Health Care Update

Weekly Healthcare Update for April 1, 2011

Last Week in Congress

After a week of tense budget negotiations, President Obama and Congressional leaders agreed late Friday on a deal to cut more than $37 billion in federal spending this fiscal year, narrowly avoiding a government shutdown. A short-term spending resolution was approved by both the House and Senate to keep the government open, and House Speaker John Boehner (R-OH) said the final agreement for the rest of the year will be approved this week.

The final agreement would cut $37.8 billion from the federal budget through the end of September. Democrats had wanted to cut billions less. They agreed to the larger figure, and in return Republicans dropped a demand to take federal funds from Planned Parenthood and a few other Democratic priority areas. The cuts would add up to the largest budget reduction for federal agencies in U.S. history. Still, the fight raised concerns about the ability of President Obama and a divided Congress to deal with bigger issues, from raising the federal debt ceiling to reining in budget deficits.

Also grabbing headlines was House Budget Chairman Paul Ryan's 2012 budget proposal, which would cut $6.2 trillion in spending over the next 10 years while overhauling Medicare and Medicaid. In other activity, the House passed a one-week stopgap spending bill; legislation to block regulation of greenhouse gases; and a measure to disapprove "net neutrality" rules. The Senate debated a small business bill and gave final approval to H.R. 4, legislation to repeal the widely-disliked 1099 reporting requirement from the Affordable Care Act (ACA).

On healthcare, Congressional hearings continued to examine the impact of the ACA. The House Energy and Commerce Committee approved five bills to repeal the "advanced appropriations" in the health law, while the House Oversight Committee held a hearing on waste, fraud and abuse in government health programs. On Wednesday, the E&C Health Subcommittee met to examine medical malpractice costs.

This Week at a Glance

This week, Congressional leaders vote on fiscal 2011 spending for the remainder of the year. Before the Senate votes on the CR, it will vote on two motions to defund the health law and Planned Parenthood. Next, the focus will turn to an even bigger fight: the 2012 budget. The House will begin consideration of the Republican budget proposal on Thursday, and a full vote is expected for Friday.

In floor activity, the House is expected to vote on H.R. 1217, the bill to repeal the Prevention and Public Health Fund. The Rules Committee could also consider H.R. 1213, to repeal exchange funding, and H.R. 3, legislation to ban taxpayer funding of abortion. On Wednesday, President Obama will speak about his plans for deficit reduction, including Medicare and Medicaid reforms.

Meanwhile, the House will host a few health-related hearings. On Wednesday, the House Education and the Workforce Committee is scheduled to hold a hearing on "Policies and Priorities of the U.S. Department of Health and Human Services." HHS Secretary Kathleen Sebelius is expected to testify. The same day, the Senate Special Committee on Aging will hold a hearing looking at the FDA process for approving medical devices. On Thursday, a subcommittee of the House Oversight and Government Reform Committee will hold a somewhat similar hearing called "Pathway to FDA Medical Device Approval: Is There a Better Way?"

Budget Deal Includes ACA Policy Riders, Senate Repeal Vote Guarantee

The budget deal that funds the federal government through the end of September also guarantees a debate and vote in the Senate on legislation that would repeal the president's signature domestic initiative, the Affordable Care Act. The deal also requires several studies on the effects of the health law, including a probe on the cost of premiums; an audit of all the waivers given to businesses and unions that can't meet the new annual coverage limits; a full audit of the comparative effectiveness research funding in the ACA and the Recovery ('Stimulus') bill, and a report on all of the contractors who have been hired to implement the law and the cost of those contracts to taxpayers.

While the repeal legislation is expected to fail, it could put vulnerable Senate Democrats in an uncomfortable position of defending a law that many polls show remains unpopular. Senate Democrats in conservative states like Joe Manchin (WV), Claire McCaskill (MO) and Ben Nelson (NE), are all facing tough re-election bids next year. During last fall's midterm elections, many Democrats distanced themselves from the law as Republicans campaigned against it.

Senate Repeals 1099 Provision, Sends Bill to President

Last Tuesday, the Senate voted 87 to 12 to repeal the health care law's 1099 tax-reporting provision, ending nearly a year's worth of efforts to do away with one of its most unpopular requirements. The measure now goes to the president, who is expected to sign it, making it the first part of the healthcare reform bill to be rolled back. The measure, initially included as a funding measure for the healthcare bill, does away with the requirement that businesses file tax forms for all purchases of $600 or more.

While the provision has had few backers in either party, debate over its repeal had dragged on for months. The House easily passed the same repeal, 314-112, earlier this month. In that vote, every Republican and 76 Democrats supported the bill. In a statement, the White House said it was "pleased Congress has acted to correct a flaw that placed an unnecessary bookkeeping burden on small businesses." Under the version passed by both chambers, repeal will be paid for by requiring individuals to repay subsidies if their income unexpectedly exceeds certain levels.

Ryan Releases Budget Proposal

Last Tuesday, House Budget Committee Chairman Paul Ryan outlined a budget plan for fiscal 2012 that would fundamentally change how the federal government pays for health care, likely resulting in higher out-of-pocket costs and greater coverage limits for many Americans.

The Ryan budget plan would phase out traditional pay-for-service Medicare and instead provide government subsidies for the elderly to obtain healthcare through private insurers, under a model called "premium support." The change would be for future retirees. Anyone currently over 55 would remain enrolled in the current system. Additionally, the Medicare eligibility age would gradually increase from age 65 to 67 from 2022 to 2033.

In offering his proposal, Ryan said his plan would make healthcare more affordable by letting market competition work as a check on costs. But in a report issued last Tuesday, the CBO concluded the under Ryan's proposal, "most elderly people would pay more for their health care than they would pay under the current Medicare system."

While most of the Medicare provisions of the ACA would be retained, Ryan's budget would repeal the following provisions of the healthcare reform law: individual and employer mandate; insurance exchanges; subsidies for purchasing coverage through the exchange; small business tax credits; the CLASS Act; Pre-existing Condition Insurance Program (PCIP); Early Retiree Reinsurance Program (ERRP); Prevention and Public Health Fund (PPHF); Independent Payment Advisory Board (IPAB); and the Medicare Part D 'doughnut hole' coverage gap provisions. Repealing the various provisions of the ACA would save an estimated $1.4 trillion over 10 years.

Ryan's budget plan would also change the way the federal government reimburses states for Medicaid, the public health-insurance program for low-income and disabled people. Under Ryan's 10-year budget blueprint, states would receive lump-sum "block grants" instead of matching funds, giving governors' wider discretion on how funds are spent. But critics say shifting Medicaid funding to block grants would compromise Medicaid's ability to respond to economic downturns and lead to substantial reductions in state funding.

The House Budget Committee approved Ryan's fiscal 2012 budget resolution last week, setting the stage for a floor vote this week. While the budget resolution will pass the House, many of the policies are opposed by Senate Democrats and the White House.

Providers Slam Ryan's Proposed Cuts To Insurance Coverage

The 2012 GOP budget proposal would end the healthcare reform law's insurance subsidies while retaining the deep Medicare cuts that pay for them, sparking cries of outrage from providers. A number of stakeholder groups, including hospitals and drug makers, agreed to deep Medicare payment cuts under the ACA in exchange for the promise that 32 million Americans would be covered. The law also made $200 billion in cuts to the Medicare Advantage program.

The roadmap released Tuesday by Rep. Paul Ryan (R-WI) would undo that expansion, while retaining hundreds of billions in Medicare cuts. That enables Ryan to claim $1.4 trillion in savings from repealing healthcare reform, but has left his budget open to attacks from stakeholders and Democrats. "The coverage expansions are rescinded, but the cuts remain," American Hospital Association President and CEO Rich Umbendstock said in a statement. "The two were coupled in healthcare reform... It's unacceptable if just the cuts stand."

House Panel Repeals ACA Provisions

Last week, the House Energy and Commerce Committee approved five bills that would eliminate or modify funds appropriated under the ACA. These funds include the Prevention and Public Health Fund, along with money for state insurance exchanges, school-based health centers, personal responsibility education programs and Graduate Medical Education (GME) funds at teaching health centers.

The full House takes up these bills this week. While passage in the lower chamber is all but assured, it is unlikely these measures will pass the Senate or even receive floor votes.

House GOP Seeks Audit of AARP

Last Friday, GOP lawmakers on the House Ways and Means Committee asked federal tax authorities to audit AARP's finances. The request was widely expected after the committee released a report last week raising questions about the hundreds of millions of dollars the nonprofit seniors' lobby gets for endorsing insurance products. "The facts laid out in our report strongly suggest that AARP, Inc., and its affiliates may no longer qualify as a tax-exempt organization," said the letter to IRS Commissioner Douglas Shulman.

The joint letter, signed by Ways and Means Health Subcommittee Chairman Wally Herger (R-CA), Oversight Subcommittee Chairman Charles Boustany (R-LA) and Rep. Dave Reichert (R-WA), requests that the IRS review the findings detailed in the report and assess whether the IRS should conduct a more thorough examination of AARP.

AARP says all its revenue supports its mission of helping seniors. Democrats say Republicans are simply trying to punish the seniors' lobby for putting its considerable political weight behind healthcare reform.

Reps. Applaud CMS Delay on DME Competitive Bidding Program

Last Tuesday, U.S. Reps. Jason Altmire (D-PA) and Glenn Thompson (R-PA) said they welcome the decision by CMS to delay the originally scheduled start date for round two of its competitive bidding program for durable medical equipment. Round two, in which the program is set to be implemented in 91 areas nationwide, has been delayed for six months, until the summer of 2013. The competitive bidding program has already gone into effect in nine metropolitan statistical areas.

Congressmen Altmire and Thompson have recently introduced the Fairness in Medicare Bidding Act (H.R. 1041), which would repeal the competitive bidding program at no cost to taxpayers. The Congressmen expressed their concerns that the competitive bidding program would push small businesses out of the marketplace and diminish seniors' quality of care. "CMS's decision to delay round two of the competitive bidding program shows that even it acknowledges that this program is seriously flawed," said Congressman Altmire in the news release.

White House Announces Plan to Reduce Health Disparities

Last Friday, the White House released two strategic plans to address the disparities facing ethnic and racial minorities in accessing preventive care. Numerous studies show these groups have less access to preventive care, more chances of developing diabetes and heart disease and a lower probability of getting quality care when they're sick. In a first-of-its-kind report, the government is recommending steps to reduce those disparities.

The first report is an HHS action plan outlining goals and actions for the department, such as collecting better data on minority health and training more minority doctors and nurses. HHS also released a national stakeholder strategy that sets common objectives for public-and private-sector initiatives; the strategy was coordinated by HHS' Office of Minority Health.

"For the first time, the United States has a coordinated road map designed to give everyone the chance to live a healthy life," HHS Secretary Kathleen Sebelius said in a statement announcing the strategies. "We all need to work together to combat this persistent problem so that we can build healthier communities and a stronger nation." HHS didn't put a dollar figure on the projects, but a spokesman said the agency plans to pay for them with money already in hand and not subject to Congress' ongoing budget battle.

Senators Seek To Open Up Medicare Payments For Public Review

A bipartisan duo in the Senate is seeking to open up long-secret parts of Medicare claims data to the public, a move that could have significant effect on medicine in this country. If the bill became law, it would overturn a 1979 court injunction that bars release of data that shows how much doctors and suppliers are paid from Medicare claims, reports The Wall Street Journal. Patient identities would not be released.

The proposed legislation, by U.S. Sens. Ron Wyden (D-OR), and Charles Grassley (R-IA), comes after the WSJ and The Center for Public Integrity recently published a multi-part series "exposing how doctors and other medical practitioners appear to be gaming Medicare to increase revenue." Under their legislation, the public could see payments made to doctors and suppliers by Medicare, as well as the services they performed for that money. For the first time, the public would be able to scrutinize the massive government program in the same way it does other services. The bill would also require the creation of a searchable database so the public could review the payments.

The WSJ was able to identify an Oregon neurosurgeon "who had an unusual propensity for performing multiple spine surgeries –as many as seven– on the same patients." That doctor has denied wrongdoing. In a statement, the American Medical Association (AMA) said it "supports vigorous efforts by the Department of Justice, HHS Office of Inspector General and others to identify perpetrators of fraud – the vast majority of whom are not physicians." But the AMA fears that including a physician's provider identification number in a public database, as the legislation suggests, could actually increase Medicare fraud and put physicians at risk for identity theft.

Many ACOs May Lose Money Initially

According to a recent study by The New England Journal of Medicine, many hospitals and health systems may lose money on accountable care organizations (ACOs) in the first few years of operation. The Affordable Care Act mandates the creation of ACOs, which aim to lower costs and improve care by fostering cooperation between physicians, hospitals and other health care providers.

The health law requires federal health programs to begin contracting with ACOs starting in January 2012. ACOs would cover as many as five million Medicare beneficiaries in total. To qualify as an ACO, a group of care providers would need to cover at least 5,000 enrollees.

Published March 23, the NEJM article analyzed data on participants in the CMS' Physician Group Practice Demonstration. Most early adopters did not recoup their set-up costs in the first three years of operation. The 10 integrated health systems that were studied spent an average of $1.7 million to take part in the demonstration project. Eight received no shared savings payments in the first year of the project. Six got a payment in the second year, and five received a bonus payment in the third year.

Proponents say the ACO model has significant potential, but rules and regulations need to take into account lessons learned in early projects. "There is good reason for health care providers to be cautious when thinking about being an accountable care organization," said Chester Speed, vice president of public policy at the American Medical Group Association. The authors of the NEJM study suggest that the ACO model will be more economically sustainable if bonus payments are issued based on cumulative savings over several years rather than annually. How patients and their expenses are assigned to physicians or health systems, how goals are set for an institution and how to make feedback timely still needs to be addressed.

CMS issued proposed rules for ACOs on March 31. The agency is taking public comments until June 6 as it works toward a final rule.

Medicare Publishes Hospital Injury Data Against Industry Wishes

Despite industry concerns, last Wednesday HHS announced that Medicare beneficiaries will have access to data about hospital-acquired condition (HAC) rates. Data posted by the Centers for Medicare and Medicaid Services (CMS) makes public data on eight types of HACs, which often result from improper patient-care procedures.

Medicare has, since 2008, banned reimbursements for care resulting from HACs, and the healthcare reform law enacted a year ago requires the same policy to be extended to state Medicaid programs. Injury from a fall or other trauma has been the most common HAC, occurring once for every 2,000 discharges, and more than 70 percent of hospitals reported at least one fall over a two-year period, CMS said. Meanwhile, blood or urinary tract infections were reported once for every 3,000 discharges, and 45 percent of hospitals reported at least one case, according to CMS.

CMS Administrator Don Berwick said any preventable HAC is "unacceptable." "We at CMS are working together with the hospital and consumer community to bring hospital acquired conditions into the forefront and do all we can to eliminate harm from the very healthcare system intended to heal us," Berwick said in a statement. The American Hospital Association (AMA), which opposes the release of the HAC data, has raised questions about the formula CMS uses to calculate error rates.

Waiver Update: AZ, WV Move to 'No'

This week, the "leaning no" category grew by two with West Virginia and Arizona officially deciding against applying for a waiver. "We just didn't see a need for it," said W. Va. insurance commissioner spokesman Jason Butcher. "We did an analysis of the market and it wasn't going to affect us that much. Our largest provider [BlueCross] had already adjusted their rates to comply."

Meanwhile, Arizona insurance commissioner spokesperson Erin Klug said her state won't pursue a waiver either. "It's a definite no at this time," she told reporters. She said they might look into it in the future but that the state's market "was really pretty good."


  • APPROVED - 1 (Maine)
  • APPLIED - 8 (Fla., Ga., Iowa, Ky., La., N.D., Nev., N.H.)
  • LEANING YES - 4 (Alaska, Okla., S.C., Texas)
  • LEANING NO - 22 (Ala., Ariz., Calif., Colo., D.C., Hawaii, Idaho, Ill. Mass., Md., Miss., Mont., N.J., N.M., N.Y., Ore., Penn., Utah, Vt., Wash., Wyo., W.Va.)