Health Care Reform Memo: December 14, 2009

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.

Senate debate enters third week

After 12 days of debate, the major issues appear to be:

Abortion: longstanding pro-life Democratic Senators Ben Nelson (D-NE) and Bob Casey (D-PA) have stated unequivocal opposition to a reform bill that would allow direct or indirect funding of abortion using federal funds. An amendment introduced by Sen. Nelson to strengthen anti-abortion provisions of the bill failed 54-45 last week. Late last week, Rep. Brad Ellsworth (D-IN) introduced an amendment that would require the Secretary of Health and Human Services to use private contractors to split premiums for elective abortions under the public option from other amounts paid by the federal government.
Public option alternatives: Last week, an alternative to the public option was described by Senate Majority Leader Reid (D-NV). It includes two features: (1) 6.5 million “pre-seniors” 55-64 years old would be eligible to buy into Medicare beginning in 2011, and (2) the U.S. Office of Personnel Management (OPM), the agency that oversees health insurance benefits for eight million federal employees including members of Congress, would oversee contracting with two nonprofit health insurance plans run by private insurance companies to offer coverage to individuals and small businesses who qualify for subsidies. As support for the dual effort increased, a state-triggered public option championed by Sen. Marie Cantwell (D-WA) and others seemed to lose momentum with observations that states would not be able to shoulder the burden of the public option trigger while also handling Medicare expansion. The potential expansion of Medicare drew criticism from hospitals and doctors who believe it will increase their losses (Medicare pays 93 percent of hospital costs, forcing a shift of costs to commercially insured patients to make up the difference).

NOTE: premiums for the Federal Employee Health Benefits Plan overseen by OPM increased nine percent in 2009, so fiscal hawks observed the dual solution might not reduce health costs unless accompanied by Medicare cuts and limitations on services.

Cost of the bill: Democratic moderates in both houses are concerned that health reform might increase the deficit and might be better if delayed until the economy recovers. Concurrent with the health reform debate, both houses will vote before Christmas to increase the federal debt by $1.1 to $1.8 trillion from the current limit of $12.1 trillion. And with unemployment at ten percent and an election year ahead, concern is high that a health reform bill might not be timely.

Last week, it disposed of several amendments including:

Health insurance executive compensation: An amendment offered by Senator Blanche Lincoln (D-AR), to limit insurance plan deductions for executive compensation failed 56-42—four votes short of the 60 necessary to be in the Senate bill.
Satisfaction surveys for health exchanges: An amendment by Senator Mark Pryor (D-AR) requiring health exchanges to survey and monitor user satisfaction passed.
Limits on malpractice awards to lawyers: In a 32-66 vote, an amendment by Sen. John Ensign (R-NE) was rejected that would have placed limits on how much attorneys can earn from medical malpractice lawsuits.

And others will likely surface this week including:

Importation of prescription drugs: while Governor of Kansas, Secretary of Health and Human Services Kathleen Sebelius was one of six states that permitted importation.
Independent Medicare Advisory Commission (IMAC): An IMAC that would set rates is a concept that gained momentum last week as economic indicators seemed to reinforce a slower than expected recovery and Medicare cuts a continued point of concern. The Senate proposal would create an 18 person commission with authority to set rates for Medicare (doctors, hospitals, etc.). It would be composed of eight appointees from each party and two from the Treasury.
Limits on health insurance plan administrative costs: Senator Jay Rockefeller (D-WV) has proposed an amendment to require plans to spend 90 percent of premiums on medical costs.
NOTE: see attached brief summarizing seven studies quantifying plan administrative costs ranging from 9 to 41 percent with wide variation attributable to types of benefits offered and major distinctions between plans for Medicare, Medicaid and commercial populations.
Reauthorization of the Children’s Health Insurance Program: This program is set to expire on Oct. 1, 2013.

Medicaid expansion troublesome to states, some more than others

Because states in the South and West currently have lower income thresholds that disqualify Medicaid eligibility, in the House bill—that increases eligibility to 150 percent of the federal poverty level—they would receive more proportionately of federal subsidies than states with higher eligibility ceilings. Ex: Southern states would receive 49 percent of new enrollees and pay 44 percent of new state expenditures to support enrollees.

NOTE: The House bill provides for the federal government to pay 100 percent of costs for new enrollees for 2013 and 2014, then 91 percent of costs thereafter. The Senate bill, with an eligibility threshold of 133 percent, provides for 100 percent federal funding for 2014-2016, then 30.3 and 31.3 percent for states that already cover adults with incomes above 100 percent FPL and 34.3 and 33.3 percentage points for other states. These percentage point increases would be adjusted so that by 2019, all states would receive an increase of 32.3 percent percentage points for the newly eligible, not to exceed 95 percent in any year. (Kaiser Family Foundation, 12/2009)

CMS actuary study: Senate bill will increase the deficit and hurt hospitals

Friday, Rick Foster, chief actuary for the Centers for Medicare and Medicaid Services (CMS), issued analysis indicating the proposed Medicare $155 billion/10 year cuts to hospital payments in the Senate bill would disable one in five hospitals in the U.S., making it difficult for seniors to access care. Republicans said the report confirms seniors’ fears; Democrats believe the Medicare savings are necessary to the solvency of the program.

NOTE: Under the current Senate proposal, expansion of Medicare to people 55-64 years old would increase the likelihood of insolvency above the 20 percent threshold since Medicare pays hospitals less than cost.

Hospital performance-based payments update: CMS Hospital Compare, avoidable readmissions

Re: Current pay for performance programs: Under the current program (Reporting Hospital Quality Data for Annual Payment Update Program a.k.a. RHQDAPU), CMS collects hospital quality data by offering incentives to hospitals to voluntarily participate in the program.^[1] CMS Premier Hospital Quality Incentive Demonstration (HQID) that awards bonuses to hospitals was extended for three years in 2007 through September 2009.^[2] In a 2007 report, “Report to Congress: Plan to Implement a Medicare Hospital Value-Based Purchasing Program,” CMS proposed to expand RHQDAPU to financially reward hospitals differentially for performance, rather than for simply reporting quality data.^[3] In the Senate bill, a Value-Based Purchasing Program would be created.^[4] The House Bill does not contain an equivalent version of the pay-for-performance initiatives.^[5]

Re: Avoidable readmissions: The Senate bill includes a Hospital Readmission Reductions Program (HRRP) that utilizes data from CMS posted to Hospital Compare. Starting in FY2013, all hospitals would be ranked according to readmission rates for eight high volume or high cost conditions. The list of conditions could be expanded starting in FY2016. Hospitals in the top quartile would receive bonus payments up to 20 percent with corresponding cuts to the bottom quartile.^[6] 30-day readmission rates for acute myocardial infarction, congestive heart failure, and pneumonia are expected to be in the new program along with others as these are also included in the CMS Hospital Compare project and already being monitored. Five additional as yet not specified conditions will be added.^[7]

[1] http://www.cms.hhs.gov/HospitalQualityInits/08_HospitalRHQDAPU.asp#TopOfPage
[2] http://www.cms.hhs.gov/HospitalQualityInits/downloads/HospitalPremierFactSheet200907.pdf
[3] http://finance.senate.gov/press/Bpress/2009press/prb102109a.pdf (p.148 of the Senate Bill)
http://www.cms.hhs.gov/AcuteInpatientPPS/downloads/HospitalVBPPlanRTCFINALSUBMITTED2007.pdf
[4] http://finance.senate.gov/press/Bpress/2009press/prb102109a.pdf
http://finance.senate.gov/sitepages/leg/LEG 2009/042809 Health Care Description of Policy Option.pdf
[5] http://healthaffairs.org/blog/2009/11/21/the-senate-bill-medicare-and-much-else/
[6] http://finance.senate.gov/press/Bpress/2009press/prb102109a.pdf
[7] http://www.annals.org/content/early/2009/11/19/0003-4819-152-2-201001190-00185.full?aimhp#sec-3

Data file

Cancer survival rate increased by 1.6 percent from 1999 to 2006: from 181/100,000 cases to 201/100,000 (Source: American Cancer Society)
Deficit as percent of GDP: 2007—1.8 percent versus 11 percent in 2009. (Source: U.S. Secretary of the Treasury)
Number of earmarks in House Bill passed 221-202 that extends U.S. debt ceiling by $1.1 trillion last week: 5,224 (Source: Taxpayers for Common Sense)
The U.S. economy will add 15.2 million jobs between 2008 and 2018: 96 percent of these will be in services, 25 percent will be workers above 55 years of age, and the highest growth industry will be health care (Source: Bureau of Labor Statistics)
Unemployment rate fell from 10.2 percent to 10 percent in November with health care adding 21,000 jobs (613,000 added in health care since recession began December 2007 (Source: Bureau of Labor Statistics)