: Public option tied to Medicare rates will reduce Medicare costs $85 billion over ten years

Thursday, the Congressional Budget Office (CBO) advised that a public plan option linked to Medicare rates (up to five percent above Medicare rates) would save $85 billion over ten years. Moderate Democrats and Republicans are concerned that a “big” public plan tied to Medicare rates would drive providers out of business and erode quality.

AHRQ Study: Hospital admissions

Thursday, the Agency for Healthcare Research and Quality (AHRQ) released a report comparing discharge data from 1,000 hospitals in 40 states in 2007. Compared to 1997 data, the agency noted declines for coronary heart disease (-31 percent), cerebrovascular disease (-15 percent) and heart attacks (-10 percent). However, increases were noted for osteoarthritis hospitalization for degenerative joint disease with a high incidence of total joint replacement (+95 percent), septicemia or serious bacterial infections in blood (such as MRSA) (+63 percent), non-specific chest pain (+47 percent), and mood disorders, such as depression and bipolar disorder (+21 percent).

For 2007, the top ten are:

1. Pneumonia
2. Congestive heart failure
3. Coronary atherosclerosis
4. Osteoarthritis
5. Non-specific chest pain
6. Mood disorders
7. Cardiac dysrhythmias
8. Septicemia
9. Disorders of vertebral discs and bones in the spinal column
10. Heart attack

NOTE: the significance of these is the likelihood they will be the focus of bundled payments (episode-based payments) to hospitals likely in the reform bill.

Outcomes-based payment for physicians proposed

Last week, a bipartisan coalition of 26 Senators sent a letter to the White House urging that it "realign spending in the Medicare program to focus on providing more value to beneficiaries." Led by Sen. Maria Cantwell (D-WA), the proposal would change the payment formula to a ratio of quality to cost—and not quantity—beginning in 2015. Outcomes would be the primary focus of the model with consideration for rural and underserved populations also factored in.

Humana Medicare Advantage communication to its enrollees prompts investigation, draws criticism of Senator Baucus

Friday, September 11, acting Director of the Centers for Medicare and Medicaid Services (CMS) Center for Drug and Health Plan Choice Jonathan Blum launched an investigation into Humana’s communications to its Medicare Advantage enrollees. The investigation’s focus is the plan’s possible violation of marketing rules involving letters to enrollees in Michigan, Florida and other states urging them to contact lawmakers to voice opposition to proposed cuts in the Part C program. A specific focus is Humana’s online Partner program that automatically drafts letters to lawmakers from constituents. CMS requested the company cease mailings and shut down the website.

Medicare Advantage plans bundle physician and hospital coverage with extra benefits (vision, dental, coverage prescription drugs, disease management, etc.). Medicare pays plans 14 percent more than traditional Medicare rates to cover these additional services. February 26, President Obama proposed cuts to Medicare Advantage of $177 billion over 10 years as a down payment on health reform. The Senate Finance Committee bill includes a $123 billion cut. Cuts to Medicare Advantage plans are viewed by Congressional Democrats an important mechanism for funding health reform.

"[Humana's] tactics do a disservice to beneficiaries by spreading false claims about such an important bill in Congress. Cutting the fat from the profits of private health plans that deliver Medicare is the best way to ensure the sustainability of the program and preserve the Medicare benefits seniors depend upon." (Senator Max Baucus 9/18/09)

Humana enrolls 1.4 million Medicare Advantage members and is the second-biggest provider of the plans behind UnitedHealth Group Inc. The business accounts for about half of Humana's revenue. 23 percent of Medicare enrollees—about 10.5 million—are enrolled in Medicare Advantage programs.

NOTE: Senate Republican leader Mitch McConnell (R-KY) told reporters the Republicans will stall pending appointments to key HHS departments until efforts like the Humana investigation cease.

Biden stumps for health insurance reform as President participates in G20 and UN Security Council

While President Obama spent the week focused on global stability and financial markets, Vice President Biden made appearances promoting insurance reform. National Association of Insurance Commissioners’ data showing state by state comparisons of health insurance premium increases compared to wage increases for 1999-2009 was the focus: on average, insurance premiums increased at three times the pace of wages, ranging from Alaska (premiums +145 percent, wages +38 percent) to Michigan (premiums +88 percent, wages +28 percent).

Comparing the bills and subsidies (Kaiser Family Foundation)

For a 25 year old single at 200 percent of the federal poverty level in a moderate cost market…

For a family of four with a 45 year old head of household with income at 300 percent of the federal poverty level…

C-suite action items

• Plans (health insurance companies, self-insured employers) should develop scenarios for analysis of health participation levels, tiered benefits designs and premium costs. A key variable in the analysis should be the potential payroll penalty that might be applicable to the company’s payroll. In addition, plans should evaluate capabilities in preventive health to assure cost-effective delivery of these services anticipating they’ll be a focus of increased government scrutiny.
• Commercial health plans should re-engineer current Medicare Advantage plans to reduce costs and capture data necessary to justification of the premiums paid by Medicare.
• Health systems should build strategies assuming significant integration of physicians with the hospital as employment models for physicians accelerate. In addition, episode-based payments should be modeled beginning with high prevalent Medicare discharges.
• Medical device manufacturers, pharmaceutical companies, clinical labs and health insurance plans should model potential levels of participation in anticipated fees to be paid by the sector (included in Baucus proposal and referenced by the White House September 9).

Related Content

Library: View all Health Care Reform Memos
Debate: The Public Plan Option on Health Care: Holy Grail or Pandora’s Box 
Report: Reducing Costs While Improving Care in the U.S. Health System: The Health Care Reform Pyramid
Report: Health Care and Public Policy: What Do Americans Want?
Resource: Administration of Change - The Obama Impact on Health Care Policy
Overview: Deloitte Center for Health Solutions
Overview: Health Sciences 

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