New "Public Options" and Focus on "affordability" as health reform debate continues

This week we are seeing new reports to create a "middle ground" on the public option debate -- perhaps focused on scenarios such as the "Trigger Option" proposed by Senator Olympia Snowe (R-ME). The purpose would be to create more incentives for private payers to reduce costs more quickly as a means to prevent having to compete with a public option.

Reports today are that Baucus and other Senate Finance Committee members are discussing ways to modify their health reform bill to make it more affordable to beneficiaries, including the possibility of adjusting the minimum coverage of the lowest (bronze-level) plan down to 60 percent actuarial value from its current 65 percent. The risk in such changes is that while they reduce the cost of health insurance coverage they also typically reduce the scope of coverage and can create new issues in terms of out-of-pocket costs for patients. Senators are also discussing stronger incentives and penalties for individuals which would help increase the number of insured.

On Monday, Baucus also released the legislative text and report language for the health reform bill passed by Finance Oct. 13. http://finance.senate.gov/sitepages/leg/LEG%202009/101909%20America%27s%20Healthy%20Furture%20Act%202009%20Leg.pdf
Based on Baucus' comments the area we may see significant change to bill would relate to affordability concerns.

Is Bipartisan Reform still possible?

Today, Senate Finance Chairman Max Baucus (D-MT) said there is “high probability” that he will release his health care reform bill Tuesday and that he hopes to simultaneously announce that it will be a bipartisan product. Clearly Baucus is working to bring the "gang of six" together and their has been focus this week to compromise together on the most controversial issues such as having more of a private co-op or exchange than a true "public option". After the Chairman's mark is released there will still be opportunities to modify the bill through the amendment process which does leave open the door for more bipartisan support. Other key issues being discussed include language intended to make sure that illegal immigrants can not participate in such coverage and also new funding to reduce medical malpractice lawsuits.
Stay tuned -- it will be a busy week for health care!

Baucus Healthcare Refom: New Details Released Today

Below is the framework of Baucus' healthcare reform approach, apparently released to the Senate Finance Committee "gang of 6" for consideration today. The official documents have not been released but new details (summarized below) have been widely shared across Washington experts today. It does includes some key imminent issues such as addressing the 2010 Medicare physician reimbursement cut (referred to as sustainable growth rate). It also includes some new "surprise" fees on health insurers, device industry and others.

The reported price tag comes in a $900 billion over 10 years and there is no "true" public plan option although the bill includes a number of insurance market reforms, including creation of state health insurance exchanges to help facilitate access to coverage for individual and non-group markets. The bill includes an individual mandate for coverage, beginning 2013, but would not require employers to provide coverage for employees (although employers with more than 50 employees must "pay" if they don't "play" per framework below).

The framework also creates/makes improvements to value-based purchasing programs for hospitals, physicians, home health agencies and SNFs, among other providers, and would facilitate payment bundling approaches through pilot programs. It also includes payment changes for some DMEPOS (e.g., oxygen, power wheelchairs, etc.). The framework also includes increased emphasis on industry transparency (e.g., Rx drug sampling reporting requirements) and fraud and abuse, including imposition of new fees on manufacturers.

Key highlights being reported today include the following proposals (please note the actual bill language has not been released):

• Part D Drug Discount Program. Beginning in 2010, in order to have their drugs covered under Medicare, manufacturers must provide a 50%discount off the negotiated price for brand-name drugs covered on plan formularies when beneficiaries enter the coverage gap. Beneficiaries are eligible provided they do not qualify for low-income subsidies, do not have employer sponsored coverage, or do not pay higher Medicare premiums under Part B or Part D.
• Medicaid Coverage for the Lowest Income Populations. In January 2011, prior to the expansion, states would be given the option to cover non-elderly non-pregnant adults through a state plan amendment (SPA) at their current match rate. Effective January 1,2014, the proposal would expand Medicaid income eligibility levels nationwide.
• Prescription Drug Coverage, Medicaid Rebates and AMP. Prescription drugs would become a mandatory Medicaid benefit. The status of drugs used to promote smoking cessation, barbiturates, and benzodiazepines would be changed from "excludable" to "non-excludable." Medicaid prescription drug rebates would be applied to Medicaid managed care organizations. Similarly, the rebates would be applied to new formulations of existing drugs, with an exception for orphan drugs. The rebate amounts would be increased, with the minimum rebate percentage for single-source and innovator multiple source drugs going from 15.1%to 23.1%and from 1 1%to 13% for generic drugs. For clotting factors and drugs approved by the FDA for pediatric use only, the rebate would be increased from 15.1%to 17.1%.The federal upper limit (FUL) would be changed to no less than 175% of the weighted average (determined on the basis of utilization) of the most recently reported monthly average manufacturer price (AMP).
• Hospital Value-Based Purchasing.The proposal would establish a value-based purchasing program for hospitals starting in 201 1. Under this program, a percentage of hospital payment would be tied to hospital performance on quality measures related to common and high-cost conditions, such as cardiac, surgical and pneumonia care. Quality measures included in the program (and in all other quality programs in this section) will be developed and chosen in cooperation with external stakeholders.
• Physician Value-Based Purchasing.This provision would make improvements to the Physician Quality Reporting Initiative (PQRI) program, including requiring all eligible health professionals to participate by 201 1, establishing payment incentives for physicians to appropriately order high-cost imaging services, expanding the Medicare physician feedback program, and penalizing physicians who utilize significantly more resources than their peers.
• CMS Innovation Center. This provision would establish an Innovation Center at CMS that would have the authority to test new provider payment models. Payment reforms that are shown to improve quality and reduce costs could be expanded throughout the Medicare program. The Innovation Center's funding would be set at $10 billion.
• National Pilot Program on Payment Bundling. This provision would direct the Secretary to develop a voluntary pilot program encouraging hospitals, doctors, and post-acute care providers to achieve savings for the Medicare program through increased collaboration and improved coordination of patient care by allowing the providers to share in such savings.
• Medicare Sustainable Growth Rate (SGR).The scheduled 21% reduction in Medicare physician payment rates in 2010 would be replaced with a 0.5% increase.
• Ensuring More Appropriate Physician Payment Rates.This provision would establish a panel comprised of health care providers, experts, and stakeholders to identify physicians' services that are overvalued in the Medicare physician fee schedule. In consultation with the expert panel, the Secretary would be required to adjust payments for those services that have increased at an unusually high annual rate without evidence supporting the clinical appropriateness of such growth.
• Prescription Drug Sample Transparency. Drug manufacturers and authorized drug distributors would be required to report to the Secretary information already collected pursuant to the Federal Food, Drug and Cosmetic Act. Specifically, manufacturers and distributors would be required to report the type and amount of drug samples requested by and distributed to practitioners, along with the practitioners' names, addresses, professional designations and signatures. The reported information would not be made publicly available.
• Pharmaceutical Manufacturing Companies Fee.Under this proposal, an annual fee of $2.3 billion would be imposed on the pharmaceutical manufacturing sector beginning in 2010. The fee would be allocated by market share.
• Medical Device Manufacturers Fee.Under this proposal, an annual fee of $4billion would be imposed on the medical devices manufacturing sector beginning in 201 0. The fee would be allocated by market share.
• Health Insurance Provider Fee.The proposal would impose an annual fee of$6billion on the health insurance sector beginning in 201 0. The fee would be allocated by market share.
  Clinical Laboratories Fee.Under this proposal, an annual fee of $750 million would be imposed on clinical laboratories beginning in 2010. The fee would be allocated by market share, except for small businesses.

Senator Baucus pushes for bipartisan support of Senate Finance Health Reform Proposal

In today's Washington Post, Senate Finance Chairman Max Baucus is said to be urging his Republican colleagues to support the $900 billion health-care reform package they have helped to negotiate over the past two months -- creating a bipartisan proposal before President Obama's speech Wednesday night.

The Baucus plan, circulating among the Finance Committee's "Gang of Six" this weekend, sets forth provisions that have already gained the group's unofficial support but now there is pressure from other Republican colleagues to let the Democrats fight for a health reform bill on their own.

The Baucus plan creates bipartisan options for some of the most controversial aspects of health reform. Instead of a government insurance option, the Baucus proposal would create a network of non-profit cooperatives which is an alternative that Grassley, the lead Republican negotiator, has backed. The Baucus plan also creates new fees on "high cost plans" which may be controversial since many union households could be impacted.

At a cost of under $900 billion for 10 years, the finance bill would appears to be at least $100 billion less than other legislation on the table. Analysts indicate the plan is designed to "bend the cost curve" downward over time to make health-care more affordable for businesses, individuals and government, while reducing the federal deficit within 10 years.

In addition to the fee on high-cost plans, the proposal also would extract about $400 billion in cost-savings from Medicare, cuts that are stirring unease among both parties.

Under Baucus's plan, Medicaid would be expanded to cover all individuals -- except illegal immigrants -- who make up to 33 percent above the current federal poverty level. The plan would provide tax credits to help low and middle-income families purchase private insurance coverage, and would set up health insurance exchanges so small business workers and other individuals whose employers don't provide health coverage, could select from a menu of plans.


We expect to see more detail tomorrow from the Senate Finance team tomorrow in advance of the President's speech on Wednesday. The Senate Finance health plan proposal has been projected to be the best opportunity for bipartisan health reform legislation this year.