November 16, 2009

"In the debate over health care reform, no issue has produced more fury and sound bites than the question of whether to include a government-run insurance plan."

New York Times, October 17, 2009

The public option is one of the most controversial issues in the anesthesia community. The American Society of Anesthesiologists urged a "yes" vote on the public option as it appears in the monumental Affordable Health Care For America Act, H.R. 3962, which was passed by the House of Representatives on Saturday, November 7, 2009. The American Medical Association, the American College of Surgeons and the Medical Group Management Association are also among the many organizations representing physicians that have lent their qualified support to H.R. 3962. Yet there are many members of ASA, AMA, ACS et al. as well as members of the MGMA's Anesthesia Administration Assembly (AAA) who strongly oppose the legislation overall and the public option in particular. A balanced examination of the public option is in order.

What Does the Public Option Look LIke in H.R. 3962?

At the outset we note that whatever the public option looks like in H.R. 3962, it is likely to change in the conference that will reconcile the House and Senate legislation. Before there can be any joint conference, the two bills that have come out of the two Senate committees of jurisdiction must be reconciled into a single bill on which the full Senate will then need to vote.

The Health, Education, Labor and Pensions (HELP) Committee package contains a public option considered more robust than H.R. 3962. The version adopted by the Finance Committee is much less ambitious. The lobbying frenzy is going to continue. The final shape of the public option- and whether the healthcare reform legislation that emerges from conference will be adopted by Congress and signed by President Obama- all remain quite uncertain.

The public health insurance option in H.R. 3962 will be developed by the Secretary of Health and Human Services as a plan choice within the future Health Insurance Exchange. Its most significant features are as follows:

1. It participates in the Health Insurance Exchange on a level playing field with private plans.
2. Physician and other provider payments will be negotiated, not based on Medicare.
3. Participation is voluntary. It is also the default status for providers who participate in Medicare, so physicians must take action to opt out. Opting out of the public option does not prevent participation in Medicare.
4. Enrollment is voluntary.
5. The public plan would have to charge premiums that covered its costs, including the costs of paying back start-up funding that the government would provide.

The Congressional Budget Office (CBO) together with the Joint Committee on Taxation has estimated that by 2019, 6 million beneficiaries will be enrolled in the public option, or roughly one-fifth of the individuals purchasing coverage through the Health Insurance Exchanges (states may choose to establish their own Health Insurance Exchanges as long as they operate in the same manner as the federal Exchange).

CBO estimates that interest in enrollment will be limited because the public plan will "typically have premiums that are somewhat higher than the average premiums for the private plans in the exchanges. The rates the public plan pays to providers would, on average, probably be comparable to the rates paid by private insurers participating in the exchanges. The public plan would have lower administrative costs than those private plans but would probably engage in less management of utilization by its enrollees and attract a less healthy pool of enrollees." CBO Letter to House Ways and Means Committee dated October 29, with preliminary analysis of H.R. 3962.)

Medical, Health Plan and Business Associations' Positions on the Public Option

ASA took a very strategic position on the public option in H.R. 3962: it urged a "yes" vote on the bill primarily because the public option would pay anesthesiologists negotiated rates, not 105% or less of Medicare as proposed elsewhere. ASA led the campaign to de-link a public option from Medicare rates because Medicare pays only 33% of commercial rates for anesthesia services. Other medical societies including the AMA have since made negotiated rates a condition of their support. ASA believed that it could not be silent, which would have undermined its previous efforts to take Medicare rates out of the equation. Opposing the bill would not have prevented its passage but would have cost the commitment of anesthesiology's allies in the House. ASA President Alexander A. Hannenberg, MD explained the decision-making in a "Town Hall' meeting with members conducted by telephone on November 11. A transcript is posted at www.asahq.org.

ASA's cautious recommendation of a "yes" vote (something short of an endorsement) was also based on the following: (1) H.R. 3962 does not contain any additional reductions in payments to physicians, (2) it does not add to the federal budget deficit, but rather reduces it by $109 billion over the next 10 years (CBO's qualified estimate) and (3) H.R. 3962 would protect patients' choice and access to health care, with the number of uninsured patients projected to drop to 4 percent.

In a set of Questions and Answers on H.R. 3962, Dr. Hannenberg addressed the perception that H.R. 3962 amounts to a "government take-over" of our health care system, stating:

• There is no evidence that H.R. 3962 will result in a "government take-over" of health care
• H.R. 3962 represents a reasonable effort to expand access to health insurance for the uninsured. Under H.R. 3962, the vast majority of Americans will continue to receive their insurance coverage through commercial insurers. Similarly, the majority of newly insured will receive their coverage through commercial insurers. In fact, analysts believe that most low-income individuals will use their government-provided subsidies to purchase commercial insurance plans through the new insurance "exchanges."
• It is worth noting that the true "government take-over of health care" -- an effort to implement a single payer health care system -- was soundly rejected at multiple junctures during the House reform debate.

MGMA expressed support for H.R. 3962 in a letter to Speaker of the House Nancy Pelosi dated November 6. On balance, MGMA President and CEO William F. Jessee, MD told members, the desirable provisions of H.R. 3962, notably its broad set of administrative simplification measures, outweigh the undesirable provisions. On the plus side is a public option in which provider participation is voluntary and payment rates are negotiated, not based on Medicare rates.

Other positive features of the bill, from MGMA's perspective, are (1) the expansion of the resource utilization feedback program for physicians in Medicare, (2) requirements for more timely PQRI feedback and for a PQRI appeals process, (3) incentives for primary care (4) incentives to the states to explore alternative medical liability reforms. H.R. 3962 did not receive MGMA's unqualified support because it includes further reductions in payment for imaging services performed in doctors' offices and restrictions on physician-owned specialty hospitals.

Individual anesthesia administrators' reactions to the bill, and to MGMA's support, posted to the AAA "e-group" discussion board were overwhelmingly negative.

AMA. At the interim meeting held in Houston November 7-10, the AMA House of Delegates approved a resolution affirming the leadership's efforts on healthcare reform, including its support for H.R. 3962. According to the AMA's Health System Reform Bulletin dated November 5, 2009,

The public option defined in H.R. 3962 is voluntary for physicians and with negotiated rates. That said, we continue to believe that creating a public plan is not the best way to promote competition and we urge consideration of other alternatives to promote competition and more affordable health insurance options. Further, if a public option is created, it should provide patients with some reimbursement for services provided by an "out-of-network physician".

Several specialty and state medical societies offered amendments to the resolution that denounced any public health insurance option sponsored by the federal government. The House of Delegates rejected the amendments by a nearly two-thirds vote.

AHIP (America's Health Insurance Plans) obviously does not welcome the competition that a public option would create. The insurers' lobby believes that "A new government-run plan would bankrupt hospitals, dismantle employer coverage, exacerbate cost-shifting from Medicare and Medicaid, and ultimately increase the federal deficit." (AHIP Statement on House Passage of H.R. 3962.)

The Business Roundtable, which represents the chief executives of major U.S. companies, released a report on November 12 that stated that without changes to the current U.S. health-care system, costs would rise to $28,530 per employee. The most important objectives of healthcare reform are reducing the deficit and reigning in healthcare costs. The "right legislative reforms" would reduce those costs by more than $3,000 per employee, according to the report.

A public option is not among the "right" reforms. Business groups are concerned that a public plan would underpay hospitals and doctors, who would then raise their fees for privately insured patients. Instead the CEOs favor changing the way that Medicare pays doctors and hospitals, by tying payment rates to meeting national quality standards or by episode-of-care pricing and bundled payments. (Reforming how doctors and hospitals are paid is the most likely way to successfully reduce health care spending according to a study to be published later this month in the New England Journal of Medicine. Researchers from RAND tested 8 promising approaches and found that bundling payments for the care of 6 common chronic diseases was the most likely to provide the most savings.)

Bundled payments and payments linked to quality measures are definitely on the horizon. While anesthesiologists are going to be well prepared to demonstrate quality, they may be at a disadvantage relative to the referring specialties if they must negotiate their share of a global or bundled payment with the hospital and surgeons.

For now, however, under H.R. 3962's public option, physicians and other providers will be negotiating fee-for-services rates. Section 323(a)(2) provides:

MANNER OF NEGOTIATION.- The Secretary shall negotiate such rates in a manner that results in payment rates that are not lower, in the aggregate, than rates under title XVIII of the Social Security Act, and not higher, in the aggregate, than the average rates paid by other QHBP offering entities for services and health care providers.

Negotiated rates are thus bounded by Medicare at the low end and by average commercial payment levels at the high end. Determining the upper limit of payments, i.e., the average rates established by other qualified health plans participating in the Health Insurance Exchange, will not be easy unless and until there is some price transparency in each geographic market. Section 323(a)(2) will also place a sizable burden on the Secretary of Health and Human Services, who will have to negotiate on a provider-by -provider basis -- with 5,500 private hospitals and more than 750,000 physicians. Blogging for Health Affairs, Professor Timothy Jost of the Washington and Lee University School of Law concludes that in-demand physician groups will likely hold the bargaining advantage. That should be particularly true of the many anesthesia practices that have had extensive experience negotiating payment rates and will understand the calculation of anesthesia rates much better than many of the public insurance plan option.

We hope that this review of the public option in H.R. 3962 is helpful to our readers.

Sincerely,

Tony Mira
President and CEO