July 20, 2009

Right now the healthcare reform (HCR) comet is moving so fast that the best use of these Monday Alerts is to keep you abreast of major developments affecting anesthesia practice. On Wednesday July 15, we sent you a special Announcement shortly after the House of Representatives “Tri-Committee” (Committees on Ways and Means, Energy and Commerce, and Education and Labor) released its $1 trillion-plus, 1000-page bill, “America’s Affordable Choices Act” (H.R. 3200). Since then, the following has occurred:

1. Wednesday, July 15.

   The Director of the Congressional Budget Office, Douglas Elmendorf, warned Congress that the legislative proposals then on the table would raise costs, not lower them. Proposed cuts to Medicare and Medicaid would not cover the increased spending.

   Elmendorf, key Senators Baucus, Grassley and Conrad and other health policy experts argue for capping the tax subsidy on employer-provided insurance. The tax subsidy is the largest source of revenue within the health care system to help pay for the future system. On the other side of the issue are President Obama, the House and Senate Majority Leaders, and many rank-and-file Democratic legislators who are sensitive to the voting public’s (especially the labor unions’) antipathy toward any tax on health benefits and who would prefer a surtax on the highest-earning individuals.

2. Thursday, July 16.

   1. The AMA endorsed without reservation the Wednesday version of the Tri-Committee bill, handing the Administration a significant victory. The bill would eliminate the despised Sustainable Growth Rate (SGR) methodology for setting the annual Medicare physician fee schedule update, among other things. Not mentioned in the AMA letter was the bill’s basing provider payment in the proposed public option on Medicare rates. This, as we have echoed ASA in repeatedly saying, is anesthesiology’s life-or-death issue. ASA posted its response to the AMA letter on its website on Friday afternoon, withholding support from H.R. 3200 and seeking to dispel any confusion about the schism.
       
   2. In Massachusetts, the state with the highest health care spending, a 10-member state commission issued recommendations for slowing the growth rate of health care spending through a global-payment system. This radical overhaul would require primary-care physicians, specialists and hospitals to form “accountable care organizations.” The accountable care organization would receive a single, periodic prospective payment based on the number of patients enrolled; the organization would determine how to divide the payment among its providers. The global payment could be adjusted with performance incentives based on the quality of care provided – if an acceptable methodology for P4P can be found. Members of the Massachusetts commission, notably anesthesiologist Alice Coombs, M.D., also want the system to adjust for severity of illness.

      Accountable care organizations and similar global payment systems have not gained much traction yet. Their concept has a lot of appeal for payers and budgeters. Some ASA leaders recognize that they are a major threat: how would the average anesthesiology group fare in negotiating its share of the pie with the hospital, surgeons and primary care physicians, instead of negotiating compensation rates directly with the payers?

3. Friday, July 17.

   1. The Ways and Means Committee and the Education and Labor Committee approved H.R. 3200 with a few revisions.

      1. Beginning in 2013, qualified health plans – including a public option – would participate in a health insurance exchange. The public option would be self-funding after receiving an initial $2 billion for start-up costs (repaid over 10 years). Payment rates for providers would be based on Medicare rates with a 5% add-on for practitioners participating in Medicare. The implication is that the add-on would disappear and payments to physicians and other practitioners would drop to amounts equal to Medicare in 2016.

         Note that President Obama has expressed support for giving the Medicare Payment Advisory Commission (MedPAC) new power as an executive-level agency to determine Medicare reimbursement of providers. This shift of authority from the legislative to the executive branch surfaced in legislation (S. 1110) introduced May 20 by Sen. Jay Rockefeller (D-WV), chair of the Senate Finance Health Care Subcommittee. MedPAC currently can and does make recommendations, but it has no power to implement them. If MedPAC were to become an executive agency rather than a Congressional advisory body, its recommendations on physician payment and other cost reductions would automatically become law unless opposed by a joint resolution of Congress. It seems likely that Medicare payment rates would drift lower if legislators could no longer be lobbied to prevent cuts. Combine this scenario with Medicare payment rates for services provided to all patients enrolled in the future public option as well as in Medicare, and the specialty of anesthesiology will be in serious trouble.

      2. Provider participation is voluntary but presumed, and providers must act to opt out of the public option.
          
      3. One-half of the cost of the package would be covered through an income surtax on the wealthiest 1.2% of Americans. Adjusted gross incomes of $350,000 to $500,000 (married couples) would see a 1% surcharge. Families with incomes exceeding $500,000 would pay an additional 1.5% to 5.4% (at the $500,000 level, this would mean a surtax of $1,500, or 0.3% of income, in the Committee’s example). The other half would come from Medicare/Medicaid savings.
          
      4. The financing provisions noted above are a small part of the entire HCR package. Even more fundamental are the requirements that both individuals and employers pay a tax if they fail to obtain or offer health insurance. A 35-page summary of H.R. 3200, and the full text of the bill, are available on the Ways and Means Committee’s website.
       
   2. The Energy and Commerce Committee, home to many of the Blue Dog Democrats, did not approve the bill. Expect to see efforts to amend H.R. 3200 before the Committee votes later in the week.

As we prepare this Alert on Friday afternoon, we fully anticipate that there will be burning new issues in HCR by the time you receive your copy on Monday. We will try to update you as often as needed – and we encourage you to visit the ASA, MGMA, AMA, state medical association and other websites – while keeping an eye on the practice management questions to which you need answers today.

With best wishes,

Tony Mira
President and CEO