Health Care and Health Care Reform-UPDATE

In order to fully appreciate the current health care reform initiatives it is necessary to begin with a brief review.
What is the state of health care in the U.S. today?

• According to the Institute of Medicine of the National Academy of Sciences, the United States is the “only wealthy, industrialized nation that does not ensure that all its citizens have health coverage”.
•  Current estimates are that spending on health care in the U.S. is about 16% of GDP. In 2007, an estimated $2.26 trillion was spent on health care in the U.S. or approximately $7,439 per capita.
•  Health care costs are rising faster than wages or inflation, and the health care share of GDP is expected to continue its upward trend, reaching 19.5% of GDP in 2017.
•  A recent study found that medical expenditures were a significant contributing factor in 62% of all personal bankruptcies in the U.S. in 2007.
• The U.S. health care system already has substantial public components. The federal Medicare program covers nearly 45 million elderly and some people with disabilities. The federal-state Medicaid program provides coverage for the poor. The State Children’s Health Insurance program (SCHIP) extends coverage to low-income families with children. Merchant seamen are covered by the Public Health System; and retired railway workers and military veterans are also covered by the government.
• The Congressional Budget Office (CBO) has stated that the Medicare program as currently structured is unsustainable without significant reform, as tax revenues dedicated to the program are not sufficient to cover its rapidly increasingly expenditures.
•  The Government Accountability Office (GAO) reported that the unfunded liability facing Medicare as of January 2007 was $32.1 trillion which is the present value of program deficits expected to be incurred over the next 75 years in the absence of reform.
•  According to the U.S. Census Bureau, people in the U.S. without health insurance coverage at some time during 2007 totaled 15.3% of the population or 45.7 million people. In 2009, the Census Bureau estimated that there are 47 million Americans who do not have any health insurance coverage.

A brief history of health care reform – It isn’t new.

•  U.S. efforts to achieve universal coverage predate Theodore Roosevelt, who had the support of progressive health care reformers in the 1912 election but was defeated.
• Harry S. Truman called for universal health care as part of his Fair Deal in 1949 but strong opposition stopped that part of the Fair Deal.
•  The Medicare program was established by legislation signed into law on July 30, 1965, by President Lyndon B. Johnson.
•  In his 1974 State of the Union address, President Richard M. Nixon called for comprehensive health insurance. On February 6, 1974 he introduced the Comprehensive Health Insurance Act. Nixon’s plan, had it succeeded, would have mandated employers to purchase health insurance for their employees and in addition provided for a federal health plan, similar to Medicaid, that Americans could join by paying on a sliding scale based upon income.
•  The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) amended the Employee Retirement Income Security Act of 1974 (ERISA) to give employees the ability to continue health coverage after leaving employment.
• Health care reform was a major concern of the Bill Clinton administration however; the 1993 Clinton Health Care Plan was not enacted into law.
• The Health Insurance Portability and Accountability Act of 1996 (HIPAA) made it easier for workers to keep health insurance coverage when they change jobs or lose a job, and also made use of national standards for tracking, reporting and protecting personal health information.
• During the 2004 presidential election campaign both George Bush and John Kerry offered health care proposals. As President, George Bush signed into law the Medicare Prescription Drug Improvement and Modernization Act which included a prescription drug plan for elderly and disabled Americans.
• In February 2009, President Obama signed H.R.2 to provide coverage for millions of children through the Children’s Health Insurance Program, and signed the American Recovery and Reinvestment Act to make investments in computerized medical records and preventive services.

So what is the status health care reform as of December 15, 2009?

• There are currently two major proposals being considered in Congress
  1. On November 7, 2009, the House passed their version of a health insurance reform bill, the Affordable Health care for America Act, by a vote of 220-215.
  2. On November 21, 2009, the Senate officially began consideration of the Patient Protection and Affordable Care Act.
• The two bills are similar in a number of ways. In particular, both bills:
  o Expand Medicaid eligibility up the income ladder (to 133% of the poverty line in the Senate bill and 150% in the House bill).
  o Establish health insurance exchanges, and subsidize those making up to 400% of the poverty line.
  o Create some type of public option within the exchange – see update on this issue below.
   Note – Although details have yet to be publicized, on Wednesday December 9th Democrats are purported to have settled on a public option compromise that they believe will garner broad support. This new option would give millions of Americans the option of signing up for private plans sponsored by the federal employee health system, which covers some 8 million people including members of Congress. The compromise, which also offers people age 55 to 64 the option of buying into Medicare, appears to have given democrats a way around the deal-breaker issue of a new governmental plan to compete with private carriers.
  o Offer Tax credits to certain small businesses (fewer than 25 workers) that provide employees with health insurance.
  o Impose a penalty on individuals who do not buy health insurance
  o Offer a new voluntary long-term care insurance program
  o Pay for new spending, in part, through cutting Medicare Advantage, slowing the growth of Medicare provider payments, reducing Medicare and Medicaid drug process, cutting Medicare and Medicaid spending, and raising various taxes.
• The two bills are similar in that neither would have much, if any, effect on the rising costs experienced by most Americans who currently have private health insurance.
• The biggest difference between the two bills, currently, is how they are financed. In addition to the two items listed above in the bullet point, the House bill relies mainly on a surtax on income above $500,000 ($1,000,000 for families). The Senate, meanwhile, relies largely on an excise tax for high cost ‘Cadillac’ health insurance plans, as well as an increase in the Medicare payroll tax for high earners.
• As of this writing it appears that the Senate could be prepared to vote on their version of the bill by December 22nd or 23rd.

How does currently proposed health care legislation impact ASCs?

• Once again, in order to put some context around health care reform and ASCs it is necessary to provide just a bit of background:
  1. As recently as 2003, Medicare paid ASCs 86%, on average, of what hospital outpatient departments (HOPDs) were paid for performing identical services. However, a multi-year payment freeze and further cuts have now reduced ASC payments in relation to HOPD payments to 59%.
  2. Just as troubling, future payments to ASCs would diverge even further from hospital payments and could fall as low as 52% in five years.
  3. Medicare’s payment methodology results in further ratcheting down of ASC payments as compared to hospitals in 2009 and beyond. For example, different payment updates are used for ASCs and HOPDs even though ASCs confront the same inflationary challenges as hospitals in hiring and retaining nurses and purchasing medical supplies. ASC payment updates are based upon the CPI-U, an index representing inflation in items consumers’ purchase, while hospital payment updates are based on a hospital market basket, representing the cost of goods and services purchased by hospitals.
  4. By setting rates this low, CMS is threatening the ability of ASCs to provide care for Medicare beneficiaries. This could mean that Medicare beneficiaries would have to delay needed outpatient surgery and Medicare would likely have to spend substantially more money for identical services in a hospital setting. For example, the Medicare beneficiary saves 57% when they have a colonoscopy at an ASC on the co-pay alone.
• With the foregoing as background, leading up to the current health care reform bills, proposed legislation from both the House and the Senate have few direct provisions that impact upon ASCs.
• There are three primary areas of concern in the House and Senate bills. They are outlined as follows:
  1. Productivity Adjustment – Both the House and Senate versions of the proposed legislation contain a productivity adjustment for Medicare providers who receive CPI updates in addition to those who receive market basket updates. This includes ASCs. The House version of the bill would impose the productivity adjustment beginning in 2010. The Senate version of the bill would impose the productivity adjustment beginning in 2011. The Productivity Adjustment amounts to a “secondary rescaling” calculation, which is intended to reduce ASC payments when volume increases at ASCs, notwithstanding that these procedures are already paid at a substantial discount from hospitals where they would otherwise be performed. The CBO has indicated that some annual provider payment updates overstate actual costs to providers, because they do not assume increases in provider productivity that could reduce the actual cost of providing the services For example, the House version calls for a negative 1.3% Productivity Adjustment in ASC rates for 2010. Combined with the now approved 1.2% CPI increase that would result in a negative .1% decrease for 2010 which, as pointed out earlier, would follow on the heels of six years without any inflationary adjustment at all. It should be noted that in recent conversations between the ASC Advocacy Committee and Democrats involved with the legislation, they do not seem committed to the 2010 implementation and would most likely defer to the Senate version in terms of the implementation date.
  2. Medicare Cost Reporting – The bills each require ASCs to submit cost and quality data to CMS. The legislation directs the Secretary to develop a cost report for ASCs within three years of enactment and to require reporting of cost data by ASCs for cost reporting periods beginning on or after the date when the cost report is developed. The bills would also require ASCs to submit quality data beginning in 2012. The quality data to be reported would be specified by the Secretary. In addition, the bills would require both hospitals and ASCs to report information on health care-associated infections to the Centers for Disease Control and Prevention. This information would be posted on the DHHS website in such a manner as to allow for the comparison of information on infections among hospitals and ASCs.
  3. Public Option – Except as noted above as a comprise development that was first partially unveiled on Wednesday December 9th, both bills have heretofore contained a so-called public option. The introduction of a public plan could prove problematic for several reasons. First, the reimbursement under any such public plan is anticipated to be no more than Medicare rates plus 3% to 5%. Further, since the premiums for the public option are projected to be significantly lower than those generally contained in private insurance plans, it could be projected that many patients might switch from their current private insurance plan to the public plan. A “domino effect” of lower enrollments and profits for private plans, which in turn would lead to higher premiums (and even lower enrollments), is certainly possible. This is exactly why many view the introduction of any public option as a very slippery slope towards a single payer system. There have been estimates that a movement to a public option structured with a Medicare plus 5% reimbursement would include almost 120 million people in 3 to 5 years. As Medicare or public option reimbursement is likely to be substantially lower than typical private plan reimbursement, this means that a great number of the patients from whom ASCs and physicians actually make a profit, would/could migrate to the public option and thus reduce ASC/physician profitability.

ASC Summary – ASCs have and continue to play a major role in moving services into less expensive yet clinically appropriate settings. ASCs have been an important and beneficial partner to Medicare and its beneficiaries in constraining spending growth by providing a lower-priced option for outpatient surgical needs. And further, the health care reform objectives articulated by Congress and as drafted in the two competing bills – promoting efficient use of services in the health care system and improving the value of Medicare’s spending – are inextricably linked to promoting the use of ASCs for beneficiaries’ outpatient surgical needs. Taken together the evidence suggests that public policies promoting the expansion of ASC capacity have helped to ensure access to essential surgical and cancer screening services at a savings to the Medicare program and its beneficiaries and will thus prove to be an important contribution to achieving health care reform goals.

What about GI focused EASCs? Other than the issues discussed above, there is nothing specific in any of the legislation as to gastroenterology or EASCs.
What are the key issues for GI Professional Practices? On October 30, 2009, CMS posted a final rule that establishes new policies and payment rates for physicians who are paid under the Medicare Physicians Fee Schedule for 2010. The rule was published in the Federal Register on November 25, 2009. A summary of the key items effecting gastroenterologists is outlined below:
• CMS has indicated that the overall impact of the 2010 update will be a negative 21.2 percent, absent Congressional intervention. The negative update according to CMS is required under the Sustainable Growth Rate (SGR) formula adopted as part of the Tax Relief and Health Care Act of 2006.
• As part of the update CMS has changed the definition of physician services under SRG to exclude physician-administered drugs. This change, which will be retroactive to the 1996/1997 base year, will materially lessen future SRG cuts beginning in 2011.
• The combined impact of all fee schedule changes for gastroenterologist’s professional payments (work, practice expense, and medical liability) is negative 1% in 2010. The CMS fee schedule changes impact physician specialties differently due to the goal of budget neutrality however, the impact upon GI, as currently promulgated, would be minus 22.2% for 2010 IF Congress fails to address SGR.
• Also in the final rule, CMS has decided to stop making payments for physician consultation services beginning January 1, 2010. CMS’s reasoning for this was that they see no substantial difference in work between Consultation and Visits. However, CMS also has decided to adjust the payment for the surgical global period to reflect the higher value of an office visit furnished during the surgical global period. CMS has stated that by increasing the work RVUs for both New and Established Office Visits by 6% and the work RVUs for initial hospital and facility visits by 2%, they have made the consult elimination budget neutral for physicians.
These are the biggest economic issues for GI physicians on the professional practice side. We continue to hear and to believe that Congress will address the SGR prior to their holiday recess and that implementation of the 21.5% decrease will be overturned at the last minute.

Update December 24, 2009

• The House voted last week to postpone the major cuts in Medicare payments to physician fees which were scheduled to go into effect on January 1, 2010. This week the Senate, as part of their approval of the defense spending bill has also voted to postpone the scheduled Medicare cuts and made it clear that the problems with the Sustainable Growth Rate (SGR) formula must be corrected once and for all before March 1st 2010. Several weeks ago the House passed a standalone bill H.R. 3961 which proposed to replace the SGR formula with an annual payment increase equal to 1% more than the growth in the GDP (2% more for primary and preventative care physicians. As of this date it remains to be seen whether the Senate will support and similar proposal however the Senate has made it crystal clear that they want a permanent fix presented and approved on or before March 1, 2010.

Update December 28, 2009

• On Thursday December 24th the Senate approved its version of the Healthcare Reform Bill (HR 3590) by a totally partisan vote of 60 to 39.
• The House will reconvene on January 12 and the Senate on January 19th. Representatives from each body will meet in a conference committee in an attempt to reconcile the two versions. The stated goal from a timing perspective is to have the two versions reconciled and to have a final bill passed prior to President Obama’s State of the Union address in late January or early February. Reconciliation of the two bills could prove to be extremely challenging as there are some significant differences. Below is a look at 10 key issues that will need to be reconciled as detailed in a HealthLeaders Media Article published on December 24, 2009: As you will see, none of the major issues to be resolved are ASC specific.
1. Insurance exchanges. While the exchanges in the states would be open to small businesses and to individuals without access to employer coverage, different phase-in periods for other businesses appear in the bills.
The House bill calls for federal operation of the exchange, and offers states an option to create exchanges that are subject to federal guidelines. The Senate bill calls for states or regions to operate exchanges using federal guidelines. In the Senate bill, a health insurer’s participation in the exchanges will depend on performance. For instance, insurers that increase their premiums before the exchanges begin will be excluded.
2. Public insurance option. Despite weeks of debate, the public insurance option was dropped from the final Senate bill. The House bill contains a public insurance option that requires the Health and Human Services (HHS) secretary to negotiate rates with healthcare providers as private insurers currently do.
The Senate bill instead has a provision in which multi state private insurance plans would be offered under contract with the federal Office of Personnel Management, with at least one of the plans being a nonprofit entity.
3. Medicaid expansion. Under the House bill, Medicaid would be expanded up to 150% of the federal poverty level (roughly $16,245 for a family of four). The House bill provides 100% federal financing of Medicaid expansions through 2014, and then 91% financing beginning in 2015.
In the Senate bill, the rate of eligibility is 133%. It would provide 100% federal financing of Medicaid expansions between 2014 and 2016. By 2017, most of the states would share in the cost of expanded coverage.
4. Financial assistance. For individuals with low or moderate incomes, subsidies would be available in the House bill on a sliding scale to offset the premium costs for plan enrollees living above 133% of the federal poverty level. Above that level, premium contributions would be capped at no more than 1.5% of income for those living at 133% of poverty to no more than 12% of income for those at 400%.
The Senate bill requires those families above the poverty level to contribute no more than 2% of income; this increases to no more than 9.8% of income for those at three to four times the poverty level.
5. Physician care. The House bill calls for a 5% increase in fees for primary care services, and a 10% increase in those areas with shortages. The Senate bill calls for a 10% increase for primary care physician fees, along with the fees for general surgeons practicing in areas with shortages.
6. Paying for healthcare. The Senate bill includes a Medicare payroll tax increase of 0.9% (to 2.35%) for individuals earning more than $200,000 or families making more than $250,000. A tax also is included on high-cost or “Cadillac” plans: a 40% tax is proposed for employer sponsored health coverage that exceeds $8,500 a year for individuals and $23,000 for families. The Senate also raises the threshold for deducting medical expenses from 7.5% to 10%.
In the House bill, the tax rate for high income families would be increased, with a 5.4% income tax surcharge on individuals with incomes over $500,000 and families with incomes over $1 million.
7. Mandated coverage. Under both bills, most Americans will be required to have coverage or face paying penalties. But some differences still exist. Under the House bill, individuals would have to have coverage by 2013 or pay up to 2.5% of their income; the penalty, however, could not surpass the average cost of a plan found in the exchanges.
In the Senate version, which would take effect by 2014, the penalty for not having coverage is $95 in 2014 or 0.5% of an individual’s income—whichever is higher. This penalty would climb in 2016 to $750, or 2% of income—up to the cost of the cheapest health plan.
8. Employers. In the House bill, large employers would be required to offer coverage to their employees and contribute at least 72.5% of the premium cost for single coverage and 65% of the premium cost for family coverage of the lowest cost plan; or pay 8% of payroll into a health insurance exchange trust fund.
The Senate bill requires companies with 50 or more full time employees who do not offer coverage to pay $750 per employee to a trust fund if at least one employee obtains subsidized coverage through the exchange.
The House bill exempts small businesses with payrolls of less than $500,000. The Senate bill exempts firms with less than 50 employees from providing or contributing to coverage.
9. Health and wellness. Both bills call for establishing a fund to provide resources for community based prevention programs, childhood obesity programs, and other similar public health programs. The Senate bill, though, creates a new annual wellness visit, including a health risk assessment and personalized prevention plan, for Medicare beneficiaries.
10. Abortion language. The House bill has strict language: plans in the insurance exchanges that accept federal subsidies could not provide abortion services at all. The Senate bill would permit insurers operating in the new exchanges to offer abortion services, but enrollees would have to write separate checks for the abortion coverage.

Update January 6, 2010
• This week the House began the process of trying to reconcile the two bills. The Senate will join process on or about January 20th.
• One ASC provision that appears in both the House and Senate version of the bills that is potentially important to be tuned into is the waiver of coinsurance. Both bills contain a prevision that beginning in 2011, would waive any requirement of the beneficiary to pay coinsurance for certain preventive services, including colonoscopies. The current interpretation of this provision is that CMS would pay the full amount for such services without burdening the beneficiary with a coinsurance payment regardless of whether the beneficiary has secondary insurance or not. We will be watching this provision closely over the next several weeks both for clarification and potential amendments.

Update March 3, 2010

On Tuesday evening March 2nd, the Senate finally voted to delay for another 30 days a 21.2% pay cut in Medicare reimbursement to physicians. By agreeing to the physician pay cur delay that was mandated by the SGR, the Senate finally joined the House which had approved the delay last week. The pay cuts technically went into effect on Monday March 1st however CMS said last Monday that they would ask providers to hold claims temporarily indicating that they expected a congressional response that would prevent the cuts. This delay seems intended to give Congress time to adjust the SGR formula.

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