Health Care Reform Update

April 2010

Winter 2008 - IHS leadership and affiliate CEO’s form health care agenda including “Top 10” list

Address geographic disparity in Medicare reimbursement for Iowa hospitals.

Address geographic disparity in Medicare reimbursement for Iowa doctors.

Promote value based purchasing models. Authorize new care models, specifically, accountable care

organizations. GME issues including  “foundation model fix” and ability to count

time for didactic and scholarly activities Value primary care with bonus payments for primary care/general

surgery Limit physician specialty hospital provisions Authorize pilots for different payment models, such as bundling of

payments Prevention and wellness provisions Healthcare workforce provisions

Road to Health Reform

Road to Health Reform Winter 2009

Stimulus (includes funds for SCHIP, Medicaid, electronic health records, and “comparative effectiveness research”)

Budget (includes reserve fund for health reform, provides some financing for but not details on specific proposals)

Spring 2009 Hearings, reports, deal making, negotiation, missed deadlines

Summer 2009 Senate HELP and H.R. 3200 released, “markups” Floor votes delayed, recess chaos Revised budget

Fall/Winter 2009 House and Senate bills pass – both under $900 billion

Winter 2010 –Scott Brown elected to congress

House passes underlying Senate-passed reform bill Plus a fix-it bill (agreed upon changes) Plus a manager’s amendment (9 pages of technical changes

– includes geographic variation agreement)

President signs Senate reform bill – health reform is law

Senate considers and passes, fix-it bill and manager’s amendment via budget reconciliation process

Road to Health Reform

The Players and the Process

Senate Health, Education,

Labor & Pensions – HELP Chairman Harkin

Finance Chairman Baucus Ranking Grassley

House Ways & Means

Chairman Rangel (Stark taking over)

Subcommittee Chair Stark

Energy & Commerce Chairman Waxman (Braley)

Education & Labor Chairman Miller (Loebsack)

The Players and the Process

Senate breakdown – 57 Ds, 41 Rs, 2 Is Need 60 votes to overcome filibuster

House breakdown – 257 Dems, 178 Reps Blue Dogs – 52 moderate Dems

White House Nancy Ann Deparle – Health reform quarterback Rahm Emanuel – Chief of Staff

High Level Content Health Reform Bill

Co-ops and Exchange Insurance market reforms National vs. state

exchanges Subsidies for coverage Mandates and penalties –

individual/employers Medicaid expansions

Delivery system reforms Limitations on Physician-

owned hospitals Wellness/prevention Workforce / GME

Provisions Comparative effectiveness Tax provisions and industry

fees Enhanced fraud and abuse

/ transparency provisions

Increased Coverage for the UninsuredCoverage and Subsidies

Medicaid expansion up to 133% FPL Provides tax credits to support purchase of insurance

Sliding scale credit amounts depending on income Available to those between 133% and 400% FPL (Senate bill

did not provide for credits to those above 200% FPL) Creates Consumer Operated and Oriented Plan (CO-OP)

program Requires coverage of dependants under age 27 Reinsurance for early retirees age 54-65, subsidy for employer

to continue coverage Subsidies

Provides tax credits to certain individuals and small businesses for affordability

Increased Coverage for the Uninsured Mandates

Individual Mandate Minimum coverage required after 2013

and penalties imposed Employer Mandate

Penalties for employers with more than 50 employees who do not offer coverage

Increased Coverage for the Uninsured Exchanges / CO-OPs

Secretary awards planning and establishment grants to States within 1 year

States required to establish Exchanges by 2014 Exchanges would facilitate purchase of “qualified

health plans” and provide consumer protections Secretary will set criteria for certification of qualified

plans by the Exchanges Regional or interstate exchanges permitted Requires secretary to establish a Consumer

Operated and Oriented Plan (CO-OP) to create qualified non-profit health insurance issuers

Delivery ReformsOverview

Address geographic disparity for Iowa Readmissions – CMS will not pay for avoidable hospital readmissions Accountable Care Organizations (national program) and Medical Homes Bundling pilots – voluntary program to facilitate care coordination.

Secretary to select 10 conditions Episode begins three days prior to admission and ends 30 days after

discharge. Value based purchasing – beings 2013 using measures from hospital reporting

program. Independent Payment Advisory Board

15 members appointed by President for six year terms Innovation Center – $10 billion of new authority and funding to CMS

Medical home and other chronic disease management To test innovative methods to increase quality and efficiency and reduce costs

Delivery Reforms Geographic Disparity

Includes language on geographic disparity for hospitals (championed by Congressman Braley)

Provides $400 million for FY 2011-2012 for hospitals located in counties in the bottom 25% of spending per Medicare enrollee

Requires IOM studies on: adjustment factors volume and quality of care

Requires a National Summit on Geographic Variation to be convened this year (additional verbal commitments by Sebelius)

Physician provisions on geographic disparity include GPCI adjustment and addresses misvalued codes (championed by Senator Grassley)

Delivery Reforms Readmissions

Readmissions – reduces payments to hospitals for avoidable readmissions (CAH’s exempt).

Focus on heart attack, heart failure and pneumonia All discharges reduced by adjustment factor that equals

the greater of a hospital-specific readmissions adjustment factor based on the number of readmitted patients in excess of the hospital’s calculated expected readmission rate or 0.99 in FY2013, 0.98 in FY2014, 0.97 in FY2015.

Secretary can expand list of conditions starting FY 2015 Community-based care transitions demo for those with

highest readmission rates

Delivery Reforms ACOs

Accountable Care Organizations Voluntary program (not a demo or pilot) Begins 2012 Accountability for care of FFS beneficiaries Minimum of 3 year participation Minimum of 5000 Medicare beneficiaries, assigned by

CMS Requires legal structure to distribute payments Must meet quality thresholds Secretary determines savings thresholds and breakdown Benchmarks determined on most recent 3 year period,

with growth against risk adjusted average expenditure growth for beneficiaries nationwide

Delivery Reforms

Bundling payment pilots – Secretary to select 10 conditions Episode begins three days prior to admission and

ends 30 days after discharge Value based purchasing – beings 2013 using measures

from hospital reporting program. Value based purchases required for long term care

hospitals, hospice and home health agencies Value based modifier for physician fee schedule and

penalties for failure to comply with PQRI standards Medical home demos Other demos

Delivery Reforms

Independent Payment Advisory Board – to submit proposals to Congress on the solvency of Medicare.

15 members appointed by President for six year terms If health care costs exceed CPI, Board submits

recommendations to reduce cost growth by .5 percent. If not acted on by Congress, automatically implemented.

Must reduce excess cost growth by increased amount each year.

Innovation Center Medical home and other chronic disease management To test innovative methods to increase quality and efficiency

and reduce costs

Cost Containment Measures Impact on Providers

Market basket reductions Productivity adjustments Limitations on physician owned hospitals – prohibits new

facilities; grandfathers facilities with Medicare provider agreement before December 31, 2010 but limits future growth

Home health cuts – rebasing and cuts amounting to over $40 billion

Extension of PQRI By 2012, individualized reports on resource use Value-based payment modifier under the physician fee

schedule – phase in beginning 2015 Independent Payment Advisory Board

Cost Containment Measures Cost Impact on Physicians

Extension of work geographic index floor and revisions to practice expensive geographic adjustment factor under fee schedule

Extends PQRI and provides additional bonus payments on certain quality measures

Establishes a physician feedback program comparing resource use

Establishes a “Physician Compare” website Value-based modifier for high quality care 10% Medicare bonus payment for primary care

physicians starting in 2011

Cost Containment Measures Impact on Hospitals

Scales back Medicaid DSH payment reductions from $18.1 billion to $14 billion, but implements the reduction one year earlier, in 2014.

Scales back Medicare DSH payment reductions from $25.1 billion to $22.1 billion, but implements the reduction one year earlier, in 2014. (a portion of the cut is returned to hospitals for uncompensated care, subject to a trigger tied to coverage)

The hospital market basket reductions increased: In FY 2014: market basket (MB) minus 0.3 + productivity

adjustment In FYs 2015-2016: MB minus 0.2 + productivity adjustment In FYs 2017-2019: MB minus 0.75 + productivity

adjustment Applies to all Prospective Payment System (PPS)

hospitals

Cost Containment Measures Impact on Hospitals

Provides extra assistance for the federal share for all state Medicaid programs

Includes Federal Medicaid Assistance Program (FMAP) increase for states that have already expanded their coverage for childless adults

Cost Containment Measures Impact on Hospice

Reduces payment by $7.1 billion Reduces market basket update by 0.5% in 2013-

2019 (contingent on reductions in uninsured) Productivity adjustment beginning in FY 2013

Requires HHS to collect additional data to revise payment for hospice Quality reporting programs

Medicare Hospice Concurrent Care Demonstration program

Cost Containment Measures

Impact on Inpatient Rehabilitation Services

Senate Reform Bill Reduces payment by $5.4 billion

Reduces market basket update by 0.25% for FY 2010 and 2011, 0.3% for FY 2014; 0.2 percent for FY 2015 thru 2016 and 0.75% for FY’s 2017-2019

Productivity adjustment effective FY 2012. Quality report program effective FY 2014 (2.0%

penalty)

Cost Containment Measures Impact on Home Health

Senate Reform Bill Reduces payment by $39.4 billion

Cap on outlier payments Reduce market basket by 1% in 2011, 2012,

and 2013 Rebase payment system in 2014

Workforce

National Health Workforce Commission Grants to states and localities Loan repayment programs Geriatric training, family medicine, general medicine, general

pediatrics, physician assistantship Training in dentistry Mental and behavioral health training and education grants Advanced nursing education grants Nurse faculty loan program Primary care extension program focused on evidence-based

therapies, health promotion, disease management, preventive medicine.

Workforce GME

Flexibility for jointly operated residency training program

- Allows IME and direct graduate medical education (GME) funding for residents who train in non-provider settings (including foundation model)

Redistribution of unused residency positions Hospitals can request up to 75 slots Priority given to hospitals in states with resident-to-population ratios

in the lowest quartile; and 30% of positions to hospitals in rural areas and hospitals located in top 10 states of population living in

HPSA Counting time for didactic and scholarly activities Teaching health centers development grants to develop/expand

primary care residency.

Fraud and Abuse Transparency

Substantial new investment in fighting fraud and abuse, including: Requires provider screening and disclosures Creates a Integrated Data Repository at CMS to

integrate data and expand data sharing Enhances penalties and creates new sanctions CMS-IRS data match to identify fraudulent

providers $250 million increase for Health Care Fraud and

Abuse Control Fund

Requires hospitals to publicize costs of common procedures a list of standard charges for items and services provided by the hospitals including DRG’s

Requires non-profit hospitals to conduct a community needs assessment and imposes penalties for failure to do so.

Limits the amount that can be charged for emergent or medically necessary services to individuals eligible for financial assistance.

Direct Secretary of Treasury to review community benefit activities of hospitals at least once every three years.

Fraud and Abuse Transparency

Revenue Generators Excise Tax on High Cost Health Plans – Cadillac Tax

Under reconciliation, implementation delayed to 2018

Increase in Medicare (HI) Payroll Tax Increase to 2.35% on all income earners over $200,000

Various Industry Fees and Taxes Device Health plans

Cuts in Medicare reimbursement to healthcare providers (market basket value based purchasing)

“Independent Payment Advisory Board” Will make proposals to Congress on ways to reduce Medicare spending

over time; not allowed to proposed payment cuts to providers until 2018

Scales back Medicare Advantage Program

Considerations for Providers

Downward pressure on reimbursement A larger insured population (but will put stress on

providers and will add complexity) Insurance exchange – potentially more

competition Delivery and payment reforms can provide

opportunities such as pilots, demos and various grant opportunities

Increased involvement in regulatory process will be necessary over the next 5 years

“Top 10” List - Accomplishments

Address geographic disparity in Medicare reimbursement for Iowa hospitals.

Address geographic disparity in Medicare reimbursement for Iowa doctors.

Promote value based purchasing models. Authorize new care models, specifically, accountable care

organizations. GME issues including  “foundation model fix” and ability to

count time for didactic and scholarly activities Value primary care with bonus payments for primary

care/general surgery Limit physician specialty hospital provisions Authorize pilots for different payment models, such as

bundling of payments Prevention and wellness provisions Healthcare workforce provisions