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Health Care Reform Memo: December 7, 2009

A Deloitte Center for Health Solutions publication

Health care reformsThe 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.

This week’s headlines:

  • Senate debate takes spotlight; President focused on passage
  • New studies got attention: focus on HR 3590 impact, variation, transparency
  • Advocacy efforts increasingly visible
  • Benjamin makes first major speech; calls for increased diversity in health care workforce
  • Update: Office of the National Coordinator for Health Information Technology (ONC) 
  • HHS offer is $235 million to model health IT communities

Senate debate takes spotlight; President focused on passage

The Senate debate on HR 3590, “Patient Protection and Affordable Care Act,” continued through the weekend with both parties holding serve on themes that mark their positions:

  • Republicans (1) affirmed that the bill is too expensive and does little to reduce health costs, (2) challenge the advisability of Medicare cuts that might make it difficult for seniors to find doctors to treat them, and (3) believe the public option represents government takeover of the health system.
  • Democrats contend (1) the bill will not increase the deficit because its delivery system reform features are not factored into Congressional Budget Office (CBO) and other estimates adequately, (2) increased coverage for 30 million Americans is essential to reform, (3) the public option is an appropriate mechanism to bring health insurance premiums down for many Americans, and (4) reform is necessary to facilitate economic recovery and job growth.

Yesterday, the President met Senate Democratic leaders to affirm support for a bill and encourage resolution of the issues that threaten solidarity of the party, which is necessary to passage with 60 votes.

The partisan challenges are reflected in the amendments from the debate that began Monday at 2 PM EST and continued through the weekend. Some examples:






12/2 Barbara Mikulski
Requires insurers to provide preventive health services (mammograms, pap tests) to women without a co-payment Increases reform costs by $940M over 10 years Accepted 61-39 (includes three Republicans: Snowe-ME, Collins-ME, Vitter-LA)
12/2 John McCain
Eliminate Medicare cuts to Medicare Advantage Plans ($118B) Would have increased costs Rejected
58-42 (two Democrats Webb-VA, Nelson-NE voted with Republicans in support)
12/5 Mike Johanns
Eliminate cuts to home care (included in Medicare cuts of HR 3590) Increase cost of bill $42.1B over 10 years Rejected
12/5 John Kerry
Prohibits denial of guaranteed home care services to eligible seniors Strengthens oversight and enforcement Accepted 96-0

The amendment process will continue this week posing a challenge to Senate Majority Leader Reid’s (D-NV) effort to pass a bill with 60 votes by Christmas. Likely amendments expected to prompt attention in the coming week are:

  • Language to preclude use of federal funds directly/indirectly for abortion (Senator Ben Nelson-NE)
  • Amendment to increase hospital penalties for avoidable re-admissions (Senators Joe Lieberman, I-CT, and Arlen Specter, D-PA)
  • Allowing retail pharmacies and wholesalers to import drugs from Canada and other countries saving $19 billion over 10 years (Senator Byron Dorgan, D-ND) NOTE: President Obama supported an earlier version of the Dorgan proposal while serving in the Senate
  • Language to rescind anti-trust exemptions granted the insurance industry (Senator Pat Leahy, D-VT)
  • Transfer of 6 million dual eligible seniors from Medicare to Medicaid, saving $53 billion over 10 years on drug costs since Medicaid pays drug companies lower prices than Medicare (Senator Bill Nelson, D-FL). NOTE: The Nelson proposal is supported by AARP because the savings would be applied to the “donut hole” in Medicare D coverage, but is opposed by the pharmaceutical industry as it appears to go beyond the $80 billion original deal with the White House.

And a healthy debate about the public option—still a source of concern to at least four Democratic Senators who have publicly said they will not vote for a bill with its inclusion.

The most contentious issues in the Senate debate are likely to be:

  Democratic Position Republican Position Key Trade Groups
The costs of HR 3590: $848 billion 2010-2019, $2.5 trillion 2010-2023 The bill is deficit neutral because cost-savings (preventive health, insurance reforms, the public option) are not considered The CBO says it will result in a $290 billion deficit by 2023. The initial 10 year $848 billion price tag includes 10 years of tax collections but only six years of program expenditures, thus an artificial surplus. Opposition by U.S. Chamber of Commerce
The payment mechanisms: Cadillac plans, Medicare tax increases on upper income, industry fees, Medicare cuts, “Botax” etc The potential for newly insured adults to increase revenues to the system will increase revenues to doctors, hospitals, medical devices etc, so industry taxes are justified; taxes on Cadillac plans will drive down premiums and lower costs; increased taxes on wealthier Americans is fair; Medicare cuts are essential Medicare cuts will limit access to hospitals and doctors for seniors and undermine the system; industry fees are punitive; wealth re-distribution is an intentional result of the bill Major trade groups PhRMA, AHIP, AdvaMed, AHA oppose industry fees above what was agreed June 1; AMA supports elimination of the sustainable growth rate payment model for physicians and Medicare cuts
The creation of the 15 member Independent Medicare Advisory Commission (IMAC) with regulatory authority requiring Congressional override Necessary to make changes to Medicare payments independent of the political process The legislative process works now; IMAC will create a new bureaucracy that sets coverage and payments for seniors Strong support from AARP
The public option accompanied by insurance industry regulations and health exchanges Necessary to provide accessible insurance to small business and lower income individuals; approaches to phase-in via triggers/state opt-out necessary to pass bill with option included Health exchanges and insurance industry reforms are potentially achievable without a public option that would undermine the private sector and lead to a single payer system. Business groups (U.S. Chamber of Commerce, NFIB, Business Roundtable etc), trade industry groups (AMA, AHA, AHIP, etc) opposed; labor unions supportive

New studies got attention: focus on HR 3590 impact, variation, transparency

As debate proceeds, new high profile studies were referenced in last week’s Senate debate, including:

“An Analysis of Health Insurance Premiums Under the Patient Protection and Affordable Care Act” HR 3590

The CBO analysis is based on a forecast of impact to premiums in 2016, assuming all elements of the bill are fully implemented. It did not incorporate spillover effects of the bill – the growth rate of health spending from increased demand resulting from expanded access or from proposed delivery system reforms and efficiency improvements citing these as small and non-material to its analysis. Key findings: The effects on premiums would differ across insurance markets. The effects on premiums in 2016 would be much smaller in the small group and large group markets compared to the individual market:

  Individual Market Small Group
Under 50 Employees
Large Group
% insurance market 17 percent 13 percent 70 percent
Premium change in 2016 w/o HR 3590
+10 to 13 percent
+1 to -2 percent 0 to -3 percent
Premium change in 2016 with HR 3590 for those receiving subsidies -57 to -59 percent -8 to -11 percent NA
Assumption: percent of newly insured population receiving subsidies
57 percent
12 percent NA
Forecast: Number covered in 2016 with HR 3590 implemented 32M 25M 134M

Net effect: Average premiums per policy in the non-group market in 2016 will be $5,800 for single policies and $15,200 for family policies under the proposal, compared to $5,500 for single policies and $13,100 for family policies under current law. The weighted average of the differences in those amounts equals the change of 10 percent to 13 percent in the average premium per person above, but the percentage increase in the average premium per policy for family policies is larger and that for single policies is smaller because the average number of people covered per family policy is estimated to increase under the proposal. 

Source: Congressional Budget Office, November 30, 2009 (Submitted to Joint Committee on Taxation)

“Promotional Spending for Prescription Drugs”

Drug companies spent $4.7 billion on direct to consumer (DTC) advertising in 2008—one fourth of total promotional expenditures of $20.5 billion (10.8 percent of total industry sales) that includes $12 billion for retailers, $3.4 billion for events and $0.4 billion for medical journal advertising. The study included data from 100 advertised drugs dating back to 1995 (of the 2,000 drugs in the CBO data set). The analysis indicates DTC advertising is typically targeted to new drugs for large patient populations and is accompanied by targeted promotional activity to health professionals. DTC is most frequently used in tandem with, rather than exclusive of provider promotion, the study concludes. And drug companies tend toward DTC efforts when a drug has little or no direct competition. 

Source: Congressional Budget Office December 2, 2009. 

NOTE: increased regulation of DTC advertising is among many elements of reforms under consideration.

“Does Price Transparency Legislation Allow The Uninsured To Shop For Care?”

85 percent of California’s 353 hospitals are adherent to legislation requiring written estimates of anticipated charges for the uninsured though only 10 percent were able to provide both hospital and physician charges. The RAND study concludes most hospitals fall short in transparency efforts. 

Source: Farrell KS, Finocchio LJ, Trivedi AN, Mehrotra A. Journal of General Internal Medicine, 2009.

“Effectiveness Of Public Report Cards For Improving The Quality of Cardiac Care”

Based on a randomized trial of patients admitted for acute myocardial infarction (AMI) or congestive heart failure (CHF) in 86 Ontario hospitals, the authors concluded “few empirical data exist to determine whether publicly released report cards on hospital performance improve the overall quality of care provided." 

Source: Journal of the American Medical Association Vol. 302, No. 21 (December 2, 2009) 2330-2337.

Advocacy efforts increasingly visible

To be expected, advocacy efforts have increased in recent weeks. Most are single issue focused with varied media and geographic targeting tactics. A few examples:

  • Americans Against Food Taxes (funded by major food and beverage companies) began a $24 million campaign against proposed 1 cent per ounce tax on carbonated beverages to fund anti-obesity programs;
  • Catholics for Choice (funded by pro-choice individuals and organizations) ran full page ads opposing the Stupak (D-MI) amendment in the House bill that limits abortions brokered by the U.S. Catholic Bishops ;
  • Employers for a Healthy Economy and Start Over (funded by the U.S. Chamber of Commerce, business organizations) began television and print ads in nine states against the cost and timeliness of reform considering overall economic conditions;
  • The Federation for American Immigration Reform (funded by pro-immigration control groups) began print ads advocating for stricter identity verification in the bills;
  • American Association for Justice (funded by trial lawyers) canvassed Washington’s Union Station with a $100,000 ad blitz targeting Senate staffers reminding that 98,000 die annually in U.S. hospitals as a result of medical error to discourage tort reform.

Benjamin makes first major speech; calls for increased diversity in health care workforce

Speaking Thursday at Morehouse College in Atlanta, newly confirmed Surgeon General Regina Benjamin reported that only 6 percent of physicians are minorities but African-Americans and Hispanics are 28 percent of the U.S. population.

Update: Office of the National Coordinator for Health Information Technology (ONC)

Working under authority granted in the Health Information Technology for Economic and Clinical Health (HITECH) Act, ONC released specifications Wednesday for three new funding opportunities: Beacon Community Program, the Curriculum Development Centers Program, and the Community College Consortia to Educate Health Information Technology Professionals Program. In coming weeks, it is expected to release Interim Final Rules, the Meaningful Use Notice of Proposed Rulemaking (NPRM), and award announcements for the Regional Extension Centers and State Health Information Exchange Cooperative Agreement Programs.

HHS offer is $235 million to model health IT communities

Health and Human Service Secretary Kathleen Sebelius announced Wednesday that $235 million in funds are available to "help us get a better handle on how health information technology will improve the quality care that Americans get." The grants will support 15 "beacon communities," – hospital systems, provider groups, and state and local governments already using cutting-edge technology to showcase and accelerate IT adoption.

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