Health Industry Washington Watch : Washington DC Healthcare Industry Law Firm : Reed Smith : Health Industry Washington Watch : Regulations, Medicare/Medicaid, Governmental Organizations

Yesterday President Obama convened a health reform summit in an effort to bring together key members of Congress and administration personnel to discuss ways to move forward on health reform. After a long day of policy debate, however, the summit failed to result in a bipartisan breakthrough on reform legislation.   While isolated areas of agreement were indentified, such as in the area of fraud and abuse efforts and certain aspects of insurance market reforms, the meeting largely highlighted the divisions between the two parties on fundamental aspects of reform. In particular, Democrats and Republicans at the meeting were far apart on such basic questions about how large a role the federal government should play in establishing insurance market rules, whether insurance coverage should be mandated, and how to achieve cost-savings in the health care system, among others. The summit is widely viewed as laying the groundwork for Democratic leaders to forge ahead with comprehensive health reform without Republican support -- if compromise can be reached among Democrats. In particular, Democrats appear to be ready to use a Senate parliamentary procedure known as “budget reconciliation” that would require only 51 Senate votes for passage in order to enact a bill in the coming weeks.   Additional background information on current health reform legislative efforts is available here.  
 

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Today the Obama Administration released an 11-page summary of its health reform proposal in preparation for a bipartisan health reform summit scheduled for February 25, 2010. Among other things, the proposal includes a relatively-detailed discussion how the Administration would promote access to affordable insurance, address health care fraud and abuse proposals, and bridge the differences between the House and Senate reform proposals in other key areas. Items of note include the following:

• Access to Health Insurance – The Administration proposes expanding access to affordable insurance through a series of insurance market reforms, including an insurance purchasing pool; federal premium subsidies; a requirement that individuals buy insurance or pay a penalty (with exceptions); a requirement that employers defray costs employees receiving federal subsidies (with exceptions); expansion of Medicaid; and a new Health Insurance Rate Authority to provide federal assistance and oversight to states in conducting reviews of unreasonable rate increases and other insurance industry practices. There is no mention of establishing a public health insurance plan to compete with private insurers.
• Waste, Fraud and Abuse – The Presidential proposal includes a variety of program integrity provisions, which include: a comprehensive sanctions database; registration and background checks of billing agencies and individuals; expanded access to the Healthcare Integrity and Protection Data Bank; liability of Medicare administrative contractors for claims submitted by excluded providers; strengthened standards for facilities that seek reimbursement as community mental health centers; limiting debt discharge in bankruptcies of fraudulent health care providers or suppliers; expanded use of technology for real-time data review; sanctions for illegal distribution of a Medicare or Medicaid beneficiary identification or billing privileges; a study of universal product numbers/claims forms for selected items and services under the Medicare program; a state Medicaid prescription drug profiling requirement; extrapolation of Medicare Advantage risk adjustment errors to contract payment for a given year; modification of certain Medicare medical review limitations; establishment of a CMS-IRS data match to identify fraudulent providers; and prevention of delays in access to generic drugs.
• Cost-Containment Provisions – While the summary document does not include a detailed discussion of Medicare provider rate changes, it does include a limited number of cost containment/fiscal sustainability provisions, including: an adjustment in Medicare Advantage payments to reflect “unjustified coding patterns”; an excise tax on the most expensive health plans ($27,500 for a family plan) beginning in 2018 for all plans; and new Medicare Hospital Insurance taxes on high-income taxpayers.
• Industry Fees -- The President proposes a $33 billion fee on brand name pharmaceutical manufacturers over 10 years (up $10 billion from Senate plan), beginning in 2011; a $67 billion assessment on health insurers over 10 years beginning in 2014 (with certain exceptions); and an excise tax (rather than fee) on medical device manufacturers, raising $20 billion over 10 years, starting in 2013.
• Quality of Care – Although not discussed in the summary document, a separate description on the White House web site states the President’s plan would provide “incentives for doctors, and hospitals that improve quality while providing for better coordination that helps to reduce harmful medical errors and healthcare-acquired infections.” The plan also includes “innovative payment reforms so providers are rewarded for the quality of care they provide, rather than just additional tests or treatments.” Likewise, it would reward greater coordination of care between primary care providers and specialists.
• Part D Coverage Gap – The President’s proposal fills the Medicare Part D prescription drug "doughnut hole" by providing a $250 rebate to Medicare beneficiaries who reach the coverage gap in 2010, and then phasing down the coinsurance requirement so it is the standard 25 percent by 2020 throughout the coverage gap.
• Medicaid Matching Funds – The President would eliminate the Senate’s proposed enhanced Medicaid matching provision for Nebraska and instead provide additional federal financing for all states to support the expansion of Medicaid.
• CLASS Act – The White House endorses the Community Living Assistance Services and Supports (CLASS) Program, a voluntary, privately-funded long-term services insurance program, but makes a series of changes designed to “improve the CLASS program’s financial stability and ensure its long-run solvency.”

The Administration also has released a variety of background and summary documents on the White House Health Care Meeting website.

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In an effort to jump-start progress on stalled health reform legislation, President Obama has invited Democratic and Republican lawmakers to a half-day, televised health reform summit on February 25, 2010. The event, announced by the President during a press interview on February 7, is billed as an opportunity for members of both parties to “put the best ideas on the table.”   Republican Congressional leaders have been reluctant to commit to participating in the meeting, however, unless the Democrats set aside the bills approved by the House and Senate in late 2009. In the meantime, Democratic leaders continue to work to resolve differences between the House and Senate approaches to the legislation. Our previous reports on health reform legislative efforts are available here.  

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The Obama Administration has released its proposed federal budget for fiscal year (FY) 2011. In its budget documents, the Administration reaffirms its commitment to enacting health reform legislation, and it assumes $150 billion in federal savings attributable to health reform over the 2011-2020 period. The document states that the budget “supports health insurance reform” by expanding patient-centered health research on treatment effectiveness; increasing investment in health information technology, prevention, and wellness activities; and initiating Medicare payment reform demonstrations. Nevertheless, the budget does not outline comprehensive reform plans, nor does it repeat the sweeping Medicare and Medicaid budget savings proposals included in the Administration’s proposed FY 2010 budget. In other health policy areas, the budget would: expand funding for biomedical research, health centers for the medically underserved, and HIV/AIDS prevention and treatment; provide a six-month, $25.5 billion extension of the American Recovery and Reinvestment Act (ARRA) temporary increase in federal Medicaid matching funds; expand Medicare and Medicaid anti-fraud efforts; address high-risk billing activity associated with the Medicaid drug benefit; expand Food and Drug Administration (FDA) user fees; and fund an FDA to “provide regulatory pathways for new technologies such as biosimilars.”  A separate FDA press release on the budget proposal announces that the Administration is seeking $4.03 billion for the FDA in FY 2011, which is a 23% increase over the agency’s current $3.28 billion budget.  The following initiatives are the major components of the FDA's FY 2011 budget increase:  transforming food safety ($318.3 million); Protecting Patients Initiative ($100.8 million); advancing regulatory science ($25.0 million); and tobacco-related initiatives ($215.0 million).  Note that many provisions of the proposed budget would require Congressional approval to implement. To that end, Congress is holding a series of hearings on the proposal, including Senate Finance and House Energy and Commerce Committee hearings focusing on the health policy provisions of the budget. Several other budget hearings scheduled for the week of February 8 were postponed due to extreme weather conditions in the Washington, D.C. area.

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On January 27, 2010, President Obama delivered his State of the Union address to Congress. While the economy was the overwhelming focus of the address, President Obama reaffirmed his commitment to health insurance reform. Acknowledging setbacks on this issue, he nevertheless implored Congress to “not walk away from reform.” He asked Congress to “take another look at the plan we've proposed,” calling it a “vast improvement over the status quo.” He offered to work with members of either party on refinements that “bring down premiums, bring down the deficit, cover the uninsured, strengthen Medicare for seniors, and stop insurance company abuses.”

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After devoting much of the last year to crafting comprehensive health reform legislation, the election of Republican Scott Brown in the Massachusetts special election to fill the late Senator Edward Kennedy’s seat has thrown into doubt the fate of these efforts. While just two weeks ago Democratic leaders reportedly were near agreement on a compromise bill reconciling differences between the House and Senate-approved legislation, they are now scrambling to determine if they have the votes to proceed on this issue in the wake of the loss of their filibuster-proof Senate majority. Options discussed publicly, each of which has political challenges, include: having the House simply vote on the Senate-approved measure, which would not require another Senate vote; House consideration of the Senate bill along with House and Senate votes on a companion package of House amendments using a Senate parliamentary procedure known as “budget reconciliation” that would require only 51 Senate votes for passage; attempting to develop a scaled-down bill that can gain bipartisan support; or shelving the legislation entirely. No timetable has been announced for deciding on a strategy, but given the number of lawmakers now advocating a “go slow” approach to the issue, it does not appear that final action on health reform legislation is imminent. Our previous reporting on this issue, including summaries of the House and Senate bills and links to the legislative documents, is available here.  

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The House of Representatives has returned from its winter break to start the second session of the 111^th Congress, and the Senate returns to business next week. At the top of the Congressional agenda is reconciling the differences between the separate health reform bills approved by the House and Senate late last year. While the overarching goals of the two bills are the same – to expand access to high-quality, affordable health care and reduce health care costs – there are numerous differences in the approaches the two chambers take. To highlight just a few issues facing lawmakers, agreement must be reached on, among many other things: whether to include a public health insurance option; whether health insurance exchanges should be state-based or federally administered; the extent to which health insurance premiums should be subsidized; whether expensive health insurance plans should be taxed; how to address coverage of abortion services; whether to repeal the anti-trust exemption for insurers; whether to include an independent Medicare Payment Advisory Board to recommend Medicare savings; how to avert the 21% cut in Medicare physician fee schedule payments that goes into effect March 1, 2010; the extent of Medicare provider payment reductions and Medicare Advantage cuts, along with how such cuts should be structured; how to achieve broader Medicare delivery reforms; and which health care sectors should be subject to industry fees. Rather than convene a formal conference committee, key lawmakers and staff are meeting to reach agreement on the myriad of issues. The tentative plan once final agreement is reached is for the House to consider an amended version of the Senate-approved bill. Assuming House passage, the bill would then be voted on by the Senate; if the Senate then approves the bill without amendment, it would go to the President for signature. Lawmakers hope that this process can be accomplished in the next few weeks, ideally before the President’s (still unscheduled) State of the Union Address, although there are numerous policy and political hurdles that stand in the way of final enactment.

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This morning the Senate approved H.R. 3590, the Patient Protection and Affordable Care Act, by a vote of 60-39.   Congressional leaders must now reconcile differences between the health reform bills cleared by the House and Senate, with a goal of approving a compromise bill before the President's State of the Union address early in the new year.
 

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As reported this weekend, on December 16, 2009, Senate Majority Leader Harry Reid released his "manager's amendment" to the pending Senate health reform bill, the Patient Protection and Affordable Care Act (H.R. 3590). The amendment reflects a series of agreements negotiated with individual Senators in recent weeks, and its release sets the stage for a possible Senate vote on the underlying health reform measure by Christmas. The amendment cleared the first procedural hurdle early this morning, when a motion to cut off debate and proceed to a vote on the amendment was approved by the needed 60-40 margin.  In other important health policy news, the Senate has joined the House in approving a short-term delay in the looming 21.2% Medicare physician fee schedule payment cut caused by the application of the controversial sustainable growth rate (SGR) formula to the annual fee update. 

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Today Senate Majority Leader Harry Reid released his “manager’s amendment” to the pending Senate health reform bill, the Patient Protection and Affordable Care Act (H.R. 3590). The amendment reflects a series of agreements negotiated with individual Senators in recent weeks, and its release sets the stage for a possible Senate vote on the underlying health reform measure by Christmas. Even if adopted, however, lawmakers will still face the difficult task of reconciling the differences between Senate and House approaches to health reform before a bill can reach President Obama’s desk.

The 383-page amendment makes changes throughout the legislation, including changes to provisions addressing various insurance coverage and market reforms, Medicare reimbursement policies, fraud and abuse authorities, and taxes, among many others. According to the Congressional Budget Office, the provisions of the manager’s amendment with the largest budgetary effects include:

• Expanded eligibility for a small business tax credit;
• Increased penalties on certain uninsured individuals;
• Replacement of the proposed public health insurance plan with multi-state plans that would be offered under contract with the Office of Personnel Management;
• Deletion of an increase in Medicare physician payment rates (which is likely to be addressed in a separate vehicle); and
• Increased payroll taxes on higher-income individuals and families.

Other significant changes include:

• Lowering the threshold for Medicare spending growth that would trigger recommendations for spending reductions by the Independent Payment Advisory Board;
• Enhanced Medicare quality of care provisions (including the development of hospital and physician outcomes measures, the development of a framework for public reporting of provider performance information, pay-for-performance requirements for additional Medicare provider types, and value-based purchasing for ambulatory surgical centers);
• Revisions to Medicare payment policy for a wide range of providers, including hospitals, home health agencies, skilled nursing facilities, inpatient rehabilitation facilities, long-term care hospitals, and hospices; expanded Medicare Part D medication therapy management requirements; and an extension of the proposed date by which a physician-owned hospital must have a Medicare provider agreement to quality for the “whole hospital” exception to the Stark law's self-referral prohibition from February 1, 2010 to August 1, 2010;
• Stronger health fraud enforcement provisions, including an extension of the federal health fraud statute to violations in which a person did not have specific intent to commit health fraud, revisions to the federal sentencing guidelines for federal health care offenses, and increased subpoena authority; and
• Modifications to the proposed annual taxes on the medical device and health insurance industries.

Note that the CBO warns that certain Medicare cost-saving provision in the legislation “might be difficult to sustain over a long period of time.”  The CBO expects inflation-adjusted Medicare spending per beneficiary under the legislation would increase at an average rate of less than 2% annually during the next two decades -- about half the rate over the past two decades. According to the CBO, “it is unclear whether such a reduction in the growth rate could be achieved, and if so, whether it would be accomplished through greater efficiencies in the delivery of health care or would reduce access to care or diminish the quality of care.”

In other important health policy news, today the Senate joined the House in approving a short-term delay in the looming - and very large - Medicare physician fee schedule payment reductions caused by the application of the controversial sustainable growth rate (SGR) formula to the annual fee update. Specifically, H.R. 3326, the Department of Defense Appropriations Act for 2010, includes a provision that freezes Medicare physician rates at currents levels for January and February 2010, in lieu of the 21.2% cut scheduled to go into effect January 1, 2010. The legislation now goes to the President, who is expected to sign the bill into law.  Note that lawmakers also are working on longer-range solutions to the Medicare physician fee schedule's SGR formula, but as the health reform debate drags out it is seen as increasingly unlikely that a more permanent fix can be adopted before the start of the new year.
 

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The CMS Office of the Actuary (OACT) has issued its analysis of the Senate Democratic leadership’s health reform plan, the Patient Protection and Affordable Care Act (H.R. 3590), as introduced on November 18.  OACT estimates that the Senate proposal would increase total national health expenditures by $234 billion (0.7 percent) during calendar year 2010-2019.  The increase is attributable primarily to (i) greater utilization of health care service by individuals becoming newly covered or having complete coverage; (ii) lower prices paid to health providers for the subset of those individuals who become covered by Medicaid; and (iii) lower payments and payment updates for Medicare services, together with net Medicaid savings from provisions other than the coverage expansion. The report also discusses the potential impact of the proposed $493 billion in Medicare cuts over 10 years.  In particular, the report charges that the savings associated with annual productivity adjustments for most providers are probably "unrealistic" since it is doubtful most providers could reduce costs to the extent envisioned in the legislation.  OACT simulations project that as many as 20 percent of Part A providers could become unprofitable within 10 years, potentially jeopardizing Medicare beneficiary access to care.

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The full Senate has begun debate on the Democratic leadership’s major health reform plan, the Patient Protection and Affordable Care Act (H.R. 3590). The measure cleared an important procedural hurdle November 21, 2009 when the Senate voted 60-39 in favor of proceeding to consideration of the bill, and the first votes on what is expected to be a long list of amendments took place December 3. The legislation reflects the Senate leadership’s attempts to balance differing measures previously adopted by the Senate Finance Committee and the Health, Education, Labor, and Pensions Committee. On the contentious issue of a public health plan, the leadership plan would establish a non-profit public plan dubbed the “community health insurance option” that would be available to individuals who purchase health insurance through a new insurance “exchange.”   Payment rates under the community health option would be based on negotiations with providers and suppliers, and states would be allowed to “opt out” of offering this option. The voluminous bill also would, among many other things: establish federal subsidies for individuals to reduce the cost of purchasing coverage; expand Medicaid eligibility; establish a mandate for most individuals to obtain health insurance and most large employers to contribute towards the cost of insurance; institute various insurance market reforms; substantially reduce the growth of Medicare payment rates for most services and tie certain payment rates to quality outcomes; establish an independent Medicare Advisory Board to recommend Medicare savings and quality improvement proposals, with the Board's proposals taking effect automatically unless Congress approves alternative policies; establish requirements to promote transparency in financial relationships and reduce health care fraud and abuse; establish annual fees on the pharmaceutical manufacturing sector ($2.3 billion annually), the medical device manufacturing sector ($2.0 billion annually), and the health insurance sector ($6.7 billion annually); and make various other changes to the federal tax code, Medicare, Medicaid, and other programs. The Congressional Budget Office (CBO) estimates that the gross cost of the insurance coverage expansion would be $848 billion over 10 years, but that amount would be more than offset by a combination of other tax and spending changes that would result in a $130 billion net reduction in federal budget deficits over 10 years. The CBO also estimates that the legal nonelderly insured population would rise from about 83% currently to about 94% under the bill. Note that a lengthy Senate floor debate is expected, which could potentially extend beyond Christmas. Once the Senate approves its bill, the next step will be reconciliation with the House bill approved in November.

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Today Senate Majority Leader Harry Reid released the Senate health reform plan, the "Patient Protection and Affordable Care Act."  A procedural vote to move forward on the legislation could occur later this week.

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On November 14, 2009, House Republicans released an analysis by CMS’s Office of the Actuary (OACT) that raises questions about the House-approved health reform plan’s potential to control health care spending. The report, which was requested by Ways and Means Ranking Member Dave Camp, found that under H.R. 3962, “America’s Affordable Health Choices Act of 2009”:

• Overall national health expenditures would increase by $289 billion (0.8 percent) for calendar years 2010 through 2019, reflecting the net effect of health service utilization increases and price reductions. OACT projects that the national health expenditure share of gross domestic product would be 21.1 percent in 2019 under the legislation, compared to 20.8 percent under current law.
• Net Medicare spending would be reduced by $571 billion for FYs 2010-2019 (this figure does not include the cost associated with reforming the physician fee schedule formula, which is being considered through separate House legislation). OACT warns, however, that the estimated savings for permanent annual productivity adjustments for Medicare institutional providers such as acute care hospitals, skilled nursing facilities, and home health agencies “may be unrealistic.” Although H.R. 3962’s reductions in Medicare payment updates “would provide a strong incentive for institutional providers to maximize efficiency, it is doubtful that many could improve their own productivity” to the degree envisioned in the legislation. This could result in Medicare payment rates that “grow more slowly than, and in a way that was unrelated to, the providers' costs of furnishing services to beneficiaries.” Medicare providers thus “could find it difficult to remain profitable and might end their participation in the program (possibly jeopardizing access to care for beneficiaries).” While Congress could monitor this policy to prevent beneficiary access problems, “so doing would likely result in significantly smaller actual savings” than projected.
• Other than reduced inflation updates for Medicare providers, “[m]ost of the provisions of H.R. 3962 that were designed, in part, to reduce the rate of growth in health care costs would have a relatively small savings impact.” For instance, promoting comparative effectiveness research, expanding use of prevention and wellness measures, instituting administrative simplification provisions, and enhancing fraud and abuse enforcement efforts would result in a reduction in non-Medicare federal health care expenditures of $2.1 billion, all of which would result from the comparative effectiveness research proposal.
• There are significant questions about the viability of the proposed Community Living Assistance Services and Supports (CLASS) program -- a voluntary national insurance program that would provide cash benefits to assist individuals unable to perform two or more functional activities of daily living to purchase nonmedical services in order to remain in a community setting. According to the report, “voluntary, unsubsidized, and non-underwritten insurance programs such as CLASS face a significant risk of failure as a result of adverse selection by participants.”

OACT is an independent technical advisor to the Administration and Congress. The OACT report includes a disclaimer that the information does not represent an official position of HHS or the Administration.

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On November 7, 2009, the House of Representatives approved H.R. 3962, the Affordable Health Care for America Act, by a vote of 220 – 215. The legislation seeks to expand access to affordable health insurance coverage (including through the creation of a public health insurance option) and institute numerous reforms to the nation’s health care system. The most polarizing issue during the House debate, however, was coverage of abortion services (the House ultimately adopted an amendment prohibiting federal funds for abortion services in the public option and prohibiting individuals who receive insurance subsidies from purchasing a plan that provides elective abortions). Also during floor debate, the House incorporated a “manager's amendment" to the bill that make a number of changes to the version of H.R. 3962 released October 29, addressing such issues as verification of citizenship for health coverage, insurance industry practices, optional state funding for long-term care facility background checks, enhanced oversight of claims for new medical equipment suppliers, Medicaid community support services, and specialty hospitals, among others. The House also approved a “rule” that allows Congress to consider separate legislation, H.R. 3961, the Medicare Physician Payment Reform Act of 2009, which would provide a permanent fix to the Medicare physician fee schedule formula (physicians are facing a 21.2% across-the-board cut in Medicare payments January 1, 2010 in the absence of statutory change). Our previous summaries and updates on the House bill are available here. Legislative action now shifts to the Senate, where leaders have been working to meld bills adopted by the Senate Finance Committee and the Health, Education, Labor, and Pensions (HELP) Committee. The consensus bill being developed is still under wraps while the Congressional Budget Office “scores” its fiscal impact. Senate leadership still hope to release the bill within the next week and to begin what is expected to be a lengthy floor debate on the package before Thanksgiving, although that timeline is subject to change. 

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On November 3, 2009, the House Rules Committee posted Rep. Dingell's "manager's amendment" to H.R. 3962, the Affordable Health Care for America Act. The amendment makes changes to a number of provisions of the House bill, addressing such issues as verification of citizenship for health coverage, insurance industry practices, funding for long-term care facility background checks, enhanced oversight of claims for new durable medical equipment suppliers, and Medicaid community support services, among others.  The House Rules Committee is scheduled to meet Friday, November 6, to vote on the parliamentary procedures that will be used by the House when considering H.R. 3962, including the amendments that will be considered during debate. The package is expected to be voted on by the full House as soon as Saturday, November 7.
 

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According to the preliminary Congressional Budget Office (CBO) score of the House health reform legislation released October 29,  the proposed expansions in insurance coverage would cost $894 billion over 10 years.  The bill would be paid for with cuts in Medicare rates, an income tax surcharge on high-income individuals and other tax code changes, and a variety of other offsets.  This price tag does not, however, factor in the cost of legislation to avert an upcoming 21.5% cut in the Medicare physician fee schedule, which is widely expected to be considered before the end of the year.  With regard to insurance coverage, CBO estimates that the share of legal nonelderly residents with insurance coverage would rise from about 83% currently to about 96% under the legislation.

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On October 21, 2009, a Senate effort to block upcoming reductions to Medicare physician fee schedule payments failed on a procedural “cloture” vote that would have ended debate and allowed a vote on the bill. By way of background, under the current statutory “sustainable growth rate” (SGR) formula, Medicare physician payments are expected to be reduced by 21.5% in 2010 and by about 6% more annually for several subsequent years. The bill that came before the Senate, S. 1776, would repeal the SGR formula and permanently freeze the physician fee schedule. In blocking the measure, lawmakers voiced concerns about the proposal's price tag (almost $250 billion over 10 years), which was not paid for under the bill.  Most recently, on October 29, 2009, House leaders released H.R. 3961, the Medicare Physician Payment Reform Act of 2009, which would provide a permanent fix to the physician fee schedule formula.  While Congress is widely expected act before the end of the year to avert the upcoming fee schedule cut for 2010, the timing and the scope of the legislation (permanent reform vs. one or two year fix) still has not been determined.

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Today House Democratic leaders unveiled the Affordable Health Care for America Act (H.R. 3962), which builds on the legislation approved by three House committees this summer.   The massive, almost 2000-page bill includes a wide range of provisions designed to expand access to health insurance, improve health care quality, and reduce health care costs. Notably, Congressional leaders decided to include a public health insurance option to compete with private health plans, with payment rates based on negotiations between the HHS Secretary and providers (rather than using Medicare rates). Other mechanisms to expand access to insurance include market reforms, an insurance purchasing exchange, premium subsidies, an expansion of Medicaid, and mandates for employers to contribute to workers’ health care costs and individuals to purchase insurance (or pay a penalty). The bill also includes scores of provisions that would impact Medicare reimbursement to providers, such as: bundled payments for acute and post-acute provider; payment reforms to discourage preventable hospital readmissions; reduced payments to Medicare Advantage plans; reduced market basket updates; “productivity adjustments” that reduce rate updates for certain Medicare providers; restrictions on specialty hospitals; and reductions in payment rates for home health and imaging services, among others. Many other reforms could impact a range of providers and manufacturers, such as expanded comparative effectiveness research, new nursing home transparency rules, expanded disclosure requirements regarding financial relationships between manufacturers and providers, numerous fraud and abuse provisions, Part D drug payment provisions, expanded drug rebates, and new payment policies for biosimilar biological products.

The Congressional Budget Office analysis of the bill is expected to be released later today,  and House leaders hope to bring the bill to the House floor for a vote next week. Senate leaders still have not released their combined health reform package, although that document also is likely to be released shortly in hopes of Senate consideration by Thanksgiving. Differences between bills approved by the House and Senate ultimately would need to be reconciled before a final bill could be send to the President for his signature.

In a related development, today House leaders also released H.R. 3961, the Medicare Physician Payment Reform Act of 2009, which would provide a permanent fix to the physician fee schedule through a free-standing bill, rather than using the health reform bill as the legislative vehicle to avert an upcoming 21.5 percent cut in physician fee schedule payments. 

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The three House committees that approved health reform bills this summer have released a committee report, including legislative language and supplemental materials, related to H.R. 3200, the America's Affordable Health Choices Act..   The report is divided into three parts: 

• Part 1 includes the House Energy & Commerce Committee report on H.R. 3200;
• Part 2 is the House Ways and Means Committee report  on H.R. 3200; and
• Part 3 is the House Education and Labor Committee report on H.R. 3200.

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The Senate Finance Committee has posted the 1502-page legislative text of the America’s Healthy Future Act.  
 

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On October 13, 2009, the Senate Finance Committee approved the “America’s Healthy Future Act,” representing the last step in the committee process before health reform legislation can move to the full Senate for a vote. The Committee approved the bill by a 14-9 margin, with one Republican (Sen. Olympia Snowe) joining all panel Democrats in supporting the bill. According to the Congressional Budget Office (CBO), the package would cost $829 billion gross over 10 years, but result in a net savings of $81 billion over 10 years. The proposal seeks to expand access to affordable health insurance through insurance market reforms, the creation of insurance exchanges to facilitate comparing and purchasing insurance policies, expanded Medicaid eligibility, and various subsidies (the bill does not include a public health insurance option). All individuals would be required to purchase health insurance, subject to limited exceptions. While employers would not be required to offer health insurance, firms with more than 50 workers that do not offer coverage would be subject to a financial penalty for full-time workers who obtain subsidized coverage through the insurance exchanges. The Congressional Budget Office estimates that the bill would reduce the number of uninsured nonelderly individuals by about 29 million, leaving about 25 million nonelderly residents uninsured. The bill also includes a series of provisions impacting Medicare and Medicaid payment policies, including reductions in annual updates to certain Medicare fee-for-service rates (except physicians would receive a 0.5% increase instead of a scheduled 21.5% cut in 2010), new “productivity” adjustments and other payment policies that have the effect of reducing payments for certain health providers, cuts in payments to Medicare Advantage plans, and health care delivery reforms (e.g., expanded Medicare value-based purchasing, reduced payments for avoidable hospital readmissions, and a pilot program on post-acute bundling). Other reforms include expanded federal comparative effectiveness research, disclosure of certain physician-industry financial relationships, greater investment in the health care workforce, and strengthened efforts to combat health care fraud. Financing mechanisms include an excise tax on high-cost insurance policies and annual fees on the pharmaceutical manufacturing sector ($2.3 billion annually), the medical device manufacturing sector ($4 billion) and the health insurance sector ($6.7 billion). The CBO estimates that the bill would reduce direct spending on Medicare, Medicaid, and CHIP by over $400 billion over ten years. Senate leaders now must merge the Finance package with the health reform bill approved by the Senate Health, Education, Labor, and Pensions (HELP) Committee this summer, and the unified bill could move to the full Senate for a vote this month. In the meantime, the House leadership has been working to meld the health reform bills approved by the Energy and Commerce, Ways and Means, and Education and Labor Committees to enable a unified measure to be brought to the House floor for a vote. 

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The Congressional Budget Office (CBO) has released its preliminary score of the Senate Finance Committee health reform bill, as amended in committee.   In brief, the CBO concludes that the bill would cost $829 billion gross over 10 years, but result in a net savings of $81 billion over 10 years.  CBO estimates that the bill would would reduce direct spending on Medicare, Medicaid, and CHIP by $404 billion over the 2010–2019 period, and the Medicare and Medicaid provisions would increase federal revenues by approximately $16 billion over this period.  Program savings include $162 billion in reductions to annual updates to Medicare fee-for-service rates (other than physicians’ services), and a $117 billion cut in payments to Medicare Advantage plans.  The number of uninsured nonelderly individuals would be reduced by about 29 million, leaving about 25 million nonelderly residents uninsured (about one-third of whom would be unauthorized immigrants).  The Finance Committee is scheduled to vote on the bill on October 13, 2009.

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The Senate Finance Committee health reform package, as amended during Committee markup, is now available on the Finance Committee website.  The proposal (in the form of a narrative rather than legislative text) is now being scored by the Congressional Budget Office (CBO), and a vote in the Finance Committee is expected October 6. The bill then will be merged with the Senate Health, Education, Labor, and Pensions Committee bill before moving to the full Senate for a vote later this month.

 ** Note that technical corrections to the document subsequently were posted to the website, and the vote has been delayed pending the CBO score.

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The Senate Finance Committee began markup of its health reform legislation on September 22, 2009. The panel has made its way through many of the more than 500 amendments proposed by Committee members, but more work remains to be done when the Committee resumes work on September 29, including debate on the controversial issue of whether or not to include a public health insurance option. Once the Finance Committee completes action, its provisions must be combined with the version adopted by the Senate Health, Education, Labor, and Pensions (HELP) Committee in July. On the House Side, in a highly unusual process, the Energy and Commerce Committee held a markup session on September 23 to adopt additional amendments to the health reform bill, H.R. 3200, the panel already approved in July. Members of the House leadership are now working to meld the Energy and Commerce provisions will the health reform proposals adopted by the House Ways and Means and Education and Labor Committees to enable a unified measure to be brought to the House floor for a vote. The timing of such a vote has not yet been announced.

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On September 22, 2009, the Senate Finance Committee is scheduled to begin debating Senator Baucus’s proposed health reform “Chairman’s Mark.”   On September 19, the Finance Committee posted the amendments that will be considered during the health reform markup.  More than 500 amendments have been filed, addressing health care delivery system reform, health care coverage, and financing of comprehensive health care reform.  The Finance Committee is the last Congressional panel to act before health reform legislation is taken up by the full House and Senate.

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Addressing a joint session of Congress last night, President Obama called on lawmakers to adopt a health reform plan featuring insurance market reforms, insurance mandates, Medicare reforms, and a public health insurance option. The President’s remarks came as Senate Finance Committee Chairman Max Baucus released the outline of his proposed health reform framework for consideration by a small group of Senators who have been working to forge a bipartisan agreement. Regardless of whether a bipartisan deal is reached, however, Chairman Baucus announced that his Committee will mark up health reform legislation the week of September 21, 2009.

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Congress returns next week from its August recess, starting a critical period for the fate of health reform legislation. After a turbulent summer of town hall meetings and public wrangling regarding the scope of reform, President Obama will address a joint session of Congress on September 9, 2009 to discuss in more detail his vision for the legislation. In the meantime, a small bipartisan group of Senators is continuing to try to develop a compromise plan by its September 15, 2009 target. If attempts at a bipartisan solution fail, Senate leaders have indicated they may seek to consider reform legislation under “budget reconciliation” rules, which prevent filibuster and allow passage with a simple majority of Senators, but which limit the scope of the legislation that may be considered to provisions that impact spending. On the House side, leaders still must unite the separate bills approved by three different committees before the legislation can be considered by the full House.

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All three House Committees with jurisdiction over health reform legislation now have approved different versions of H.R. 3200, "America's Affordable Health Choices Act." The House leadership now must work to meld the bills approved by the Energy and Commerce, Ways and Means, and Education and Labor Committees into a unified bill for consideration by the full House after Congress returns from its August recess. On the Senate side, while the Senate Committee on Health, Education, Labor, and Pensions approved its health reform plan, the “Affordable Health Choices Act,” in July, high-profile negotiations among a small bipartisan group of Senate Finance Committee members have not yet yielded a compromise bill. In the meantime, the White House has been stepping up efforts to build public support for health reform through a series of town hall meetings and the launch of a new “reality check” website aimed at combating what the White House perceives to be “misinformation” about pending health reform proposals. In light of more vocal public opposition to elements of health reform, however, Administration officials have begun to signal more willingness to compromise on the key issue of establishing a public health plan to compete with private insurers.

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On August 7, 2009, HHS Secretary Kathleen Sebelius will host a webcast at www.healthreform.gov to discuss how health insurance reform will benefit all Americans. The webcast, which will begin at 1:00 PM EDT, will feature a number of top HHS officials, including Dr. David Blumenthal, National Coordinator for Health Information Technology, Dr. Howard Koh, Assistant Secretary for Health, and Dr. Mary Wakefield, R.N., Administrator of the Health Resources and Services Administration.

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While three Congressional panels have now approved versions of comprehensive health reform legislation, delays in Senate Finance Committee and House Energy and Commerce Committee consideration have made it unlikely that health reform will be considered in the full House or Senate by the August Congressional recess beginning August 7, 2009. The legislative situation is still very fluid, with news of potential compromises vying with continued reports of serious divisions among key groups of lawmakers. Key developments in this process are outlined below.

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On July 15, 2009, the Senate Committee on Health, Education, Labor, and Pensions (HELP) approved its health reform plan, the “Affordable Health Choices Act,” on a party-line 13-to-10 vote. The major features of the legislation are summarized in a previous posting. Note that the HELP Committee does not have jurisdiction over Medicare or Medicaid; provisions impacting those programs will be included in the Senate Finance Committee health reform bill. A group of Finance Committee members are still meeting to agree on a bipartisan bill, but panel members are no longer predicting when the details of a compromise package may be released. After Finance Committee action, the two Committee packages then will be combined for consideration by the full Senate, likely sometime in the fall.

Sept. 2, 2009 update: The HELP Committee has finally released the version of the health reform bill adopted by the panel on July 15, 2009.

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As previously reported, on June 17, 2009, the chairmen of the three House committees that share jurisdiction over health policy released a “discussion draft” of their comprehensive health reform plan. A revised version of the bill, the America's Affordable Health Choices Act of 2009 (H.R. 3200), was unveiled on July 14, 2009. In short, the legislation would: create a public health insurance plan to compete with private insurers; expand access to insurance include low-income subsidies, creation of a health insurance exchange, Medicaid expansion, and private insurance market reforms; impose mandates for individuals to purchase insurance and employers to contribute to health care costs (with certain exceptions); and make extensive Medicare and Medicaid policy changes affecting virtually every type of health care entity. On July 17, 2009, the Ways and Means Committee approved H.R. 3200, followed the same day by House Education and Labor Committee approval of an amended version of the legislation. The third House committee with jurisdiction -- Energy and Commerce -- began consideration of the legislation on July 17. Energy and Commerce Committee markup has been suspended, however, while Chairman Henry Waxman negotiates with more conservative Democratic members of the panel concerned with the costs of the bill and other features of the legislation, such as regional disparities in payment levels. Eventually the work of the three committees will be melded into one bill for a House vote, followed by reconciliation with the Senate package later in the year.

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On July 15, 2009, the Senate Committee on Health, Education, Labor, and Pensions (HELP) approved its health reform plan, the “Affordable Health Choices Act,” on a party-line 13-to-10 vote. In addition to significant insurance reforms, including a public health plan option, the legislation addresses a variety of other health policy issues, such as health care quality, health care workforce issues, preventive care, chronic care management, and a regulatory approval process for follow-on biologicals. The major features of the legislation are outlined below.

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According to a preliminary CBO estimate of the Medicare component of the Tri-Committee health reform proposal, the plan would result in more than $500 billion in gross Medicare savings over ten years.  The proposal by the Committees on Energy and Commerce, Ways and Means, and Education and Labor, is still being refined prior to formal committee markup.

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On July 2, 2009, the Senate Health, Education, Labor, and Pensions (HELP) Committee released title I of its health reform package, the “Affordable Health Choices Act.” The new title includes insurance market reforms, a health insurance exchange (called the “American Health Benefit Gateway”), and requirements that employers contribute to workers’ insurance costs and most individuals obtain insurance. The plan also includes a new public health insurance plan, called a “Community Health Insurance Option,” under which the Secretary would negotiates with providers for covered benefits and aggregate rates would be capped at the average reimbursement rates paid by health insurance issuers offering qualified health plans through the Gateway. According to a Congressional Budget Office (CBO) estimate of these new provisions, the bill would increase the deficit by $597 billion over the 2010-2019 period— but that does not reflect the costs of the Medicaid expansion, certain low-income subsidies, and other health policy provisions. CBO expects the bill to reduce the uninsured population by about 20 million when fully implemented, but 34 million people would still be uninsured.   The HELP Committee began debating amendments to the legislation in June (called “markup”), and markup continues this week.  

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The three House panels with jurisdiction over health reform -- Energy and Commerce, Ways and Means, and Education and Labor – have held hearings recently on the Tri-Committee health reform plan, and markups are expected this month. In addition, on July 8, 2009, the House Small Business Committee is holding a hearing entitled "The Looming Challenge for Small Medical Providers: The Projected Physician Shortage and How Health Care Reforms Can Address the Problem.” 

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On June 24, 2009, Senate Finance Committee Chairman Baucus announced that the CBO has scored the Finance Committee health reform plan under development as costing under $1 trillion.  The CBO also has determined that the plan makes offsetting cuts and/or raises revenues to fully pay for those new costs.  Note that the text of the Committee's legislation is not yet available; it is expected to be released after the 4th of July Congressional recess.

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Today the Chairmen of the three House committees that share jurisdiction over health policy released their 852-page draft health reform bill. As expected, the legislation would create a public health insurance plan to compete with private insurers, with provider payments based initially on Medicare payment amounts. Other mechanisms to expand access to insurance include low-income subsidies, creation of a health insurance exchange, Medicaid expansion, and private insurance market reforms, coupled with mandates for individuals to purchase insurance and employers to contribute to health care costs (with certain exceptions). The bill also includes extensive Medicare and Medicaid policy changes affecting virtually every type of health care entity. Among many other things, the bill would:

• Reform the physician fee schedule formula, including erasing cumulative shortfalls triggered by the current payment formula, establishing separate updates for evaluation and management and other types of services, and requiring review of potentially misvalued codes;
• Reduce payments to hospitals for a preventable readmissions;
• Bundle payments to hospitals and certain post-acute care providers (SNFs, IRFs, LTCHs, and HHAs) for services provided within 30 days of hospital discharge (the HHS Secretary would be required to study how the readmission policy also could be applied to physicians), and require the HHS Secretary to develop a detailed plan to reform Medicare payment for post-acute care services;
• Reduce Medicare reimbursement for imaging services by increasing equipment utilization factor for advanced imaging from 50% to 75% and increasing the multiple imaging procedure technical component discount from 25% to 50% for second and subsequent imaging studies on the same patient/same day;
• Reduce inflation updates for a variety of providers, revise the skilled nursing facility payment methodology, and incorporate productivity improvements into market basket updates for several types of providers;
• Limit the "whole hospital" exception to the Stark law's self-referral prohibition to those hospitals with physician ownership or investment on January 1, 2009, and add significant new conditions to that exception for existing hospitals with physician ownership;
• Reform graduate medical education payments;
• Reduce Medicare Advantage payments;
• Expand drug rebates in a number of ways (increase the Medicaid drug rebate amount for brand-name drugs from 15.1% to 22.1% of the average manufacturer price, apply the additional rebate to new drug formulations, allow rebates on drugs provided through Medicaid managed care organizations, and require drug manufacturers to provide rebates for certain full premium subsidy eligible individuals under the Part D drug program);
• Expand penalties for various types of health care fraud and abuse, including penalties for hospices that demonstrate substandard quality of care;
• Gradually phase out the Part D coverage gap ("donut hole");
• Establish an accountable care organization pilot program;
• Expand comparative effectiveness research;
• Require reporting of financial relationships between drug and device manufacturers and physicians (with a limitation on the deductions for advertising for failure to file required transparency reports); and
• Require the disclosure of nursing home ownership information and address other nursing home quality issues.

The three House committees -- Ways and Means, Energy and Commerce, and Education and Labor -- have scheduled hearings on the legislation next week, with committee voting expected in July.

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On June 16, 2009, the Congressional Budget Office (CBO) outlined the potential impact of health reform on the federal budget.  In a letter to the Senate Budget Committee, the CBO warns that "without meaningful reforms, the substantial costs of many current proposals to expand federal subsidies for health insurance would be much more likely to worsen the long-run budget outlook than to improve it."   Moreover, despite consensus about the need to make changes to make the health sector more efficient, such as paying providers for value, providing incentives for both providers and patients to control costs, and promoting comparative effectiveness information, "little reliable evidence exists about exactly how to implement those types of changes—especially at the level of specificity required for legislation."

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On June 15, 2009, the Congressional Budget Office posted its preliminary analysis of the major provisions related to health insurance coverage in the "Affordable Health Choices Act," which was released by the Senate Committee on Health, Education, Labor, and Pensions (HELP) on June 9, 2009.  Among other things, that draft legislation would establish insurance exchanges through which individuals and families could purchase coverage and would provide federal subsidies to substantially reduce the cost of that coverage for some enrollees.  The CBO estimates that the HELP health reform proposal would increase the federal budget deficit by about $1.0 trillion over the 2010–2019 period. Once fully implemented, about 39 million individuals would obtain coverage through the new insurance exchanges; however, because employer-provided insurance and coverage through other sources would decline, the net decrease in the number of people uninsured would be about 16 million. The $1 trillion figure also does not include the costs of a potential expansion of Medicaid eligibility or a public health insurance options, both of which might be added at a later date.  The HELP Committee is scheduled to begin markup of the legislation on June 17.

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On June 15, 2009, the House Ways and Means Committee posted a press release outlining Medicare physician fee schedule reforms being developed by key House lawmakers.  Under current law, known as the sustainable growth rate (SGR) formula, Medicare physician payments are expected to be reduced by 21% in 2010 and by additional amounts in future years.  Under the plan being developed in the House, the SGR formula would replaced with a new formula that:

• Removes items such as drugs and laboratory services not paid directly to practitioners from spending targets;
• Allows the volume of most services to grow at the rate of GDP plus 1 percentage point per year;
• Allows the volume of primary and preventive care services to grow at GDP plus 2% per year; and
• Encourages new Accountable Care Organizations "to be responsible for their own growth paths, irrespective of reductions or increases that apply elsewhere in the system."

The press release touts the reforms as costing "less than $300 billion over ten years."

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Health, Education, Labor and Pensions (HELP) Committee Chairman Edward Kennedy released the Committee's draft health reform legislation, the "Affordable Health Choices Act," on June 9, 2009.  The legislation focuses on insurance market reforms and subsidies, along with other system changes, such as promotion of health information technology, follow-on biologicals (just placeholder-no language) and expanded participation in 340B drug program, long-term care/community living services, preventive care, health care workforce issues, and fraud and abuse provisions. Note that the bill does not address Medicare, because that falls within the Senate Finance Committee's jurisdiction.  A HELP Committee hearing on the bill is scheduled for June 11, followed by markup beginning on June 16. [Markup subsequently delayed until June 17].

Also on June 9, leaders of the three House committees with jurisdiction over health policy released a 4-page outline of their health reform plan. In addition to insurance market reforms and other system changes, the plan includes Medicare reforms (including reform of the physician fee schedule formula, reductions in Medicare Advantage payments, and implementation of other unspecified MedPAC recommendations) and explicitly calls for a public health insurance option.

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A number of Congressional panels have held hearings recently on health policy issues, including the following:

• A House Small Business Committee hearing on “Common Ground: Finding Consensus on Health Reform, the Small Business Perspective.”
• A Special Committee on Aging hearing on the value of long-term care insurance.
• A House Judiciary Courts and Competition Policy Subcommittee hearing on "Pay to Delay: Are Patent Settlements That Delay Generic Drug Market Entry Anticompetitive?"

In addition, the following hearings are scheduled this month:

• A June 10 House Education and Labor Subcommittee on Health hearing on “Examining the Single Payer Health Care Option."
• A June 11 the Senate Health, Education, Labor and Pensions Committee hearing on health care reform.
• A June 11 House Energy and Commerce Health Subcommittee hearing on "Emerging Health Care Issues: Follow-on Biologic Drug Competition." 
• A June 11 Senate Homeland Security and Governmental Affairs Subcommittee on Oversight hearing on S. 372, the "Whistleblower Protection Enhancement Act of 2009." 
• A June 18 House Energy and Commerce Health Subcommittee hearing entitled, "Medical Devices: Are Current Regulations Doing Enough for Patients?"

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On December 18, 2008, the Congressional Budget Office (CBO) released a major report entitled “Budget Options, Volume 1: Health Care,” which sets forth 115 policy options for Congress to consider as it addresses health care system reform. The CBO points out that Medicare is expected to grow from 2.8 percent of gross domestic product (GDP) in 2008 to nearly 9 percent of GDP in 2050. This spending growth will be fueled primarily by growth in per capita medical costs, according to the CBO, with the aging of the population playing a secondary role. In light of these trends, the CBO offers specific options addressing such areas as: health insurance (market reforms, tax treatment, access to federal programs); health care quality and efficiency; geographic variation in Medicare spending; paying for Medicare services (including hospital, physician, imaging, and post-acute care, and Medicare Advantage plan services, among others); financing and paying for services in Medicaid (including drug payment revisions) and SCHIP; premiums and cost sharing in federal health programs; long-term care; health behavior and health promotion; and closing the gap between Medicare’s spending and receipts.  The CBO also issued a separate report focusing on insurance reform, “Key Issues in Analyzing Major Health Insurance Proposals.” The CBO warns that without changes in policy, a substantial and growing number of nonelderly people are likely to be without health insurance. This issue cannot be addressed without making major changes in the financing or provision of health insurance and health care, which will involve "difficult trade-offs between the objectives of expanding insurance coverage and controlling both federal and total costs for health care." The report describes the assumptions that CBO would use in estimating the effects of key elements of proposals to modify the health insurance system on federal costs, insurance coverage, and other outcomes. In particular, it considers the types of issues that would arise in estimating the effects of proposals to: provide tax credits or other types of subsidies to make insurance less expensive to the purchaser; require individuals to purchase health insurance; require firms to offer health insurance to their workers or pay into a fund that subsidizes insurance purchases; replace employment-based coverage with new purchasing arrangements or provide strong incentives for people to shift toward individually purchased coverage; and provide individuals with coverage under, or access to, existing insurance plans such as the Medicare program, either as an additional option or under a “Medicare-for-all” single-payer arrangement.

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