Editor’s Note: In the post below, Tim Jost looks at provisions of the Senate Democratic health reform bill dealing with Medicare, Medicaid and CHIP, and many other significant topics. In earlier posts, Jost took a first look at the Senate bill, provided a detailed look at several issues that arise under the bill’s insurance reforms, and discussed abortion coverage and the constitutionality of the individual mandate.

My first three posts have dealt with Title I of the Senate bill, which contains the insurance reform, mandate, and affordability subsidy provisions of the bill.  Title I is only the first of nine titles of the bill, however.  This post will present an overview of the remaining eight titles of the bill, which deal with Medicaid and CHIP; Medicare (focusing on quality and efficiency); prevention, wellness, and public health; the health care workforce; transparency and program integrity; improving access to innovative therapies; and the CLASS (community living assistance services and support) program.  The revenue provisions of the bill will not be examined. 

A vast undertaking. Three features of this legislation are immediately striking.  First, the undertaking is vast.  The 274 sections of these eight titles fill 1,678 pages of the 2074 page bill.  Some of these provisions offer small tweaks to existing programs while a number create demonstration projects, research programs, or commissions to study particular issues.  Other provisions, however,  create whole new programs, such as the CLASS Act program or the biosimilars pathway, or make revolutionary changes in existing programs, such as the Medicaid expansions. 

Many of these provisions are scored by CBO as having no cost consequences or as costing or saving a few hundred million dollars over ten years.  Some, however, have massive financial consequences.  The Medicaid expansions are predicted to cost $374 billion over ten years, while the reductions in annual updates to Medicare fee-for-service rates are scored at saving $192 billion and the changes to Medicare Advantage plan payments at saving $118 billion. 

In total, the bill hopes to save $436 billion from program cost reductions and raise $486 billion in revenues to help cover the cost of the coverage expansions.  Of course, the Medicare Modernization Act was also huge, and Congress rarely passes a budget reconciliation act that does not make a multitude of changes in the Medicare and Medicaid programs, but this is the mother of all budget reconciliation acts. 

Big differences between the House and Senate bills. Second, it is striking how different the Senate bill is from the House bill.  Only about a third of the sections in these eight titles have cognates in the House bill and many of these are worded differently.  Many of the provisions of the Senate bill are completely absent in the House bill, and visa versa.  The 350 pages of the House bill dealing with health services for Native Americans have no equivalent in the Senate bill.  The revenue provisions of the two bills are completely different.  Given the vast differences between the bills, it is difficult to see how fast-track “mini-conference” or “ping-pong” strategies recently discussed in Politico could possibly work. Conference negotiations reconciling the two bills are bound to be long and difficult.

Overhauling the health care system. A third prominent feature of the legislation is the earnestness of its attempts to revolutionize the health care system to improve the quality of health care, promote patient safety, reduce the cost of health care by encouraging more efficient delivery models and reduced utilization of unnecessary care, and support prevention and wellness.  This year’s health reform legislation has often been criticized for being health insurance reform rather than health care reform, and for not doing enough to control the cost of health care.  Those who offer these criticisms have obviously not read the bills or even tried to understand them.  As is true with the House bill, there are few ideas for health care restructuring that are not in the Senate bill, at least as demonstration or pilot programs. 

Accountable care organizations, payment bundling, gainsharing, several new pay-for-performance and quality reporting programs, patient-centered outcomes research, and shared-decision making initiatives are all included in the bill, as is a tax on higher-cost health plans and the creation of a new Independent Medicare Advisory Board that would be able to implement Medicare cost-saving proposals independently in years when Medicare cost growth was unsustainable unless Congress intervened. 

The CBO has scored many of these provisions as achieving only minor cost savings, but this is in part a problem of CBO’s difficulty in scoring innovative cost-saving programs.   Section 4402 of the bill, parenthetically, expresses the sense of the Senate that Congress should work with the CBO to develop better methodologies for scoring prevention and wellness programs.

So, what does the bill do?

Medicaid

If adopted, the legislation will introduce the most revolutionary changes in Medicaid in the program’s forty-three year history.  Medicaid was built on the model of the New Deal public welfare cash assistance programs and has always been a categorical program (covering the elderly, blind, disabled, and pregnant, and dependent children and their families), although Medicaid categories have become increasingly numerous and complex over time.  Under the Senate bill, the program would be extended as of 2014 to cover all poor Americans whose household income is below 133% of the federal poverty level (FPL).  If states want to expand coverage earlier, the could do so as early as January 1, 2011.  The Medicaid expansion would be less than that found in the House bill (which expands to 150% of FPL) and would go into effect a year later.

Newly eligible recipients will not necessarily receive the same benefits as traditional Medicaid recipients, as the states can limit coverage to “benchmark” coverage as they can now for certain categories under the Deficit Reduction Act.  Benchmark coverage must cover at least all essential benefits available through the Exchange.  Asset tests would no longer apply in Medicaid after 2013 except for the elderly and disabled and for long term care services.  Medicaid eligibility for non-elderly and non-disabled would after 2013 be determined based on modified gross income without current income or expense disregards, which means that for many persons the actual increase in the eligibility ceiling will be much less than it would appear at first glance because more income would be counted.

The federal government will cover 100% of the cost of expanded coverage from 2014 to 2106.  For 2017 and 2018 the level of  additional federal assistance (FMAP) a state would receive would depend on whether the state had already covered some non-elderly, non-pregnant individuals.  After 2019, all states would receive a  FMAP increase of 32.3 percentage points for the expansion populations, up to a total of 95% FMAP.  States would be required to maintain CHIP eligibility levels through 2019,  but FMAP for CHIP would also increase for FY 2014 through 2019 by 23 percentage points, subject to a 100% cap. 

The bill would cover a number of new Medicaid benefits, including freestanding birth center services, community-based attendant services and supports to disabled beneficiaries who would otherwise need institutional care, expanded home and community-based services, expanded prevention services, tobacco cessation services for pregnant recipients (the House bill would cover tobacco cessation for all recipients), and health homes for recipients with chronic conditions.  Prescription drug rebates would increase, but disproportionate share hospital payments to the states would decrease as the rate of uninsurance dropped because of implementation of other insurance reforms.

Medicare

The Senate bill contains over 500 pages of changes in the Medicare program. Some of these provisions would reduce Medicare payments, including reductions in payments for home health, disproportionate share hospitals, advanced imaging services, and, above all Medicare Advantage plans (which would transition to a payment system based on competitive bids by 2015 at a savings over 10 years of $118 billion).  Productivity adjustments in market basket updates and additional reductions in market basket updates would save Medicare another $150 billion over 10 years.  Freezing the income threshold at which higher income Medicare beneficiaries pay increased Part B premiums at 2010 levels through 2019 for would bring in another $25 billion. The vast majority of the Medicare provisions, however, are directed at improving the quality, effectiveness, and in some instances, benefits of the Medicare program.

The Medicare title of the bill begins with a number of pay-for-performance and quality initiatives that have no exact equivalent in the House bill.  These include value-based purchasing programs for hospitals and physicians and payment penalties for hospital-acquired conditions.  The bill also requires HHS to establish and update annually a national strategy for health care quality measurement and improvement.  The Senate bill establishes accountable care organization and hospital readmission reduction programs, a national pilot program for payment bundling, and a demonstration program for chronically-ill beneficiaries to receive home-based primary care.  The bill also includes a host of payment extensions and improvements, including several for rural areas, but it includes only a one year 0.5 percent positive update for physician payment (in place of the 21 point reduction that was otherwise scheduled), leaving for another bill the inevitable sustainable growth rate fix. 

Although the bill cuts Medicare Advantage payments, it provides performance bonuses for Medicare Advantage plan care coordination and management and for quality achievements. It prohibits Medicare Advantage plans from charging beneficiaries higher cost sharing for specific services than is allowed in the fee-for-service program and requires plans that offer extra benefits to give priority to cost-sharing reductions and wellness and preventive care services over benefits not covered by Medicare.  HHS is given authority after 2011 to refuse to offer Medicare Advantage and prescription drug plans that significantly increase beneficiary cost sharing or decrease benefits.  For traditional Medicare beneficiaries, the bill removes cost-sharing obligations from most preventive services, including an annual wellness visit and personalized prevention plan.  The bill would also require Medigap policies C and F, two of the most popular offerings, to include nominal cost-sharing to reduce use of Part B services.

The bill makes a number of changes in the Part D outpatient drug program, which resemble changes in the House bill but are not as generous.  The Senate bill would require drug manufacturers to provide a 50% discount for brand-name drugs and biologics purchased in the donut hole after July 1, 2010, but would not allow beneficiaries to count the discount against the out-of-pocket limit, as would the House bill.  The bill reduces the donut hole by increasing the initial coverage limit by $500 for 2010, but only for 2010, as compared to the House bill, which takes an immediate $500 bite out of the donut hole, and then proceeds to eliminate it by 2019. 

A signature feature of the Senate bill is the creation of a new 15-member independent Medicare Advisory Board  composed of health care, health policy, and health economics experts as well as representatives of employers, third-party payors, consumers, and the elderly appointed by the President that is responsible for presenting Congress with proposals for reducing excess Medicare cost growth.  In years when Medicare costs are projected to exceed a target rate, the Board will be required to make a proposal to reduce cost growth, which will go into effect unless Congress, following expedited procedures develops an alternative proposal.  The Board’s proposals cannot ration care; raise taxes or Part B premiums; change Medicare benefit, eligibility, or cost-sharing standards; or reduce payments for providers whose payments have already been reduced by the market-basket adjustments, which will limit the Board largely to reducing Part C or Part D expenditures.  The CBO scored the Board as saving $23.4 billion over 10 years.

Prevention, Wellness, Public Health, and Workforce Initiatives

The Senate bill contains a host of prevention, wellness, and public health initiatives that create or expand various task forces and create a variety of  education and grant programs. Like the House bill, the Senate bill requires chain restaurants with more than 20 locations and vending machines to disclose calorie content on their menu boards or on a poster next to the vending machine and chain restaurants to make additional nutritional information available on request. The bill requires employers with more than 50 employees to provide break time and a place for breastfeeding mothers to express milk.  It also funds a demonstration project for addressing childhood obesity.

Like the House bill, the legislation contains a number of programs for supporting the healthcare workforce, focusing on primary care professionals; nursing students; public and allied health professionals; pediatric subspecialists; general, pediatric, and public health dentistry; and disadvantaged students who commit to work in underserved areas.  The bill also provides for a 10% payment bonus for 5 years beginning in 2011 for primary care practitioners and general surgeons practicing in underserved areas. 

Transparency and Program Integrity

No health care reform bill would be complete without a host of new program integrity requirements and remedies, and the Senate bill contains over 200 pages of them.  Among these are a number of provisions to address conflict of interest issues.  The legislation would prohibit new physician-owned hospitals from participating in Medicare after February 1, 2010.  It would require drug, device, biological, and medical supply manufacturers to report most transfers of value to physicians, physician medical or group practices, or teaching hospitals or physician ownership or investment interests.  With some exceptions, the information will generally be available in a searchable public database.  The requirements preempt duplicative state laws, but not state laws beyond the scope of the federal law. The law further requires physicians who refer patients for ancillary services within their group practices to inform the patients that they can also receive the services from other physicians.  The bill also requires drug companies to disclose to HHS information regarding distribution of drug samples and pharmaceutical benefit managers to disclose to HHS specific information about their practices.  Finally, charitable hospitals would face new requirements, including periodic community needs assessments. 

Comparative Effectiveness Research, Malpractice, Access to Innovative Therapies, and the CLASS program.

The Senate bill establishes a private, nonprofit entity to identify priorities and provide for the conduct of comparative effectiveness research (CER), renamed  “patient-centered outcomes research.” and sunsets the Federal Coordinating Council created by the ARRA for CER.  The section contains extensive protections intended to assure that CER findings are not used to discriminate against the elderly or discourage individuals from choosing health care treatments based on their values as to a tradeoff between extending life and risking disability.  The program is specifically prohibited from using a dollars-per-quality adjusted life year approach as a threshold for determining if a type of health care is effective or recommended or for determining coverage, reimbursement, or an incentive program. 

The legislation expresses a sense of the Senate that someone should do something about malpractice reform.

The bill creates a pathway for approving biosimilars (generic biologics) similar to the House provisions.  A new biosimilar could not be approved until 12 years after the original product was first approved. The bill further provides a market exclusivity period of one year for the first biosimilar before a second biosimilar could be approved. 

Finally, the bill would establish Senator Kennedy’s signature national voluntary insurance program for purchasing community living assistance services and supports. The program is supposed to be self-funded and actuarially sound and would provide cash benefits of not less than $50 a day to a plan member who develops specific functional limitations.

The Senate bill will undoubtedly be amended further as the it progresses through the Senate and will change even further in conference.  Stay tuned for further developments.

Editor’s Note: In the post below, Tim Jost looks at how the Senate Democratic health reform bill treats abortion coverage, and also at the question of the individual mandate’s constitutionality. In earlier posts, Jost took a first look at the Senate legislation and provided a detailed look at several issues that arise under the bill’s insurance reforms. In a later post, Jost looks at the bill’s provisions on Medicare and other topics.

Abortion. Early drafts of the health reform legislation attempted to ignore the issue of abortion, but in American politics, abortion is an issue that refuses to be ignored.  The problem is that current federal law only permits public funding for abortions involving rape, incest, or physical endangerment to the life of the mother.  Many private plans, however–perhaps most—cover all medically necessary abortion. 

Once federal premium subsidies are made available to purchase private insurance, therefore, the problem becomes whether to ban subsidies for any plan that covers abortion, thus significantly reducing private coverage for abortion, or to try to segregate in some way the premium subsidies, allowing private plans to still cover abortion but only with private funds.  The Capps Amendment, adopted by the House Energy and Commerce Committee tried the second approach. The full House adopted instead the Stupak Amendment, which adopted the former approach.  The Senate bill is closer to the Capps Amendment.

The Senate bill first makes clear that it does not does not change or preempt any current state or federal laws pertaining to abortion, including conscience protections.  It explicitly also prohibits discrimination against a provider or facility on the basis of its willingness or unwillingness, for reasons of conscience, to provide, pay for, provide coverage for, or refer for abortion.  Second, the bill prohibits HHS from requiring the coverage of abortion as an essential health service (even abortions for rape, incest, or physical life endangerment). 

Third, the bill would mandate that the public option only cover abortions that are not otherwise federally-funded if HHS can certify under GAAP and GAO and OMB standards that federal funds are not being used and that the federal government is not at risk for the coverage.  Since the public option can only cover essential benefits unless additional benefits are required by state law, abortion could only be covered by the public option if a state required it. 

The bill further provides, however, that if a state requires abortion coverage through the public option, it must assure that “no funds flowing through or from” the public option can be used to pay for abortion, so the state would have to provide abortion coverage as a supplemental benefit.  The state would also have to pay for the abortion benefit for any public option member who received premium subsidies, because states can only require non-essential services to be covered by the public option for people who receive premium subsidies if the state pays for the additional benefits.  It is conceivable that a state would pay for abortions in the public option—seventeen states now fund medically-necessary abortions through Medicaid with state funds—but as the public option would not serve a predominantly poor population, state funding is unlikely.

The bill also prohibits public premium affordability or cost-sharing credits from being used to cover abortions through private plans purchased through the exchanges.  HHS must calculate the cost of abortion coverage for each plan, not taking into account the cost savings to the plan of paying for an abortion rather than a childbirth, and segregate the cost of abortion coverage.  This amount must be paid for separately by the insured.  This is essentially the same language as was used in the Capps amendment, and is encountering the same objections that it is insufficient to assure that federal funds are not in fact used to pay for abortion.  Opponents will undoubtedly seek to amend the bill. 

The legislation requires each exchange to provide access to at least one plan that covers non-federally funded abortions and one that does not to assure choice. This provision was in the House bill but was eliminated by Stupak.  Provisions later in the bill (which are also found in the House bill) fund a longitudinal study of the mental health effects of having an abortion as compared to other means of “resolving a pregnancy” and ban abortion coverage in the school-based health center program.

The Constitutionality of the Individual Mandate.  Under our constitutional system, the federal government is limited to the “enumerated” power provided to it by the Constitution.  These include the power to regulate interstate commerce and to tax and spend for the public welfare.  Both of these powers have been given very broad scope by the Supreme Court, whose most recent extended consideration of the Commerce Clause upheld the power of the federal government to sanction an individual who grew marijuana for personal medical use.   There is virtually no limit to the federal government’s power to regulate economic activity.  In particular, its authority to regulate insurance was recognized by the Supreme Court over sixty years ago and is beyond serious challenge. 

The question has been seriously raised, however, of whether requiring individuals to purchase health insurance is regulation of commerce. (See, for example, September 15th and 18th opinion pieces in the Wall Street Journal. The argument is that, while Congress can regulate goods and services in the stream of commerce, it cannot compel individuals to initiate commercial transactions, or at least it never has before.  In part this is an argument about what the Constitution really means, as opposed to what the Supreme Court says that it means, with some constitutional scholars arguing that the Court has gone too far in allowing Congress to interfere in matters that should be left to the states or left alone entirely. 

But even some commentators who believe that what matters is ultimately what the Supreme Court says the Constitution means (and believe me, this is what ultimately matters in reality) question whether the Supreme Court would uphold the individual mandate.  Indeed, the Supreme Court has in a couple of cases in recent years held that the commerce power is not unlimited—that it only extends to the regulation of economic activity and that some private conduct is not economic in nature.

It is for this reason that the Senate bill prefaces the individual mandate with almost four pages of findings, essentially a brief to the Court as to why the mandate is in fact intended to regulate economic activity, and is thus constitutional.  The findings note that:

• The mandate regulates “economic and financial decisions about how and when health care is paid for, and when health insurance is purchased.”
• Health insurance and health care are a significant part of the national economy and are sold in interstate commerce.
• The mandate will “add millions of new consumers to the health insurance market, increasing the supply of, and demand for, health care services;” strengthen our employer-based health insurance system; and improve the financial security of American families
• Increasing the size of the risk pool is necessary to fully exploit economies of scale and thus reduce administrative costs in the individual and small group markets; and
• Most importantly, since the law now prohibits pre-existing conditions clauses and health status underwriting, without the provision many people would wait until they were in fact sick or injured to purchase health insurance. The provision is necessary, therefore, to prevent adverse selection and to assure a viable risk pool.

This is an issue that some people are passionate about and the legislation will undoubtedly be challenged.  The Supreme Court’s most recent case mentioning the Commerce Clause, however, was the partial birth abortion case, in which the Court recognized the power of Congress to regulate medical practice.  If Congress can regulate medical procedures, it would seem that it could regulate the timing of the purchase of insurance.  In fact, I believe that there are only one or two members of the Supreme Court that would clearly reject this proposition.  Time will tell, but the Senate is taking no chances.

For more on this topic, see this post and this response on the blog of Georgetown University’s O’Neill Institute for National and Global Health Law, as well as this Politico article.

Editor’s Note: In the post below, Tim Jost provides a detailed look at several issues that arise under the insurance reforms included in the Senate Democratic health reform bill. In an earlier post, Jost provided a first look at the bill. In a third post, Jost looks at how the bill treats abortion coverage and also at the question of the individual mandate’s constitutionality. In a final post, Jost looks at the legislation’s provisions on Medicare and other topics.

My first post presented a broad overview of the Senate bill, HR 3590 and a more detailed analysis of the bill’s provisions that go into effect prior to the 2014 general effective date.  This post will examine in detail four additional issues that arise under the bill’s insurance reforms.  There are 1) how the bill addresses implementation, administration, and enforcement; 2) the different categories of insurance coverage available under the bill and the requirements that attach to them; 3) how the exchanges function and the various types of coverage they will offer; and 4) the risk adjustment programs the bill creates.

Implementation, Administration, and Enforcement

The immediate addressee of most of the provisions of Title I of the Senate bill, “Quality, Affordable Health Care for All Americans,” is the “Secretary,” by which is meant the Secretary of Health and Human Services.  The House bill creates a new federal agency, the Health Choices Administration, whose Commissioner is primarily responsible for implementing the legislation.  The Senate bill, by contrast, calls on existing federal agencies to implement the bill, primarily HHS, but also the Department of the Treasury, which would implement the excise taxes imposed by the bill’s individual and employer mandates; the Department of Labor, which assists with the implementation of the provisions of the bill dealing with employment-related health plans; and the Department of Homeland Security, which helps to ensure that unauthorized aliens do not in any way benefit from the legislation. 

The primary responsibility of HHS under the new legislation is to draft the regulations, standards, and guidelines needed to implement the legislation.  This is often to be done in consultation with the National Association of Insurance Commissioners (NAIC), the states, or special advisory groups created to implement particular provisions, like the co-op and public option sections.

With few exceptions, however, the federal government has limited responsibility for the direct implementation and enforcement of the statute.  Most of the insurance reform provisions of the Senate bill are created through amendments to the Health Insurance Portability and Accountability Act of 1996 (HIPPA), as it is found in title XXVII of the Public Health Service Act.  Under HIPAA’s enforcement provisions (found at 42 U.S.C. §300gg-22), responsibility for enforcing the law against insurers rests in the first instance with the states.  Only if  HHS determines that a state has substantially failed to do so, may HHS step in and enforce the law directly.   This approach to enforcement is reinforced by section 1321 of HR 3590, which reiterates that the states are primarily responsible for enforcing the insurance reforms, and only if they have not taken steps to enforce the law by January 1 of 2014, can HHS enforce the laws directly,

The states are also responsible for establishing exchanges or for cooperating with other states in establishing regional exchanges.  Only if a state fails to do so by 2014 can HHS either directly or through a non-profit entity establish and operate an exchange.  The only major responsibility assigned to the federal government by the legislation (other than drafting regulations, standards, and guidelines) is to make eligibility determinations for premium and cost-sharing tax credits and to handle appeals of those determinations, but even here the applications are handled in the first instance by the states or exchanges and the federal government’s role will be largely invisible.

Our experience of implementing HIPAA should give us pause in pursuing this route.  While the HIPAA group insurance reforms were implemented smoothly, implementation of the individual market reforms encountered problems.   Moreover, the Senate approach puts the federal government in the very awkward position of regulating the states, which in turn must regulate insurers.  Some states will implement the law enthusiastically, but a number of states have already indicated their  lack of support for reform.  Depending on the states to get the job of reform done risks implementation delays.  In some states the reforms may not be implemented at all.  Unless an administration is in place in 2014 that is deeply committed to pushing recalcitrant states aside and taking direct action, it is likely that the reforms may never be implemented adequately throughout the country.

What Categories of Insurance Does the Law Recognize?

Another feature of the Senate bill that compares unfavorably with the House bill is its confusing definitions of insurance coverage.  The House bill recognizes one category of private insurance, a “qualified health benefits plan,” which employers are obligated to provide and  individuals to buy.  Only grandfathered plans are permitted to not meet the QHBP requirements.

The Senate bill is far more complicated.  Individuals are required under §5000A(f) to have “minimum essential coverage.”  Minimum essential coverage is defined, in turn, to include public insurance (like Medicare and Medicaid), “an eligible employer-sponsored plan,” a “health plan offered in the individual market in the state,” or a grandfathered plan.  Section 1301 defines “health plan” to include “health insurance coverage” and group health plans (but not self-insured ERISA plans).  “Health insurance coverage,” in turn is defined in HIPAA to include all medical insurance offered by a health insurance issuer, which in turn is defined to include all health insurers and managed care companies.   Most of the insurance reform requirements of the bill address health insurance issuers in the group or individual market, although some also address group health plans, presumably including self-insured ERISA plans.  An amendment to ERISA, moreover, extends most of the insurance regulation provisions of the bill to ERISA plans.  You have to go through the bill section by section, however, to determine which health plans are covered by which requirements or prohibitions.

Section 2707 of the bill requires health insurance issuers that offer health insurance coverage to ensure that plans cover all “essential benefits” required under the legislation.  Section 1302 defines “essential health benefits package,” (a term used nowhere else in the bill) to include the essential benefit package defined by HHS, the cost-sharing limits imposed by the bill, and the requirement that insurers offer coverage fitting into the four tiers (bronze, silver, gold, or platinum).  Presumably these requirements apply to all individual insurance and group insurance policies (other than self-insured plans), but the legislation is far from clear.

The bill also recognizes a number of other categories of insurance coverage as well.  “Qualified health plans” are offered by the exchange, although the bill doesn’t seem to say clearly that they are offered exclusively by the exchanges. (Remember that in the Senate bill, unlike the House bill, individual plans can be sold outside of the exchange).  QHPs  must meet a number of additional requirements addressing such issues as  marketing, coverage design, network adequacy, coverage of out-of-network emergency services, accreditation, and quality and patient safety.  “Eligible employer-sponsored” coverage is defined to include all employee benefit plans.  Individuals can qualify for premium credits, however, if “the employer  plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs.”  Since the essential benefits requirements don’t apparently apply to self-insured plans, however, it is not clear what benefits the plan must cover 60% of. 

One cannot help but wonder whether all of this complexity is intentional.  There may be some reason for imposing additional requirements on insurance sold through the exchange, but  I would hope that as the bill goes through conference, we get something closer to the simplicity of the House version.

The Exchanges

The exchanges will, as I have already noted, be operated by the states (although regional or substate exchanges are also possible and the federal government must establish an exchange in states that fail to do so).  The exchanges will make available qualified health plans to uninsured individuals and to employees of “qualified employers,” which are initially defined as small employers (with 100 or fewer employees, or at the option of a state 50 or fewer).  After 2017, the exchanges can be opened to larger employers.  Individuals and employers can purchase insurance outside of the exchange, but insurance plans outside of the exchange (other than grandfathered plans and self-insured plans) must consider all individuals and all small groups as part of the same risk pools, must charge the same premium rate as are charged for the same plan inside the exchange, and must participate in the risk-sharing system.  Despite these requirements, there will undoubtedly be adverse risk selection against the exchange, a major problem for exchanges in the past.

The exchanges have many responsibilities, including certifying, recertifying, and decertifying health plans; enrolling qualified individuals and employees of qualified employers; rating health plans; certifying individuals who qualify for exemptions from the individual mandate; presenting available insurance alternatives in a standardized format through an internet portal; taking applications for subsidies; and informing the IRS when employees receive subsidies because their employers provide inadequate or unaffordable subsidies.  The exchanges are also supposed to contract with “navigators” to assist with consumer education.

Although exchanges do not have the authority that the exchange has under the House bill to negotiate with insurers, they are required to certify “that making available such health plan through such exchange is in the interest of qualified individuals and qualified employers.”  The exchanges are prohibited from setting premiums for plans, but can require plans to justify premium increases and can consider unjustified or excessive premium increases in deciding whether or not to make a plan available.

In addition to regular state-licensed private insurance plans, several specific types of plans are available under the bill.  First, insurers can sell plans across state lines through interstate compacts.  The legislation allows the states in which the plans are purchased some regulatory control over interstate plans, although not as much as the states have under the House bill.  Second, insurers can offer nationwide plans, indeed states must permit nationwide plans to be sold unless a state opts out.  A nationwide plan can be a plan with a common service-mark, so the BCBS plans might qualify nearly automatically.  Nationwide plans are subject to all state laws other than coverage mandates.  Third, the legislation provides grants and tax exempt status for member-governed co-ops, consumer operated and oriented plans.  Fourth, the bill permits states to establish a basic health program outside of the exchange for uninsured individuals with incomes above the Medicaid level but below 200% of the FPL.  Because the state is only paid 85% of the amount that  the premium credits would pay to provide benefits to the covered population through private plans, it is hard to believe that this option will be attractive, but it might work in some states.

Finally, there is the community health insurance option, the public plan.  This option is offered on a national basis, although states can opt out by law.  The public option could receive loans for start up costs, but would otherwise face additional quality and service requirements, could not provide benefits other than the essential benefits unless states paid for the extra benefits, and would have to comply with all state and federal requirements applicable to private plans.  Its premiums, which would be geographically adjusted, would have to cover its costs.  It would negotiate rates with providers, as in the House bill.  There is not provision, like that in the House bill, however, that Medicare providers are presumed to participate in the public plan unless they opt out, so these negotiations may be more problematic.  The legislation contains extensive and frankly confusing provisions for permitting HHS to contract out the administration of the public plan. While the legislation seems to contemplate private administrators functioning like Medicare contractors and prohibits them from bearing risk, it also requires that the administrators be licensed insurers that meet solvency requirements.   The CBO projects that the public option will face adverse selection, high provider payments, and difficulty in controlling utilization, and that it will only cover only 3 to 4 million enrollees.

Risk Adjustment

Experience in the United States and in other countries has shown that regulatory controls are not enough to eliminate health status underwriting and that risk adjustment is also needed.  The Senate bill contains not just one, but three risk adjustment mechanisms.  First, § 1343 requires states to assess a charge against insurers in the individual and small group market (other than self-insured and grandfathered plans) that have below-average actuarial risk and to make payments to plans with higher than average actuarial risk.  A second program under § 1341 would be in effect from 2014 through 2016 and would collect payments from all insurers and self-insured plans (but not grandfathered plans) and distribute the payments to insurers who cover individuals with specific high-cost conditions. 

The third program, modeled after the Medicare Part D risk corridor program, requires HHS to make payments that reward plans in the individual and small group markets whose “allowable costs” (expenditures for health care services) are less than their “target costs” (premiums minus administrative costs) and to make payments that penalize those plans whose allowable costs exceed their target costs.  This program also will only last from 2014 to 2016.  Since HHS would not under the Senate bill in fact make payments to insurers, as it does in the Part D program, it is very hard to figure out what the drafters have in mind here.  In fact, since neither the states nor the federal government control payments to insurers at all under the Senate bill (other than the premium and cost-sharing credits) and since an active insurance market will continue outside of the exchange, making any of these risk adjustment schemes work is going to be difficult.  The House approach of channeling all individual insurance through the exchange and then adjusting premiums paid through the exchange to compensate for risk seems far more practical.

Editor’s Note: In the post below, Tim Jost takes a first look at the Senate Democratic health reform legislation. In a second post, Jost provides a detailed look at several issues that arise under the bill’s insurance reforms. In a third post, Jost looks at how the bill treats abortion coverage and also at the question of the individual mandate’s constitutionality. In a final post, Jost examines the bill’s provisions on Medicare and other subjects.

As readers of Health Affairs are undoubtedly already aware, the Senate Democratic leadership has released HR 3590, the 2,074-page Patient Protection and Affordable Care Act.  The bill combines the Senate Health, Education, Labor, and Pensions (HELP) Committee bill marked up this summer and the Senate Finance Committee bill marked up earlier this fall.  On the whole, the combined bill resembles the Finance bill more closely than the HELP bill, but it does include important elements from the HELP bill, the most prominent of which is provision for the community health insurance (public) option. 

As has been widely reported, the CBO has scored the gross cost of the coverage provisions of the Senate bill at $848 billion over 10 years, less than the cost of the House bill, and as reducing the budget deficit by $130 billion over 10 years.  The CBO also projects that the bill would reduce the number of uninsured by 31 million by 2019, leaving 24 million nonelderly Americans uninsured.  The bill would cover 92% of the nonelderly population–94% of the nonelderly population excluding unauthorized immigrants. 

This post will describe the new programs and regulatory requirements that would take effect immediately under the bill and briefly summarize HR 3590’s insurance reform, affordability, and mandate provisions.  My next post will take a closer look at the bill’s insurance reforms, including the exchanges, public plan, cooperatives, and other insurance options created by the bill.  A third and possibly fourth post will analyze the Medicaid, Medicare, quality, public health, workforce, program integrity, innovative medical therapy access, “CLASS Act,” and revenue provisions of the bill.  I will not address the politics of the legislation, which will be closely followed and breathlessly reported by the media.

The basic insurance accessibility and affordability provisions of HR 3590 parallel those of HR 3962, the House bill, although there are important differences between the bills.  The most significant differences in these parts of the bill, I argue, are two.  First, the key provisions of the House bill go into effect in 2013; the Senate, not until 2014.  To expect the key provisions of the bill to remain intact for three years is heroic; to expect them to remain for four years seems highly unrealistic. I view further delay, therefore, as a real problem.  Second, the House bill creates a new federal agency, the Health Choices Administration, to implement and enforce the provisions of the bill.  The Senate bill, however, relies largely on the states to do so and gives the states far more flexibility in how they go about doing so.  This will make implementation much more complex and uncertain.

Insurance Reforms Implemented Immediately

Although most of the financing reforms do not take effect until 2014, several take effect within six months of enactment.  The hope is, obviously, that these will be noticed and that Americans will patiently await implementation of the remainder of the bill. 

First, the bill bans lifetime coverage limits and unreasonable annual limits.  (The bill cross-references Section 223 of the Internal Revenue Code, the HSA provision, to define unreasonable, but 223 does not address coverage limits.)  The bill prohibits rescissions except for fraud and misrepresentation and bars cost sharing for specified preventive services.  It requires insurers to extend coverage of unmarried dependents up to age 26 (though not to the children of those dependents). 

HR 3590 requires HHS to develop within 12 months clear and comprehensive standards for disclosing insurance coverage and requires insurers and self-insured plans to begin using these forms within 24 months.  The legislation extends to insured group plans a prohibition against discriminating in favor of highly compensated employees.  This prohibition already applies to self-insured and cafeteria plans. 

HHS is supposed to develop within 2 years reporting requirements that plans must implement describing their health outcome improvement, patient safety, and wellness programs.  Health insurers must report the percentage of their premiums that they spend on administrative costs and rebate to their insureds amounts that they spend on administrative costs in excess of 20% in the group market or 25% in the individual market (subject to qualifications). 

Finally, the legislation requires insurers to offer internal and external review of coverage determinations, a provision almost universally available already under state law.  Curiously, the bill does not (like the Finance bill) explicitly also recognize the availability of judicial review for these determinations, although it would presumably remain available under existing state or federal law.

New Programs Implemented Immediately

The legislation also creates several new programs, effective in 2010.  First, it provides funding for grants to states to establish health insurance ombudsman or consumer assistance programs.  Second, it authorizes HHS to require insurers to justify “unreasonable” premium increases and provides grants to the states to review premium increases as well. 

Third, the bill establishes a high-risk pool for people who have been uninsured for at least six months and who have a pre-existing condition.  Coverage under the program must have an actuarial value of 65%, out-of-pocket limits that do not exceed those applicable to HSA-linked high-deductible policies (currently $5,950 for an individual, $11,900 for a family), and premiums that do not exceed those charged for a standard insurance policy.  This program resembles that in the House bill, but would have more limited eligibility.  HR 3950 provides $5 billion for this program, which the CBO estimates will be exhausted midway through 2011. 

A fourth program provides reinsurance for high-cost claims for retirees with health benefits. A fifth program offers tax credits for small businesses (up to 25 employees) for up to 35% of the employer’s contribution if the employer pays 50% or more of the premium for 2011 through 2013, and then half of the cost of the employer’s premium contribution thereafter for two years. (Non-profit employers get smaller credits).  Seventh, the bill has additional provisions to facilitate administrative simplification.  A final provision reduces the Medicare Part D doughnut hole by $500 by raising the coverage ceiling for 2010 only.

The immediate regulatory reforms in the bill would by and large remain in effect after 2014 except insofar as they are superseded by the provisions of the new bill.  The rebates for excess administrative costs, for example, sunset at the end of 2013. Most of the accessibility and affordability provisions of the bill do not go into effect until 2014, however.  I now turn to these.

Insurance Reforms

These parallel the House bill rather closely.  Existing individual and group plans are grandfathered in, but new plans offered in the individual or group market after 2014 must comply with the bill’s requirements.  The bill bans all pre-existing condition exclusions, requires guaranteed issue and renewal, and prohibits discrimination on the basis of health status.  The bill does permit substantial discounts for participation in wellness promotion programs, with complex provisions to attempt to keep wellness programs from becoming a safe harbor for health status discrimination.  The bill prohibits insurers for varying rates except based on individual or family coverage status, age, geographic area, and tobacco use (1.5:1).  The age variance of 3:1 is a compromise between the Finance Committee’s 4:1 (originally 5:1) and the HELP committee’s 2:1, but should have the effect of making health insurance less expensive for younger people, but more expensive for those who are older.  Waiting periods of greater than 90 days are banned, as is discrimination in coverage based on type of provider.  

A health insurance plan in the individual or small-group market must cover a range of “essential health benefits,” to be defined by HHS, and which must be equivalent to the typical employer plan.  No health insurance plan can have out-of-pocket limits exceeding those that apply to HSA-linked high-deductible health plans, and small-group plans cannot have deductibles exceeding $2,000 for individuals and $4,000 for families.  Plans in the individual and small-group market must fit under one of four levels of coverage — bronze, silver, gold and platinum – which correspond to actuarial values of 60, 70, 80, and 90 %, respectively. The House bill has three levels, with actuarial values of 70, 85, and 95 %, so the Senate bill offers much less generous coverage.  Indeed, the Bronze level has deteriorated from the Finance bill, which set the floor at 65 %.   The Senate bill also makes available a catastrophic very high-deductible policy for people under age 30 or for whom insurance is otherwise unaffordable.  Special provisions affecting abortion coverage will be addressed in a later post.

The Exchanges

Unlike the House bill, which provides a single national exchange, the Senate bill depends on each of the states to establish its own exchange (or to cooperate in forming a regional exchange).  If a state fails or refuses to do so, HHS may either establish one itself or contract with a private nonprofit to do so.  The exchanges will be discussed in detail in my next post, but they will basically offer individuals and employees of employers (initially small employers) a choice of qualified health plans.  Both individuals and small groups can purchase insurance inside and outside of the exchange, but affordability subsidies are available only through the exchange.  The only Americans required to purchase insurance through the exchange are members of Congress and congressional staff.

HR 3590 creates a public plan, the community health insurance option, which like the House public option is national in scope and negotiates fees with providers.  States may opt out of the public plan by passing a law, and CBO estimates that about a third will.  The bill also provides $6 billion in federal start-up funds for cooperatives, although CBO projects that these will be ineffective and that only half the start-up money would be spent. 

A number of provisions are intended to assure that the public plans and cooperatives will enjoy no advantages over private insurers.   The legislation also permits states to establish “basic health programs” for people under 200% of the poverty level, and allows interstate insurance sales through compacts and the sale of nationwide plans that do not need to comply with state mandates.  States can opt out of permitting nationwide plan sales in their state.  Finally, a broad waiver provision permits states to opt out of most of the requirements of the legislation if they meet certain requirements and get federal permission.

The bill provides for three different risk-adjustment programs, two temporary and one permanent, that will be discussed in the next post.

Premium Tax Credits and Cost-Sharing Reductions

Among the most expensive provisions of the bill, and those most important for expanding coverage to the uninsured, are those providing for premium and cost-sharing subsidies.  Premium assistance tax credits are available to help cover premium costs for American citizens and aliens lawfully present in the United States whose household income does not exceed 400% of the federal poverty level (FPL).  The premium subsidy is intended to reduce the cost of insurance to 2% of income for those at 100% of the FPL increasing to 9.8% at 400% of the FPL.  The subsidies are quite generous at the upper end (compared to 12% of income in the House bill and 12.5% in the Senate HELP bill), but less generous at the lower end (compared to 1% in the HELP bill and 1.5% in the House bill). 

Cost-sharing subsidies are on the whole less generous than those in the House bill, reducing the standard out-of-pocket maximum (based on the HSA-linked high-deductible health plan) to one-third for persons between 100% and 200% of the FPL, one-half for those 200% to 300%, and two-thirds for those at 300% to 400% of FPL.

Premium subsidies would be available to the uninsured, but also to persons who are offered employer coverage where the employee’s share of the premium would exceed 9.8% of income or where the plan’s share of the total allowed costs under the employee benefit plan is less than 60%.  Eligibility for credits will normally be decided by HHS, subject to an appeal process.

The Individual and Employer Mandates

Individuals are required to maintain “minimal essential coverage” under HR 3590.  This can be public insurance (Medicare, Medicaid, VA, etc.), individual coverage purchased through or outside of the exchange, employment-based coverage, or grandfathered coverage. Individuals who are not covered face a penalty of $95 in 2014, $350 in 2015, and $750 in 2016 and indexed thereafter.  An additional penalty equal to half the penalty amount is imposed for each uninsured dependent of an individual up to 300% of the normal penalty.

Excepted from the individual coverage requirement are persons who belong to religious groups that object to insurance (such as the Amish), individuals not lawfully present in the United States, persons who belong to religious sharing ministries, and incarcerated individuals.  The penalty does not apply to persons who have to pay more than 8% of their income for insurance after applying the affordability credits, those uninsured for less than three months, persons with incomes under 100% of poverty, members of Indian tribes, and persons who receive a hardship waiver.  A person who refuses to pay the penalty cannot be criminally prosecuted.

The penalty is calculated differently than that in the House bill. The House penalty is 2.5% of income above the filing limit (currently $8,350 for a single person, $18,700 for a married couple filing jointly) up to the average cost of a basic insurance policy.  It would seem that the penalty would be higher under the Senate bill for lower-income persons, lower for higher-income persons.  The CBO scores the Senate penalty as producing $8 billion in revenue, the House, $33 billion.

The Senate bill purports not to have an employer mandate.  Employers who do not insure their employees, however, face stiff penalties.  Employers who have more than 50 employees who do not offer health insurance and who have at least one full-time employee who receives a premium assistance tax credit must pay an assessment of $750 times the number of its full-time employees. 

An employer who offers insurance, but who has at least one full-time employee who receives a premium assistance tax credit because employment-related insurance is not affordable or adequate must pay the lesser of $3,000 for each employee who receives a credit or $750 for each full-time employee. Employers are prohibiting from firing or otherwise discriminating against employees who receive tax credits.  It is hard to imagine that many large employers that do not offer health insurance coverage will have no employees earning less than 400% of poverty, so the bill effectively imposes a mandate.

Large employers who impose waiting periods in excess of 30 days before employees become eligible for insurance also face penalties; of $400 per employee for 30-60-day periods, $600 per employee for periods over 60 days.  This provision will probably have a major impact on retailers and others who have high employee turnover.  Employers with more than 200 employees must automatically enroll new full-time employees in insurance coverage with an opportunity to opt out (the Nudge solution).  Employers must also notify employees of their potential coverage through the exchange and of the possible availability of affordability subsidies if the employment-based insurance is inadequate.

Atul Gawande, leading surgeon and writer, and Margaret Hamburg, commissioner of food and drugs at the U.S. Food and Drug Administration, are among the confirmed speakers for the 2010 National Health Policy Conference (NHPC). The conference, sponsored by AcademyHealth and Health Affairs, will take place February 8 and 9, 2010.  No other conference offers a more comprehensive and detailed look at health care reform.

You can register for the 2010 NHPC online.

This year’s NHPC agenda covers the depth and breadth of health care reform, providing a first-hand opportunity to learn how reform will affect 2010’s policy and research agenda.

Plenary speakers will outline the presidential and congressional policy agendas while breakouts offer perspectives on different aspects of health care reform from leading researchers, policymakers, clinicians, and advocates.

Confirmed sessions include: 

• Reforming Provider Payment to Promote Models of Integrated Delivery
• Empowering Consumers Through Information Therapy
• The Nation’s Agenda for Prevention
• Redesigning Health Care Workforce for the Right Primary Care Skill Mix
• State Roles in Health Care Reform: From Medicaid to Exchanges
• Using Evidence to Design Benefits
• From HIT to Actionable Knowledge: Building the Research Bridge
• Special Session on Forming Accountable Care Organizations: Lessons Learned from the Group Employer Model

Editor’s Note: In the post below, John Wennberg and Shannon Brownlee discuss the controversy over a proposed study of regional variations in Medicare spending. Wennberg and Brownlee rebut claims that spending and utilization variations among academic medical centers are due to differences in patient income, race, and health status. In another post coming next week, Wennberg and Brownlee will rebut claims that academic medical centers with higher utilization and spending produce better outcomes.

To the casual observer of health care reform legislation, the reaction from several prominent medical centers to a modest provision in the House health reform bill might seem perplexing. The bill provides funding for a two-year study by the Institute of Medicine (IOM) looking at regional variation in Medicare spending, something that has been documented several times over by the Dartmouth Atlas.

It’s a seemingly sensible provision, yet the response from more than a dozen academic medical centers makes it seem as if this study represents a major threat to the lives of thousands of patients. In op-eds, blogs, letters to members of Congress, broadsides in the press, and now in a report from the American Hospital Association, administrators and physicians decry both the Dartmouth Atlas’ findings and the proposed IOM study as a threat to “the future quality of American health care” and a lot of “malarkey.”

Of course, it isn’t the Dartmouth Atlas or the study that these medical centers object to, but rather what the Centers for Medicare and Medicaid Services (CMS) might do with the information. The House bill gives CMS the power to use the results of the IOM study to rein in Medicare spending by rewarding more efficient providers – those that use fewer medical services to care for a given population while maintaining equal or better outcomes compared with the national average. CMS would also be permitted to clamp down on reimbursements to providers that are less efficient.

And there’s the rub. Many of the academic medical centers that are objecting to the bill already know from the Dartmouth data that they fall into the latter category and could very well see revenue go down. They are fighting back with an old argument: their utilization and spending profiles are higher than most because their patients are poorer and sicker. They claim that more of their patients are urban, poor, and African American, and need more care than patients being cared for by more efficient hospitals.

Higher Utilization And Spending Is Not Accounted For By Poorer And Sicker Patients

This theory simply doesn’t stand up to scrutiny. First, many of the more efficient academic medical centers – the University of California, San Francisco (UCSF), Cleveland Clinic, and University of Chicago Medical Center, to name just a few – are also located in urban areas and have a high percentage of black, low-income patients. For example, African Americans using the Cleveland Clinic and University of Chicago spent an average of 16 days in the hospital during the last six months of life. Compare that to the 30 days black patients in the last six months of life spend in New York University Medical Center in Manhattan and Cedars-Sinai in Los Angeles. Is this because NYU and Cedars are serving more of the urban poor? Just the opposite: only 4% of NYU’s patients and 9% of Cedars-Sinai’s patients are African American, compared to 69% for the University of Chicago and 28% for the Cleveland Clinic.

Race and poverty do affect utilization, but where patients get their care matters far more than the size of their income or the color of their skin. Take a look at the table below, which shows the number of days spent in the hospital among chronically ill blacks and non-blacks (which includes whites, Hispanics, and other races) during the last two years of life. (The data are drawn from the Dartmouth Atlas and cover Medicare recipients who died between 2001 and 2005. Each region contains at least one academic medical center.)

What the table shows is that all patients are hospitalized more often and/or spend more days in the hospital in some areas compared to others, regardless of race. For instance, the percentage of patients who are black is right in the middle for Manhattan, but all chronically ill patients in Manhattan spend a lot of days in the hospital, regardless of race. Chicago, on the other hand, has the highest black population of all, but the number of hospital days is right in the middle.

*Adjusted for age, sex and type of chronic illness

The critics argue that it’s unfair to compare utilization at community hospitals to that of academic medical centers, which like to point out that they are caring for a larger percentage of the sickest and the poorest and have the added burden of training the nation’s doctors. So let’s just look at what happens to patients at individual academic medical centers.

Utilization Varies Widely Among Academic Medical Centers Regardless Of Patient Characteristics

It turns out that all races get more services at some academic medical centers than at others — sometimes a lot more. For instance, both the University of Medicine and Dentistry of New Jersey (UMDNJ) and the University of Chicago are located in the middle of poor, urban, black communities. Yet blacks at the UMDNJ spend an average of 25.2 days in the hospital in their last two years of life – 60% more than blacks at the University of Chicago. Blacks at NYU Medical Center spend 35.5 days in the hospital in their last six months of life — 2.5 times more days than blacks using the University of California at San Francisco (UCSF) Medical Center. Compare that to the rate of hospital days for non-blacks, who also spent more than twice as much time in the hospital at NYU compared with UCSF.

Even when we look at academic medical centers in the same city, we see wide variation in how they treat similar patients. In Philadelphia, Hahnemann University Hospital used about 40% more days for treating blacks than the University of Pennsylvania. (Patients at Penn still spend more days in the hospitals than comparable patients at more efficient medical centers such as the University of Chicago, UCSF, or the Cleveland Clinic.)

In Boston, Tufts-New England Medical Center used 25% more hospital days in treating its black patients than did Beth Israel Deaconess Medical Center.  In Los Angeles, blacks using Cedars-Sinai experienced 44% more days in hospital than blacks using UCLA. Non-blacks at Cedars used 31% more days in hospital than their counterparts at UCLA, and administrators and physicians at these institutions – “America’s best hospitals”  – cannot account for why they vary so widely in the manner in which they treat similar patients.

What about poverty? Maybe the hospitals with higher utilization take care of poorer patients of all races. Under the poverty hypothesis, as the percentage of patients below the federal poverty line in a hospital’s patient population increases, the average number of days spent in the hospital would also increase.  But take a look at the figure below, which shows the relationship between poverty (which we measured by looking at the percentage of Medicare patients who were also eligible for Medicaid) and days in the hospital among academic medical centers.

The association among academic medical centers between the number of days spent in hospital by patients with chronic illness during the last six months of life and the percentage of patients eligible for Medicaid

This figure shows that there is no relationship between the number of days patients spend in the hospital and the proportion of patients who are poor. A recent study published in the New England Journal of Medicine by some of our colleagues found that poverty and race had virtually no impact on utilization.

As guardians of the scientific basis of medical practice, academic medical centers have a special responsibility to understand why they treat similar patients differently, and to untangle the implications of those variations in the practice of medicine. It matters for patients and it matters for the nation, because we can’t keep paying for medical services that do not appear to be based on sound science.

From the very beginning, a central tenet of health care reform was that no one would lose coverage they already have. That’s why so many women are outraged by the Stupak amendment to the health reform legislation recently passed by the House.  It goes against one of the fundamental tenets of health care reform: do not leave anyone worse off than they were before reform.   

Under the Stupak amendment, millions of women would either lose access to health care benefits, or worse, lose benefits they currently have if they purchase health insurance in the new exchange. The Stupak amendment prohibits any coverage of abortion in the public option and prohibits anyone receiving a federal subsidy from purchasing a health insurance plan that includes abortion coverage. It also prohibits private health insurance companies participating in the exchange from offering a plan that includes abortion coverage to both subsidized and unsubsidized individuals.

This leaves few possibilities for abortion coverage: An insurance company could offer a separate plan for women without subsidies that includes abortion coverage in its basic package. Also, an insurer could theoretically offer a single-procedure rider for abortion coverage, separate and apart from its broader health insurance policies. At best, the logistics involved make this a highly unlikely option. At worst, other provisions of the bill actually prevent health plans from doing so. 

Realistically, the actual effect of the Stupak amendment would be to ban abortion coverage across the entire exchange–for women who receive a subsidy and for women who pay 100 percent of their premiums with their own money. This is very significant because up to 30 million Americans may purchase health care insurance through the exchange.

The Stupak Amendment Would Greatly Extend Existing Limitations On Abortion Access

There are a number of restrictions on abortion access already in effect under current law.  Only women who can afford to pay for abortions with their own money or through their insurance plans have access. This excludes low-income women on Medicaid who live in states that don’t cover abortion care with state funds; federal employees, their spouses, and female dependents; women serving in the military overseas; women in federal prisons; and women in the District of Columbia – not an insignificant group!

The Stupak amendment extends the group of women ineligible for abortion coverage far beyond its current breadth. It is essentially a middle-class abortion ban. The exchange would offer coverage to many of the 17 million women ages 18–64 who are uninsured, along with the 5.7 million women who are now purchasing coverage in the individual market. In addition, small employers are also likely to purchase their health insurance through the exchange where they may find more affordable options. Because the majority of health insurance plans in the private insurance market currently include abortion, many women will lose coverage that they already have in an exchange where abortion coverage is not permitted.

Where does that leave the working mother in a family earning up to $88,000? Or the self-employed woman who is paying the entire cost of her coverage and who doesn’t have access to employer-sponsored coverage? Or the woman who works in a small business whose owners purchase coverage through the exchange? 

The Stupak amendment leaves them without coverage for a legal medical procedure. Simply put, women’s access to private coverage for abortion would be restricted by health care reform. One thing is certain: Women should not be left worse off after health care reform than they are now.

The newly released November-December 2009 edition of Health Affairs features a series of articles on the challenges posed by the HIV/AIDS pandemic.  The articles focus on steps policymakers can take to change the dynamics of the pandemic so that millions of lives will be saved, infections prevented, and overall costs made more affordable. Publication of the series was supported by the Bill & Melinda Gates Foundation.

In conjunction with the issue, Health Affairs has also produced a special series of policy briefs on the issues surrounding the pandemic. These briefs, also produced with the support of the Gates Foundation, are available on the Health Affairs Web site.   

Increasing prevalence of HIV infection, coupled with the current global economic slowdown, portends a drastic funding shortfall for addressing the HIV/AIDS pandemic in both the short and long run. By the year 2031, when the pandemic enters its 50th year, funding needed for developing countries could reach $35 billion annually — three times the current level, according to a paper in the journal coauthored by Robert Hecht. Even then, more than 1 million people will be newly infected each year; some 33 million people worldwide are infected currently.

The world has an opportunity to avert this bleak future, say Hecht, managing director of the Results for Development Institute, and coauthors. They predict that by investing in high-impact prevention and efficient treatment efforts, world policymakers could cut the cost of fighting the pandemic by more than half.

Other highlights include the following:

• Stefano M. Bertozzi, HIV director at the Bill & Melinda Gates Foundation, and co-authors offer a timeline of the world’s response to the pandemic and urge policymakers to shift from the “emergency response” mode of recent years to a more effective and efficient set of initiatives today. “An emergency response is appropriate for an earthquake, but wasteful and ineffective for an epidemic that has been with us for more than twenty-five years,” they write. They urge a new focus on evidence-based prevention programs, longer-term interventions designed to change fundamental social drivers of transmission, investments in training a new generation of health care professionals and managers, and more coordinated oversight of programs characterized by modern management practices.
• Across the board, HIV treatment programs must be restructured to maximize benefits at the lowest possible costs, according to Anil Soni of the Clinton HIV/AIDS Initiative and Rajat Gupta of the Global Fund to Fight HIV, TB, and Malaria. They urge far broader use of the most cost-effective drug regimens for treating patients with HIV/AIDS. They also urge better use of available medical personnel through such strategies as “task shifting.” For example, in Rwanda, trained nurses with some physician supervision are conducting patient consultations for HIV treatment. By reducing the demand on physicians for HIV services, the authors say, task shifting reduces costs so that money can be used to improve and expand care.
• Anthony S. Fauci, director of the National Institute of Allergy and Infectious Diseases, and colleague Gregory K. Folkers call for increased global funding of a robust research agenda on everything from vaccines to new prevention modalities. They argue that new revenue sources to combat HIV/AIDS globally are needed, including investment by rich and middle-income countries whose contributions so far have been limited.
• Although much attention has focused on the scientific obstacles to developing an HIV vaccine, the Massachusetts Institute of Technology’s Jeffrey E. Harris contends that the economic challenges are just as real. Among the issues that need to be addressed are a lack of incentives for fostering cooperation among private-sector parties and regulatory conflicts that promote public welfare but impinge on individual rights.
• Meanwhile, Judith Auerbach of the San Francisco AIDS Foundation argues that the focus of HIV prevention needs to be broadened, from changing the behavior of individuals to enabling societal-level health promotion and disease prevention that will have positive impacts beyond HIV/AIDS. She cites cost-effective interventions — such as empowering women in poor countries and providing stable housing for the homeless — that have shown good results.
• The global response to the AIDS pandemic aims for universal access to treatment and for pursuing every avenue for prevention. But given limited funding availability, Dan W. Brock, a professor at the Harvard School of Medicine, and Daniel Wikler of the Harvard School of Public Health assert that there is a moral imperative for shifting priorities to prevention, which ultimately will save more lives — even if such a change in course slows progress toward the goal of universal treatment access.

Louise Norris at the Colorado Health Insurance Insider features the best in health policy blogging in a Simpsons-themed edition of the Health Wonk Review. Louise leads off with the Tim Jost’s series analyzing the House health reform bill on the Health Affairs Blog.

Editor’s Note: In addition to John Wennberg and Shannon Brownlee (photos and bios above), authors of this post include James Weinstein, MS, DO, and Elliott Fisher, MD, MPH. Weinstein is chair of the Department of Orthopaedic Surgery at the Dartmouth-Hitchcock Medical Center. Fisher is Director of the Center for Population Health at The Dartmouth Institute for Health Policy and Clinical Practice and Professor of Medicine and of Community and Family Medicine at Dartmouth Medical School.

Now that Congress appears to be on its way to passing some sort of health insurance reform legislation, attention is turning to our dysfunctional, disorganized, and wasteful delivery system.

Both the House and Senate bills contain a little something for everyone in terms of delivery system reform, but how close they come to fulfilling that ambition will depend in large measure upon achieving four major goals:

1. Improving the science of health care delivery;
2. Fostering the expansion of organized systems of care;
3. Establishing informed patient choice as the standard of care for elective surgeries, tests, and procedures;
4. Constraining the undisciplined growth in health care capacity and spending.

A Science Of Health Care Delivery

Both House and Senate bills would create new institutes (the Patient Centered Outcomes Research Institute in the Senate Finance Committee bill), aimed at providing much needed comparative effectiveness research. While such research is necessary for improving outcomes, it is not sufficient. The nation’s research priorities must also include the development of a science of health care delivery, which is currently a black box. Patients with similar conditions are treated in very different ways by different providers, few of whom devote any research effort at all to determining how best to allocate resources and how to achieve the most effective care pathways.

What’s more, few existing electronic health records (EHRs) are able to support the kind of ongoing research into the relationship between care processes and measures of efficiency (such as delays in discharge). Nor can they support research looking at the link between care processes and health outcomes (such as those recently applied successfully to back pain treatment). The latter requires incorporating patients’ reports of their health status into both effectiveness research and routine care. As EHRs are rolled out, they must enable the creation of registries and the tracking of patient outcomes, so that organized systems can learn continually to improve care.

Fostering Organized Systems Of Care

Expanding organized systems of care will require shared savings plans that reward Accountable Care Organizations, or ACOs (either newly formed or existing organized group practices) for reducing utilization while maintaining quality. Shared savings can also soften the short-term financial blow that will likely result from reining in excess utilization, and ease the transition to value-based care, especially for supply-sensitive services – the routine hospitalizations, physician visits, and procedures that are delivered to chronically ill patients, and which we estimate account for about 60 percent of Medicare spending.

The current legislation authorizes the CMS to support the development of ACOs and new payment models – either as pilots (in the House bill) or as a national voluntary shared savings program (in the Senate’s). Although the principles of how ACOs might be structured and rewarded have been outlined, a number of details will have to be worked out to make sure they evolve into high-performing organizations that deliver on the promise of “accountability.” This will require learning, adapting the model, and technical support. In addition, the CMS will need to make the Medicare claims data more rapidly and widely available.

Establishing Informed Patient Choice

Patients facing elective services, even invasive surgical procedures, routinely don’t understand what they’re getting into. This can lead to higher costs when patients undergo treatment that they would not have wanted had they been fully informed, and may encourage malpractice suits. Changing the standard of care from informed consent to informed choice that is achieved through shared decision making could reduce unwanted care.

We recommend two parallel strategies to achieve this goal. First, the CMS should move rapidly to implement standardized approaches to informing patients. Simply disseminating patient decision aids regardless of their quality, as the Senate HELP Committee bill would do, will not achieve the goal of ensuring that patients are making informed choices. Any research institute that emerges from the legislation should direct funds to validating patient decision aids and shared decision-making processes. Fully implementing informed patient choice will also require that state legislatures redraft informed consent laws to promote informed patient choice as the standard of practice for elective treatments.

Second, the CMS must reimburse providers for the cost of supporting shared decision making; reward those who achieve high-quality patient decision making; and ultimately, require hospitals and ambulatory surgery centers to support shared decision making as a condition of participating in Medicare and Medicaid. We see this reimbursement fitting easily into the Medical Home concept.

Constraining Undisciplined Growth

The current legislation achieves short-term savings largely through across-the-board cuts in the prices Medicare pays to providers. This approach penalizes efficient providers and communities that achieve high levels of quality for lower spending, and misses a critical opportunity to use the annual adjustment in Medicare fees to encourage slower spending growth and greater accountability. We strongly advocate a more nuanced approach that involves both carrots and sticks.

First the carrots. The secretary of Health and Human Services (HHS) should be authorized to establish a category of providers who have demonstrated the ability to slow spending growth and improve quality of care. This would include not only ACOs, but also other provider groups participating in performance measurement that focuses on overall cost accountability, such as medical homes. These would be eligible for financial bonuses related to demonstrated improvements in quality and slower cost growth.

Congress should also consider giving CMS a stick that it could use to penalize providers in regions with excessive growth in per capita spending. We know that some regions of the U.S., such as McAllen, Texas, and East Long Island, spend more and have grown faster than others. Restraining excess spending may save some money today, but more importantly, it would serve as a signal that Medicare is serious about reducing future spending growth. This is key to getting Medicare’s budget back in balance over the long haul. Indeed, if all U.S. regions could slow spending growth by even 1%, savings of more than $1 trillion over the next 15 years would accrue to Medicare alone.

We suggest that providers in regions where overall per capita growth in spending exceeds a reasonable target should receive reduced updates. This could be aimed narrowly at the highest-cost hospitals within those regions. Given the contribution of hospital expansion to rising costs (a “record breaking” $50 billion of hospital construction in 2008, according to MedPAC), such an “outlier penalty” could encourage more rational and population-based planning.

An alternative method of reducing spending would be to spread the reduced updates across all providers within high-growth regions. This would serve as an incentive for both physicians and hospital administrators to rein in the local medical arms races and ancillary services that contribute to skyrocketing costs.

Either way, reducing updates to high-growth regions or specific providers should discourage the easy flow of money from bond and equity markets for hospital expansion, and could spur the most inefficient providers to participate in ACOs and other shared savings programs. The key here is encouraging local providers to consider how to slow – or even reduce – local spending on unnecessary care. Some communities that have successfully held down costs did so by merging hospitals and eliminating unneeded capacity.

Other aspects of the health care reform bills are worth noting. The Senate Finance Committee has included a provision for a Workforce Advisory Committee, which would look into both the specialty composition and number of physicians being trained. Our data indicate that the nation does not need more physicians, but we do need to shift the ratio of primary care physicians (PCPs) to specialists back toward more PCPs. The bill’s provision for redirecting residency slots toward rural hospitals and hospitals that are short of personnel should also shift residencies toward the most organized, efficient teaching hospitals, whose practices we want to disseminate.

A Call For An All-Payer Atlas

Finally, we call on Congress to include measures to create an all-payer atlas, similar to the Dartmouth Atlas for Medicare. As the largest single payer, the CMS can do much to drive the delivery system toward higher-value and patient-centered care, but private payers could also play a part. There is some uncertainty about utilization patterns among the under-65 population. Through the insurance exchanges, private payers could be encouraged (or even compelled) to share claims data for the creation of an all-payer atlas, which can be used in defining patient populations for ACOs, benchmarks for efficiency, and fine-tuning risk-adjusted, population-based reimbursement strategies aimed at rewarding efficient institutions.

Achieving our four goals will depend in part upon the willingness of the secretary of HHS to move rapidly from pilot projects to payment reform, and to put into action payment models that at least some hospitals and physician groups might not welcome at first. But given the Congressional Budget Office’s alarming projections for health care spending, which will have an impact not only on the federal budget but also the capacity of American companies to compete in the global marketplace, the need to reduce health care inefficiency and spending has never been more pressing.