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January 29, 2010 Health Care Reform UpdateThe election of Republican Scott Brown as the new U.S. Senator for Massachusetts reset the congressional agenda and dramatically impacted the path and speed of health care reform. The Senate Democratic caucus lost its 60th Dem vote needed to overcome a potential Republican filibuster of a health care reform conference bill. In addition, the Scott Brown election caused national leaders to refocus attention on the economy and jobs, and to rethink how to proceed with health care reform. Consequently, while the size and shape of a final health care reform package for 2010 may change greatly from what was once anticipated, many provisions included in the House and Senate bills passed by their respective chambers in 2009 remain of critical importance and concern to our hospitals and health care systems. On January 12, IHA issued an advocacy alert highlighting the key hospital concerns relative to the previously passed House and Senate health care reform bills (House-HR 3962 and Senate-HR 3590). A summary of those key concerns is listed below. While some say any new reform bill effort must start from scratch, parts of these bills may still serve as discussion starters and are important concerns to keep in mind as health care reform progresses. January 12, 2010 Urge Your Members of Congress to Back Critical Changes During Health Reform
Conference Key Message Points:
Summary of IHA Position on Key Hospital Issues: Hospital Payment Updates: Almost half of the Medicare savings in the House and Senate bills come from reductions in the annual market basket updates for hospitals and other providers over the 10-year period. While the hospital field recognizes that it will make a substantial contribution toward financing health care reform, hospital payment reductions should coincide with coverage expansions as closely as possible or the successful implementation of health reform will be at risk. Under the Senate Bill, preliminary estimates are that it would reduce Medicare reimbursements to Illinois hospitals by about $8 billion over ten years. We urge conferees to minimize the hospital market basket reductions in 2010 through 2013 unless coverage is extended in those years. We strongly prefer the Senate approach to market basket update reductions for 2010 and 2011, which would reduce the updates by 0.25 percentage point in each year, rather than the larger cuts in the House bill. Beyond 2011, both the House and Senate bills propose to reduce the annual market basket update permanently by a measure of productivity growth in the general economy, generating billions of dollars in savings. The Senate market basket reductions consist of productivity measures beginning in 2012, and added reductions of 0.1 percentage point in 2012 and 2013, and 0.2 percentage points in 2014 through 2019. The House bill applies productivity cuts to the hospital market basket update starting in 2010 – an estimated reduction of 1.3 percent each year. We oppose the permanent annual productivity reductions in the Senate and House bills, and strongly urge conferees to sunset the productivity adjustments after 2019, the end of the 10-year budget period. Medicaid Expansion: We urge adoption of the Senate heath care reform proposal to expand Medicaid eligibility to those at or below 133 percent of poverty, as opposed to the House proposal that expands Medicaid to those up to 150 percent of poverty. While we support expanding Medicaid eligibility with federal funding for certain new populations, we remain concerned about Medicaid provider payment shortfalls and expanding a public program that already pays hospitals much less than the cost of care. We urge adoption of the original House funding approach that would provide all states with 100 percent federal funds through 2019 for the expanded populations. In addition, we support the House measure that would give states that already have expanded their Medicaid programs prior to enactment of health care reform the same enhanced Federal Medical Assistance Percentage (FMAP) for these same populations. Medicaid FMAP Extension: We strongly urge conferees to adopt the House provision to extend the American Reinvestment and Recovery Act (ARRA) temporary FMAP increase for an additional six months through June 2011. This temporary increase has raised Illinois’ rate from 50% to nearly 62%, greatly helping our state’s Medicaid program weather the added pressures of a serious economic downturn and increased numbers of Medicaid patients. Separately, the Illinois Hospital Association continues to urge members of our Illinois Congressional delegation to work for a permanent increase in the Illinois FMAP rate. Without the enhanced stimulus match, Illinois receives a federal match of only 50%, the lowest FMAP rate allowed, and less than all of our surrounding states (which range from 59% to 70%). Although Illinois provides 4.1% of the nation’s Medicaid services, it receives only 3.3% of federal Medicaid funds – a gap that costs the state more than $1 billion annually. For every dollar that Illinois currently sends to Washington in taxes, it receives back only 75 cents. Each 1% increase in Illinois’ FMAP rate means an additional $130 million a year in federal Medicaid funds at current spending levels. Medicare and Medicaid Disproportionate Share Hospital Payments: We urge a combination of Senate and House approaches with regard to DSH payment reductions. First, it is vital that no reductions occur until a threshold trigger of 50 percent improvement in a state’s insurance coverage is attained, as referenced in the Senate bill. A final reform bill should include the House savings number of $10 billion for Medicaid DSH and $10 billion for Medicare DSH over the period starting on January 1, 2017 through FY 2019 and the later date of 2017 for the start of any DSH reductions. The Senate approach to achieving those reductions in Medicaid DSH by not providing the Secretary of the Department of Health and Human Services with the authority to change the current program, but simply taking the reductions from the already established state DSH allotments, also should be adopted. DSH payments should be preserved in a manner consistent with the continuing responsibility of hospitals to serve all uninsured and underinsured and that recognizes losses associated with Medicaid payment shortfalls. Readmissions: Any policy to reduce readmissions should address only avoidable and unplanned hospital readmissions related to the original admission. We strongly disagree with the House and Senate approaches, similar policies that would impose financial penalties for so-called "excess" readmissions when compared to "expected" levels of readmission. Current House and Senate proposals do not distinguish among planned readmissions that represent good care; unplanned readmissions that are unrelated to the original reason for admission; and readmissions that are not planned but are related to the original admission. Both House and Senate provisions should be amended to apply only to avoidable and unplanned readmissions. Graduate Medical Education (GME): We appreciate that both bills maintain current levels of indirect medical education (IME) payments that are part of Medicare’s inpatient prospective payment system. Both the House and the Senate reform bills implicitly recognize that expanding coverage to millions of Americans will increase demand for medical care. Likewise, there will be a need for additional physicians, especially in primary care, to meet the needs of newly covered Americans. IHA is pleased that both the Senate and House proposals address the matter of unused residency positions as it has been estimated that 1,000 to 1,200 residency positions are not filled annually in the US. However, IHA is very concerned that under the current proposals, neither the House nor the Senate provides that the redistribution is limited to within each state’s boundaries. Under the Senate bill, Illinois is likely to lose any unused positions out of the state, since it has a high resident-to-population ratio. While the House version does not specifically mandate unused residency positions to states with low resident-to-population quartile, it also does not provide a state boundary safeguard to assure that any redistribution would keep those valued positions within our State borders. We appreciate and support provisions in both bills that ensure these new positions receive full IME and direct GME payments. However, we urge Congress to add new residency positions, not just redistribute unused positions, as part of health care reform legislation. In addition, IHA supports provisions to address resident time spent in non-hospital settings and time spent in non-patient care activities, including didactic conferences and seminars. Health Insurance Exchanges: IHA supports the creation of health insurance exchanges as mechanisms for consumers to choose health plans that fit their needs. IHA supports the approach adopted by the House regarding the federal role of the exchange and the limited grandfathering of existing plans to comply with the key insurance reforms mentioned above. In addition, IHA supports the House approach that allows all individuals, regardless of status, the opportunity to purchase coverage through the exchange. Structured enrollment periods, risk adjustment across plans and transparent management of the public subsidies are much-needed elements within the exchange to avoid adverse selection and market segmentation. The House bill accomplishes these steps by creating a federal exchange program and allowing existing health plans that are grandfathered a five-year period in which to come into compliance with insurance reforms. While IHA supports the creation of state-based cooperatives and multi-state, non-public health plans, the Senate’s state-based insurance exchange approach lacks the leverage and authority to provide the insurance market oversight needed in a health care reform environment. The federal exchange in the House bill, coupled with the Senate’s non-governmental, state-based insurance co-operatives, is the preferred approach. Public Option: We urge adoption of the Senate bill’s approach calling for state-based, non-public, non-governmental health care co-operatives and non-public multi-state health plans. This structure could offer more affordable health plans, while preserving market-based approaches with negotiated provider rates. Creation of a public option to compete in the exchange paying rates based in part on Medicare, and potentially open to all individuals, as well as small and large businesses, would put tremendous pressure on provider payment rates - and would only exacerbate the underpayment of hospitals. Additional Requirements for Tax-Exempt Hospitals: IHA does not believe that the new requirements for charitable hospitals and their ability to maintain tax exemption in the Senate bill are necessary and we urge the conferees to remove these provisions from the final health reform conference report. No similar provisions are included in the House bill. If the entire section in the Senate bill is not removed, at a minimum we urge removal of the section requiring hospitals limit the amount charged to patients eligible for financial assistance to the amounts generally billed to individuals who have insurance coverage. Each hospital and its community is unique with respect to its needs for financial assistance and the hospital’s ability to provide that assistance. Many states, including Illinois, already have laws requiring certain discounts or limits on amounts collected from patients needing financial assistance. In Illinois, a fair and reasonable law was developed through extensive negotiations between hospitals and the Illinois Attorney General. We urge that this provision be removed or language inserted to allow applicable state laws to take precedence. Medical Reimbursement Data Center: IHA urges conferees to ensure that efforts to increase hospital price transparency maintain the proprietary nature of per-service payments negotiated between hospitals and insurers. We support state-based transparency approaches to provide hospital charge and quality information by service. However, efforts to reveal negotiated payment rates between individual hospitals and insurers would not provide relevant information to consumers. Consumers need information on their individual co-pays, deductibles and other out-of-pocket costs, and we urge the conferees to require plans to provide this information to patients. As such, a similar provision in Section 1001 – 2718(e) of the Senate bill would require a hospital to make public their charges for items and services (the charge master) that would not be of benefit to understanding patient obligations, and only confuse, as it merely lists individual item charges. This provision would result in significant administrative burdens when hospitals already are making this same information public through state-based transparency initiatives. As noted, charge information is proprietary and developed exclusively by individual hospitals, based on their costs, and purchasing and payment contracts. We respectfully urge removal of this provision (Section 1001-2718(e) of the Senate bill) from the final legislation. Hospital-Acquired Conditions (HACs)/Infections: We urge conferees to reject the Senate bill provision that would add a 1 percent penalty to hospitals in the upper quartile of rates of HACs. Congress previously adopted policies that prohibit assigning a patient to a higher-paying diagnosis-related group (DRG) when the reason for that assignment was a preventable complication associated with a misstep in care during the hospitalization. These policies already provide financial incentives for hospitals to reduce hospital-acquired infections, falls and other potentially preventable complications in care. Independent Payment Advisory Board (IPAB): We appreciate the Senate excluding hospitals from IPAB through 2019. However, creation of any new advisory board, such as the one proposed in the Senate bill, which would make binding recommendations on Medicare payment policy, should be dropped from the bill. Such a board minimizes the role of Congress in ensuring adequate Medicare payments. If this proposal is adopted, hospitals, including Critical Access Hospitals (CAHs), should be permanently exempt from IPAB’s scope of review. Medical Device Tax: We urge conferees to adopt the Senate approach on medical device "taxes" or fees. The Senate provision will make it more difficult for device manufacturers to easily pass the "fee" on to hospitals and better ensure that device manufacturers contribute to the nation’s goal of expanding coverage to more Americans. We also support the House provision effective date of 2013. Geographic Variation: IHA appreciates the $8 billion in additional funding provided in the House bill to implement changes in 2012 and 2013 following two Institute of Medicine (IOM) studies designed to look at geographic variation in Medicare spending and value, but we are very concerned about the redistributional impact in FY 2014 and beyond. Any study to assess the regional variation in health spending variation should require a thorough analysis of the causes of variation including the costs of purchasing goods and services needed to provide health care in a given market. IHA believes that the Senate’s VBP proposal, which includes an additional new measure of total Medicare spending per capita (adjusted for DSH, medical education, outliers and special rural payment add-ons) as well as efficiency measures, is a more appropriate approach than the second IOM study (called for in the House bill) to improve value in the Medicare program, and is preferable to allowing the HHS Secretary to make major changes in payment policy. The inclusion of efficiency measures in a VBP system will offer opportunities to reward hospitals that provide patient care in a cost effective manner. Additional Issues of Concern … 340B Drug Program Expansion: IHA strongly supports and urges adoption of the Senate provision to expand 340B discounts to include inpatient drugs. Both the House and Senate bills expand the 340B drug discount program, but the Senate bill expands the discounts to cover not only outpatient pharmaceuticals, but also inpatient pharmaceuticals for existing 340B program participants. The Senate bill also would expand 340B eligibility (for both outpatient and inpatient drugs) to certain Rural Referral Centers (RRCs) and Sole Community Hospitals (SCHs) with DSH adjustments at 8 percent or higher, CAHs, freestanding children’s hospitals, and freestanding cancer hospitals. In addition, while the Senate provisions expanding eligibility to additional hospitals should be adopted, we prefer the hospital expansion provisions in the House bill that cover more rural hospitals, including Medicare-Dependent Hospitals (MDHs). Accountable Care Organizations (ACOs): We urge adoption of the Senate provision that allows hospitals, in cooperation with physicians, to provide leadership in an ACO. In addition, we support inclusion of the House measure creating ACO pilots instead of an ACO program as proposed in the Senate bill. Establishing a pilot allows for testing and evaluation before a program is established. Rural Provisions: IHA urges adoption of the House-two-year extension for certain existing rural programs. In addition, we urge that the Senate provisions to help sustain and improve access to care in rural areas should be included in the final conference report. The Senate bill’s rural hospitals provisions include: improvements in the payment adjustment for low-volume hospitals; a demonstration project on community health integration models; a Med PAC report on Medicare payment adequacy to rural providers; assurances that Critical Access Hospitals (CAHs) are paid 101 percent of costs for all outpatient services they provide, regardless of the billing method elected; a rural community hospital demonstration program; an extension of the MDH program for one year; extension of the Medicare Rural Hospital Flexibility Program through 2012; and reasonable cost reimbursement for laboratory services in small rural hospitals. Wage Index: IHA urges the conferees to retain the Senate wage index provisions in the final health reform conference report. The Senate bill contains two hospital wage index provisions that are critical for certain hospitals in order to receive adequate payments for Medicare inpatient services. First, the bill includes a provision to require the HHS Secretary to use, until FY 2014, the area wage index reclassification thresholds of the average hourly wage that were in effect prior to FY 2009. Second, the bill includes a provision that would require the Secretary to apply the wage index rural floor budget neutrality adjustment on a national basis for FY 2011 and beyond. Medical Liability: IHA encourages support for meaningful medical liability reforms that rein in soaring premium costs and lawsuits that prompt both hospitals and physicians to close services or curtail high-risk procedures. Defensive medicine increases our nation’s annual health care bill by an estimated $50 billion to $100 billion. The Administration’s making of grants available to states and health systems to try out new approaches to medical liability is a good start - but more needs to be done. An administrative compensation system (ACS) could be created to compensate patients for injuries that could have been avoided during medical care. Decisions would be made using nationally developed evidence-based clinical guidelines and schedules for compensation amounts. The system would be part of a comprehensive approach to address injuries sustained during care. Robust regulatory and oversight activities would complement the system to protect patients from individual practitioners who may place their safety at risk. Long-Term Care Hospitals (LTCHs): IHA supports Senate bill provisions that extend for two years selected LTCH provisions in the Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA). These provisions would further delay full implementation of the 25 percent rule, the short-stay outlier cut, and the one-time budget-neutrality adjustment planned by CMS. The current moratorium on new LTCH beds and facilities, with exceptions, also would be extended. This extension is important so that MMSEA-required studies can be completed and new criteria for LTCHs can be developed. | |
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