The ACA’s controversial Independent Payment Advisory Board (IPAB) is charged with submitting detailed proposals to Congress and the President to reduce Medicare per-capita spending if projected spending growth exceeds a specified target based initially on inflation and then growth in the economy. IPAB’s proposals will go into effect automatically unless Congress enacts alternative legislation to achieve the required savings (with certain exceptions). The ACA authorizes the IPAB’s first recommendations to be submitted by January 2014 for implementation in 2015 if the Medicare per capita target growth rate is exceeded. The CMS Office of the Actuary has just determined, however, that the Medicare spending target will not be triggered for 2015, and as a result IPAB savings proposals will not be needed for that year. Specifically, in an April 30, 2013 memo, the Actuary explained that because the projected 5-year Medicare per capita growth rate (1.15%) for the period of 2011 to 2015 does not exceed the Medicare per capita target growth rate (3.03%), there is no applicable savings target for 2015. Note that to date, no members have been appointed to the IPAB, and there have been repeated legislative attempts to repeal the IPAB provision (although the Obama Administration’s proposed FY 2014 budget would strengthen the IPAB by reducing the target rate of Medicare cost growth that triggers IPAB recommendations).
The Senate Finance Committee held a hearing on the President’s proposed HHS budget for FY 2013. The House Ways and Means Committee is holding a hearing on the HHS budget proposal on February 28; the budget also will be the focus of a House Energy and Commerce Committee hearing on March 1, 2012. Also looking ahead, the following health policy hearings and markups have been scheduled:
- A February 28 House Budget Committee hearing entitled “Strengthening Health and Retirement Security.”
- A February 29 Senate Budget Committee hearing on “Putting Health Care Spending on a Sustainable Path.”
- A February 29 Senate Health, Education, Labor and Pensions Committee hearing on expanding access to dental care.
- A February 29 Energy and Commerce Health Subcommittee markup of H.R. 452, the Medicare Decisions Accountability Act of 2011, which would repeal the ACA's Independent Payment Advisory Board (IPAB);
- A March 1 Energy and Commerce Committee hearing entitled "Prescription Drug Diversion: Combating the Scourge."
- A March 1 Senate Judiciary Committee markup of S.1002, the "SAFE DOSES (Strengthening and Focusing Enforcement to Deter Organized Stealing and Enhance Safety) Act."
According to new CMS national health spending statistics, U.S. health care spending grew 3.9% in 2010 -- the lowest rate of increase in 51 years. The relatively low rate of growth is attributed to lower utilization of health care services. Notably, retail prescription drug spending grew only 1.2%, the slowest rate of growth for prescription drug spending recorded in the national health expenditure survey. Medicare spending grew 5.0% in 2010, while Medicaid spending increased 7.2%.
The House Energy and Commerce Health Subcommittee has held a hearing entitled “CLASS Cancelled: An Unsustainable Program and Its Consequences for the Nation’s Deficit.” The panel also has scheduled a November 2, 2011 hearing entitled “Do New Health Law Mandates Threaten Conscience Rights and Access to Care?”
The GAO has issued a report entitled, “Health Care Price Transparency: Meaningful Price Information is Difficult for Consumers to Obtain Prior to Receiving Care.” According to the GAO, consumer difficulties in obtaining meaningful medical pricing information stem from both health care factors (such as the difficulty of predicting health care services in advance, billing from multiple providers, and various insurance benefit structures) and legal factors that may prevent the disclosure of negotiated rates between insurers and providers that could be used to estimate consumers' complete health care costs. While a number of public and private price transparency initiatives are underway, the types of information available to consumers vary. The GAO recommends that HHS determine the feasibility of making estimates of complete costs of health care services available to consumers as part of its transparency initiatives.
On April 8, 2011, President Obama and Congressional leaders announced an agreement on the outline of a spending bill to fund the government through the rest of FY 2011 (until September 30, 2011). The final FY 2011 continuing resolution cuts an additional $38.5 billion in federal spending over the remainder of the year, including new cuts in Department of Health and Human Services funding. Notably, the continuing resolution includes a number of provisions addressing the Affordable Care Act, including: reduced funding for the ACA Consumer Operated and Oriented Plan (which supports nonprofit, member-run health insurance issuers that offer qualified health plans in the individual and small group markets); elimination of the “Free Choice Voucher” insurance subsidy program; mandates a number of reports on the cost of implementing the ACA, administrative waivers of ACA annual insurance limits, and the impact of certain ACA market reforms on premiums for employer-sponsored health insurance; and requires an audit of ACA comparative effectiveness funding. Congress is expected to vote on the FY 2011 continuing resolution later this week. In the meantime, Congress passed and the President signed a separate stop-gap bill to fund the government through April 15, 2011 to allow time for action on the FY 2011 bill to be completed. As noted above, although the FY 2011 spending plan is not yet finalized, the House of Representatives already is moving ahead with consideration of its FY 2012 budget framework.
The President has signed another short-term government spending bill (H.J.Res. 48), funding government operations through April 8, 2011 as Congress attempts to craft a spending bill for the remainder for FY 2011. The latest bill would cut federal spending by $6 billion, including reductions in funding for HHS state health access grants and certain “no-year” pandemic influenza funding (both reductions were included in the President’s budget request).
President Obama has signed into law a short-term spending bill (H.J.Res. 44) that keeps the government funded through March 18, 2011 while Congressional leaders try to reach agreement on a spending package for the rest of fiscal year 2011 (through September 30, 2011). The latest stop-gap bill includes $4 billion in spending cuts, including reductions in certain HHS program management funding and earmarked projects at the Health Resources and Services Administration and Centers for Disease Control and Prevention. The appropriations bill for the remainder of FY 2011 is expected to include much deeper cuts to discretionary spending, as evidenced by a spending package approved by the House in February (H.R. 1) that would reduce spending by an additional $61 billion over the rest of the fiscal year compared to President Obama's budget request (note that different sources count the savings differently). The Senate is expected to begin debate on alternative spending packages this week.
The House Energy and Commerce Committee held a hearing entitled "The Consequences of Obamacare: Impact on Medicaid and State Health Care Reform." In addition, the House Energy and Commerce Health Subcommittee held hearings on the FY 2012 HHS budget and implementation of the ACA. On March 2, three Congressional panels held hearings on health care fraud: the Senate Finance Committee examined "Preventing Health Care Fraud: New Tools and Approaches to Combat Old Challenges"; the House Ways & Means Oversight Subcommittee focused on "Improving Efforts to Combat Health Care Fraud"; and the Energy & Commerce Committee held a hearing on “Waste, Fraud and Abuse: A Continuing Threat to Medicare and Medicaid". The fraud hearings covered current and planned regulatory and enforcement initiatives, legislative proposals, and areas of continued program vulnerability. Note that yet another Medicare/Medicaid fraud hearing, this one to be held by the Senate Homeland Security and Governmental Affairs Committee, is scheduled for March 9. Also on the Congressional schedule is a March 9 Energy and Commerce Subcommittee on Health hearing on “Setting Fiscal Priorities in Health Care Funding” and a March 10 House Education and the Workforce Health Subcommittee hearing on "The Pressures of Rising Costs on Employer Provided Health Care."
On January 25, 2011, the House of Representatives voted 256-165 to approve H.Res. 38, which directs Congress to cut FY 2011 non-security discretionary spending to no more than fiscal year 2008 levels. While H.Res. 38 does not specify planned spending cuts, the Republican Study Committee has offered a plan for achieving such reductions, including cutting funding to carry out the ACA and eliminating $16.1 billion temporary increase in federal Medicaid matching funds enacted by Congress last year. Likewise, in his State of the Union address, President Obama proposed freezing annual domestic spending for the next five years, which would reduce the deficit by more than $400 billion over the next decade. Additional details on the President’s spending plan will be included in his FY 2012 budget proposal, which is scheduled to be released in February.
The new 112th Congress has already held a number of hearings on health policy issues and other policy areas that also can impact the health industry. For instance, with regard to health reform, the House Ways and Means Committee held a hearing on the “Health Care Law’s Impact on Jobs, Employers, and the Economy.” In addition, the Senate Health, Education, Labor and Pensions Committee examined the ACA’s insurance market reforms, and the House Budget Committee focused on the ACA’s fiscal impact. In other areas, a Senate Judiciary Committee hearing focused on “Protecting American Taxpayers: Significant Accomplishments and Ongoing Challenges in the Fight Against Fraud." Separately, the House Judiciary Committee held hearings on "Medical Liability Reform - Cutting Costs, Spurring Investment, Creating Jobs," and on H.R.10, the "Regulations from the Executive in Need of Scrutiny (REINS) Act," which would require Congress to vote on every new major rule (economic effect of at least $100 million) before it could be enforced. Coming up, on February 2, the Senate Judiciary Committee has scheduled a hearing on the Constitutionality of the ACA, and the Senate Energy and Natural Resources Committee will review S. 99, the American Medical Isotopes Production Act of 2011.
CMS reports that national health care spending grew at 4.0% in 2009, to a total of $2.5 trillion. While this is the slowest rate of growth in decades (attributable to the recession), health care spending growth continued to exceed overall economic growth, which declined 1.7%. While private health insurance spending increased only 1.3% in 2009, Medicaid enrollment growth triggered a 9.0% increase in Medicaid spending (as a result of Recovery Act funding, federal Medicaid spending increased 22% while state Medicaid spending fell 9.8%). Medicare spending rose by 7.9% in 2009 to $502.3 billion. With regard to types of care: hospital spending increased 5.1% to $759.1 billion; physician/clinical services spending rose 4.0% to $505.9 billion; retail prescription drug spending grew 5.3% to $249.9 billion; spending for freestanding nursing care facilities/continuing care retirement communities increased 3.1% to $137.0 billion; home health care services grew 10.0% to $68.3 billion; and spending for durable medical equipment decreased 0.8% to $34.9 billion.
On May 6, 2010, the House Energy and Commerce Health Subcommittee has scheduled a hearing on health care pricing transparency legislation, focusing on H.R. 4700, the "Transparency In All Health Care Pricing Act of 2010"; H.R. 2249, the "Health Care Price Transparency Promotion Act Of 2009"; and H.R. 4803, the "Patient's Right To Know Act." The broadest of these bills, H.R. 4700, would require all hospitals, physicians, nurses, pharmacies, pharmaceutical manufacturers, dentists, insurers, and other such entities to publicly disclose, on a continuing basis, all prices for health care related items, products, services, or procedures. The disclosure, which would be available at the point of purchase, in print, and on the internet, would be required to include all wholesale, retail, subsidized, discounted, or other such prices the entity accepts as payment in full. The HHS Secretary would be authorized to impose civil fines or other civil penalties “as determined appropriate by the Secretary” for failure to comply with this requirement.
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.
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.
On February 4, 2010, the Centers for Medicare & Medicaid Services (CMS) released its health spending projections for 2009, estimating that growth in U.S. national health expenditures (NHE) increased 5.7%, compared to 4.4% in 2008. This 2009 growth rate exceeded the growth in the gross domestic product (-1.1%) and brought total national health spending to $2.5 trillion, or 17.3% of the GDP (compared to 16.2% in 2008). The increasing rate of spending is attributable in part to faster growth in Medicaid spending (9.9% compared to 4.7% in 2008), as the recession resulted in increased Medicaid enrollment. According to CMS, the NHE growth is expected to decelerate in 2010 to 3.9%, but much of this projected slowdown is attributable to the 21.2% reduction in Medicare physician payment rates scheduled to go into effect in March 2010 -- but which Congress is expected to mitigate through legislation (as discussed above). If, on the other hand, physician payment rates are held at 2009 levels, total health spending is projected to grow 4.7%. By 2019, national health spending is expected to reach $4.5 trillion and comprise 19.3% of GDP.
On February 1, 2010, President Obama is scheduled to deliver his proposed federal budget for fiscal year 2011, which is likely to again include provisions that would, if adopted, significantly impact federal health care policies. Congressional panels already have scheduled hearings on the upcoming proposal, including Senate Finance Committee and House and Senate Budget Committee hearings set for February 2, 2010 and House Ways and Means Committee hearings on February 3. In addition, the Senate Finance Committee is holding a hearing on February 3 to discuss the health policy provisions of the budget proposal with Department of Health and Human Services (HHS) Secretary Kathleen Sebelius.
CMS has announced that overall US health spending grew 4.4% in 2008 – the slowest rate of growth since CMS began compiling this data in 1960. CMS attributes this spending slowdown to the effects of the economic recession. Nevertheless, health spending continued to increase faster than did the nation’s gross domestic product (GDP), which grew at 2.6%, according to figures released January 5, 2010. Health spending totaled $2.3 trillion in 2008, or $7,681 per person, and comprised 16.2 percent of the GDP. Health care spending by public programs, including Medicare and Medicaid, rose 6.5% in 2008, while health care spending by private sources grew only 2.6%.
On December 16, 2009, President Obama signed into law the conference report to accompany the Consolidated Appropriations Act, H.R. 3288, an omnibus spending bill that combines six of seven unfinished appropriations bills for fiscal year (FY) 2010, including the appropriations for the Department of Health and Human Services (HHS). Among other things, the bill includes increased funding for anti-fraud efforts, combating hospital-acquired conditions, nursing home and medical facilities inspections, health care workforce training, and Public Health Service and National Institutes of Health initiatives.
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.