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Health Care Reform Memo: January 4, 2010

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.

Reconciling differences in the House-Senate bills: Update

Congressional staff spent the holiday break working through changes to the bills with the goal of completing work by the State of the Union Address tentatively scheduled for January 20 or 28. Meanwhile key members offered conciliatory assessments on key differences in the bills and in most cases, it appears the Senate version will prevail.

Abortion: Democratic House Conservatives want the Stupak (D-MI) amendment in the bill but recognize the delicate Senate vote that featured concessions to Sen. Ben Nelson (D-NE) might be a necessary compromise in the final bill.

The public option: House Democratic leaders concede the Senate version's alternative (insurance plans offered by not-for-profit insurance companies with subsides for the uninsured) will reluctantly accommodate the need for expanded access.

Funding: Medicare cuts for providers, Part C insurance plans, and drug companies provide half of the funding needed to pay for the respective bills. The balance reflects major differences in the two bills. The Senate bill uses a combination of industry fees and new taxes on individuals/families and health plans; the House bill primarily relies on income taxes on individuals/families. The major focus of compromise will be in 3 areas: (1) timing of industry fees (drug companies, device makers, insurance companies) start in FY2011 or later, (2) is the Cadillac plan threshold of $8500 individual/$23,000 family too low when all costs are considered and (3) is the 0.9 percent Medicare tax increase for higher income earners better than the House income tax? 

Medicaid expansion: Currently, the federal government pays 57 percent of Medicaid funding and states pay the rest. Expansion of Medicaid, one of the two major costs with subsidies individual/family coverage up to 400 percent of the federal poverty level, is a key to expanded coverage for 31 million. The House bill sets Medicaid eligibility at up to 133 percent starting in 2013; the Senate bill sets Medicaid eligibility at up to150 percent starting 2014. The likely compromise will be 150 percent with the federal government agreeing to pay 100 percent of the costs of expanded coverage beginning 2013 for the first 3-4 years (setting aside a deal for Nebraska to receive 100 percent federal subsidization permanently. Thirteen state attorneys general to date have petitioned to receive permanent subsidization identical to Nebraska prompting Sen. Nelson (D-NE) to concede it was not essential to his vote on the final bill.

Mandates: The House and Senate bills impose penalties on individuals or families that do not purchase health insurance. The House bill also imposes a mandate on employers, while the Senate's version includes a penalty only if an employee uses a subsidy to purchase insurance because his/her employer coverage was not accessible. A compromise that links the penalty to a percentage of adjusted gross income with a ceiling is likely. 

NOTE: a concern among reform sponsors is the potential that the penalty be high enough to encourage participation to avoid scenarios where individuals might elect to pay the penalty and enroll only when diagnosed. Employer mandates, a feature of the House bill, is not likely in the final bill but language akin to the Senate Finance bill that penalizes employers whose employees use subsidies to purchase insurance is probable.

Insurance reforms: Consensus around health exchanges, guaranteed issue, and elimination of lifetime limits et al. appears strong. The only issue to be resolved is the premium-setting band. The House includes a maximum differential of 2:1; the Senate 3:1. The likely compromise will be 3:1 since it will keep premiums lower for younger, healthier consumers.

Delivery system reforms: Evidence-based medicine, comparative clinical effectiveness, accountable care organizations, episode-based payments, expansion of primary care, coordination of care, and emphasis in long-term (CLASS Act), and preventive health are fairly consistent across both bills. The only major issue might be the creation of the Independent Medicare Advisory Commission in the Senate version that would set payment rates for doctors and hospitals. The inclusion of state-run pilots to test liability reforms might be more prominent in the final bill as moderates suggest it offers potential savings and deflects criticism of physicians.

Costs: The House bill costs $893 billion 2010-2019; the Senate $871 billion. The differences are minor and each, per the CBO, is deficit neutral in the current form (because program spending begins in FY2014 while funding begins FY2011). However, the 2014-2023 impact per the CBO is a deficit increase of $287 billion (not including the $210 billion physician fix). The impact on deficits will be a focus of critics: sponsors will likely emphasize the delivery system reforms that are likely to bend the curve long-term.

Meaningful use regulations announced

On Wednesday, the Department of Health and Human Services issued two sets of federal regulations for public comment: (1) the “meaningful use” criteria that health care providers must meet to qualify for federal IT subsidies, and (2) the standards and certification criteria that EHRs must meet for their users to qualify for funding; $14.1 to $27.3 billion under the Health Information Technology for Economic and Clinical Health Act provisions of the American Recovery and Reinvestment Act of 2009.

  • To qualify for funding, providers must demonstrate they use their EHR to improve the quality, safety and efficiency of health care services, reduce health care disparities, engage consumers; improve the coordination of care, improve population and public health, and ensure the privacy and security of personal medical information.
  • EHR vendors must securely exchange information among providers and between providers and patients using standardized data elements and technologies. The regulations outline standardized formats for such things as clinical summaries, medical descriptions of clinical conditions and test results, and how that information is exchanged over the Internet.

Special Report: New Taxes in the Senate Bill

Senate approves comprehensive health care bill with $398 billion tax package

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