Health Care Reform Memo: September 21, 2009

A Deloitte Center for Health Solutions publication

Health Care Reform Memo: September 21, 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.

Presidential Sunday morning TV blitz

In an unprecedented move, the President taped interviews Friday afternoon with Sunday Morning news shows for CBS, NBC, ABC, CNN and Univision. He reiterated his desire to get a health care bill in 2009 and suggested his willingness to entertain suggestions that would cover the uninsured, reduce costs long-term and be deficit neutral.

Baucus bill introduced; reaction mixed

The much-anticipated Senate Finance bill was introduced Wednesday by its chair Max Baucus (D-MT). For weeks the “gang of six” had deliberated with the expectation its effort would produce the bipartisan solution that could rally moderate Democrats and perhaps a handful of Republications in the upper chamber. By the end of the week, Senator Baucus stood alone as moderate Democrat senators like Conrad (D-ND), Bingaman (D-NM) and others distanced themselves and no Republican senators would be associated with the bill.

Recap of the bill:

Individual mandates with subsidies up to 300 percent of the FPL (and caps on household costs for insurance up to 400 percent of the FPL) beginning in 2013; out-of-pocket payments by consumers calculated between 3 and 13 percent of the household’s income
Insurance industry reforms: waiver of pre-existing condition, new risk rating provisions, transparency, creation of insurance exchanges to facilitate side-by-side comparisons of plans for consumers
Not-for-profit co-ops overseen by state government to offer low priced insurance programs for lower income and small businesses
Expansion of Medicaid eligibility to 133 percent of the federal poverty level
Employer impact – tax credits for small businesses to purchase insurance starting in 2013 and penalties to businesses with more than 50 fulltime employees of $400/employee

Impact on access: The Baucus bill would reduce the number of nonelderly people who are uninsured by about 29 million, leaving about 25 million nonelderly residents uninsured (CBO estimate). About one-third of the remaining uninsured are illegal immigrants. The rate of nonelderly residents with insurance coverage would rise from approximately 83 percent to about 94 percent. In addition, 11 million new enrollees to Medicaid would be covered.

Costs of the bill: The Chairman’s mark had a price tag of $856 billion over 10 years. The nonpartisan Congressional Budget Office (CBO) estimated the cost at $774 billion. Some major elements:

Subsidies for low income individuals to purchase insurance ($463 billion)
Expansion of Medicaid and SCHIP enrollment ($287 billion)
Tax credits for small employers to subsidize coverage ($24 billion)
Changes in payments to physicians: one year cessation of sustainable growth rate (SGR) model ($10.9 billion)
Funding for incentives to primary care and innovation in Medicare ($54 billion)

The Baucus bill would be paid for with taxes and fees on industry sources and employers as well as Medicare cuts and improved efficiency in the system:

New excise tax of 35 percent on high-cost “Cadillac” insurance plans that cost more than $8,000 a year per person or $21,000 a year per family ($215 billion)
Penalties for employers whose employees purchase government subsidized insurance ($27 billion)
Limitation of $2,000/year contribution to flexible spending accounts ($16.5 billion)
New fees on drug manufacturers ($17.2 billion)
New fees on health insurers ($40.5 billion)
New fees on medical device manufacturers ($30 billion)
New fees on clinical laboratories ($5.6 billion)
Cuts to Medicare Advantage plans ($125 billion) with new bidding requirements beginning 2014

Three major bills: Major differences and similarities

As of September 9, five committees have submitted their proposals. The details of each major bill provide differences in timing and amounts, but at a high level similarities among the three are strong.

	Senate Finance	Senate HELP	House Tri Committee
2019 Uninsured	25M	36M	17M
Public Option	No (not-for-profit co-ops)	Yes	Yes
Individual mandate	Yes (subsidies/tax credits up to 300% of FPL)	Yes (subsidies up to 400% of FPL)	Yes (subsidies up to 400% of FPL)
Employer mandate	No (Starting in 2013, employers with more than 50 workers must repay the government for tax credits for employees)	Yes (Must pay 60% of premiums or $750/employee)	Yes (Must pay 65% of premiums or penalty based on payroll)
Medicaid expansion	Yes (133% FPL)	Yes (150% FPL)	Yes (133% FPL)
Insurance reforms	Yes	Yes	Yes
Comparative effectiveness	Yes	No	No
Liability reform	No	No	No
10 year cost (CBO)	$774 B	$645 B	$1.3 T

This week, members of the Senate Finance Committee will review the Chairman’s mark and offer amendments. It is expected more than 500 amendments will be offered compared to 230 offered in the House Energy and Commerce deliberation of HR 3200.

Deloitte poll: Consumers suspect health care reform bill might not happen in 2009

Friday, the Deloitte Center for Health Solutions released results of a telephone survey of 1,010 adults over the age of 18, conducted between September 10^th and 13^th (error margin 3.1 percent at .95 confidence interval), immediately after the President’s primetime address on health reform Wednesday night.
Key findings:

54 percent of U.S. adults believe health care reform will not pass this year vs. 41 percent who do
45 percent said they watched the President’s address on health reform Wednesday night; of these, 68 percent said they are generally supportive of the President’s effort to reform health care vs. 30 percent opposed
48 percent believe the U.S. health care system is the best system in the world compared to 48 percent who disagreed
48 percent believe the US health system needs a major overhaul—among the uninsured (60 percent) and underinsured (55 percent)
73 percent of respondents believe it is important for every American to have health insurance but 55 percent do not believe coverage for the uninsured should be the sole focus of the debate
The most trusted sources to reform health care are providers (37 percent), the White House (21 percent), Congress (13 percent), employers (11 percent) and health insurance companies (7 percent)
61 percent believe that Congress is likely to make the health care situation worse than better
55 percent believe government solutions to health care will cost more and deliver less compared to private sector solutions
51 percent believe health reform should not wait until the economy is better compared to 47 percent who thought it should wait

Fear of an expanded role of government in running the health system tops the list of possible concerns about health reform:

37 percent do not want the government to run health care
20 percent do not want their taxes to increase to cover health care for others
13 percent were concerned that they did not understand the proposals
12 percent thought they might have to wait too long to see a doctor if the public option is passed
5 percent were concerned about issues related to end-of-life care

Familiarity with key terms frequently mentioned in health reform messaging is low; respondents say they understand:

The public option (46 percent)
Health care co-ops (34 percent)
Health insurance exchanges (28 percent)
Comparative effectiveness research (20 percent)
The medical home (19 percent)

Individual mandate in all reform proposals thus far, but constitutional challenge might be on horizon

The constitution grants limited powers (Article 1, Section 8) to the federal government around while granting broad regulatory powers to states. Those powers are to declare war and raise an army for defense against foreign powers, to tax, borrow and spend money, to establish postal services and to regulate commerce. Constitutional scholars are mixed about the constitutionality of a federal mandate for individual insurance coverage, citing case law (Gonzales v Raich 2005, U.S. v Lopez 1995) as potential challenges.

Medical home pilots in states expanded: Health and Human Services (HHS)

The medical home is included in both Senate bills (HELP, Finance) and in the House Tri Committee bill (HR 3200). The Baucus bill sets aside bonus payments for pilots in both Medicare and Medicaid programs. Last week, HHS Secretary Kathleen Sebelius announced a new three-year initiative starting early next year to give states extra funding for demonstration programs that actually produce better results with lower health care costs.

Experts suggest sugar-sweetened beverages tax

A New England Journal of Medicine study released Wednesday suggested a tax on sugar-sweetened beverages would reduce rates of diet-related diseases and health-care costs. Such a tax was discussed, but seemingly discarded in earlier Congressional debates. The study by experts in nutrition, public health and economics called for an excise tax of one cent per ounce on caloric soft drinks and other beverages that contain added sweeteners such as sucrose, high-fructose corn syrup or fruit juice concentrates. The team concluded the tax could reduce calorie consumption from sweetened beverages by at least 10 percent and generate revenue of $14.9 billion annually that governments could use to fund health programs. Currently 33 states have sales taxes on soft drinks, but the taxes are too low to affect consumption and the revenues are not earmarked for health programs according to the authors.

HITECH update: Meaningful use criteria to be basic in 2011

The government will implement a basic level of initial 2011 criteria for meaningful use of electronic health records systems to determine who will receive Medicare and Medicaid incentives under the American Recovery and Reinvestment Act. More rigorous standards will follow in 2013 and 2015, according to David Hunt, M.D., chief medical officer in the Office of the National Coordinator for Health Information Technology, September 17^th. In remarks to a Boston audience, Hunt described 2011 as a period of "structure," 2013 a period of "process" and 2015 a period of "outcomes." He also indicated the Certification Commission for Health Information Technology (CCHIT) will be one of the entities that certify EHRs as meeting meaningful use criteria, along with others.

Fact file

2009 hospital price increases forecast: +7 percent, down from +7.3 percent in 2008 (Bureau of Labor Statistics’ Consumer Price Index, 8/09)
Employers picked up 74 percent of employee health benefits costs for family policies in 2008 and 84 percent for individual policies (Health Research and Educational Trust)

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
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
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 plans and referenced by the White House September 9^th)