• Senate approves motion to take up health reform bill
• Senate health care reform would reduce deficit, shrink employer coverage: CBO
• Medicare paid more than $92 million for 2008 medical provider quality reporting

• State health care reform update—week of November 1

• Cost containment potential gains ground in wellness, health management programs

Senate approves motion to take up health reform bill

The Senate on Nov. 21 approved by a 60-39 margin a procedural motion to take-up a sweeping $849 billion health care reform measure, but some moderate Democrats said their vote to proceed does not ensure their support for final passage. The full Senate returns from Thanksgiving recess on Nov. 30 and lawmakers are expected to engage in a lengthy debate stretching into late December.

Senate Democratic leadership warned that if the bill is not finished by the holidays, the Senate could take an abbreviated break and quickly return to work "We have to finish it in the Senate or it's going to be maybe a long lunch break over Christmas," Majority Whip Dick Durbin, D-Ill., said Nov. 22 on NBC's "Meet The Press."

Central issues to the looming debate include whether or not to provide a public option, statutory language disallowing any federal funding for abortions, and a 40 percent tax on high end insurance plans that could hit middle income earners. Democratic leaders are expected to negotiate with moderate democrats on a compromise solution regarding a government-sponsored health insurance plan.

Senate Majority Leader Harry Reid (D-Nev.) on Nov. 18 unveiled the health care reform plan "the Patient Protection and Affordable Health Care Ac" that the Congressional Budget Office reported would cost $849 billion over 10 years. The 10-year cost of the revised legislation comes in well below the $900 billion threshold set by President Obama and would cut the federal budget deficit by $127 billion over 10 years. The plan would reduce the number of uninsured by 31 million by making coverage available to 94 percent of eligible Americans, according to a Senate Democratic leadership aide.

Insurance market reforms. The legislation would institute a variety of health insurance market reforms, some that would take effect almost immediately, and some in 2014. In 2010, a new federal program would do the following—

• (1) offer insurance coverage for uninsured individuals with pre-existing conditions;
• (2) create a re-insurance program to enable employer-sponsored health plans to offer coverage 1. for early retirees;
• (3) reduce the size of the coverage gap (or "donut hole") under the Medicare Part D prescription drug program;
• (4) provide tax credits to small businesses to make it easier for them to offer health insurance to their employees;
• (5) extend dependent coverage to allow children to stay on family plans until age 26; and
• (6) provide for prevention and wellness benefits that are offered without deductibles or other cost-sharing.

Starting in 2014, the legislation would: (1) end insurance underwriting and pre-existing condition exclusions; (2) restrict variances in premiums; (3) establish exchanges in each state to help individuals and small employers obtain health insurance coverage; (4) provide tax credits to help individuals purchase insurance; and (5) create a limited mandate for individuals to purchase insurance, and employers to offer it, or to pay a penalty.

Medicare changes. A value-based purchasing program for hospitals participating in Medicare would launch in FY 2013. This program would link Medicare payments more closely to health care quality. A new Center for Medicare and Medicaid Innovation would be established within CMS to research and test innovative delivery and payment arrangements. Medicare Part C payments would be adjusted to match fee-for-service Medicare payments more closely. A new adjustment to the market basket update for most Part A provider payments will reward productivity. The House bill includes similar provisions to these Medicare provisions.

A Medicare Advisory Board established by the Senate bill would develop proposals to reduce Medicare cost and improve quality. Unless Congress specifically passes alternative legislation that would create the same savings, these proposals would go into effect.

Medicaid changes. Under the legislation, states would be allowed to expand Medicaid eligibility to everyone with an income of less than 133 percent of the federal poverty level (FPL); under the House bill approved on Nov. 7, Medicaid eligibility would extend to everyone with an income less than 150 percent of the FPL. States would be required to maintain income eligibility levels for the Children's Health Insurance Program (CHIP) until the end of the 2019 fiscal year. Enrollment procedures for CHIP would be coordinated along with enrollment into insurance plans offered by the new exchanges. (Under the House bill, the CHIP program would end in 2014.)

Federal disproportionate share hospital payments to states would be reduced as a state's uninsured population decreases; the House bill includes a similar provision.

Program integrity. To reduce physician self-referrals that increase Medicare spending, physician-owned hospitals that do not have a Medicare provider agreement prior to February 2010 would not be allowed to participate in Medicare. Skilled nursing facilities under Medicare and nursing facilities under Medicaid would be required to provide specific ownership information. New procedures to screen providers and suppliers participating in Medicare, Medicaid and CHIP would be put in place. Additional Medicare and Medicaid program integrity provisions would be enacted.

Healthcare workforce. The legislation includes several provisions designed to increase the number of healthcare worker, especially in the area of primary care. Unfilled residency positions will be redirected for the training of primary care physicians (the House bill has a similar provision). Federal student loan programs would be modified to make the primary care student loan program more attractive. New and expanded funding would be provided for federally qualified health centers.

Revenue provisions. The legislation would be financed several ways, including (1) an excise tax on high cost employer-sponsored health insurance policies; (2) higher taxes on distributions from health savings accounts that are not used for qualified medical expenses; (3) new fees on pharmaceutical and medical device manufacturers, and health insurance providers; (4) a tax on elective cosmetic surgery; (5) various other changes in deductions related to health care spending.

The revised legislation also slices in half the tax on medical devices from $40 billion to $20 billion. Additional changes to health care tax incentives include capping flexible spending account (FSA) contributions, conforming definitions of deductible medical expenses, and changing penalties for the improper use of health spending account (HSA) funds. CCH Washington Bureau, Nov. 18, 2009.

Senate health care reform would reduce deficit, shrink employer coverage: CBO

The Senate health care reform bill introduced on November 18 would yield a net reduction in federal deficits of $130 billion over the 2010-2019 period, according to the Congressional Budget Office (CBO).

The CBO estimate of the direct spending and revenue effects of H.R. 3590, the Patient Protection and Affordable Care Act, includes a projected net cost of $599 billion over ten years for the proposed expansions in insurance coverage.

That net cost itself reflects a gross total of $848 billion in subsidies provided through the exchanges, increased net outlays for Medicaid and the Children's Health Insurance Program (CHIP), and tax credits for small employers; those costs would be partly offset by $149 billion in revenues from the excise tax on high-premium insurance plans and $100 billion in net savings from other sources, according to the CBO.

Over the 2010–19 period, the net cost of the coverage expansions would be more than offset by the combination of other spending changes that the CBO estimates would save $491 billion and other provisions that would increase federal revenues by $238 billion. In total, the CBO estimates that the legislation would increase outlays by $356 billion and increase revenues by $486 billion between 2010 and 2019.

Coverage expansions. The CBO estimates that provisions affecting health insurance coverage would result in a net increase in federal deficits of $599 billion over fiscal years 2010 through 2019. That estimate primarily reflects $374 billion in additional net federal outlays for Medicaid and CHIP and $447 billion in federal subsidies that would be provided to purchase coverage through the new insurance exchanges and related spending.

The other main element of the coverage provisions that would increase federal deficits is the tax credit for small employers that offer health insurance, which is estimated to reduce revenues by $27 billion over ten years. Those costs would be partly offset by receipts or savings, totaling $249 billion over the ten-year budget window, from four sources: net revenues from the excise tax on high-premium insurance plans, totaling $149 billion; penalty payments by uninsured individuals, which would amount to $8 billion; penalty payments by employers whose workers received subsidies via the exchanges, which would total $28 billion; and other budgetary effects, mostly on tax revenues, associated with the expansion of federally subsidized insurance, which would reduce deficits by $64 billion.

By 2019, the CBO estimates that the number of nonelderly people who are uninsured would be reduced by about 31 million, leaving about 24 million nonelderly residents uninsured (about one-third of whom would be unauthorized immigrants). Under the legislation, the percentage of legal nonelderly residents with insurance coverage would rise from about 83% currently to about 94%. About 25 million people would purchase their own coverage through the new insurance exchanges, and there would be approximately 15 million more enrollees in Medicaid and CHIP than what is projected under current law. Relative to currently projected levels, the number of people purchasing individual coverage outside the exchanges would decline by about 5 million, and the number obtaining coverage through their employer would also decline by about 5 million.

Under the legislation, certain employers could allow all of their workers to choose among the plans available in the exchanges, but those enrollees would not be eligible to receive subsidies via the exchanges. The CBO expects that approximately 5 million people would obtain coverage in that way in 2019, bringing the total number of people enrolled in exchange plans to about 30 million in that year.

About one out of eight people purchasing coverage through the exchanges would enroll in the public plan, the CBO estimates, meaning that total enrollment in that plan would be 3 million to 4 million.

For more information, visit http://www.cbo.gov/.

Medicare paid more than $92 million for 2008 medical provider quality reporting

For 2008, the Centers for Medicare and Medicaid Services (CMS) provided incentive payments totaling more than $92 million to more than 85,000 physicians and other eligible professionals who successfully reported quality-related data to Medicare under the Physician Quality Reporting Initiative (PQRI), according to a November 13 CMS report. For 2007, the CMS paid $36 million in PQRI incentives to 56,700 eligible professionals. In 2007, eligible professionals could only participate in the program during a six-month reporting period, whereas in 2008, the program expanded to allow reporting for either a six-month or a 12-month period, the CMS explained.

The PQRI is a voluntary program in which physicians and other eligible health care professionals may earn incentive payments for reporting quality measures data on medical services provided to Medicare. For the 2008 PQRI, the average incentive amount for individual professionals was more than $1,000, with the largest payment totaling more than $98,000. Of the more than 162,800 professionals who participated in the 2008 PQRI, more than 85,000 met statutory requirements for satisfactory reporting for the reporting period and received incentive payments.

Health care practices with participating eligible professionals in Florida and Illinois received the highest incentive payments for the 2008 PQRI. In Florida, eligible professionals received a total of more than $7.5 million; and in Illinois, they received more than $6 million.

For the 2009 PQRI year, the CMS added 52 new quality measures, raising the total number of measures to 153. These new measures cover all types of health care professionals who provide services to Medicare beneficiaries, and address areas such as osteoarthritis, back pain, coronary artery disease, and HIV/AIDS; as well as 18 measures that must be reported exclusively through PQRI-qualified registries.

Additional 2008 PQRI results, as well as information on how eligible professionals who participated in the 2008 PQRI can access confidential feedback reports, can be found in a CMS Fact Sheet at http://www.cms.hhs.gov/apps/media/fact_sheets.asp.

State Health Care Reform Update—Week of November 16

For the last few years, states have been leading the way toward more comprehensive health care coverage to ensure that more people have or can obtain health insurance. Because of the potential impact of this ongoing activity on employer-provided health insurance benefits, Spencer's Benefits Reports provides regular updates about state health care.

Over the past few months, state action in health reform has slowed, due to interest in the national health reform debate. While most states are waiting to act on health reform until after the national plan is voted on, the National Conference of State Legislators has found that members of at least 11 state legislatures are using the legislative process to seek to limit, alter, or oppose selected federal action, including single-payer provisions and mandates that would require the purchase of insurance. As of late October, formal resolutions or bills had been filed in Arizona, Florida, Indiana, Michigan, Minnesota, New Mexico, North Dakota, Ohio, Pennsylvania, West Virginia, and Wyoming. None of the proposals has been approved; Arizona's resolution is the only measure to have passed the legislative process thus far, and it needs to be voted on next November. For more information, visit http://www.ncsl.org.

Arizona. Gov. Jan Brewer has proposed a sweeping overhaul of Arizona's mental health system that would give the state's Medicaid program, Arizona Health Care Cost Containment System, responsibility for tens of thousands of new patients while creating a pilot program to address people with serious mental illnesses. The proposal suggests integrating physical and mental health care for people with basic mental health and substance-abuse issues. For more information, visit http://www.azahcccs.gov/.

California. Gov. Arnold Schwarzenegger has signed into law a bill that recognizes same-sex marriages entered into in other states. Since last year, New York also legally recognizes same-sex marriages validly performed out of state. California has a mixed system of marriage after the California Supreme Court in May upheld Proposition 8, the voter-approved law restoring a ban on same-sex marriages, but left intact the more than 18,000 marriages of couples who wed last year when the court originally approved the unions. For more information, visit http://www.ca.gov/.

Louisiana. The state's health department has proposed cuts to the rates paid to private health care providers for taking care of Medicaid patients, which could save Louisiana more than $232 million per year. The proposed cuts would take Medicaid spending for the private providers to the level paid in the 2005-06 budget year. For more information, visit http://www.dhh.state.la.us/offices/?ID=92.

Michigan. The state House recently passed tax bills that levy a 3% tax on physician services. This tax on non-Medicaid physician services is expected to raise $300 million in revenue, and would leverage $525 million in federal matching funds for health care for the poor and seniors. For more information, visit http://www.michigan.gov/mdch/0,1607,7-132-2943_4860---,00.html.

Minnesota. Gov. Tim Pawlenty has proposed letting Minnesotans purchase out-of-state health insurance policies and letting for-profit insurers into Minnesota to drive down health costs. The plan also would use copayments and higher deductibles to steer lower-income people on Medical Assistance and MinnesotaCare toward state-approved clinics, which could trim state costs by $100 million per year, according to Mr. Pawlenty. For more information, visit http://www.dhs.state.mn.us.

North Carolina. State employees who smoke or have a body mass index of higher than 40 will pay 10% more than other workers for their health care insurance, unless they quit smoking or join programs to lose weight. The added cost to state employees is expected to save the state health plan $13 million in 2010. For more information, visit http://www.ncgov.com/.

Cost containment potential gains ground in wellness, health management programs

In 2009, employers held medical benefit plan cost growth to an average of 5.5% or $8,945, the lowest rise in a decade, according to the final results of Mercer's annual National Survey of Employer-Sponsored Health Plans for 2009. Employers plan to keep medical plan cost growth to 6% in 2010, mainly by changing plan design or plan vendors. Without plan changes, employers would experience a 9% cost growth. The Mercer survey includes responses from 2,914 employers with at least ten employees. Nearly two-thirds (65%) of all employers offer health care benefits, but nearly all employers with at least 500 employees do so.

Use of wellness and health management programs expanded at large employers to contain costs without cost shifting to employees. Medical plan cost increases in 2009 were about two percentage points lower, on average, among employers with extensive health management programs than among those employers offering limited or no health management programs. In addition, nearly three-fourths of employers that have measured the return on investment (ROI) in health management programs said that they are satisfied with the year-over-year savings, lower utilization rates or improved health risks. However, only about one-third of all large employers have formally measured ROI.

"A lot more employers were willing to place their bet on health management in 2009," said Linda Havlin, a worldwide partner and Mercer's global health and benefits intellectual capital leader. "But they will want to see continual gains. Measuring health management ROI is inherently challenging and continues to evolve. There's growing anecdotal evidence that well-designed and communicated health management programs can improve outcomes, but we need to work harder at understanding and eliminating missed opportunities--and that includes changing noncompliant patient behavior."

Currently, one-fifth of all large employers—but nearly half of those with 20,000 or more employees—use health management incentives. Nearly one-fourth of those with 20,000 or more employees vary employees' premium contribution amounts based on their smoker status—23%, up from 17% last year, Mercer found. One Senate bill would allow employers to give employees larger financial incentives to participate in programs.

PPO enrollment in 2009 was flat at 69%, but HMO enrollment dropped from 23% in 2008 to 21%.

For more information, visit www.Mercer.com/ushealthplansurvey or call Tara Lewis at (212) 345-2451.