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Health Care Reform Memo: December 24, 2009 - Special Edition

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.

Today’s headlines:

  • Senate passes bill; reconciliation with House bill next step
  • Funding the Senate bill: four major sources
  • What’s ahead?
  • AMA endorsement
  • GDP below forecasts
  • CCHIT certifies 14 EHR vendors

Senate passes bill; reconciliation with House bill next step

After a four week debate that began November 20, ninety-five floor speeches and seven procedural votes, the Senate passed HR3590 health reform bill 60-39 at 7:15am EST this morning, then adjourned for Christmas. The $871 billion bill’s major features are—

Increased access to insurance:

  • Expansion of Medicaid eligibility to 133 percent of the federal poverty level (14,000,000 added)
  • An individual mandate for all under the age of 65 with subsidies for individuals/families up to 400 percent of the federal poverty level with penalties for non-participation (17,000,000 newly insured)
  • Subsidies for small businesses under 50 employees to purchase insurance and penalties for employers if adequate insurance is not provided to employees
  • Expanded coverage for “young invincibles”: catastrophic coverage to age 30, dependent coverage to age 26
  • Insurance industry reforms: no lifetime limits, pre-existing condition precluded as a basis for eligibility/enrollment, premiums based only on age/family size and geography with limits no more than 3:1 ratio of highest to lowest, elimination of federal anti-trust exemptions, et al
  • Creation of health insurance exchanges for individuals and small businesses to purchase coverage through insurance companies that qualify

Improved delivery system performance

  • Expansion of pilot programs for the medical home, innovation in local delivery systems, use of evidence-based practices in performance assessment and payments, bundled payments to accountable care organizations, and improved coordination for long term care services
  • Transparency: prices and quality for hospitals, physicians and allied health facilities
  • Elimination of “donut” hole in Medicare Modernization Act Part D coverage
  • Essential benefits defined by the Secretary of Health and Human Services to improve access to preventive health, included with employer sponsored plans/insurance plans offered through health exchanges
  • Requisite expenditures for medical care by health insurance plans (medical loss ratio thresholds)
  • Efforts to improve and enhance the health care workforce with special emphasis on primary care and connecting local human services programs with health delivery systems

Reduced costs ”bending the curve”

  • Creation of independent commission with authority to set payment rates for doctors and hospitals
  • Increased use of bundled payments to providers to encourage improved coordination and reduced error
  • Administrative simplification involving business transactions, paperwork reduction, standardization of insurance procedures for claims management, utilization, et al
  • Implementation of value-based purchasing program for comparisons of hospitals
  • Increased emphasis on preventive health and coordination of post-acute services (home care, et al)
  • Increased use of clinical information technology to improve safety, adherence to evidence-based practices
    • Increased access to information about provider (hospital, physician) safety, outcomes and satisfaction for consumers

Funding the Senate bill: four major sources

  • Cuts in Medicare’s rate of growth ($493B) including Part C plans, adjustments to physician/ hospital formula, prescription drug concessions
  • Industry fees beginning in 2011: health insurance plans, drug companies, medical device companies, clinical labs
  • Increased Medicare tax withhold from 1.45 to 2.35 percent matched by employer contribution for higher income individuals
  • Taxes on “Cadillac” insurance programs

What’s ahead?

The staffs of the House and Senate have already begun the process of reconciling the respective bills focused on areas where differences are not significant. When Congress reconvenes after January 4, the Joint Conference Committee (soon to be named) will tackle the more substantive differences in the bills comparing House versus Senate for the following:

  • The public option (not tied to Medicare payment rates) versus state-run exchanges with not-for-profit insurance companies
  • Abortion coverage and direct/indirect role of federal funding
  • Timing: when tax collections and industry fees begin in FY2011 versus expanded coverage beginning in 2013/2014.
  • Sources of funding: the Senate’s mix of payment mechanisms versus House’ dependence on Medicare cuts and increased income taxes on wealthier individuals/families.

Democratic Congressional leaders have expressed hope the bill can be finalized before the President’s State of the Union address January 20 (Press reports).


“There are 100 senators here, and I don't know that there's a senator that doesn't have something in this bill that isn't important to them. If they don't have something in it important to them, then it doesn't speak well of them."

- Senate Majority Leader Harry Reid (D-NV), Washington Post December 21, 2009

“Major bills passed in our history—Medicare, Social Security, Hatch Waxman, others—have always gotten 75-80 votes in the Senate. If they don’t, it’s a lousy bill. This bill is a lousy bill.” 

- Sen. Orrin Hatch (R-UT), CNN December 23, 2009

“You have got this divide, this polarization in America. People become risk-averse, politically risk-averse. There is no incentive to reach across the divide and appeal to a broader inclination. It looks like pragmatism is a political cop-out; compromise is certainly viewed that way.” 

- Olympia Snowe (R-ME), New York Times, December 24, 2009

“I don’t see this as 60 Democrats versus 40 Republicans. I see it as 60 leaders who stood up to insurance companies and stood up for working families all across America.” 

- Senate Majority Leader Harry Reid (D-NV), December 24

AMA endorsement

The AMA endorsed the Senate bill Monday citing its provisions to (1) drop a tax on elective cosmetic surgery, (replaced in the final bill with a 10 percent levy on tanning-salon services), (2) increased payments to primary-care physicians and general surgeons in rural and underserved areas (without cuts to other doctors), (3) elimination of the proposed $200 physician enrollment fee for Medicare, and (4) assurance the physician payment fix would be remedied. Three issues remain that still concern the AMA: (1) the scope of powers of a proposed Medicare payment board that would set payment rates for doctors and hospitals, (2) release of data about physician quality by Medicare and (3) liability reforms.

GDP below forecasts

U.S. GDP rose at a 2.2 percent annual rate from July through September-- the second time third-quarter GDP was revised lower. The government initially reported third-quarter GDP growth of 3.5 percent, then lowered it to 2.8 percent. In the second quarter, GDP contracted 0.7 percent. The latest figure was below Wall Street forecasts of 2.7 percent growth. NOTE: in the official forecast of government spending on which the health reform bill’s surplus/deficit impact is calculated by the CBO, a recovery to 3 percent GDP growth was forecast for FY2011.

CCHIT certifies 14 EHR vendors

The Certification Commission for Health Information Technology announced certification of 14 electronic health record products under two programs--the CCHIT Certified 2011 Comprehensive program and the Preliminary ARRA certification program. CCHI began its certification process Oct. 7.

Date file

  • $400,000,000—spending to date on health reform lobbying activity (Center for Responsive Politics, December 22, 2009)
  • Ten states that have announced to date they will challenge concessions to Nebraska for Medicaid funding (C-Span report, December 24, 2009)
  • President Johnson’s Medicare program passed in the Senate by a vote of 68 to 21 with 13 Republicans joining 55 Democrats in favor, and 7 Democrats joining 14 Republicans in opposition (


Monday Memo will not be published December 28 but will resume January 4.

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