Federal Health Reform Update

Senator Kennedy, Chair of the Senate Health Education and Labor Committee released pieces of his proposal last week.  Several days ago, the House of Representatives followed suit.  California Congressmen, Pete Stark, Chairman of the House Ways and Means Health Subcommittee and Henry Waxman, Chairman of the House Energy Commerce Committee, published a joint outline of their health reform bill. Medicare physician payment reform will be included in the health reform package.  House legislation is expected to be introduced this Friday. The Senate Finance Committee has not yet unveiled their legislation.

The Committees with health care jurisdiction plan to start Committee meetings to vote on the proposals within the next two weeks.  The Committee process will take two to three weeks.  Both the House and Senate hope to have floor votes before the August recess.

Highlights of the House Health Reform Package

- Individual mandate

- Expansion of Medicaid (~133% of FPL) to cover low-income families

- Tax Credits and Subsidies to assist families up to ~400% of FPL

- Health Insurance Exchange of competing private plans

- Health Exchange limited to those who are currently uninsured

- Market Reforms on the private health plans

(i.e, guaranteed issue, community rating, medical-loss ratios)

-    A Public-Government Run Plan to Compete with the Private Plans

-    Participation in the Public Plan may be mandatory for physicians participating in

the Medicare program;  Rates will be tied to Medicare and may be higher.

- Numerous initiatives to promote wellness, preventive care and primary care,

including funding for primary care training.

Highlights of the Medicare Reform Bill

- In 2010, physicians will receive a payment update based on the Medicare

Economic Index (MEI)

- In 2011, Elimination of the SGR formula (cost $285 billion)

- Two New Spending Targets:  1) Primary Care (E&M) and 2) Other Services

- #1 Primary Care will receive automatic updates based on GDP + 2%

- #2 Other Services will receive automatic updates based on GDP + 1%

The GDP has increased on average ~2%/year since 2000.

The high was 5% and the low was 0.3%

- Transitions to new payment methodologies including medical homes, and Physician Accountable Care Organizations.  Physicians who collaborate and coordinate care will receive bonus payments based on the local hospital savings they create by reducing unnecessary hospitalizations.  The payments are cumulative.

- Authorize medical groups who want to contract directly with Medicare on a capitated basis.

- Transition California GPCI payment localities to Metropolitan Statistical Areas.

CMA Issues

Elimination of the SGR in the House bill is an enormous victory for physicians. However, the Senate Finance Committee reports that they cannot afford to eliminate the SGR so that issue will likely be worked-out in Conference Committee.  It helps that the Obama Administration is pushing for the elimination of the SGR as well.

Other positive developments include the emphasis on prevention and primary care, the coverage expansions for low-income families, the insurance market reforms, and the ability for physicians to receive substantial bonus payments for coordinating care.  Moreover, President Obama and Congress have imposed major cuts on almost every other health care sector (health plans, pharma, hospitals, nursing homes, home health) except physicians.

However, there are four major areas of concern.

1.  CMA would be opposed to a requirement that mandates physician participation in the public government plan option at Medicare rates.

2.  CMA is disappointed that the House has reestablished national spending targets to control volume based on the GDP.  CMA has advocated that Congress transition to new payment methodologies that appropriately reimburses physicians who responsibly manage the care of their patients.

3.  CMA is also concerned that the Medicare increases are not adequate to cover physician practice costs, particularly for primary care.

4.  Finally, the Medicaid expansion may include an increase in the Medicaid (Medi-Cal) primary care rates to Medicare levels.  While this is a step in the right direction, CMA is concerned that all Medi-Cal services should be reimbursed at Medicare levels.