What Might Healthcare Reform Accomplish?

Washington Report –June, 2009

An HBMA Government Relations Publication

Healthcare Reform

What Might Healthcare Reform Accomplish?

Mr. Franken Comes to Washington

PhysicianFee Schedule Proposed Rule Released

HBMA Goes to Baltimore (and Capitol Hill)

EHR Standards Under Development

CMS Transmittals

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Healthcare Reform

Efforts to reform our nation’s healthcare delivery system continued to move forward – albeit at a much slower pace than the President has requested. Several months ago President Obama outlined a series of principles he felt were essential to reforming our nation’s healthcare delivery system (see April/May Washington Report for list of principles). He urged Congress to adopt legislation that embodied these principles and stated that he would like to see the process completed by the August Congressional recess.

It now appears unlikely that both houses of Congress will be able to meet that deadline. It is possible that the House could pass healthcare reform legislation prior to the August recess. It is highly unlikely that the Senate will make that deadline. The rules of the Senate make it more difficult to move legislation swiftly. In addition, the Senate is schedule to devote several days of floor debate to consideration of the nomination of Judge Sonia Sotomayor to serve on the Supreme Court. The President has asked the Senate to complete action on Judge Sotomayor’s nomination prior to the August recess. There may not be sufficient time on the Senate’s calendar to deal with both Healthcare Reform and the Sotomayor nomination prior to the August recess.

Some observers are predicting that Congress will not only fail to meet the August deadline but will ultimately fail in their efforts to pass healthcare reform legislation. Those who believe the effort will fail, however, remain in the minority and most observers believe that Congress will ultimately adopt major reforms of the healthcare system by late Fall.

Over the past few weeks, two healthcare reform proposals have emerged – Senator Kennedy’s “Affordable Health Choices Act” which is currently being considered by the Senate Health Education Labor and Pensions (HELP) Committee and what is commonly referred to as the “Tri-Committee bill in the House of Representatives. Revisions to the Tri-Committee bill are expected to be released within the next few days.

Within the next seven to ten days, we expect that the Senate Finance Committee will put forward a third healthcare reform proposal as well.

Below are some of the key issues that have emerged as part of the healthcare reform debate:

Insurance Market Reform

• Establish a federal mandate that each individual show evidence of having “qualified” health insurance. Failure to have health insurance would result in some type of financial penalty.
• Establish a federal mandate that companies employing more than 25 employees must provide health insurance to the company’s employees. Plan offered would have to meet minimum federal health insurance standards. Failure to provide insurance would result in per employee “equity assessments” the proceeds of which would help fund the new government insurance plan (see below).
• Establish a new federal health insurance program to compete with private insurance. Program would be open to any individual who fails to qualify for Medicaid or Medicare.
• Create new federal subsidies to either pay for or assist individuals in paying for health insurance. Subsidies would be on a sliding fee scale basis with very low income individuals eligible for a subsidy covering 100% of the cost of health insurance. Depending upon the plan, subsidies could be available for families making up to 500% of the Federal poverty level (for a family of four, this would be an annual income of $112,000.00).
• Insurance companies could not deny coverage to anyone based upon a pre-existing condition.
• State and/or Regional insurance exchanges would be established where individuals could purchase a community rated “qualified” health insurance product.

Medicare and Medicaid Reform

• Fix the Sustainable Growth Rate (SGR) problem by repealing the current formula and replacing it with a new annual update process that looks at medical inflation and volume. Instead of a single update, there would be two updates. There would be one for “primary care and preventive services” and a separate update for “all other” services.
• Medicare payments for primary care would receive a 5 – 10% boost in the first year of Medicare reform to narrow the gap between primary care and specialty care. Payment boosts would also be used as a way to incentivize more physicians to go into a primary care specialty.
• Establish a national demonstration program to assess the value of Accountable Care Organizations (ACOs). ACOs are vertically integrated multi-specialty group practices with associated in-patient capacity. Included in the ACO would be the medical home model in which each individual receiving care through the ACO would be assigned to a “medical home” within the ACO. To the extent an ACO were able to produce aggregate savings below a predetermined target level, the ACO and their providers would receive a portion of those savings as a year-end bonus.
• Reduce Medicare Advantage payments to a level more closely approximating what traditional Medicare would have paid for care provided to beneficiaries enrolled in an MA plan.
• Slow the rate of growth in hospital payments by approximately 1 – 1.5% per year by adjusting the annual market basket updates.
• Reduce Medicare Part B payments for imaging services over the next 10 years.
• Expand Medicaid eligibility by raising income level to 133% of Federal Poverty Level.

Revenue Options

• Impose a federal surtax on all individuals making over certain levels. Just when the surtax would commence has not been determined. The amount of proposed tax ranges from 1 – 3% depending upon income level.
• Limit charitable deductions for individuals/married couples making more than $250,000.00 per year
• Limit deductibility of employer provided health insurance to the actuarial value of an “average” plan. To the extent an employer provided a “richer” benefit package, the amount the employer contributes over the average would not be deductible as a business expense. In addition, the amount over the average would be added to the employees federal taxable income.
• Impose a new federal tax on “sweet” beverages.
• Increase federal taxes on beer, wine and spirits.

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What Might Healthcare Reform Accomplish?

The goal of healthcare reform, as articulated by the President and Congressional leaders is to ensure that all Americans have access to affordable, quality healthcare. This position was recently reaffirmed in a press release issued by the Democrats serving on the Senate HELP Committee. Their press release states their commitment to “pass health reform legislation that reduces health costs, protects choice of doctors and plans, and assures quality and affordable health care for Americans.”

The Congressional Budget Office (CBO) is the Congressional agency that is responsible for assessing both the financial impact of changes in federal law, as well as the impact those changes will have on how people react to those changes. CBO is charged with evaluating the various Healthcare reform proposals and determining not only how much or how little the proposal will “cost” but also what the impact the changes mandated by the legislation will have on improving access to health care (or health insurance).

On July 1, the Congressional Budget Office released their preliminary analysis of the Affordable Health Choices Act. CBO’s analysis determined that in 2010, if we take no action, there will be 50 million uninsured individuals in the United States and 150 individuals covered through an employer sponsored health insurance benefit. These numbers include both U.S. citizens, as well as “undocumented” aliens. According to CBO, if we do nothing for the next 10 years, the number of uninsured, would rise to 54 million and the number of people covered by an employer sponsored health insurance plan would rise to 162 million.

Status Quo

2010 / 2019
Uninsured / 50 Million / 54 Million
Employer provided insurance / 150 Million / 162 Million

Once CBO determined the baseline (i.e. doing nothing), it then analyzed the Affordable Health Choices Act to determine how this would affect the number of uninsured individuals and the number receiving healthcare through an employer sponsored program.

According to CBO, if Congress were to enact the Affordable Health Choices Act, the number of uninsured would drop from the projected 54 million in 2019 to 34 million. The number of people with employer provided health insurance would be unchanged from current projections. Finally, CBO estimates that by 2019, 27 million people (those previously uninsured) would obtain health insurance through the new public health plan envisioned by the Affordable Health Choices Act.

Affordable Health Choices Act

2010 / 2019
Uninsured / 49 Million / 34 Million
Employer provided insurance / 150 Million / 162 Million
Public Plan Enrollment / 0 / 27 Million

Finally, CBO analyzed what the financial impact of the changes proposed by the Affordable Health Choices Act would be if the legislation were enacted.

The cost of providing subsidies, as envisioned under the Affordable Health Choices Act, to help reduce the cost of health insurance would by $732 Billion over 8 years. Technically the CBO estimates are 10 year estimates but because of how the subsidy program is structured, there is no cost until 2012.

It should be noted that the HELP Committee does not have jurisdiction over the tax code nor can it consider direct changes in either the Medicare or Medicaid programs. Consequently, the above estimates do not include any possible changes in the Medicare or Medicaid programs. It is assumed that when the Senate Finance Committee does take up healthcare reform, the cost figure will shrink due to offsetting cuts in Medicare and Medicaid spending as well as tax increases to pay for healthcare reform.

If you would like to review CBO’s letter to Senator Kennedy regarding their assessment of the Affordable Health Choices Act, you can go to:

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Mr. Franken Comes to Washington

The Minnesota Supreme Court ruled that Al Franken (DFL) was the winner of the disputed November, 2008 Senate election. His defeat of Republican incumbent Norm Coleman gives Democrats 58 seats in the U.S. Senate, which becomes 60 when you add in the two independents (Senators Lieberman and Sanders) who caucus with the Democrats.

While this nominally gives the Democrats the long-sought 60 vote majority necessary to defeat a filibuster, they do not have a “working” filibuster proof majority due to the absence of the two most senior Democrat Senators – Ted Kennedy (D-MA) and Robert Byrd (D-WV).

Senator Kennedy’s battle with a brain tumor has been well-publicized. Due to his battle, he has been unable to participate in much of the Senate’s work this year and it is not clear when or if he will be able to return to cast votes on the Senate floor. Senator Kennedy’s Committee votes are able to be cast by “proxy” meaning that another Senator on the Committee can cast his vote for him in his absence. Senate rules, however, do not permit “proxy” voting on the floor of the Senate. Instead, a Senator must be in the chamber and vote in person in order for his or her vote to count.

Senator Byrd’s illness appears less serious; however, he too has been unable to participate in floor activities for several months. His office continues to insist that he will return soon. During a hospital stay in the Spring, Senator Byrd reportedly contracted a staph infection that has been more difficult to treat than originally expected. Senator Byrd will be 92 years old this October. He is serving his 9th term in the U.S. Senate.

No one expects either Senator Kennedy or Senator Byrd to resign his seat in the Senate.

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Physician Fee Schedule Proposed Rule Released

On July 1, the Centers for Medicare & Medicaid Services (CMS) announced proposed changes to policies and payment rates for services furnished during calendar year (CY) 2010 to Medicare beneficiaries by physicians and non-physician practitioners paid under the Medicare Physician Fee Schedule (MPFS).

CMS put forward several proposals to refine Medicare payments to physicians, which are expected to increase payment rates for primary care services. The proposals include an update to the practice expense component of physician fees. For 2010, CMS is proposing to include data about physicians’ practice costs from a new survey, the Physician Practice Information Survey (PPIS), designed and conducted by the American Medical Association.

Federal law requires CMS to annually adjust the Medicare fee schedule payment rates based on the Sustainable Growth Rate (SGR) formula. The SGR formula was adopted in 1997 as part of the Balanced Budget Act. Every year since 2002, the SGR formula has yielded negative updates, although actual cuts in payments were largely averted because Congress took a series of legislative actions to prevent reductions in 2004-2009. Based on current data, CMS is projecting a rate reduction of 21.5 percent for CY 2010.

Congress, as part of healthcare reform, is expected to address the Sustainable Growth Rate formula problem.

The Obama Administration has indicated its support for comprehensive, “but fiscally responsible,” reforms to the SGR formula. In the President’s FY 2010 Budget summary, it was announced that the Administration would explore “the breadth of options available under current authority to facilitate such reforms, including an assessment of whether the cost of physician-administered drugs should continue to be included in the payment formula.”

Until Congress has an opportunity to enact permanent changes in the fee schedule update formula, CMS is proposing to remove physician-administered drugs from the definition of “physician services” for purposes of computing the physician update formula. While the proposal will not change any payment reductions projected for 2010, CMS does expect that this will reduce the number of years in which physicians are projected to experience a negative update.

CMS is also proposing to discontinue Medicare payment for consultation codes, typically billed by specialists. In lieu of the use of consultation codes, specialists would be required to use Evaluation and Management Codes for payment purposes. CMS recognizes that typically consultation codes are paid at a higher rate than equivalent evaluation and management (E/M) services.

CMS is proposing to redistribute the savings generated by this change to increase payments for the existing E/M services.

In addition, CMS is proposing to increase the payments for the “Welcome to Medicare” physical (technically referred to as the Initial Preventive Physical Exam).

CMS is also proposing to refine how Medicare recognizes the cost of professional liability insurance in the Resource Based Relative Value Scale (RBRVS) payment methodology. While CMS acknowledges that this RBRVS change would have a limited impact on outlays, they do believe this change will “promote payment equity by redirecting the portion of Medicare’s payment for professional liability insurance to those physicians that have the highest malpractice costs.”

CMS estimates that the redirection of resources from proposed cuts to areas slated for increase would increase payments to general practitioners, family physicians, internists, and geriatric specialists by between 6 and 8 percent.

Finally, CMS is proposing two changes to address concerns from the Medicare Payment Advisory Commission (MedPAC) and the U.S. Government Accountability Office (GAO) about rapid growth in high cost imaging services.

1.CMS is proposing to reduce payment for services that require the use of expensive imaging equipment. According to CMS, “the current payment rates assume that a physician who owns this type of equipment will use it about 50 percent of the time, but recent survey data suggest this expensive equipment is being used more frequently.” As use increases, the per-treatment costs for the equipment declines. CMS believes this justifies, making a reduction in payments.

2.CMS is proposing to implement a requirement that suppliers of the technical component of advanced imaging services be accredited beginning January 1, 2012 by designating accrediting organizations (AOs) for these suppliers and utilizing the imaging quality standards that have been developed by the AOs. The accreditation requirement would apply to mobile units, physicians’ offices, and independent diagnostic testing facilities that create the images, but would not apply to the physician who interprets them.

In a separate regulatory action, CMS will address suppliers’ accountability, business integrity, physician and technician training, service quality, and performance management.

The proposed rule also contains a number of provisions to promote improvement in quality of care and patient outcomes through revisions to the E-Prescribing Incentive Program and the Physician Quality Reporting Initiative (PQRI). Beginning in 2010, CMS is proposing that eligible professionals or group practices that meet the requirements will be eligible for incentive payments for each program equal to 2.0 percent of their total estimated allowed charges for the reporting periods.

The HBMA Government Relations Committee is reviewing the proposed rule (it’s over 1,000 pages long) and will be developing comments for submission to CMS.

The proposed rule is scheduled to appear in the Federal Register on July 13. If you would like to review the advance release copy, go to:

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HBMA Goes to Baltimore (and Capitol Hill)

On June 17, the HBMA Government Relations Committee engaged in a series of all-day meetings with Senior CMS staff at the agency’s Baltimore, Maryland headquarters. This has become an annual event for the Committee and has resulted in the development of several valuable relationships between HBMA and the senior management at CMS

Issues discussed ranged from a comparison of the results of the Medicare Contractor Provider Satisfaction Survey with the HBMA shadow survey, to on-going problems with Medicare provider enrollment.