As a result of the November 2008 U.S. elections, achievement of systemic health care reform is now a shared priority of President-Elect Barack Obama and a Democratic-controlled Congress. The outlook for both health care reform and movement on individual health legislative issues is discussed below.
Comprehensive Health Reform
With 47 million Americans uninsured and health costs escalating, expanding health insurance coverage and curtailing health care costs while providing incentives for improved health care quality will be paramount goals in any health reform effort.
President-Elect Obama’s health care pronouncements to date indicate a desire to work toward universal coverage, with the federal government occupying an important, but not exclusive, role. The plan enunciated by the Obama campaign embodies the “play or pay” concept, which would require large employers that do not offer or make a meaningful contribution to the cost of quality health coverage for their employees to contribute a percentage of payroll toward the costs of a national insurance plan. The plan also called for expanded eligibility for Medicaid and the State's Children's Health Insurance Program (SCHIP).
For those who do not have employer-provided health care and who do not qualify for existing federal programs, a new national health insurance program would be created. Individuals could choose between the new public insurance program and private insurance plans that meet certain coverage standards. While President-Elect Obama has not called for mandated individual coverage, he has called for mandatory health insurance coverage for all children. President-Elect Obama has also called for spurring increased adoption of health information technology and establishment of a comparative effectiveness institute that would review the relative effectiveness of different interventions.
Congress is poised to consider President-Elect Obama’s ideas alongside an array of alternative health reform measures. Senate Finance Committee Chair Max Baucus (D-MT) put forth a comprehensive “white paper” in mid-November 2008. Chairman Baucus is a key player on health matters because the Finance Committee has exclusive jurisdiction in the Senate over Medicare, Medicaid and SCHIP. Baucus has made health reform a priority and will work diligently to achieve it. Already in 2008, the Finance Committee has dedicated 10 congressional hearings to health reform topics. The Baucus white paper would, for example, achieve universal coverage, reduce health care costs, improve the quality of care provided, impose an individual mandate for health insurance—once quality affordable care is accessible—and create a U.S.-wide insurance pool called the Health Insurance Exchange. During a transition period, the Baucus plan would allow a Medicare buy-in for those aged 55 to 64.
Senator Baucus has also put forth legislation calling for a comparative effectiveness institute, and Baucus and Finance Committee senior Republican Charles Grassley of Iowa released in mid-November a discussion draft of legislation that would create a value-based purchasing program for Medicare inpatient hospital care. The proposal seeks to reverse the current Medicare payment incentives, which reward volume rather than quality. Note that the proposal would provide hospitals with either an increase or a decrease in Medicare payments depending on performance on standard quality measures for treatment of heart attacks, heart failure, pneumonia and surgical care.
Senator Edward Kennedy (D-MA), chairman of the Senate Committee on Health, Education, Labor and Pensions, has dubbed health reform his foremost priority. Already, Senator Kennedy has created three working groups of committee members; each will focus on a different aspect of health reform. The “quality of care” working group will be led by Senator Barbara Mikulski (D-MD); the “prevention and public health” working group will be led by Senator Tom Harkin (D-IA), and the “health insurance” working group will be led by Senator Hillary Clinton (D-NY) (provided she remains in the Senate and is not named secretary of state in the Obama administration, as is widely rumored). In mid-November, Senators Baucus, Grassley, Kennedy and others critical to the prospects for health reform convened in a bipartisan meeting to discuss jurisdictional and other issues. Reportedly, the legislators directed staff to compile a list of health reform options. Additional legislators, organizations and others in the health sector are also laying down markers and proposals for health reform. Look for a Congressional Budget Office compilation of key issues facing the health care system and outlining policy options for addressing them that is expected by year-end.
Earlier in 2008, the worsening economic outlook prompted many who desire health reform to wonder where the money would be found to pay for it. (Current budget rules, PAYGO or pay as you go, require that any new spending be offset.) Interestingly, this dialogue is now undergoing a subtle shift. Some lawmakers have indicated that the investment in health reform is so important that it should happen regardless of whether or not it is paid for in the early years. Further, an increasing number of policymakers are describing health reform as a key “jobs-creation” measure that is a vital component of any economic recovery effort. Nonetheless, key factors affecting any domestic spending, including spending on health legislation, include the burgeoning budget deficit, the $700 billion cost of the recent financial rescue package, and the ongoing wars in Iraq and Afghanistan. In addition, if the Democrats fail to gain a filibuster-proof majority in the Senate, Republicans will be able to use the filibuster to affect and to thwart legislation, including health legislation.
Another influence on systemic health reform is the extent to which lawmakers heed the lessons learned from the failed health reform efforts of 1993 – 1994. Key lessons offered by the Alliance for Health Reform include the following:
Strike while the iron is hot in the first year of a new administration before lawmakers have to worry about re-election.
Go for the easiest procedural path, use the budget reconciliation process to move health reform thus avoiding the chance of a Senate filibuster.
The White House must work with Congress from the beginning.
Raising taxes is difficult but expanding coverage without raising taxes necessitates massive shifts within the health system, which may be an even heavier lift.
Don’t try to include every last detail in one bill, pass the big provisions and then fill in the technical details later.
Be willing to compromise.
Expect pushback, systemic health reform will entail major change that inevitably generates opposition.
Health reform will not occur unless leaders at both ends of Pennsylvania Avenue make it a top priority. For more information, visit www.allhealth.org .
Some early indicators of the path that the health system reform process may take will be provided when President-Elect Obama makes his selections for secretary of the Department of Health and Human Services (HHS), administrator of the Centers for Medicare and Medicaid Services, commissioner of the Food and Drug Administration, White House domestic policy advisors and other key health-related positions. Already, the selection of Rep. Rahm Emanuel (D-IL) as White House chief of staff bodes well for legislative success on all fronts, including health care, because Rep. Emanuel has shown that he is an extremely effective results-oriented legislator—having risen to the fourth highest post in the House Democratic leadership after only six years in Congress—and having effectively served in the Clinton White House. In announcing the appointment, President-Elect Obama said, “No one I know is better at getting things done than Rahm Emanuel.” Emanuel may also be able to moderate some of the more liberal committee chairs in the Congress. Emanuel has already spoken to many business leaders urging their support for an expansion of health insurance to all Americans.
It is widely expected that Tom Daschle, a former Senate majority leader (D-SD), will get the top job at HHS. In addition, it is widely reported that Daschle, heeding the lessons of 1993-1994, insisted that he alone be the new administration’s “point person” on health reform. This bodes well for systemic health reform because it will streamline not only the development of the president’s health reform proposal but will also make negotiations with Congress more efficient and effective. Recall that the Clinton administration placed the first lady in charge of health reform. Another likely Obama pick that is a positive indicator for health reform is Peter Orszag, an economist with significant health expertise who currently heads the Congressional Budget Office (CBO), for director of the Office of Management and Budget.
Membership in key congressional committees with jurisdiction over health care will shift significantly in the new Congress that will convene in January 2009. The most noteworthy change is the unseating of House Energy and Commerce Committee Chair John Dingell (D-MI) by Rep. Henry Waxman (D-CA). In a bold challenge to the seniority system, Rep. Waxman petitioned Democratic colleagues to allow him to take over the helm of the Energy and Commerce committee from Rep. Dingell, the longest serving member in the House of Representatives. The House Energy and Commerce Committee has vast jurisdiction, including health matters, such as Medicaid, SCHIP, public health, biomedical research and development and Medicare Parts B (outpatient services), C (private plans – “Medicare Advantage”) and D (the new drug benefit), as well as energy and climate change issues, for example. With jurisdiction over key Obama domestic policy priorities, the shift to the more liberal Waxman likely portends a shift to the left both in the House of Representatives, and on health and other matters that will be considered in the Energy and Commerce Committee.
In other shifts, not only will Democrats expand their numbers on all committees given their election day gains, but a number of committee members on both sides of the aisle will not be returning in January 2009, which creates openings for additional members of Congress to join these committees. All of these shifts in committee membership will affect the prospects for systemic health reform and the outlook for health legislative activity.
Targeted Health Initiatives
The first health policy focus in the new year will likely be on already identified and targeted health initiatives. Some are time-sensitive measures while others are front-and-center concerns. Health industry stakeholders immediately have opportunities to weigh in on these initiatives and either affect their shape or capitalize on them as vehicles for accomplishing other health-related goals apart from the specific focus of the legislation. In addition, understanding the health legislative and regulatory landscape remains a critical element of sound legal and business strategy and decision-making.
Unless Congress acts by March 31, 2009, federal funding and authorization for the SCHIP program will expire. SCHIP provides federal matching funds to states to cover uninsured children and some adults with family incomes too high to qualify for Medicaid. On the campaign trail, President-Elect Obama called for expansion of the SCHIP program as a key element of his health overhaul proposal. It is presently unclear if Congress will opt to pass the SCHIP legislation twice-vetoed by President Bush, pass a simple extension early in 2009 and include more comprehensive SCHIP reform in another larger health bill later in the session, or opt for another approach. If the financing can be found, it is likely that a comprehensive SCHIP reauthorization and expansion will be enacted early in 2009.
Medicaid Payment Reductions
On April 1, 2009, steep Medicaid payment reductions will go into effect unless Congress or the new president extends the moratoria on six Medicaid regulations established by the Bush administration and suspended by the Democratic Congress. Affected payment areas include graduate medical education, coverage and payment for rehabilitation services, treatment of targeted case management services and allowable provider taxes. An additional regulation not suspended by Congress relates to outpatient hospital services. Look for efforts to include additional Medicaid monies in any economic stimulus package.
Medicare Payment Reductions
Physicians face dramatic Medicare payment reductions of at least 20 percent unless those reductions are averted by Congress before January 1, 2010. If Congress does rescue physicians from these cuts, the cost will be between $40 and $100 billion, depending on whether Congress replaces the reductions with a payment increase, and the size of the increase, forcing cuts from other sources. Democrats have recently looked to the Medicare Advantage program as a source of funding in the 110th Congress, but efforts to slash funding to the program have been blocked by the Bush administration. Without the Bush firewall of protection for private plans, efforts to reduce private plan funding are expected. Indeed, President-Elect Obama has previously supported efforts to strategically cut spending for Medicare Advantage to support other Medicare priorities. However, cuts to the Medicare Advantage program will not provide ample funds to avoid physician payment reductions. Congress will have to look to other funding sources, which could include payment reductions for hospitals, skilled nursing facilities, durable medical equipment suppliers and new restrictions on physician ownership of hospitals.
Other Front and Center Concerns
Other pressing health priorities include health information technology, follow-on biologics and re-tooling of the Medicare physician drug benefit.
Health Information Technology
Lawmakers widely view the U.S.-wide implementation of interoperable health information technology as critical to efforts to improve efficiency in the health sector. President-Elect Obama was an original co-sponsor of the principal Senate health information technology bill in the 110th Congress. Areas of controversy include how to incentivize providers to adopt health information technology and whether to penalize them for failure to do so, whether patient privacy and security protections would need to be expanded and/or refined, and how to manage the investment costs in new health information systems and in new privacy and security protections.
The ability of hospitals, health systems, pharmaceutical companies, academic medical centers and others to use data to improve care for specific patients and to use and work with aggregated data for quality improvement at the population level could be undermined by new privacy and security provisions that may accompany health information technology legislation. Some of the newly proposed requirements could prove extremely burdensome for hospital, health systems and others who extensively use electronic medical records. All providers could face new cost and standards of practice flowing from new requirements, incentives or penalties related to adopting health information technology, and accompanying privacy and security measures. Amongst the questions that will be on the table is whether certain entities (e.g., hospitals or pharmaceutical companies) could financially support physician acquisition of the hardware and software that will be needed.
President-Elect Obama has called for an approval pathway through the U.S. Food and Drug Administration for generic or “follow-on” versions of biologicals. Congress began to entertain proposals in this regard in 2008, setting the stage for stand-alone consideration in early 2009. A key area of concern is how long manufacturers of brand name biologicals would have market exclusivity. Brand name manufacturers will seek to protect their market exclusivity for as long as possible, and some of these manufacturers may be able to make a case for singling out specific types of products that should not be subject to market exclusivity established timeframes.
Additional areas ripe for possible early action in 2009 include drug importation, embryonic stem cell research and tobacco regulation. President-Elect Obama has indicated that the importation of prescription drugs from other countries should be allowed provided safety is assured. He has also expressed support for government negotiation of drug prices, reversing the ban on federal funding of research using embryonic stem cells, and giving the FDA authority to regulate the manufacturing, marketing and sale of tobacco products.
Clearly, health issues will be center stage on the congressional and administration agenda in 2009. Players in the health sector should carefully evaluate their desired level of involvement in the upcoming swirl of health legislative activity.