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The Revised Senate Health Reform Bill: Cost Control And Other Aspects



December 21st, 2009
by Timothy Jost

Editor’s Note: This is the second of two posts by Tim Jost analyzing the Senate health reform bill, as revised by the manager’s amendment offered on December 19. Jost’s first post focused on the health insurance reforms in the revised bill.

One of the most common complaints about the health reform legislation pending in Congress is that the bills do nothing to control the growth in health care costs or improve the quality of health care.  Those who raise this complaint either have not read the bills or are very attached to a particular proposal that was somehow left out.  This is not to say that the legislation will actually control costs or improve quality; it is simply to say that many, if not most, of the credible ideas that health policy analysts or economists have dreamed up over the past two decades for bending the cost growth curve or improving the quality of American health care are in the bills. 

It will not be easy to turn around the bloated American health care system, long accustomed to unlimited fee-for-service funding and few incentives or demands for improvement, but the legislation attempts to make a beginning.  In the Senate, most of the initiatives in pursuit of these goals are in the main bill, but the manager’s amendment contains a sampler of what the larger bill contains, including a number of new programs.

What explains the amendment’s changes?

The manager’s amendment is not all about cost control and quality improvement, of course.  The amendment represents the compromises that were necessary to get from perhaps 55 to 60 votes while at the same time holding onto the original 55.  Senators are, as always, at least as interested in patching local potholes as they are in promoting the good of the nation, and the amendment responds to their needs. 

The beneficiaries of some of the provisions are pretty obvious, like the indefinite 100 percent federal funding for Medicaid expansion populations in Nebraska, increases in Medicaid federal match for Massachusetts and Vermont (which, to be fair, were slated under the main bill to miss out in the entire increase in Medicaid funding for the expansion eligibles since these states had already got out in front of the rest of the states and covered them), or exclusion from the insurance premium excise tax for Blue Cross of Michigan and Mutual of Omaha.  The amendment also includes a number of programs for rural states, reflecting the home states of the Senators most reluctant to sign on to reform. 

Other gimmes in the bill are, at least to me, a little more mysterious—where exactly is the “academic health center at a public research university in the United States that contains a State’s sole public academic medical and dental school” that is getting a $100 million dollar hospital?  Which are the states that still remain, to the probable satisfaction of Frederick Jackson Turner, “frontier states” eligible for elevated hospital wage index payments for Medicare?

There are also gimmes for the lobbyists who have been swarming Washington for months, such as a delay in the medical device and insurance excise taxes, the elimination of the tax on cosmetic surgery (which was replaced by a tax on indoor tanning), and reductions or delays in the cuts that were to be imposed on a variety of Medicare providers through rebasings, market-basket adjustments, or reductions in disproportionate share hospital payments..

Potential Improvements In Cost, Quality, and Health. Most of the Medicare, Medicaid, public health, wellness, prevention, workforce, and program integrity provisions of the manager’s amendment, however, capture someone’s vision of an initiative that might legitimately improve the quality or efficiency of America’s health care system or the health of Americans.  Many of these are demonstration projects.  As Atul Gawande pointed out recently in the New Yorker, however, some of the most useful government programs in the United States began as demonstration projects, and it certainly makes sense not to implement a program fully until you have some idea whether it will work. 

Some of the initiatives are pilot programs that can be scaled up program-wide without further congressional permission if they succeed.  Others are programs that are funded on a short term basis or for a limited number of sites, again to see if a program actually has promise before extending it too broadly.  Finally, yet other programs are indeed new nationwide initiatives that will become a permanent part of the landscape.

New initiatives in the manager’s amendment

The simplest, though perhaps most tedious, approach to identifying these provisions of the manager’s amendment is simply to list them.  Here is a list,  roughly in the order in which they appear in the bill.  New or expanded initiatives in the bill include:

  • Medicaid coverage for former foster children under the age of 26 who age out of Medicaid.
  • Requirements for public notice and comment at both the state and federal level (including public hearings at the state level); periodic evaluation by the Department of Health and Human Services; and reporting to Congress for new Medicaid and Children’s Health Insurance Program section 1115 waivers.  These waivers have often been used to make radical and permanent changes in state Medicaid programs with little transparency or public scrutiny.
  • “Balancing payment incentives” to incentivize new program initiatives to encourage the use of Medicaid-funded home and community-based care in states that rely disproportionately on institutional long-term care.
  • Extended federal funding for the CHIP program for 2014 and 2015. 
  • Competitive grants to the states for assisting pregnant and parenting teens and women.  These grants would go to institutions of higher learning, high schools, and community centers that would offer pregnant and parenting teens and women the support that they need to get an education and to function.  Grants would also be made to state attorneys general for improving services to pregnant women who are victims of domestic violence, sexual violence, sexual assault, or stalking.
  • Enactment of  S. 1790, a bill to improve the Indian Health Care Improvement Act.
  • The development of a value-based purchasing program for ambulatory surgical centers.
  • A revision to the national quality improvement strategy to mandate quality outcomes measures for doctors and hospitals for 10 acute and chronic diseases in 24 months and 10 primary and preventive care measures within 36 months.
  • A public report by HHS on measures for hospital-acquired infections and ongoing studies by the Institute of Medicine on clinical practice guidelines.
  • A requirement that HHS develop a strategic framework for collecting, aggregating, and reporting data on provider performance.
  • New provisions for testing  payment and delivery system innovation models by the Center for Medicare and Medicaid Innovation.
  • Provision for additional payment models for the Medicare shared-saving (accountable care organization) program.  ACOs are encouraged to participate in similar arrangements with private payers.
  • Provision for expansion of the national Medicare pilot program for payment bundling if it proves successful.
  • A pilot program for continuing care hospitals, which combine rehabilitation, skilled nursing facility, and long-term care services with acute care.
  • Further extension of the rural community hospital demonstration project.
  • A study, to be followed by a demonstration project, of revising the home health prospective payment system to assure access to care and accommodation of patient severity of illness.
  • A quality reporting program for psychiatric hospitals.
  • A pilot study for a pay-for-performance programs for psychiatric, rehabilitation, long-term care, and cancer hospitals and for hospices.
  • Incentive payments for doctors who participate in maintenance of certification programs more often than is required for their board certification.
  • Targeted Medication review programs for Part D drug plans.
  • Development of a physician compare website with information on outcomes, patient safety, patient satisfaction, and continuity of care.
  • Demonstration projects on providing incentives to Medicare beneficiaries to choose high quality providers
  • Provision for access to Medicare data for researchers with appropriate safeguards.
  • A program for community-based collaborative care networks involving a hospital and federally qualified health centers to provide comprehensive services to law income populations.
  • The creation of a Deputy Assistant for Minority Health in HHS and creation of offices of minority health in the CDC, HRSA, SAMHSA, AHRQ, the FDA, and CMS.  This provision is, in my mind, long overdue.
  • A requirement for a national diabetes report.
  • Provision for $200 million in grants to small businesses for wellness programs.
  • Creation of a new national center for excellence in depression research and a national center on congenital heart disease.
  • A new program for breast cancer education and prevention for younger women.  (I wonder where this came from?)
  • Provision for a prospective payment system for federally qualified health centers by 2014.
  • Additional funding for training nurse practitioners, rural physicians, and preventive health and public health specialists.
  • Six billion dollars in new funding over 5 years for community health centers.
  • A 3-year demonstration project for 10 states to provide comprehensive care to the uninsured at reduced fees.
  • Provisions for amending the federal sentencing guidelines to increase criminal sanctions for fraud and amending the criminal health care fraud statute to clarify that a provider need not have actual knowledge of the prohibition or intent to violate the fraud statute to be convicted of fraud.

Provisions requiring further discussion

Independent Payment Advisory Board. Several provisions merit further comment. First, as I noted in my previous post, the Independent Medicare Advisory Board, created by the underlying act to impose Medicare payment cuts if Medicare costs are otherwise not controlled, is renamed the Independent Payment Advisory Board by the manager’s amendment.  Its authority is extended beyond the Medicare program to allow it to make recommendations to the President and Congress (and, indirectly, to the states) as to measures that can be taken to slow the growth of non-federal expenditures. 

The legislation also changes the requirement in the original bill that the Board make and HHS implement a proposal to cut Medicare costs (absent Congress imposing an alternative proposal) in years between 2015 and 2017 if Medicare expenditures grow faster than the average of the growth in the medical cost CPI and the urban consumer CPI, and in years after 2018 if Medicare expenditure growth exceeds GDP growth plus 1 percent; except that after 2019 no proposal was necessary under the original bill if Medicare did not grow faster than the costs of national health expenditures generally.  The manager’s amendment provides that the Board shall submit a proposal to cut Medicare expenditures for any year after 2017 in which Medicare expenditures grow faster than the CPI plus 1%, but also provides an exception that the proposal need not be implemented in a year in which Medicare expenditure growth is less than the per capital growth rate in national health expenditures, although this exception cannot be applied two years in a row.

The CBO initially projected in its December 19 letter that the Advisory Board would be “fairly effective” at reducing costs, particularly beyond 2019.  The CBO issued a corrected estimate on December 20, stating that it had misunderstood the formula under which the Board’s proposals would go into effect, and that it accordingly revised downward their estimate of cost savings under the program beyond 2019, although not dramatically.

Medical malpractice liability reform demonstration projects. Another section provides $50 million in grants for state demonstration projects to evaluate alternatives to litigation for medical torts.  The grants would fund projects that would encourage the prompt, fair, and efficient resolution of malpractice disputes and improve patient safety and provider access to liability insurance.  The projects are to be developed with input from all stakeholders, including patient representatives, health care professionals and providers, attorneys for the plaintiff and defense bar, malpractice insurers, and patient safety experts.  The provision does not preempt any existing state tort reforms.  Patients would, moreover, fully retain the right to turn to tort litigation to enforce their rights and could ignore the programs developed under this provision.  Past experience has shown that claimants are often reluctant to pursue alternative dispute resolution in malpractice cases if tort litigation remains an alternative.

Medicare eligibility for those with environmentally caused diseases. Finally, a third provision creates a new category of Medicare eligibles—environmental exposure-affected individuals (that is, individuals with environmentally caused diseases such as asbestosis or mesothelioma).  It also creates a pilot program for providing care to individuals residing in environmental emergency declaration areas.  The program can provide benefits not otherwise available through Medicare and is supposed to use innovative reimbursement methodologies.  The provision also creates an initiative to make grants to establish programs for the early detection of conditions related to environmental health hazards. This part of the legislation was specifically meant to aid people exposed to asbestos in a vermiculite mine in Libby, Montana, and was apparently inserted by Senator Baucus, but could aid other people in an area declared to be an environmental emergency as well.

Closing gripes

While there is much to like in titles II through IX of the manager’s amendment, I will close with a mention of the two features in amendment that I find disagreeable.  First the bill provides a “cures acceleration program” to fund research for “high need cures” for which incentives in the commercial market are unlikely to result in timely development.  The Food and Drug Administration, the National Institutes of Health, and a new Cure Acceleration Network Board are supposed to work together to facilitate the discovery of such cures and to translate them from bench to bedside.  Grants can be made under the project of up to $15 million a year to eligible entities such as academic medical schools, biotech companies, and drug companies, who need only meet a $1 to $3 matching requirement.  $500 million is appropriated for this program for 2010. 

This is all well and good and a great idea.  But nothing that I can see in the legislation gives the taxpayer any stake in this investment.  A drug or biotech company that in fact discovers a blockbuster drug or biologic through the federal government’s investment (perhaps for an off-label use) owes nothing in return.  Shouldn’t we the taxpayers get some return on  our investment, or at least the promise of reasonable prices?

The final issue is a small one.  The original bill required charitable hospitals to charge persons eligible for financial assistance “the lowest amount charged” insured patients.  The amendment requires that they charge “the amount generally charged.”  Merry Christmas, Ebenezer.

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1 Response to “The Revised Senate Health Reform Bill: Cost Control And Other Aspects”

  1. Dr. M.Z.Younis Says:

    President Obama is eager to pass any form of healthcare legislation. He is compromising to the conservative Democrats, Republicans, and other conservatives of both parties. His behavior can be compared to a woman in her late thirties trying to get married to any man who knocks at her door so she can bear a child before her “biological clock” runs out. In reality, we cannot know what is going on in the President’s mind. The best guess is that he is worried about his legacy, but this is an issue every president tackles during his term of office. If we look at recent history, there is no doubt the President believes if he does not pass any healthcare legislation now that he is not going to be elected to a 2nd term.

    This is similar to what happened to President Clinton who in reality was a president for 18-24 month. After his healthcare reform bill failed, the Republicans took over Congress and effectively moved it to the conservative right. Clinton basically spent the rest of his two terms bending over backwards to the conservatives by passing what was called welfare reform and ending the safety net–easing regulations that effectively caused the 2008 financial crash and attempted to privatize social security. The Progressives hope that the President will be emboldened to pass real bankruptcy reform and other pro-consumer legislation while hopefully claiming victory for any healthcare legislation.

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