Federal Issues Update From CMA

Summary: In the 112th Congress, efforts to repeal healthcare reform are widely considered to be symbolic and will not be signed by the president. However, CMA will be actively working to push for improvements to the law. CMA will focus its 2011 advocacy in the regulatory arena where the Centers for Medicare and Medicaid Services (CMS) are working quickly to implement the new Medicare reforms, which impact all payers. CMA will be working to ensure that these new programs are physician-led and patient-centered and give physicians appropriate financial and clinical autonomy in all modes of practice.

I. LEGISLATION

A. Repeal of Healthcare Reform — The Patient Protection and Affordable Care Act (ACA)

On January 19, 2011, the U.S. House of Representatives passed HR 2, legislation to repeal the Affordable Care Act (ACA), on a mostly partisan vote of 245 to 189, but the measure is not expected to pass the Senate nor gain the support of the White House.

CMA did not take a specific position on HR 2. In fact, none of the major national healthcare organizations (health plans, hospitals, pharma, or physicians) took a position on HR 2. CMA will continue to strongly advocate our position, which outlines the elements of healthcare reform that California physicians support and the elements physicians oppose.

CMA will be working vigorously to pursue improvements to the ACA, such as the elimination of the IPAB (the non-elected board given broad new authority to govern Medicare), repeal of the Medicare SGR payment formula, increases in Medi-Cal reimbursement rates, augmenting graduate medical education, and improvements to the quality reporting programs. CMA will continue to support the provisions of the ACA that reform the abuses of the for-profit insurance industry, such as ending rescissions and coverage denials for pre-existing conditions, as well as forcing insurers to dedicate at least 80% of their revenue to direct patient care.

On January 20, 2011, the House passed H Res. 9, which instructs the committees of jurisdiction to develop new legislation to replace the ACA. The Republican leadership also intend to try to stop the flow of funding to prevent the ACA from being implemented. CMA met with the Committee leaders last week in Washington, DC, and will be actively engaged in the discussions related to this legislation.

While a full repeal of the ACA is not expected to be successful in the 112th Congress, many predict that Congress will adopt some changes to the law on a bipartisan basis. For instance, both Democrats and Republicans have agreed to eliminate the Form 1099 new reporting requirement, which requires businesses, including physician offices, to report certain payments.

B. Medicare Private Contracting

AMA, CMA, and the federation will be pushing legislation (The Medicare Patient Empowerment Act) to allow physicians to privately contract with Medicare patients. An outline of the draft legislation will be posted to the CMA website. CMA was actively involved in crafting the bill. Several Republican leaders appear to be interested in introducing the legislation. To ensure maximum success, AMA is currently testing the bill and the public messaging through a series of senior focus groups prior to launching the campaign and introduction of the bill in March.

C. Repeal of the Medicare SGR Payment Formula

CMA is working with an elite group of state medical associations and specialty societies through AMA to develop an alternative to the SGR to present to Congress by the end of 2011.

D. Update the California Payment Localities (The California “GPCI Fix”)

CMA will continue to vigorously pursue legislation to update the California payment localities, which have not been updated in over a decade despite changing demographics. The 2010 GPCI legislation would have provided up to 14% Medicare payment increases to physicians in 13 California counties while holding physicians in rural counties harmless from cuts for five years. For 2011, CMA is considering alternative approaches that might include other states.

E. Increase Funding for Graduate Medical Education

CMA remains committed to expand the number of Medicare Graduate Medical Education (GME) residency programs to improve access to care in California. CMA is developing potential legislation as well as working with physician groups on the national level.

F. Protect MICRA

AMA and many other state medical associations are pushing for federal medical liability reform that mirrors the successful laws in California and Texas. With a new Republican-controlled House of Representatives, there will be several liability bills introduced and moved through the House. Passage of liability reform will be much more difficult in the U.S. Senate. CMA’s first priority will be to protect MICRA to ensure that federal law does not weaken California law. CMA will also continue to seek changes to the ACA (that CMA achieved in the House health care reform bill) that prohibits new guidelines or payment policies from becoming the standard of care in a liability claim.

G. Geographic Variation in Medicare Spending — The “Value Index”

Sometimes the best defense is a good offense. The rural states may continue to push “value” legislation that increases Medicare payments in their states while reducing Medicare payment rates to California physicians. Last year, CMA was successful in killing the rural state proposals that cut California physician payments by 23%, in addition to the 25% Medicare SGR cut. CMA is considering legislation that rewards physicians practicing in states with low rates of healthcare spending growth, such as California, which has a 2.5% growth rate — well below the national average. The rural Midwest states' healthcare spending growth rate is 4%.

II. REGULATIONS

A. CMS Medicare Regulations

CMA will be focused on the regulatory implementation of healthcare reform at the Centers for Medicare and Medicaid Services (CMS). The bulk of the activity will be aimed at implementing the Medicare payment reform and quality programs. These programs will have an enormous impact on physician practices, and CMA will be fighting to ensure they work for physicians and their patients.

CMA has already been meeting with CMS officials and providing extensive comments on the proposed programs. The CMS Innovation Center was provided $12 billion in funding to test innovative payment and healthcare delivery models, such as capitated ACOs, medical homes, and other practices. CMA will be working with CMS to fund physician-centered projects in California.

Following is a list of new Medicare reforms and programs that CMS is charged with implementing:

• CMS Innovation Center Pilot Projects ($12 billion)
• Accountable Care Organizations: Shared Savings Program; Partial Capitation Program; Full-Risk Pilots
• Medical Homes — particularly for chronic disease patients
• Bundled Payment for Acute Care Hospital Demonstration Project
• The Physician Payment Value Modifier (“Value Index”): Effective 2015
• Geographic Practice Expense Reduction
• Physician Confidential Utilization Feedback Program
• Five Medicare Programs That Require Individual Physician Quality Reporting (PQRS, ACOs, Value Modifier, EHR Meaningful Use, “Public Compare” Website, and the Health Insurance Exchanges)

B. Studies Mandated by the ACA that Specifically Impact California Physicians

Background: The ACA mandates that HHS contract with the Institute of Medicine (IOM) to perform two studies. These studies are at the centerpiece of the healthcare cost containment debate in Congress. The rural Midwest states used the Dartmouth Atlas studies that show wide variation in Medicare spending across the country to develop a new Medicare payment methodology called the “Value Index.” The Index would reward physicians spending less than the national average and providing high quality care (rural Midwest) and penalize physicians spending more than the national average (California).

CMA and a handful of other state medical associations fought these proposals. The congressional compromise was to charge the IOM with conducting studies on the geographic differences in practice costs (physician office expenses, wages paid to nurses and non-physician staff) and further study the variation in Medicare spending. Based on their findings, the IOM was asked to make recommendations to CMS and Congress on new payment methodologies related to cost, spending, quality, and value.

In addition, CMA was successful in ensuring the legislation included a mandate to adjust for California’s higher practice costs (rent, wages) and the socioeconomic characteristics of California’s patient population ( rates of uninsured, low-income, racial and ethnically diverse patients with language barriers and other healthcare disparities) that impact access to care and healthcare spending.

CMA was invited to testify before the prestigious IOM on both studies. Dr. Larry DeGhetaldi, chairman of CMA’s Medicare TAC, recognized medical group leader, and physician leader on geographic payment issues, represented CMA at these hearings. Below is the detail on the latest hearing held January 17, 2011, in Washington, DC. Dr. DeGhetaldi’s presentation will be on CMA’s website.

In summary, CMA told the IOM: 1) Medicare must update the physician payment localities; 2) Medicare must adjust payments for geographic differences in practice costs and the socioeconomic characteristics of the patient population; 3) the IOM needs to study geographic variation in Medicare spending more thoroughly before implementing payment policies; and 4) Medicare should model new programs after existing California physician initiatives (solo/small group and medical group initiatives) that allow physicians to lead in making clinical and quality decisions that produce value for patients.

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CMA Press Release:

CMA Tells IOM: Protect Seniors’ Quality of Healthcare

Cost and risk factors must be considered when evaluating Medicare’s effectiveness

Sacramento — To ensure senior citizens get the healthcare they need, no matter what their background or where they live, policymakers must balance concerns about Medicare spending with other factors to accurately ensure access to care, the California Medical Association said today in a hearing before the Institute of Medicine.

An independent, nonprofit organization tasked with studying geographic differences in Medicare spending and value of care, the Institute of Medicine (IOM) took comments on the issue in Washington, DC. CMA joined the American College of Physicians as the only two major physician organizations asked to testify.

After studying the issue, IOM will present Congress with a recommendation on how to change the Medicare payment system.

“While Dartmouth Atlas studies show big variations in Medicare spending region to region, they do not adequately weight for other crucial factors that account for these differences, such as costs to practice medicine in different regions and differences in patients’ income levels, ethnicities and health histories,” said Larry deGhetaldi, MD, who testified on behalf of CMA. “Once you accurately assess risk and cost factors unique to each region, Medicare spending does not differ as much region to region. A failure to do so would compromise access to care for the most vulnerable Medicare patients, low-income beneficiaries.”

For example, deGhetaldi said, Los Angeles County has a high poverty rate and high rents and wages, which all push up the cost of providing healthcare there.

DeGhetaldi also gave examples from his medical group, the Palo Alto Medical Foundation, that could provide models for the federal government to spur physician innovation by offering incentives to reduce unnecessary clinical variation and improve care.

In addition, deGhetaldi called upon the IOM to fix the outdated Medicare physician payment regions that undercut physician payments in several California counties. Seniors struggle to find doctors to treat them in counties such as Santa Cruz, San Diego, and Sacramento counties, which are classified as rural under Medicare and therefore offer physicians low reimbursement rates.

CMA advocates for realigning those counties with hospital payment localities, which more accurately reflect urban and suburban costs.

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C. Health Insurance Exchanges

The CMA Policy Center sent preliminary comments to HHS on the implementation of state-based exchanges. CMA comments are on the website.

D. Medical Loss Ratio

Under the ACA, the National Association of Insurance Commissioners (NAIC) were charged with making recommendations on the definition of the 80% medical loss ratio (MLR) to the Secretary of HHS. AMA staff, led by Catherine Hanson, was extremely involved in the negotiations with the NAIC. CMA and the other state medical associations coordinated closely with AMA. Late last year, the NAIC sent those recommendations to Secretary Sebellius, and she adopted them as interim final regulations with a few additions that allow new plans to transition to the 80% MLR. The regulations were effective January 1, 2011. Subsequently, State Insurance Commissioner, Dave Jones, adopted regulatory changes to conform state law with federal law.

CMA sent preliminary comments to Secretary Sebellius in May 2010 and will coordinate comments on the final rule. CMA also sent comments to Commissioner Jones. Final comments on the federal rule will be posted to CMA’s website when they are finalized.

E. 2011 Medicare Fee Schedule

CMS published the final Medicare physician payment rule on the Medicare fee schedule in December after Congress acted to stop the 25% SGR cut and extend the 2.2% rate increase. Later, on December 29, 2010, CMS made additional changes to the practice expenses and conversion factor.

The extensive CMA letter to CMS is posted on the CMA website, as well as several CMA Alert articles (December–January) explaining the new changes. CMA’s Center for Economic Services has also published a summary of the new 2011 Medicare Fee Schedule changes, which are on the CMA website.

F. CO-OPs

CMA has a new issue brief on the Consumer Operated and Oriented Plans (CO-OPs) that will be allowed to participate in the new health insurance exchanges. These CO-OPS could be led by community physicians. The brief will be posted on CMA’s website.

G. Medi-Cal

CMA is engaged in discussions with CMS on the California Medicaid Waiver, State Plan Amendments, and the Medi-Cal rate lawsuit, advocating for higher reimbursement rates to improve access to care in the current Medi-Cal program and the expansion under healthcare reform.