Health Care Reform Memo: July 27, 2009

Published

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.

Health reform center stage last week; White House pressing hard for bill but concedes on timetable

Wednesday, July 22: President Obama held the fourth televised news conference of his 180-day old administration focused on health reform. From his prepared statement and answers to eight reporters’ questions, the White House maintained: A health reform bill remains the top priority on the White House domestic agenda and a bill before year-end is its goal. The bill should be budget deficit-neutral, reduce the cost of health care to facilitate overall economic recovery, and provide a mechanism to cover Americans lacking health insurance coverage. The President stated his support for a public option to “keep plans honest” and said he was open to ideas about how health reform should be implemented within the context of his goals. As evidence, he expressed support for the creation of an independent body (the Independent Medicare Advisory Council, IMAC) that would set rates of payment for Medicare—an idea suggested by several moderate Democrats and supported by some GOP leaders in Congress.

Thursday, July 23: The President visited the Cleveland Clinic to call attention to its model (an integrated delivery system where clinicians work together closely), quality, and cost effectiveness. He then did a town hall meeting on health reform in Shaker Heights to build support for reform.

Friday, July 24: The President convened key members of Congress in the House and the Senate to punctuate his goal of a bill, conceding that it was not likely before the August recess. Earlier in the week, Senate Majority Leader Harry Reid announced a Senate bill would be delayed until the fall since Senate Finance Chair Max Baucus had resisted efforts to abandon his committee goal of a bi-partisan bill. By week’s end, it appears a bill from the House might also be delayed.

Saturday, July 25: In the President’s weekly radio and internet address, he reiterated his commitment to a bill before the end of the year and his goal the bill would cover every American without insurance, be deficit-neutral, and reduce costs.

NOTE: Most concede a bill in the Senate will be delayed until the fall and the possibility the House will follow suit. Proponents consider a bill by year-end achievable and hope it might be named for ailing Senator Ted Kennedy (D-MA) who might be able to participate in a signing ceremony.

Update: HR 3200 – Blue Dogs key to House Energy and Commerce passage; leadership may take bill directly to floor without committee approval

Two committees of the House—Ways and Means, Education and Labor—have passed their versions of HR 3200 “America’s Affordable Health Choices Act”. Late Friday, the consensus is that it may falter in the House Energy and Commerce Committee as Blue Dogs maintained opposition to its price tag and public option feature.

The House Energy and Commerce Committee is chaired by California Congressman Henry Waxman (D-CA) and is composed of 36 Democrats and 23 Republicans. Changes to the bill included in late-week negotiations included provisions to allow Medicare to compensate providers for value (efficiency and quality), the creation of the Independent Medicare Advisory Commission (IMAC) to oversee Medicare payments, provisions to address Medicare payment disparities between urban and rural areas, and consideration of alternative funding other than a surtax on the wealthy (household income above $1 million) to pay its projected $1 trillion price tag. However, in its current form HR 3200 appears unlikely to get a majority vote out of the committee.

HR 3200 was introduced July 14. On Wednesday July 15, the American Medical Association (AMA) announced its support for HR 3200, and the next day, Congressional Budget Office (CBO) Director Doug Elmendorf testified to the Senate Budget Committee that the bill would cover only 16 million of the uninsured and cost in excess of $1.2 trillion. Today, the Democratic caucus will meet to take HR 3200 section by section with the goal that its mark-up be continued this week. Lacking support, it is likely HR 3200 will not get out of the House Energy and Commerce Committee. However, House leaders can bring HR 3200 to the floor for a vote even without the Energy and Commerce Committee’s approval.

NOTE: Seven of the AMA’s state societies have passed resolutions against the national organization’s endorsement of HR 3200. AMA national leaders say HR 3200 was appropriate to its interest in protecting physician income by setting aside use of the sustainable growth-rate (SGR) formula for Medicare payments. Local and state AMA leaders cite the overall negative reaction to the bill as a sign that AMA national leadership is not representing its interests. AMA membership stands at less than 40 percent of practitioners in the U.S. and is on a downward slide as physicians align with their specialty societies in greater numbers.

Public plan option “trigger” in Part D might be model for health reform

Fearing a scenario in which private plans might not elect to offer a Part D prescription drug discount program in a community, framers of the Medicare Modernization Act (December 2003) created a mechanism that allowed the government to trigger a government-run Part D option in any community with fewer than two private options. In February 2009, nearly 60 percent (25.7 million) of Medicare beneficiaries were enrolled in a Part D plan.

The potential of a trigger similar to Part D might be a compromise for Blue Dogs who fear a government public option would compete unfairly with private plans and eventually drive down payments to doctors and hospitals.

Independent Council gaining momentum; CBO says it might not contain costs long-term if composed of physicians

The President seems supportive of the creation of the “Independent Medicare Advisory Council” to take responsibility for oversight of the Medicare program, particularly payment rates to providers and possibly other aspects of coverage. Per the White House, IMAC would function the way the Federal Communications Commission (FCC) and others do—with full time appointments of five medical experts and a full-time staff. Congress could block its recommendations within 30 days of announced changes via majority vote, but otherwise the White House would be authorized to implement its recommendations without Congressional approval. A sticking point is its composition: the White House favors composing the group of physicians and medical experts. The CBO believes the inclination of a physician-led council would not address budget restraints and possibly contribute to higher costs. Some influential Democrats including House Ways and Means Chm. Charles Rangel (D-NY) and Pete Stark (D-CA) oppose IMAC because they fear dilution of Congress’ control over Medicare and the possibility a future Republican administration might use IMAC to reduce Medicare benefits.

Republican leader offers GOP alternative

Monday, GOP Chairman Michael Steele held a news conference at the National Press Club to announce the party’s alternative to the “government takeover of the health care system” that he called “socialism”. Key elements of the GOP alternative are: online posting of prices and outcomes for tests and procedures, a single, simplified billing form, paperless health-care systems, preventive care, portability of health coverage between jobs, and shifting of financial responsibility to consumers by ending the employer tax exclusion for health benefits replaced with tax credits for individuals. Reporters noted that each of these appears in several of the Democratic bills offered to date with the exception of the employer tax exclusion change.

Data file: “middle class”

A major focus of White House efforts is to fund health reform without additional taxes for the “middle class”. As it turns out, definitions of the “middle class” vary based on variables including household income, numbers of wage earners per household, education and geography. Depending on which factors are used, the middle class may constitute anywhere from 25 percent to 66 percent of households.

Source: U.S. Census Bureau

Quotable

“Small businesses are being crushed by skyrocketing health care costs. Because they lack the bargaining power that large businesses have and face higher administrative costs per person, small businesses pay up to 18 percent more for the very same health insurance plans—costs that eat into their profits and get passed on to their employees.” 

- Saturday, July 25 radio address by President Obama

C-Suite action items

Hospitals: The likelihood of episode-based payments and cuts in future Medicare payments will shrink operating margins and drive integration of physicians and hospitals. Plans for physician-hospital integration, episode-based payments, and conservative use of capital are necessary to an institution’s planning efforts. It is also likely tax exempts will face public scrutiny for executive compensation and demonstration of community benefits as the spotlight is focused on Medicare payments and budget constraints. Also notable is the likelihood that physician ownership of imaging facilities, specialty hospitals, and freestanding surgery centers will be a focus of attention as “profiteering” in health care as advocates of a single payer system become more aggressive.

Plans: A public option that might be triggered under various scenarios appears likely, though less onerous than earlier discussions of a major public plan. Expect intensified public scrutiny of business dealings, executive compensation, policies and procedures for coverage and denials, provider credentialing and performance assessment criteria, and medical loss ratios to be topics among advocates for health insurance reform. Plans should actively promote the value of administrative simplification as a first step in reform since these savings accrue to the benefit of consumers and providers and have widespread popular appeal.

Life sciences organizations: Downward pressure on provider operating margins and scrutiny of pharmacy and therapeutics committee processes among plans will challenge commercial opportunity among diagnostic and therapeutic companies. The likelihood of significant disruption from a nationalized comparative effectiveness process in the near-term is minimal; however, Medicare payment cuts and shrinking operating margins for plans and providers will drive price pressures to supply chains.

Related Content

Library: View all Health Care Reform Memos
Debate: The Public Plan Option on Health Care: Holy Grail or Pandora’s Box 
Report: Reducing Costs While Improving Care in the U.S. Health System: The Health Care Reform Pyramid
Report: Health Care and Public Policy: What Do Americans Want?
Resource: Administration of Change - The Obama Impact on Health Care Policy
Overview: Deloitte Center for Health Solutions
Overview: Health Sciences 

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