SZD Health Law Scan : Health Care Lawyers & Attorneys : Schottenstein Zox & Dunn Law Firm : Strategic Planning, Managed Care, Insurance : Columbus, Cleveland, Cincinnati, Central Ohio

On November 19, 2009, the House of Representatives passed the Medicare Physician Payment Reform Act of 2009 ("H.R. 3961"). The bill reforms the Medicare physician payment formula, called the Sustainable Growth Rate ("SGR"). Under the current formula, Medicare payment rates for physicians' services will be cut by about 21 percent in 2010 and additional cuts would occur annually.

The Congressional Budget Office ("CBO") summarized H.R. 3961's changes to the SGR as follows:

• The update for 2010 would be the percentage increase in the Medicare economic index (MEI), which is 1.2 percent, as specified in the final rule.
• Beginning in 2011, there would be separate target growth rates and conversion factor updates for two categories of service: evaluation, management, and preventive services, and all other services.
• The new SGR formula would take into account spending for each category of service since 2009 or—beginning in 2014—for the past five years. (The current SGR formula takes into account spending since 1996.)
• Finally, only physician services, and not other services provided incident to the physician visit (such as laboratory services), would be counted in each category.

As noted above, consistent with the Centers for Medicare and Medicaid final rule for the 2010 physician fee schedule (publication date: November 25, 2009), H.R. 3961 amends 42 U.S.C. 1395w–4(d)(4)(A) to eliminate the discretion of the Secretary of the Department of Health and Human Services to include physician-administered drugs within the definition of "physicians' services" for the purposes of SGR calculations. Physicians' services are currently defined to include:

"other items and services (such as clinical diagnostic laboratory tests and radiology services), specified by the Secretary, that are commonly performed or furnished by a physician or in a physician's office, but does not include services furnished to a Medicare+Choice plan enrollee." (emphasis added)

Under the proposed definition, such services would be defined to include only:

"other items and services for which payment under this part is made under the fee schedule under this section, for services for practitioners described in section 1842(b)(18)(C) on a basis related to such fee schedule, or for services described in section 1861(p) (other than such services when furnished in the facility of a provider of services), but does not include services furnished to a Medicare+Choice plan enrollee." (emphasis added)

The CBO estimated that H.R. 3961 would increase physician payments over the next 10 years by about $195 billion.

H.R. 3961 was received in the Senate on November 20, 2009.

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On November 18, 2009, the Senate released a draft health insurance reform bill, entitled the "Patient Protection and Affordable Care Act."  Like the House bill, the Senate's bill proposes to establish Exchanges, or marketplaces for individuals to shop for insurance when insurance is not available through their employers. The bill contains a public option (referred to in the Senate's bill as the "community health insurance option") but differs from the House bill in that it permits states to "opt out" or prohibit that state's Exchange from offering a community health insurance option.  This bill will expand Medicaid coverage for those people earning less than 133% of the federal poverty line and will provide subsidies for the purchase of health insurance for people earning less than 400% of the FPL.

The Senate's bill stops short of the House's proposed ban on public health insurance options providing coverage of abortion services but it does prohibit the use of federal funds for abortion services.

To pay for some of the costs of the bill, the bill proposes an excise tax on high cost employer-sponsored health coverage (i.e., plans worth $8,500 for individuals and $23,000 for families).  The bill also proposes a tax on elective cosmetic surgeries and an increased hospital insurance tax on high-income taxpayers that would increase the Medicare deduction from 1.45% to 1.95% for incomes over $200,000 for individuals and $250,000 for couples.

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On September 16, 2009, Senate Finance Committee Chairman Max Baucus released the Chairman's Mark for the committee's health care reform legislation, entitled America's Healthy Future Act.

The Chairman's Mark differs from the legislation passed by the Senate Committee on Health, Education, Labor and Pensions (the "HELP Committee") on July 15, 2009, in a number of ways such as:

1. Does not include a public insurance plan option. Rather, The Chairman's Mark proposes a Consumer Operated and Oriented Plan (CO-OP) program to create non-profit, member-run health insurance companies. These companies will be limited to competing in the individual and small group insurance markets.
2. Does not include an employer mandate. However, the Chairman's Mark provides for a fee capped at $400 per employee for certain employers who do not provide health insurance.
3. Expands Medicaid to non-elderly, non-pregnant (childless adults) with incomes up to 133% of the federal poverty line. The HELP Committee's bill expands Medicaid to such individuals up to 150% of the federal poverty line.
4. Provides tax credits (on a sliding scale basis) for individuals and families with incomes between 134-300% of the federal poverty line to offset the cost of private health insurance premiums. The HELP Committee's bill provides such credits for individuals and families up to 400% of the federal poverty line.

The Chairman's Mark is scheduled for markup at the committee's open executive session on September 22, 2009.
 

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On June 25, 2009, Daniel Levinson, Inspector General of the U.S. Department of Health and Human Services, testified before the House Energy and Commerce Committee's Subcommittee on Health. During his testimony, he addressed the OIG's ongoing efforts in combating fraud, waste and abuse in Medicare and Medicaid. Additionally, he reiterated the OIG's "Five Principles," which the OIG believes should guide the development of a national health care integrity strategy. The Inspector General had recently announced these same principles before the Senate's Special Committee on Aging.

The Inspector General summarized the Five Principles as follows:

1.      Enrollment - Scrutinize individuals and entities that want to participate as providers and suppliers prior to their enrollment in health care programs.

2.      Payment - Establish payment methodologies that are reasonable and responsive to changes in the marketplace.

3.      Compliance - Assist health care providers and suppliers in adopting practices that promote compliance with program requirements, including quality and safety standards.

4.      Oversight - Vigilantly monitor programs for evidence of fraud, waste, and abuse.

5.      Response - Respond swiftly to detected fraud, impose sufficient punishment to deter others, and promptly remedy program vulnerabilities.

The Inspector General concluded his testimony by tying the OIG's strategy to the broader efforts to reform the U.S. health care system: "In the context of health care reform, it is an especially important time to consider how to best safeguard health care programs from fraud, waste, and abuse to protect beneficiaries and taxpayer dollars." According to the Inspector General, the Five Principles provide the necessary framework to accomplish these goals.

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'Tis the season for new year predictions.  Desperate to report some good news, business writers appear to like the prospects for some health care stocks and for new jobs created in the health care sector of the economy.  But can H Street really overcome what's happening on Wall Street and Main Street?

Price Waterhouse Coopers in its advertising supplement to Modern Healthcare entitled "Top Nine Health Industry Issues in 2009: Outside Forces Will Disrupt the Industry" presents a somewhat guarded outlook.  The conclusion reached by PWC: "During 2009, the health industry may prove to be a source of profitable growth during an economic malaise.  As new players continue to enter the healthcare market and new technologies develop, the next frontier in healthcare could be hidden from view.  In addition, heightened focus by regulators will need to be monitored carefully as reducing healthcare costs are viewed as a way to stimulate the economy."   As PWC points out, three of the Top 100 Most Powerful People in Healthcare (AOL founder Steve Case, Google's Eric Schmidt, and Microsoft founder Bill Gates) have not traditionally been seen as captains of the healthcare industry.

Perhaps Americans should hope for some creative disruption by outsiders.  It is not as though healthcare insiders have proven particularly successful in prior reform efforts.  Next on the reading list, former Senator and HHS Secretary nominee Tom Daschle's book Critical: What We Can Do About the Health-Care Crisis.   SZD Health Law Scan will report on that soon.

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This may well be the strangest Presidential Election Campaign in U.S. history, but excuse me, what happened to any meaningful discussion of health care reform?  Obviously, the economy and energy issues have caused health care to drop below the radar screen (see Modern Healthcare, Sept. 8, 2008, page 9), but how can this really be an election about "change" if we sweep health care under the rug?  Neither of the major candidates gave any prominence to this issue in his acceptance speech.  Does that mean we have to wait another four years to begin an honest discussion about something as vital as the health and well being of our citizenry?

While others may be tuned into the Gaffe of the Day, it is worth studying what the candidates (or more accurately their campaigns) have said about health policy reform.  This entry and the next two will focus on three aspects of reform:  1) cost, 2) quality and 3) fairness.  Let's begin with cost.

Barack Obama proposes to lower costs by modernizing the U.S. Health Care System. John McCain proposes to lower costs by restoring control of the system to patients and their families.

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Politics aside, can anyone explain how a federal program only 43 years old came to be insolvent?  When Congress enacted the Medicare Act in 1965, the program was estimated to have an annual cost of under $10 billion for quite some time.  Indeed, contributions from Part A payroll taxes and premiums for Part B were designed to create a surplus that would be held in trust for use in the future when revenues might not cover costs.  In 2007, Medicare required an infusion of $178 billion of general revenues just to pay its current bills.  How can we have gotten so far off track?

"The Facts About Medicare," an article that appeared in the July/August 2008 issue of Contingencies, the journal of the American Academy of Actuaries, attempts to answer this question. Six factors are blamed for what might be the greatest forecasting error in history.  First, the Medicare population grew much faster than expected because of a marked increase in life expectancies (which means the program worked!).  Second, new benefits and new covered populations have been continuously added since the inception of the program, the most recent being Part D prescription drug benefits.  Third, medical costs have grown faster than wages  during the same period, both because of price inflation and the addition of new medical technologies (we can do much more today than we were able to do in 1965).  Fourth, the percentage of the program's cost shouldered by consumers has steadily fallen since inception.

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