MINNEAPOLIS, January 21, 2010 - The MMA put together a summary of federal health care reform highlights and emailed it to members Tuesday in order to assist them in understanding the complex proposal.

MMA Federal Health Care Reform Summary
Posted January 21, 2010

What will be included in the final health care reform bill?

What happened to some of the more controversial provisions like the public option and Medicare for all?

What will the bill mean for Minnesota?

Does federal reform solve the problems associated with the flawed Medicare physician fee schedule update formula - the Sustainable Growth Rate (SGR)?

Does the federal health care reform bill address the need for tort reform?

What is the expected price of federal reform, and how will it be paid for?

Are there any projected savings associated with the proposals?
When will the major provisions take effect?

What issues are continuing to draw opposition or criticism?

What role has the MMA played with respect to federal health care reform?

What will be included in the final health care reform bill?
Final details are currently being negotiated, but we are starting to see glimpses of a final product. The bill is more than 1,000 pages long and contains many, many provisions. This summary identifies only a few of the key issues that are most important to Minnesota physicians.

The main focus of this bill is on providing health care coverage to approximately 30 million of the estimated 46 million uninsured Americans. This is done through a number of insurance reforms, through the use of an insurance exchange, and through expanded Medicaid eligibility.

The insurance reforms are designed to make sure that people with existing health conditions can receive insurance. The bill prohibits insurance companies from using pre-existing condition exclusions, requires insurers to offer coverage to all people regardless of their health status, limits how much premiums can differ because of age or health status, and requires every citizen to have some form of coverage.

The insurance exchange is designed to help small employers and individuals shop for insurance products.  It is a central location where one can go to compare different types of coverage. The intent is to create a more competitive insurance marketplace.

The bill also will expand Medicaid. The Senate version expands Medicaid to cover all citizens, including adults without children, earning less than 133% of the federal poverty level, while the House version expands it to cover those earning less than 150% of poverty.  This is a major change, as Medicaid has historically covered only pregnant women, families with children, and disabled individuals.

In addition to coverage expansion, a final federal bill will likely establish pilot programs for medical homes, increase funding for workforce programs, and begin to address Medicare geographic payment inequities by rewarding providers in states such as Minnesota that provide high-quality, low-cost care.

What happened to some of the more controversial provisions like the public option and Medicare for all?
Although a number of controversial provisions remain on the table, many of the issues that generated significant media and public reactions have been removed. The creation of a public option to compete with private insurance is no longer being discussed. It was included in the House version but is not expected to be part of the final bill.

A proposal to allow uninsured individuals between ages 55 and 64 years to buy into Medicare was in an early Senate version but has also been dropped from all discussions. 

What will the bill mean for Minnesota?
The full impact on Minnesota will not be known until the final details emerge, but one of the biggest concerns has been how Minnesota would be treated financially. Minnesota, through General Assistance Medical Care (GAMC) and MinnesotaCare, has done more than many states to provide health insurance coverage for low-income individuals. The Medicaid expansions that are expected to be in the final bill will provide Medicaid coverage to individuals already covered through Minnesota programs, so the cost increases that some states are worried about will be far less significant for Minnesota and could actually result in state budget savings (as much as $500 million by some estimates). One specific Senate provision allows states to access federal dollars as early as April 2010, which could help address short-term financing needs for Minnesota's GAMC program.

Minnesota has extremely low Medicaid (known as Medical Assistance in Minnesota) payment rates; but a House provision would increase Medicaid payments for primary care providers to 100% of Medicare rates by 2012 with the enhanced payments being financed 100% with federal funding through 2014 and 91%with federal dollars starting in 2015.

The impact of a final federal bill on Minnesota's heath care reform efforts is not yet clear.  Most of Minnesota's initiatives have focused on greater reporting of cost and quality information, delivery system reform (eg, health care home development), and payment reform such as the voluntary baskets of care initiative. The federal bills include similar initiatives - generally in the form of Medicare and Medicaid pilot projects- so Minnesota may need to modify some of its initiatives in order to leverage additional federal funds.

Does federal reform solve the problems associated with the flawed Medicare physician fee schedule update formula the Sustainable Growth Rate (SGR)?
Not directly. The House has addressed the SGR issue in a separate bill (H.R. 3961) that repeals the SGR and provides new update mechanisms.

The Senate originally proposed a one-year fix, a 0.5% increase in 2010; but that was eliminated from the final Senate bill following Congressional adoption in late December of a Defense Department appropriations bill that averted the 21% cut and extended the 2009 conversion factor until March 1, 2010.

The Senate is expected to resume floor action on a variety of issues on January 20. The MMA is working with the AMA to include repeal of the SGR as a part of these discussions. Failure to act will mean a 23% cut in Medicare physician payments in 2011. House and Senate leaders and the White House continue to say that this issue will be fixed this year.
 

Does the federal health care reform bill address the need for tort reform?
Many critics point out that the federal reform bill does not go far enough in the area of tort reform. They are right. The bill does not adopt caps on noneconomic damage awards that have been proven to reduce malpractice costs.

However, the bill does include funding for demonstration projects in the area of tort reform that go farther than anything Congress has passed in a long time. Both bills create incentive programs for states to implement alternatives to traditional litigation that emphasize patient safety, early resolution of disputes, and disclosure of health care errors.

What is the expected price of federal reform, and how will it be paid for?
The Congressional Budget Office (CBO) estimates the 10-year cost of the Senate proposal at $871 billion. Of that, $438 billion will come from Medicare and Medicaid savings from payment changes or reductions for Medicare Advantage plans, hospitals, home health agencies, skilled nursing facilities, and hospice providers, and through increased Medicare Part B and Part D premiums for higher-income Medicare beneficiaries.

In the original Senate proposal, $149 billion in new revenue was expected to come from a 40% excise tax on high-cost insurance, so-called Cadillac insurance plans. Among the critics of the proposal were many union groups. Last week, however, union leaders endorsed the proposal after agreement was reached on higher thresholds for what defines a Cadillac plan. The new thresholds do, however, reduce the expected revenue by approximately $60 million.

Additional revenue in the Senate proposal comes from a tax penalty for those who do not have coverage (enforcement of the individual mandate), an increase in the tax on Health Savings Account distributions not used for medical expenses, limits on the amount of contributions made to flexible spending accounts, and an increase in the threshold for the itemized deduction of unreimbursed medical expenses. The final Senate proposal does not include the so-called "Botax" (a 5% tax on elective cosmetic surgery), but does include a 10% tax on indoor tanning that uses UV radiation.

The House proposal includes $426 billion in Medicare and Medicaid savings achieved in ways similar to those outlined in the Senate bill. The largest source of new revenue in the House bill, however, would come from a 5.4% surcharge on individuals who earn more than $500,000 and families with incomes above $1 million. Given the recent agreement on the Cadillac plan tax, the House income tax surcharge appears unlikely to be included in the final bill.

Are there any projected savings associated with the proposals?
The CBO estimates that the Senate proposal will reduce the federal deficit by $132 billion over 10 years. The House proposal is estimated to reduce the deficit by $104 billion over 10 years. These savings are achieved by reducing the growth in health care spending.

When will the major provisions take effect?
Many of the most significant provisions - the individual mandate, Medicaid expansion, premium subsidies for people with low incomes, and the insurance exchange - do not take effect until 2013 (according to the House bill) or 2014 (according to the Senate bill). The delays were included to allow time for implementation, including action by state legislatures to authorize and/or implement some provisions, and the desire to reduce the 10-year price tag by allowing new revenue to build before new spending would begin.

There are, however, some important provisions that would take effect in 2010 including changes in insurance underwriting, establishment of medical loss ratios (limits on the proportion of premium dollars that must be spent on medical care), workforce investments, funding for early adopter states to offset the cost of providing coverage, through existing state-funded programs, and new public health and prevention initiatives.

What issues are continuing to draw opposition or criticism?
Both the House and Senate proposals are complex, far-reaching, and extremely expensive. Significant concerns continue to be raised about the cost of the proposals and the long-term impact of such spending on the federal deficit. Although the proposals would provide insurance coverage to many of the uninsured, such coverage would be accomplished, in large part, through expansion of Medicaid. Physicians have reason to be concerned about further expansions of Medicaid given the historic tendency of the program to reimburse at levels well below market rates, and often below the cost of providing care.

A key item concern that the AMA has identified is the proposal to establish a Medicare Independent Payment Advisory Board, which could have the authority to mandate payment cuts for physicians, who are already subject to an expenditure target and other potential payment reductions as result of the Medicare physician payment formula.

Other provisions that have drawn concern include the individual mandate for insurance coverage, further regulation of the insurance industry, use of comparative effectiveness research, lack of significant payment reform, and general concerns about expanded government bureaucracy.

What role has the MMA played with respect to federal health care reform?
The MMA has been working directly with members of Minnesota's Congressional delegation to influence the provisions that are crucial to Minnesota physicians and patients. The MMA has also been working very closely with the American Medical Association; but unlike the AMA, which took a formal position in support of the House bill, the MMA has so far chosen to seek clarity on details and to focus its advocacy efforts on key issues of importance to Minnesota physicians.

The MMA has advocated most loudly for reform of the flawed Medicare payment formula. In particular, the MMA has been supportive of the value index proposal that is included in the Senate bill. Beginning in 2015, this provision would modify physician payments, on a budget-neutral basis, based on measures of quality and cost. The House bill simply calls for a study of geographic disparities.