Healthcare Reform the Train Is Starting to Move

Washington Report –April/May, 2009

An HBMA Government Relations Publication

Healthcare Reform – The Train is Starting to Move

Who says the art of writing letters is dead? Obama Writes Letter to Congress

Industry Groups Promise Trillion Dollar Savings

If it sells in Springfield…

Tell Me Again how We Pay for All This Healthcare?

HHS Announces Members of Health IT Policy and Standards Committees

Medicare Expands PET coverage for Cancer Diagnosis

CMS Transmittals

Healthcare Reform – The Train is Starting to Move

The legislative process is sometimes analogized to our nation’s railroad system. Given the current state of affairs in rail travel, that may not be a bad analogy! But regardless, moving a bill through the legislative process is much like taking a train from one side of the United States to the other. And in this case, the train is not non-stop.

In the case of Healthcare Reform, it is safe to say that the train has left the station, but it still has a long way to go before reaching its destination.

House and Senate leaders have given verbal assurances that their respective bodies are on schedule to begin serious consideration of Healthcare Reform legislation during the month of June, with the goal of completing individual action in each respective body by the end of July.

Certainly an ambitious schedule – but possible.

At this point, the Senate appears to be ahead of the House as far as offering proposals and ideas. Beginning in late august, Senator Max Baucus (D-Montana) and Chuck Grassley (R-Iowa) the Chairman and Ranking Republican on the Senate Finance Committee respectively began circulating concept papers with a series of options on how to reform our nation’s healthcare delivery system.

Baucus and Grassley have issued three papers:

1. Policy Options for Transforming the Delivery System

2.Policy Options for Financing Health Care Reform

3.Policy Options for Expanding Health Care Coverage

Separately, Senator Ted Kennedy (D-MA) has been working on his version of healthcare reform, focusing his attention on private market reforms. Recently, Senator Kennedy released a draft proposal outlining his ideas on reforming the insurance market. This was followed by the release of draft legislative text to accompany the outline.

The Kennedy proposal would:

Establish a “guarantee issue” requirement for all insurers.
Prohibit pre-existing condition requirement or medical underwriting.
Place limits on premium differences (premiums should only vary due to family size, geography, and age).
Establish an individual and employer mandate (play or pay) for health insurance.
Create a new public plan to compete with low-cost commercial insurance options
Establish state and/or regional health cooperatives from which individuals could purchase low cost insurance.

Under the “play or pay” model, employers would be required to offer their employees health insurance that provides coverage for certain “essential” services. Failure to meet that obligation would result in the imposition of a tax on the employer. The revenues generated by the tax would go into a pool of money the government would use to pay for a government-sponsored insurance program. Individuals not covered by an employer-sponsored insurance program would automatically default to this government program.

The House has begun holding hearings, but no formal (or informal) proposals have been released by the House leadership.

Perhaps the most challenging problem facing the Health Care Reform (HCR) advocates is how to pay for healthcare reform.

Financing proposals include: cuts in provider payments (hospitals and physician payments); savings from administrative simplification; a national Value Added Tax dedicated to healthcare; and, limits on employer and employee deductibility of employer paid health insurance. It should be emphasized that these are just proposals, and nothing should be considered “off limits” at this point.

President Obama continues to limit his input into the HCR debate, offering reactions to proposals others have put forward rather than submitting his own ideas. The President continues to reiterate his charge to Congress to adhere to the eight principles he outlined in March. These are:

1. Protect families’ financial health

2. Make health coverage affordable

3. Aim for universality

4. Provide portability of coverage

5. Guarantee choice

6. Invest in prevention and wellness

7. Improve patient safety and quality care

8. Maintain long-term fiscal sustainability

According to budget documents submitted to Congress by the President, the cost of achieving these goals will be steep. The 10 year cost – in new federal spending – is projected to be approximately $1.2 trillion. The President has asked Congress to make an initial $634 billion downpayment on reform. It is this initial $634 billion Congress is struggling with.

Back toTop

Who says the art of writing letters is dead? Obama Writes Letter to Congress

In keeping with his approach of react but don’t propose, President Obama sent a letter to Senators Ted Kennedy and Max Baucus, responding to some of the options they have put on the table thus far. While much of the letter was a rehash of previous statements by the President and his staff, there was some new fodder. In his letter, the President said the following:

The plans you are discussing embody my core belief that Americans should have better choices for health insurance, building on the principle that if they like the coverage they have now, they can keep it, while seeing their costs lowered as our reforms take hold. But for those who don't have such options, I agree that we should create a health insurance exchange -- a market where Americans can one-stop shop for a health care plan, compare benefits and prices, and choose the plan that's best for them, in the same way that Members of Congress and their families can. None of these plans should deny coverage on the basis of a preexisting condition, and all of these plans should include an affordable basic benefit package that includes prevention, and protection against catastrophic costs. I strongly believe that Americans should have the choice of a public health insurance option operating alongside private plans. This will give them a better range of choices, make the health care market more competitive, and keep insurance companies honest.

I understand the Committees are moving towards a principle of shared responsibility -- making every American responsible for having health insurance coverage, and asking that employers share in the cost. I share the goal of ending lapses and gaps in coverage that make us less healthy and drive up everyone's costs, and I am open to your ideas on shared responsibility. But I believe if we are going to make people responsible for owning health insurance, we must make health care affordable. If we do end up with a system where people are responsible for their own insurance, we need to provide a hardship waiver to exempt Americans who cannot afford it. In addition, while I believe that employers have a responsibility to support health insurance for their employees, small businesses face a number of special challenges in affording health benefits and should be exempted.

Health care reform must not add to our deficits over the next 10 years -- it must be at least deficit neutral and put America on a path to reducing its deficit over time. To fulfill this promise, I have set aside $635 billion in a health reserve fund as a down payment on reform. This reserve fund includes a number of proposals to cut spending by $309 billion over 10 years --reducing overpayments to Medicare Advantage private insurers; strengthening Medicare and Medicaid payment accuracy by cutting waste, fraud and abuse; improving care for Medicare patients after hospitalizations; and encouraging physicians to form "accountable care organizations" to improve the quality of care for Medicare patients. The reserve fund also includes a proposal to limit the tax rate at which high-income taxpayers can take itemized deductions to 28 percent, which, together with other steps to close loopholes, would raise $326 billion over 10 years.
I am committed to working with the Congress to fully offset the cost of health care reform by reducing Medicare and Medicaid spending by another $200 to $300 billion over the next 10 years, and by enacting appropriate proposals to generate additional revenues. These savings will come not only by adopting new technologies and addressing the vastly different costs of care, but from going after the key drivers of skyrocketing health care costs, including unmanaged chronic diseases, duplicated tests, and unnecessary hospital readmissions.

To identify and achieve additional savings, I am also open to your ideas about giving special consideration to the recommendations of the Medicare Payment Advisory Commission (MedPAC), a commission created by a Republican Congress. Under this approach, MedPAC's recommendations on cost reductions would be adopted unless opposed by a joint resolution of the Congress. This is similar to a process that has been used effectively by a commission charged with closing military bases, and could be a valuable tool to help achieve health care reform in a fiscally responsible way.

For the first time, the President endorses the idea of creating a new public program to operate along side Medicare and Medicaid. Also, the President endorses the idea of enhancing the authority of MedPAC to make decisions on how, when, and how much to pay providers and creating a system whereby it would take a supermajority in Congress to overturn a MedPAC “recommendation”. Finally, the President makes clear his desire to see tax increases used as one way of paying for healthcare reform.

Industry Groups Promise Trillion Dollar Savings

In early May, representatives of various organizations met with President Obama and pledged to work together to find $2 trillion in savings in the healthcare delivery system. For several days prior to the meeting with the President, the popular media and the White House played up the industry offer but were very secretive about releasing any details of just what the industry representatives would put on the table for the President to consider. The President, not surprisingly, embraced their offer and said he looked forward to seeing the details of their efforts. The groups that signed the letter offering the ambitious savings were:

America’s Health Insurance Plans

AmericanHospital Association

American Medical Association

Pharmaceutical Research & Manufacturing Association of America

Service Employees International Union

Advanced Medical Technology Association

In their letter to President Obama, the groups said, “We are committed to taking action in public-private partnership to create a more stable and sustainable health care system that will achieve billions in savings throughimplementing proposals in all sectors of the health care system, focusing on administrative simplification, standardization, and transparency that supports effective markets.”

If the words “administrative simplification” and“standardization”in the context of healthcare reform sound familiar, they should. After the Clintonhealthcare reform initiative failed, Congress set to work on the Health Insurance Portability and Accountability Act (HIPAA) which was intended to achieve billions of savings each year through (drum roll…) administrative simplification and standardization.

Writing in the November/December 2001 issue of Family Practice Management, David C. Kibbe, MD, MBA, a Contributing Editor to the publication had this to say about the impending prospects for adoption of the HIPAA administrative simplification and standardization reforms:

“Imagine that your practice could submit all claims electronically, track the status of claims with the push of a button and communicate online with payers to confirm patient eligibility and determine what services will be paid when. Now imagine that payments could be received electronically and automatically posted to your practice's accounting software. Finally, imagine that your office could analyze payment data so that you could determine what procedures, payers and contracts were most or least profitable for your practice. And moreover, what if what I've described could actually lower your overhead costs?”

In the same article, Dr. Kibbe said this about the promise of HIPAA:

“Because you'll no longer have to deal with innumerable formats and instructions, you should save money on overhead. And it may be just around the corner….”

In response to this industry offer, Senator Chuck Grassley (R-Iowa) said, “I’m sure we’ll be waiting for some time before this fairy dust becomes real gold,” he said.

If it sells in Springfield…

It has been suggested that anyone wishing to see an example of how the federal Healthcare Reform plans will work need only look toMassachusetts for the example.

During the term of Republican Governor Mitt Romney (R-MA), the Massachusetts Legislature adopted sweeping healthcare reforms. Chief among the changes was a mandate that individuals must show evidence of health insurance and employers would be required to provide health insurance for their employees.

A recent article by the Associated Press (AP) looked at the mixed bag of results that was the product of these changes.

According to AP, Danielle and Tad Marks are a young couple that recently lost their health insurance because Danielle was laid off by her employer. Obtaining health insurance was important for the Marks’ because Danielle had recently been released from the hospital, and needed post-operative rehabilitation and, more importantly, just discovered she was pregnant with their first child.

The Marks’ were able to purchase low-cost insurance due to theCommonwealth’s experiment in expanding health insurance coverage. The AP reports that Danielle Marks and her husband pay $78 a month for state-subsidized insurance that covers doctor visits, prescriptions and hospital stays. And because she's pregnant, they pay nothing for Danielle’s pre-natal checkups, medicine and vitamins.

But numerous reports indicate that the demand for healthcare spurred by insurance coverage is outstripping the number of doctors. According to an article in Health Affairs, one in five Massachusetts adults said a doctor's office or clinic told them they weren't taking new patients with their type of insurance, or they weren't accepting new patients at all.

The ballooning cost of the program may force Massachusetts to scale-down the benefit package or force payment cuts on the providers.

While it is true that in Massachusetts nearly every resident has health insurance, the cost and doctor shortages are causing some to wonder whether the cure is worse than the cough.

Tell Me Again How We Pay for All This Healthcare?

Developing a consensus on how to reform the health insurance market and the delivery of healthcare may prove to be the easy part of the healthcare reform initiative. How to pay for it could prove to be the Achilles heel of the effort.

Numerous news reports have described various “trial balloons” for plans to pay for healthcare reform. They range from limitations on the deductibility of charitable contributions by taxpayers earning more than $200,000 to the imposition of a Value Added Tax (VAT) with the revenues dedicated to healthcare reform. Each has its proponents, but, more importantly, each has its detractors.

The charitable deduction idea was scuttled before the ink was even dry on the President’s budget.

Whenever Senator Russell Long (D-LA), the long-time chairman of the Senate Finance Committee, was about to consider legislation to change the tax code, he would often open the hearing by singing the following ditty:

Don’t tax him,

Don’t tax me,

Tax that guy behind the tree

He would then go on to describe how no one wanted to have their taxes raised and everyone was great for bringing him proposals for raising the other guys taxes (the guy behind the tree). Although Senator Long is no longer with us, I suspect his words are resonating throughout Capitol Hill, as plenty of folks have ideas on how to raise revenue by taxing the “guy behind the tree” as long as you don’t tax ME.

If Congress is unable to achieve consensus on how to pay for healthcare reform, it will be the most likely explanation for why the initiative failed.

President Obama has said that he wants a 10year plan at a cost of $634 Billion (what he describes as a “down payment”).

Recently, House Ways and Means Chairman Charles Rangel (D-NY)suggested the federal government could net $210 billion in new revenue over 10 years by cracking crackdown on offshore corporate tax havens. At about the same time, President Obama rolled out proposals for $58 billion in new revenue from taxes on securities dealers and life-insurance products.

One idea that will surely get a lot of attention is a recommendation to put a cap on the employer deductibility of health insurance costs and the inclusion of benefits as part of an employee’s compensation for purposes of determining tax liability. This particular proposal has, ironically, put business and labor on the same side of the bargaining table. Finally, proponents of a national sales tax (often referred to as a Value Added Tax) have put this idea forward as a way of paying for healthcare reform.