The President’s Health Reform Proposal: Other Provisions
February 22nd, 2010
 by
Timothy Jost
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Editor’s Note: Timothy Jost, the author of the post below, analyzed the insurance and revenue provisions of the President’s Proposal for Health Care Reform in an earlier post.
Public debate concerning the pending congressional health reform legislation has largely focused on insurance reforms, which were discussed in my first post on the president’s latest reform proposal. But the health insurance reform provisions make up only one title and one-fifth of the 2,400-page Senate bill on which the final reform will undoubtedly be based, if reform happens at all. The remaining provisions of the legislation address a wide range of health reform issues—indeed, most of the topics that health reform must deal with to be comprehensive (and perhaps some that could better have been left to a later time). The House bill addresses each of these issues with comparable, though seldom identical, provisions. This post analyzes the President’s Proposal for Health Care Reform as it affects the topics addressed by these provisions.
I discussed these provisions of the Senate bill in earlier blog posts analyzing the original Senate bill and the manager’s amendment to the Senate bill. An excellent analysis of these provisions by Karen Davis and others can be found at the Commonwealth Fund website, which also includes a tabular summary of the Senate bill’s health systems reform provisions. Detailed analyses of Medicare and Medicaid provisions of the bill are available on the Kaiser Family Foundation site.
Medicaid Expansions
Of all of the reforms found in the last four-fifths of the bill, the Medicaid expansions are the most important for extending access to care and are the most integrally related to the insurance reforms of Title I. Under current federal law and the law of most states, Medicaid eligibility is not based on poverty alone; an applicant must usually also be over sixty-five, disabled, blind, a child, or the parent of a child. These categories go back to the 1930s, when social welfare assistance was extended only to the “worthy poor.”
The Senate health reform legislation would, effective 2014, extend Medicaid assistance to all U.S. citizens with a modified adjusted gross income of less than 133 percent of the poverty level, currently $14,404 for an individual and $29,327 for a family of four. (By comparison, a forty-hour-a-week job paying the minimum wage for fifty-two weeks a year would currently gross $15,080.) The newly eligible population would be offered a benefits package similar to that available through the exchanges to the general nongroup population. The House would have expanded Medicaid to citizens earning up to 150 percent of the poverty level, but the President’s Proposal adopts the Senate’s 133 percent eligibility level. The proposal would, moreover, eliminate income disregards currently applied by the states, so the eligibility expansion would be even less generous than it would appear at first glance (although it would leave a 5 percent income disregard for certain Medicaid eligibility determinations).
The CBO projects that Medicaid expansions would cover an additional 15 million Americans, increasing the Medicaid population to 50 million. Moreover, a recent Rand study estimates that an additional 9 million Americans, 38 percent of those remaining uninsured under the Senate bill, would be eligible for Medicaid but would not be enrolled. These persons would be afforded a level of financial security by the legislation, since they would in most instances be signed up for Medicaid by health care providers if they required expensive medical care. The Senate legislation also extends the CHIP program through 2019, and funding for it through 2015. The Medicaid expansions and CHIP extension are essential to undergird the insurance reforms of Title I, since they ensure coverage to those Americans who are simply too poor to participate in the reformed insurance market.
The Medicaid expansions, however, present a serious problem. Historically, Medicaid has been funded jointly by the federal and state governments, with the federal government funding at least half of the cost of the program, but considerably more in lower-income states. Medicaid is a countercyclical program, with enrollment expanding during recessions just as state revenues are plummeting. The states are currently in terrible financial shape, and Medicaid is one of their greatest burdens. Recognizing that the states are in no position to expand Medicaid coverage, the Senate bill provided for 100 percent federal funding for expansion populations for 2014 to 2016, with federal funding settling eventually at a rate between 82.3 percent and 95 percent. CHIP funding is increased by 23 percentage points, effective October 2015.
The President’s Proposal would extend 100 percent federal funding to the states for the Medicaid expansion population further, through 2017. It would also provide 95 percent funding for 2018 and 2019, and 90 percent for 2020 and subsequent years. It would eliminate Nebraska’s “Cornhusker” kickback, one of the most derided compromises in the Senate bill, while increasing by 8 percent federal matching rates for states that have already expanded Medicaid coverage to adults with incomes below 100 percent of the poverty level, beginning in 2014.
The President’s Proposal only begins to solve the problems currently affecting Medicaid. One of the greatest of these is inadequate provider payment levels. In most states, Medicaid pays providers significantly less than Medicare, which in turn pays less than private insurance. The House bill would have provided federal funding to increase payments for primary care providers up to Medicare levels, but the Senate bill does not. The President’s Proposal follows the Senate bill.
Medicare Reforms
The Senate bill devotes over 500 pages to the Medicare program, significantly more than it spends on insurance reforms. The legislation is dense and complex, but basically it is intended to achieve four goals: 1) reducing increases in and restructuring payments for some providers to help finance the rest of the reform initiatives; 2) authorizing experiments with new approaches to provider payments, to move away from fee-for-service and limited prospective payment schemes and toward payment schemes that pay for quality and that afford providers more flexibility to improve their performance; 3) improving benefits, particularly in coverage for preventive services, drug coverage in the “donut hole,” and coverage for services in rural areas; and 4) creating an new Independent Advisory Board to rationalize and depoliticize Medicare cost control efforts.
The President’s Proposal would make two major changes in the Medicare provisions of the Senate bill. First, it would begin to fill the “donut hole,” the current gap in Medicare pharmaceutical coverage that affects Medicare beneficiaries when they exceed the initial coverage limits but have not yet reached the catastrophic coverage threshold. The Senate bill provides a 50 percent discount for certain drugs in the donut hole, and so presumably does the President’s Proposal. The Senate bill also increases the donut hole threshold by $500 for 2010. The President’s Proposal replaces this with a $250 rebate for beneficiaries who hit the donut hole. It would then phase out coinsurance in the donut hole from the current 100 percent level to the 25 percent level that now applies below the threshold, thus eliminating the donut hole by 2020.
Second, the President’s Proposal would reduce payments for Medicare Advantage (MA) plans, which currently cost 14% more than traditional Medicare to cover the same beneficiaries. Both the House and Senate bill currently reduce MA payments, but in different ways. The House bill phases MA plan payments down to fee-for-service levels, while the Senate bill changes to a bidding model of payment. The President’s Proposal claims to adopt elements of both approaches, but seems to rely primarily on moving payments toward benchmarks related to fee-for-service costs, with adjustments for quality and enrollee satisfaction. The proposal would also reduce MA payments to adjust for coding patterns in MA plans that have raised payments more rapidly than actuarial analysis would suggest is warranted, given enrollee health status. The MA payment cuts are intended to serve as a major source of funding for additional expenditures found elsewhere in the legislation.
Prevention, Wellness, Public Health, and Workforce Initiatives
The House and Senate bills contain a host of prevention and wellness initiatives. These include eliminating cost-sharing for evidence-based preventive services in Medicare, providing extra funding to states that eliminate preventive services cost-sharing for Medicaid, and requiring non-grandfathered private insurance policies to eliminate cost-sharing for preventive services. The legislation also includes grants to smaller employers and to state and local governments to implement and evaluate wellness programs.
The most important improvement that the President’s Proposal makes in this area is to expand funding for community health centers over the next five years, from the $7 billion provided by the Senate bill to $11 billion (which is still less than the $12 billion provided by the House bill). It would also eliminate cost-sharing for preventive services in grandfathered plans after 2018.
There is a widespread belief that our health care workforce must be expanded and refocused, in order to care for the millions of additional Americans who will have health coverage under the health reform legislation. The House and Senate bills contain a number of initiatives to strengthen the health care workforce, focusing in particular on education and training. Professions receiving particular attention are primary care physicians; nurses; public health workers; general, pediatric, and public health dentists; geriatric care providers; and mental health educators. The President’s Proposal does not add to or change these provisions.
Fraud and Abuse Provisions
Title VI of the Senate bill combines under the general heading of “Transparency and Program Integrity” a variety of provisions that address fraud and abuse, nursing home improvements and quality, and conflict of interest disclosures; many of these provisions are also found in the House bill. The President’s Proposal adds a number of fraud and abuse initiatives taken either from the President’s FY 2011 Budget Proposal or from Republican proposals. These proposals are described on the White House Web site and are only listed here.
They would:
1) Create a comprehensive Medicare and Medicaid sanctions database, to be overseen by the HHS Inspector General;
2) Require registration and background checks of billing agencies and individuals and strengthen exclusion authority;
3) Open up the health care integrity and protection data bank to quality control and peer review organizations, and to private plans that are involved in federal health care programs;
4) Hold Medicare administrative contractors liable for payments made to excluded individuals or entities or for denied claims;
5) Strengthen oversight of community mental health centers;
6) Limit bankruptcy discharges for fraudulent health care providers and suppliers;
7) Enhance real-time data review to identify fraudulent payments;
8) Increase sanctions for illegal acquisition and distribution of Medicare or Medicaid beneficiary identification numbers or billing privileges;
9) Study the use of universal product numbers for selected items and services paid for by Medicare;
10) Improve state monitoring of high-risk billing activity to identify worrisome patterns of drug prescribing and utilization;
11) Apply extrapolation of error rates to MA plans to recoup overpayments;
12) Increase the authority of MA contractors to conduct medical reviews; and
13) Coordinate CMS and IRS investigations and enforcement to target high-risk provider types in high-vulnerability areas.
Pharmaceutical Innovation and the CLASS Act
Title VII of the Senate bill provides for FDA approval of “biosimilars,” generic biologics. The House bill places limits on so-called “pay for delay” settlements in litigation between brand-name and generic drug manufacturers that keep generics of the market, behavior that the Federal Trade Commission estimates costs consumers $35 billion per decade. The President’s Proposal declares anticompetitive and unlawful agreements in which a generic drug manufacturer receives anything of value from a brand-name drug manufacturer and in which the generic drug manufacturer agrees to limit or forego research, development, marketing, manufacturing, or sales of the generic drug. This presumption against the legality of the agreement can be overcome only if the parties to such an agreement provide clear and convincing evidence that the procompetitive benefits of the agreement outweigh its anticompetitive effects. The FTC is given authority to enforce the prohibition. The President’s Proposal would also delay the effective date of the therapeutic discovery credit in the Senate bill.
Finally, Title VIII of the Senate bill establishes the Senator Kennedy’s CLASS Act program, to help Americans save for the purchase of community living assistance services and support when they lose the capacity to function independently. The House bill contains similar provisions. The President’s Proposal makes unspecified changes in the Senate bill to “improve the CLASS program’s financial stability and ensure its long-run solvency.”
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