SDCMS Special Update on Healthcare Reform (2010.03.19)

SDCMS Special Update on Healthcare Reform
— March 19, 2010

Executive Director Comment:

• In this email, we give you the highlights of the bill, where to go for details, the pro and cons, and how to contact your legislators.
• We also give you the opportunity to register your opinion with us online by responding to this one-question survey of how San Diego County’s physicians feel about the bill
• CLICK HERE TO TAKE THE SURVEY
• For better or for worse, we should know the answer by Sunday afternoon.

CONTENTS

• Background and Summary (From CMA)
• Major Changes the Reconciliation Proposal Would Make to the Senate-passed Bill (From the Kaiser Family Foundation)
• Summary of HR 3590 (Senate Bill) / HR 4278 (Budget Reconciliation Bill)
• CMA Advocacy Position
• Pros of the Federal Healthcare Reform Legislation
• Cons of the Federal Healthcare Reform Legislation
• Detailed Legislative Summary
• CMA/SDCMS/AMA Position
• Legislator Contact Information

Background and Summary (From CMA)

• The U.S. House of Representatives will be voting on the final compromise bills as soon as Sunday, March 21, 2010. The Senate is expected to follow suit early next week.
• The Democrats believe they are close to having the votes. Only two moderate Democrats from California remain on the fence, neither from San Diego County.
• The latest Kaiser Family Foundation (no relation to the Kaiser Permanente Health Plan) public opinion poll shows the public evenly split on their support for reform with 43% supporting and 43% in opposition.
• The Congressional Budget Office (CBO) released its budget impact estimates on Thursday, March 18, 2010. CBO estimates the bill will cost $940 billion, below President Obama’s $1 trillion target. Moreover, CBO said that the bill will reduce the federal deficit by $138 billion the first 10 years and nearly $1.2 trillion in the second decade. These numbers assume that the SGR cut does go into effect, not a political likelihood.
• The bill is financed with a combination of Medicare cuts and new taxes. All Medicare providers except physicians face significant cuts. Health plans, pharma, medical device manufacturers, hospitals, nursing homes, and home health are all hit with major cuts and fees. Starting in 2018, the bill includes a tax on health plans offering high-end, “Cadillac,” benefits and an increase in the Medicare tax on high-end earners and some net capital gains investment income.

Major Changes the Reconciliation Proposal Would Make to the Senate-passed Bill (from the Kaiser Family Foundation)

Executive Director Comment: Think of these as the results from the House/Senate conference committee that never happened.

• Heftier Subsidies: Compared to the Senate legislation, the reconciliation bill would provide more generous subsidies to low- and moderate-income Americans to help them buy health coverage.
• The “Maserati” Tax: The levy on high-cost insurance plans is scaled back and delayed, rendering it more a “Maserati” than a “Cadillac” tax. It would apply only to the portion of plans costing more than $10,200 a year for individuals (up from $8,500) and $27,500 for families (up from $23,000). The tax wouldn’t kick in until 2018, reducing the projected revenue to the government by 80 percent. Over time, however, the tax would hit more and more plans, because the tax’s threshold is set to increase at the rate of inflation while premiums are expected to continue to grow much more quickly than that.
• Closing the Doughnut Hole: Unlike the Senate bill, the reconciliation measure would eventually close the coverage gap, called the “doughnut hole,” for Medicare beneficiaries enrolled in Part D drug plans. (Currently, seniors who hit the gap must bear the full cost of their medications until they spend a certain amount, when coverage kicks back in.) Under the new bill, seniors who hit the gap this year would get $250 to help cover the costs of their medications. Starting next year, they’d get a 50 percent discount on brand-name drugs, with the cost borne by the drug industry. In subsequent years, the discounts would expand and begin covering generic drugs, with the expense picked up by the government. By 2020, the discounts would reach 75 percent.
• Shift in Medicare Advantage Payouts: Government payments to Medicare Advantage, the private-health plan alternative to traditional Medicare, would be cut back more steeply than under the Senate bill: $132 billion over 10 years, compared to $118 billion. The government currently pays the private plans an average of 14 percent more than traditional Medicare. The new bill, besides reducing payments overall, would shift the funding; some high-cost areas would be paid 5 percent below traditional Medicare, while some lower-cost areas would be paid 15 percent more than traditional Medicare. The Senate’s plan that would have shielded some areas of the country such as South Florida from major cuts was largely eliminated.
• A Raise for Doctors: Primary care doctors would get a Medicaid payment boost in the reconciliation bill. Beginning in 2013 and 2014, the doctors’ payment rates would be on par with Medicare rates, which typically are about 20 percent higher than Medicaid. The goal is to ensure that there will be a sufficient number of doctors willing to care for the millions of additional people who would become eligible for Medicaid under the healthcare overhaul.
• Pushing Up the Medicare Tax: The Senate bill adds a 0.9 percentage point to the Medicare payroll tax on earned income above $200,000 for individuals, or $250,000 for couples. Under the reconciliation bill, starting in 2013, people in those income brackets also would face a 3.8 percent tax on investment income, such as interest, capital gains and dividends.
• Penalty for Not Having Insurance: Under the new bill, most Americans without insurance would face an annual penalty, starting in 2014 at $95 – the same as in the Senate bill. But in following years, the penalties in the reconciliation bill are slightly different. Those without insurance in 2016, for example, would pay the greater of two alternatives: a flat fee of $695, down from the Senate’s $750, or 2.5 percent of their income, up from 2 percent in the Senate bill.
• Expanding Medicaid: The reconciliation package differs from the Senate-passed bill in several ways. It would delete a provision dubbed the “Cornhusker kickback” that would have exempted Nebraska from paying any cost of a Medicaid expansion included in the bill. But it would provide full federal funding to all states for newly eligible Medicaid recipients for three years. And it would give additional funding to states like Vermont and Maine that have already moved to cover adults without children, which isn’t required under the Medicaid program.
• Medicare Spending Board: The Senate bill would create an independent, 15-member board to recommend ways to control Medicare spending. The board remains in the reconciliation package, but would be expected to produce just about half of its original projected savings of $23 billion in the Senate bill. That’s because the new proposal would make greater cuts in Medicare Advantage plans.

Summary of HR 3590 (Senate Bill) / HR 4278 (Budget Reconciliation Bill) (From CMA)

• The bill covers 80% of California’s uninsured and 95% of the nation’s uninsured through tax credits and a Medicaid expansion. For those who currently have insurance and like it, you can keep it — including Health Savings Accounts. California has at least 6.5 million uninsured of which 1.4 million are undocumented or new legal immigrants who will not be covered by this bill. Of the remaining uninsured Californians, 1.7 million will be enrolled in Medicaid and it will be 100% federally financed initially, phasing down to 90%. To accompany the Medicaid expansion is a primary care provider rate increase to Medicare levels for E&M services and immunizations.
• 3.2 million uninsured will be able to choose private health plans in or out of the Health Insurance Exchange. The exchange will be state-based, not national. Two-thirds of the uninsured covered by this bill will enroll in private health plans. Everyone will have the system available to members of Congress. And patients may continue to privately contract with the physician of their choice.
• Most significant are the initiatives to end for-profit insurance company abuses. Last year alone, the insurance industry took more than $700 billion in profit and overhead out of the healthcare system. During the first six months of 2009, they contributed over $300 million to members of Congress. The bill requires insurers to direct 85% of revenue to direct patient care rather than overhead and profit. They must have adequate provider networks. And there is a requirement to reduce physician billing hassles through administrative streamlining and simplification. Insurers will be prohibited from denying coverage to those with pre-existing conditions and from dropping coverage when a patient becomes ill.
• There are many Medicare reforms, including a 50% rate increase for primary care physicians over five years; a 50% rate increase for general surgeons practicing in rural areas over five years; a 5% rate increase for physicians practicing in shortage areas; bonuses for physicians running medical homes and bonuses for physicians who coordinate care. The quality reporting programs are all voluntary for four years with at least 0.5% bonuses. The proposed Accountable Care Organizations provide a pathway to anti-trust relief that would allow physicians who collaborate to have stronger negotiating power with health plans within Medicare and the private sector. There are cuts for advanced imaging services, although they were reduced from the original bill, and a ban on future physician-owned hospitals. The Medicare Advantage plans will be cut by $130 billion but there are bonuses for quality plans. The direct contracting provision for medical groups is not in the final bill.
• Finally, the bill includes substantial funding for prevention, wellness, and public health programs. It also makes significant investments in physician training and workforce programs.
• Unfortunately, the bill does not include the California GPCI fix that would have updated our Medicare payment locality borders. It was pulled from the bill with all of the other single-state favors (a la the Ben Nelson Nebraska Cornhusker Medicaid deal). We have commitments from our House leaders to include the GPCI fix in the Medicare SGR bill later in the year.
• And while the House passed legislation to repeal the Medicare SGR, the Senate has yet to adopt a permanent solution and send it to the president for signature. Medicine will have to keep working to get the final repeal this year. Recently, AMA has been involved in high-level negotiations with the White House and the House and Senate Democratic leaders over the Medicare SGR issues. They may be close to announcing a deal this Spring.
• The most threatening part of of the bill is the establishment of an Independent Medicare Payment Advisory Board (IPAB) appointed by the president. It takes away Congress’ accountability to physicians and seniors in the Medicare program. The IPAB is mandated to recommend Medicare reforms and make cuts if Medicare spending exceeds general healthcare spending. However, as long as the SGR is in effect, physicians will not be subject to IPAB cuts. But physicians face cuts — either from the SGR or the IPAB.
• The parliamentarian ruled all changes to the IPAB out of order, so our leaders were not able to adopt reforms in the final reconciliation bill. However, because of the interplay with the increased Medicare Advantage cuts in the final reconciliation bill, the amount of cuts the IPAB must produce has been reduced by one-third to $14 billion over 10 years. Our House Democratic leaders, Speaker Pelosi, Chairman Stark, and Chairman Waxman all fought the IPAB but it has been a major priority for the president and the Senate. These leaders have vowed to enact subsequent legislation to eliminate or seriously weaken the IPAB before it takes effect in 2013. Moreover, pharma did not realize until recently that they were under the IPAB and they are out to kill it in future legislation as well. We have some strong allies on the IPAB issue.
• Finally, there are grants to states (that have not been able to enact MICRA), to test alternative medical liability reforms. Further liability relief for California physicians was not forthcoming because we enjoy the strongest law in the country. Our major objective was to protect MICRA and ensure it was not undermined. We were never going to get additional liability relief beyond MICRA — the strictest law in the land.

CMA Advocacy Position

All year long CMA has been advocating for meaningful healthcare reform that builds on what works and fixes what is broken. With CMA policy, adopted by the House of Delegates and Board of Trustees, the following general principles have guided CMA’s advocacy before Congress. (All CMA letters to the House, Senate, Conference Committee, and the White House are available on CMA’s website.)

• universal access to care
• ensuring that insurance is affordable for low-income families
• protecting the sanctity of the physician-patient relationship
• reforming the health insurance industry to increase competition and choice
• providing sufficient resources to deliver on the promise of improved access to care

Pros of the Federal Healthcare Reform Legislation (From CMA)

• All existing health plans grandfathered in. If you like what you have, you can keep it, including health savings accounts.
• Coverage of 80% of California’s uninsured (3.2 million to private health plans). 6.5 million uninsured: 1.4 million undocumented and new legal immigrants not covered; 1.7 million to Medi-Cal (under 133% of FPL; $26,000 family of four); 2.3 million to private health plans in the exchange (incomes 133 – 400% of FPL; $88,000 for a family of four); 1 million to private health plans in or out of the exchange (above 400% FPL).
• Provides subsidies and tax credits to individuals and small businesses to increase affordability.
• No public option. No mandate for physicians to participate at Medicare levels.
• 100% federal financing of the Medicaid expansion through 2016 and phases down to 90% in 2020 and later years. States like California that already have higher eligibility standards received an enhanced federal match.
• Catastrophic-only coverage option for those under 30 years old. Takes effect immediately.
• Option to extending parent’s coverage to children under age 26. Takes effect immediately.
• Ending Insurance Industry Abuses: 85% Medical Loss Ratio; adequate provider networks; no bans on pre-existing conditions and cannot drop coverage when a patient gets sick. No life-time or annual limits on benefits. Many of these reforms will take effect within six months.
• State-based Health Insurance Exchange provides wide choice of plans and benefits. Exchange state-based, not national. Same program that members of Congress and federal employees use known as the Federal Employees Health Benefits Plan (FEHBP).
• Medicare 50% primary care bonus 2011–2015. 10% / year. It is NOT financed with a cut to other physicians.
• Medicare 50% bonus for general surgeons in rural areas 2011–2015. 10% per year.
• 5% bonus payment for physicians practicing in shortage areas.
• Bonus payments for medical homes and physicians who coordinate care through accountable care organizations.
• Accountable Care Organizations provide a path to anti-trust relief for small or large groups of physicians to better negotiate contracts with Medicare and private plans.
• 100% federal financing for the Medicaid expansion of 1.7 million new enrollees.
• Medicaid payment increase for internists, family physicians, and pediatricians for E&M services and immunizations up to Medicare levels for 2013 and 2014. (Once a payment increase is enacted, Congress almost always renews it.)
• Quality Reporting Programs voluntary through 2014 with annual bonus payments.
• Closed the donut hole for Medicare prescription drugs.
• Physician Payment Hassle Reduction: Requires uniform Medicare prescription drug appeal form and process. Requires administration simplification by all payers
• Stops the escalating growth in the number of uninsured. The Robert Wood Johnson Foundation recently estimated if Congress does not act, we will have 10 million more uninsured within the next five years, which would hit the middle class.
• Urban Institute shows that uncompensated care will double in 45 states over next decade if there is no healthcare reform.
• Insurance Coverage saves lives. Harvard researchers published a 12-year longitudanal study in the American Journal of Public Health, December 2009, which shows that adults without insurance had a 40% higher relative risk for death than did insured adults.
• Investments in prevention, wellness, physician medical training, physician workforce.
• Comparative Effectiveness Research to provide clinical tools to help physicians.
• Strong prohibitions against using information for coverage and payment.
• Allows patients to privately contract with the physician of their choice.

Cons of the Federal Healthcare Reform Legislation (From CMA)

• Three major California physician payment issues not addressed: SGR, Medicaid Rates, GPCI.
• Medicare SGR: While the House passed legislation to repeal the SGR, the Senate has not yet acted. AMA in final stages of high-level negotiations with the president and House and Senate leaders to reform the SGR.
• Medicaid Rate Increase for All Physicians: Unlike the House bill, the final bill does not provide a Medicaid rate increase to ALL physician specialties. The current rate increase is for primary care specialties only and only for two years. However, most rate increases once enacted are almost never rescinded. Chairman Waxman has also vowed to revisit this issue in the near future. He and his staff fully recognize that there aren’t enough physicians participating in the program to provide real access.
• California GPCI Fix: No California GPCI payment update for physicians in 14 California counties (House bill). However, California congressional leaders have committed to CMA to include it in the Medicare SGR legislation later this year.
• Independent Medicare Payment Advisory Board: Independent Medicare Commission removes Congress accountability to physicians and seniors for the Medicare program. It mandates physician payment cuts if Medicare spending exceeds general healthcare spending. The reconciliation bill reduced the negative impact by 1/3. However, the parliamentarian ruled the changes to the IPAB out of order. California’s House leaders strongly oppose the IPAB and have vowed to eliminate or seriously weaken it in future legislation.
• Quality Reporting Data Made Public: While CMA and AMA were able to win many amendments to protect the validity of the physician data, CMA believes these programs should continue to be tested and improved to ensure the accuracy of the information before wide implementation. CMA and AMA both attempted to get changes in the reconciliation bill but they were ruled out of order.
• Advanced Imaging Service Payment Reductions: However, the reconciliation bill reduced the cuts so they are not as severe and only applied them to expensive equipment priced at more than $1 million). Initial savings from the cuts was $4 billion. New savings $1.2 billion.
• Does not allow private contracting in Medicare.
• Any Willing Provider provision in Senate bill could require health plans to include ancillary provider services.
• Allows NP to lead medical homes but only within state scope of practice laws.
• Ban on future physician-owned hospitals. Effective Date changed to December 21, 2010.
• Cadillac Tax falls disproportionately on Californians.

Click Here for a Detailed Legislative Summary

CMA/SDCMS/AMA Positions

• CMA Position: CMA’s Board of Trustees will meet this evening to determine CMA’s position.
• SDCMS Position: SDCMS’ Board of Directros will be polled to determine their thinking.
• AMA Position: Excerpted from the president of AMA: After careful review and consideration, the Board of Trustees of the American Medical Association (AMA) supports passage of the health system reform legislation under consideration in the House as a step forward in the journey to provide healthcare coverage for all Americans. Read the full letter here.

Legislator Contact Information

To find your U.S. House representative, click here. You may call (800) 833-6354 (AMA’s Grassroots Action Center) and be in touch with your congressional representative’s office in under 30 seconds, or you may call, fax, or email (via their website) with the information below:

Rep. Darrell Issa
Click Here for Website/Email
T: (202) 225-3906
F: (202) 225-3303

Rep. Brian Bilbray
Click Here for Website/Email
T: (202) 225-0508
F: (202) 225-2558

Rep. Bob Filner
Click Here for Website/Email
T: (202) 225-8045
F: (202) 225-9073

Rep. Duncan Hunter
Click Here for Website/Email
T: (202) 225-5672
F: (202) 225-0235

Rep. Susan Davis
Click Here for Website/Email
T: (202) 225-2040
F: (202) 225-2948