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Health Care Reform Memo: March 8, 2010

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 calls for up or down vote on reform; reconciliation process a possibility

Wednesday, President Obama said, "Reform has already passed the House with a majority. It has already passed the Senate with a supermajority of sixty votes. And now it deserves the same kind of up-or-down vote that was cast on welfare reform, the Children’s Health Insurance Program, COBRA health coverage for the unemployed, and both Bush tax cuts – all of which had to pass Congress with nothing more than a simple majority."

Though not referencing reconciliation per se, the President’s remarks and comments by Speaker Pelosi and Majority Leader Reid suggest it is regarded as the likely route reform might take in the Senate.

Reconciliation applies to the Senate; a simple majority is required under House rules but in the Senate, legislation requires 60 votes unless passed under reconciliation. Under its rules, a Senate bill passed through reconciliation must have budgetary relevance and is limited to tax/spending issues. It must reduce the deficit within 5 years and thereafter not add to the deficit, and be passed by a majority (51) Senators after limited (20 hours) debate. It has been used 21 times by both parties since 1974 to pass of bills about welfare reform, tax cuts, child welfare and others. Alan Frumin, 63, Senate Parliamentarian for 33 years, will be the arbiter of any amendments and procedural conflicts that may occur; Senate President Joe Biden has the authority to preside and possibly override the Parliamentarian—a rare occurrence but possible maneuver to enable quicker passage.

In this instance, the House would first need to pass the Senate Bill (12/24/10) by a simple majority (218), then the bill would go back to the Senate for a final vote where it would likely be stripped of non-budgetary items not deemed appropriate under reconciliation. Features related to insurance reforms would likely be taken out of the bill; expansion of Medicaid and subsidies for the lower and middle-income households to purchase insurance likely the major focus.

Administration officials say they want a bill passed before the March 26 Easter recess. Republican leaders have vowed to use amendments and procedural maneuvers to block passage. The White House announced the President’s schedule through March 18 featuring several speeches supportive of the reform bill’s passage starting in Philadelphia today. The President’s weekend addresses the past two weeks have focused on the urgency of health reform. After the February 25 summit, the President added four ideas to his plan attributed to Republican input in the Summit—increased payments to primary care physicians seeing Medicaid patients, increased pilot programs for liability reforms, inclusion of Health Savings Accounts in the health insurance exchanges, and increased Medicare fraud surveillance measures.

Our take: The legislative process around health reform is likely to continue for several months and include bills at the state and federal levels. A single comprehensive bill that achieves the President’s goals of “reducing costs and covering everyone” (February 24, 2009) might be problematic but reform will continue nonetheless.

State-led efforts will likely include legal challenges to caps on pain and suffering and the constitutionality of individual and/or employer mandates among others. Expansion of Medicaid is set to pose the greatest state challenge: the Senate bill’s increases eligibility to 133 percent of the federal poverty level (FPL) would add 15 million new enrollees at a cost of $372 billion. States would receive funding to cover new enrollees through 2017 (including $87 billion from the stimulus plan and $25 billion in FY11 budget)) but after 2014, states would be left to pay 9-18 percent of the ongoing costs (and bigger states with the highest deficits already would be hit hardest).

At the federal level, elements of reform are likely to unfold in the planning and budgeting processes of key agencies—the FDA’s overhaul to accelerate its review process while strengthening post market surveillance and food safety emphases. HHS’s strengthening transparency requirements and accelerating pilots to improve coordination of care. And members of Congress will likely offer bills that tackle key dimensions of reform. Example: last month, the House passed by 402-18 a bill to remove the antitrust exemption from plans and others will follow. And it appears increasingly likely the reconciliation process in the Senate will draw attention to key elements of HR3590 (“Patient Protection and Affordable Care Act”) passed December 24, 2009, including expansion of coverage via Medicaid and subsidies, an individual mandate, insurance reforms and modest delivery system reforms at a cost of $871 billion paid for by industry fees, Cadillac plan taxes and Medicare cuts among others.

In our view, health reform is likely to be a combination of state and federal legislative efforts punctuated perhaps by a bill that addresses expanded access through the Senate’s reconciliation process. Stay tuned.

Quotable

“The misuse of the arcane process of reconciliation—a process intended for deficit reduction—to enact substantive policy changes is an undemocratic disservice to our people and to the Senate’s institutional role.” 

—Sen. Robert Byrd, D-WV, author of four books on history of the U.S. Senate and longest serving member in the upper chamber

State led reforms: Update

Wednesday, the federal appeals court barred California’s Medicaid program from 5 percent pay cuts to doctors and hospitals and 20 percent cuts to home care workers on the premise that federal laws prohibit cuts that would harm the poor and disabled. The state’s Medicaid program, Medi-Cal, faces huge funding hurdles amidst the state’s $19.9 billion budget deficit. NOTE: An additional 6.8 million Californians are without insurance—18.6 percent of its population. The state’s economy is equivalent to the seventh largest country in the world.

In other states:

  • egislators initiated bills to challenge the constitutionality of the individual mandate (Kansas, Tennessee and Virginia).
  • In New Mexico, legislators passed HB12, which requires insurance companies to spend 85 percent of premiums on medical care beginning in 2011.
  • Budget cuts to state Medicaid funding were announced in South Carolina, Oklahoma.
  • Minnesota’s Gov. Tim Pawlenty moved forward with plans to transfer 32,000 Medicaid enrollees to Minnesota Care subsidized program from the Medicaid program against strong opposition from religious leaders and community activists.
  • In Arkansas, the state’s Medicaid director hosts a website to avail citizens of the opportunity to view possible ways to fund the program’s $400 million gap.

Consumer opinion: Health reform

Most consumers anticipate the costs of covering the uninsured will add to their tax responsibilities and think Medicare might be insolvent before they are eligible for the program. Among Gen X and Y consumers, these opinions are even stronger:

 “It needs to be fixed: everyone should be insured, but Congress is probably not able to fix it.”
Deloitte Center for Health Solutions Pulse Survey, December 2009
Opinions Percent who strongly agree or agree Percent who strongly disagree or disagree
The U.S. health care system is better than any other system in the world

44%

53%

Health care reform is too complicated for Congress to tackle

50%

48%

The majority of people without health insurance could afford it if they wanted it

24%

76%

You are tired of hearing and reading about health care reform

56%

43%

You will pay higher taxes as a result of health reform

74%

26%

The health care reform bill will increase the federal budget deficit

74%

22%

Medicare is going to be bankrupt before you can participate in the program

63%

37%

Copyright © 2010 Deloitte Development LLC. All rights reserved.

Physician fix update

Wednesday night, President Obama signed a bill to forego a 21.2 percent reduction in Medicare reimbursement for physicians from March 1 to April 1. This followed passage (78-19) earlier in the day of the $10 billion Senate jobs bill (HR 4691) that included the physician funding provision mirroring last week’s House passed bill. NOTE: in the FY11 budget proposal from the Office of Management and Budget (February 1, 2010), $371 billion was included to fix the payment schedule to physicians. The Senate bill (December 24, 2009) did not include a permanent fix, instead creating a special commission (Independent Medicare Advisory Commission) to recommend a payment methodology and annual updates with binding authority on lawmakers unless overridden by Congress.

HHS Secretary Sebelius hosts insurance plans to discuss premium increases; transparency requirements likely to increase for plans

Thursday, insurance executives from Aetna, UnitedHealth Group, WellPoint, CIGNA, and Health Care Service Corp met with HHS Secretary Kathleen Sebelius to discuss recent premium increase requests. Per the official HHS report on the meeting (www.HHS.gov) with media access limited to one pool reporter, the discussion focused on the justification for recent premium increases for individual policyholders in several states. The industry leaders said that underlying medical cost increases are the root cause and for-profit plans operating profits of 2.2 percent are below other health care sectors and reasonable. Secretary Sebelius observed that 2009 profits, $12.2 billion for the five largest for-profit plans, were 58 percent above 2008 and challenged the group to “shine a bright light” about methods used to calculate premiums. No decisions were made at the meeting per White House Press Secretary Robert Gibbs afternoon press briefing Thursday. NOTE: Both Senate and House reform bills include increased transparency, elimination of pre-existing condition, lifetime limits, and the creation of insurance exchanges. The White House has also proposed a new federal body to oversee and review premium increases; but under reconciliation many of these would be considered non-tax/budgetary and therefore in a separate bill.

Physician reporting option starts 2010

This year marks the beginning of an alternative to the voluntary Physician Quality Reporting Initiative (PQRI) sponsored by CMS. Under the terms of PQRI, which began in 2007, individual physicians are paid 2 percent above the Medicare FFS Part B schedule for voluntary reporting of clinical and utilization metrics. This year for the first time, physicians in groups may report under the Group Practice Reporting Option initiated under the Medicare Improvements for Patients and Providers Act of 2008.

HITECH update: ONC releases initial certification guidance for electronic health records

Tuesday, David Blumenthal, the National Coordinator for Health Information Technology, released the Notice of Proposed Rulemaking for the Establishment of Certification Programs for Health Information Technology (NPRM) providing temporary certification guidance for electronic health records (EHRs) and EHR modules. The NPRM serves as a bridge to the second, permanent certification proposal assuring that EHRs will adhere to technical requirements necessary to meaningful use. The temporary program proposed by the NPRM is critical as it assures the availability of Certified EHR Technology prior to the date on which health care providers may begin demonstrating meaningful use.

Fact file

  • The oldest baby boomers—those born in 1946—turn 65 next year. 76 million boomers will become Medicare eligible in next 20 years. (Source: U.S. Bureau of the Census)
  • Medicaid covers 62 million Americans including 8.5 million with disabilities and 8.8 million low-income frail, elderly and disabled Medicare beneficiaries; 22 percent of the average state budget increasing at 21 percent annually.
  • Incidence of physicians in solo/two person practices: 32.5 percent in 2007 vs. 40.7 percent in 1997. (Source: Center for Studying Health System Change)
  • Median (50th percentile) income of physicians: $173,000 for primary care physicians, $363,000 for specialists. (Source: MGMA, 2009)
  • Federal funding to states for public health programs was $13.5 billion in 2009—flat for fifth consecutive year. State funding decreased in the same period 3.4 percent to $392 million. (Source: Robert Wood Johnson Foundation and the Trust for America's Health)
  • Funding for public health programs ranges from $16-19 per person per year. State funding was cut $392 million in 2008; federal funding essentially flat for the fifth consecutive year. (Source: Robert Wood Johnson Foundation)
  • Seniors who hit the “donut hole” for prescription drug costs (between $2,700 and $6,154 per year): 8 percent of all seniors but 55 percent of seniors who take specialty medicine for conditions like leukemia, rheumatoid arthritis, others. (Source: Government Accounting Office)
  • Average compensation of federal employees: $67,691 vs. $60,046 for comparable occupations in private sector. (Source: U.S. Bureau of Labor Statistics)
  • Economic outlook: February unemployment remained unchanged at 9.7 percent. However, a report from First American Core Logic, a real estate research group, indicated 24 percent of American homeowners have negative equity in their primary residence, and the Conference Board reported its February Index of Consumer Confidence at 46, lowest since 1983. Meanwhile, health costs increased 5.7 percent in 2009 while the overall economy (GDP) shrank 1.1 percent.

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