By John Reichard, CQ HealthBeat Editor

May 21, 2009 -- Senate Finance Committee Chairman Max Baucus raised eyebrows briefly Thursday morning when he told reporters that "we're not going to get 100 percent coverage" of Americans under health overhaul legislation. But in later remarks he amended that to predict "near universal coverage."

Asked to clarify his opening remarks at a "newsmaker" breakfast sponsored by the Kaiser Family Foundation, the Montana Democrat said that according to Congressional Budget Office estimates, the overhaul plan he has in mind would achieve coverage of 94 to 96 percent of Americans. "There are always going to be some people . . . you just can't find" to enroll, Baucus said, adding that "we're not going to cover undocumented workers. That's too politically explosive."

Uncertainty about the ability of Democrats to put together legislation financing universal coverage is coming to the fore as lawmakers confront the political difficulties involved.

The remarks by Baucus followed a day-long meeting of the Senate Finance Committee Wednesday that wrestled with financing expected to cost more than $1 trillion over 10 years. Committee members considered a wide variety of controversial funding methods ranging from taxing alcohol, soft drinks, and pricey health coverage to cutting Medicare payments to hospitals, but did not reject any, Baucus insisted.

Easing Baucus' task in putting together a financing package may be a study released Thursday pointing out that foregoing an overhaul would also add deeply to the nation's financial burdens and strike growing numbers of middle-class Americans particularly hard. The study shows that the status quo will not be easy to defend, either, said speakers at a forum sponsored by the Urban Institute.

Nevertheless, analysts wonder whether financing an overhaul will prove so difficult that Baucus will be forced to scale back expectations for coverage gains. That in turn would sow doubt about whether the insurance industry would guarantee coverage to all insurance applicants without charging them premiums based on health status. America's Health Insurance Plans, the nation's largest health insurance lobby, has promised to do those things but only if an "individual mandate" becomes law requiring all Americans to carry health insurance.

Asked whether "guaranteed issue" and rating revisions to exclude consideration of health status fall by the wayside if coverage isn't 100 percent, Baucus said "not at all . . . a key to this is everyone having health insurance." Baucus added that "without that, you get groups falling out. Then it's much more difficult to accomplish delivery system reform because we want the public and private providers to basically be working together ."

Baucus said "we're going to try to get as close as we can (to 100 percent coverage) and we're working hard to accomplish that." Universal coverage systems in other countries have fallen short of 100 percent coverage because of the administrative difficulties of enrolling literally everyone in a country.

Baucus did his best to describe the overhaul process as on track after a series of three meetings over the past few weeks in which he and the committee's top Republican, Iowa Sen. Charles E. Grassley, walked committee members through the complexities of an overhaul. Baucus said the panel will stick to its plans for a mid-June markup of health overhaul legislation. "We've not let anything slip," he said.

But at least some interest groups are beginning to rumble into action to defeat financing options on the table such as taxing sweetened drinks and capping the value of health insurance premiums paid by employers to employees. The beverage industry has voiced objections and labor unions in Oregon are launching an ad campaign targeting a proposal by the state's Democratic Sen. Ron Wyden to end the exclusion of employer-paid premiums from taxable income as a way to pay for universal coverage.

But Baucus is urging lobbyists to keep their cool, saying the committee is going to stick with consideration of a wide range of ideas and suggesting that while there may be some things that they don't like there may be others that they do like.

"Everything's on the table," he insisted. "Everything. All proposals. All ideas that groups may have are on the table. And they're going to stay on the table. We are going to discuss them. If anyone finds something on the table that he or she has a negative reaction to, I say suspend judgment . . . try to see if there's a way to get to 'yes.' Think about it. There might be a positive angle here.

"In addition, because this is so big, so complex, there are going to be a lot of trade-offs. One group might find it a little bit difficult here, that same group can find something positive over there. This is just so large."

While Baucus doggedly voiced confidence about the overhaul effort, Grassley said Wednesday that he does not see a consensus emerging on an overhaul. "There was a greater understanding of the issues we have," Grassley said. "There's a lot of members who still want some more understanding."

Baucus said no decision had been reached on several key aspects of an overhaul, such as mandating employer coverage or a timetable for phasing in to near universal coverage. He did say, however, that employers should participate.

Asked to what degree insurance revisions would be written into statute or assigned to some type of board to be developed later, Baucus listed a number of significant provisions that would be included in the legislation. They include minimum standards for benefits, a guaranteed issue requirement, a prohibition on excluding coverage of pre-existing conditions, the creation of an insurance exchange where people should sign up for coverage, conditions for buying and selling insurance within the exchange, and rating revisions. But "states will still be able to make a lot of decisions," he said.

Asked whether there might be a provision for a "fallback" government-run insurance option in areas lacking insurance options, Baucus said it is "on the table."

On his way in to Kaiser Family Foundation headquarters, single-payer advocates tried to confront Baucus about his decision to exclude them from overhaul discussions. They said Baucus ducked them by not getting out of his car until after it disappeared behind the closing door of the building's parking garage.

One of the advocates, part of a group called Single Payer Action, said he was among those in the audience arrested May 5 at a Baucus roundtable. He called Baucus "the senator for K Street," while another charged that Baucus is "taking hundreds of thousands of dollars from the drug and health insurance corporations."

Baucus was questioned at the press briefing about why the single-payer approach to an overhaul was not under consideration. He replied that it has no chance of passage and "we can't squander this opportunity. We can't waste capital on something that's just impossible."

Asked what approach he thinks has the greatest potential to control health costs, Baucus said reduction of geographic variations in spending. If medicine were practiced across the country the way it is in low-cost regions like the High Plains states, the health system could save $700 to $800 billion in spending and medical outcomes "will be better," he said.

By John Reichard, CQ HealthBeat Editor


May 21, 2009 -- Rejecting a costly overhaul of the health care system might seem like the fiscally prudent thing to do but sticking with the status quo would be an expensive alternative, according to a new study by researchers from the Urban Institute.


Without an overhaul, up to 66 million Americans could be uninsured by 2019 and total individual and family spending on premiums and out-of-pocket costs could increase 68 percent under a worst-case scenario according to the study, which was prepared for the Robert Wood Johnson Foundation (RWJF). The study assumes that 49 million people this year are without insurance, based on adjusting 2007 figures for coverage losses from recent increases in unemployment.


"If federal action is not taken, many Americans would lose their employer-sponsored insurance over the next decade and move to Medicaid and other government programs," said Urban Institute researcher John Holohan. "Middle-income families would be truly stuck—too well off to be eligible for public programs, but too poor to afford their own health insurance."


The study said that the number of middle-income earners without insurance would rise from 12.5 million in 2009 to as many as 18.2 million in 2019.


The study explores three different economic scenarios in examining what would happen without a health overhaul. The worst-case scenario presumes that unemployment rates between 2009 and 2014 remain high, falling to 7.1 percent in 2014, and that income growth during that period is slow, with health costs rising somewhat faster than projected by the Centers for Medicare and Medicaid Services (CMS).


The best case assumes unemployment rates fall to 5.1 percent by 2014, that income growth is faster, and that health costs grow at rates consistent with those projected by CMS. The intermediate scenario presumes that the unemployment rate is 6.1 percent by 2014, with incomes and health care costs growing at rates between the best and worst case scenarios. The study makes a similar set of assumptions for the 2014 to 2019 period.


Under the best case, 53.1 million people would be uninsured in 2019 and in the intermediate case, 62.2 million. Even under the best case scenario, individual and family spending on premiums and out-of-pocket costs would likely increase at least 46 percent, the study said.


Businesses could see health costs double within 10 years. The researchers said "employer spending on premiums would increase from $429.8 billion in 2009 to $885.1 billion in 2019 in the worst-case scenario, and to $740.6 billion in the best case."


Spending on government programs also could double as more Americans are priced out of private insurance and become eligible for government programs. Spending in Medicaid (for the non-elderly) and in the State Children's Health Insurance Program would increase from $251 billion in 2009 to $519.7 billion in 2019 in the worst case scenario and to $404 billion in the best case.


And in the worst-case scenario, the amount of uncompensated care would rise from $62 billion in 2009 to $141 billion in 2019 in the worst case, and to $107 billion in the best case, "putting a tremendous strain on health systems, hospitals, providers of clinical care, and local municipalities," the RWJF said in a news release.


At a forum Thursday on the findings, Urban Institute President Robert Reischauer said that lost in the health overhaul discussion is any examination of "what happens if we do nothing. Most simply assume that well, we'll pretty much be left with what we have today." But the study shows that's not the case—"more are going to find themselves uninsured, thus adding to the uncompensated care burden facing many providers, and more will end up on government-subsidized programs," Reischauer said.


An overhaul would add to expenditures, but they would be devoted "to more of the things that we want to buy" including more coverage, improved quality of care for all, and investment in information systems that could moderate long-term cost growth he said. An overhaul also would have less measurable results, such as reducing stress and anxiety by reducing uninsurance and underinsurance, Reischauer added.


"The lesson of the study is just when you think things can't get worse, they can," said Karen Ignagni, president of America's Health Insurance Plans. "And I think that's the message that needs to go to Capitol Hill and to the country about wasting or not taking advantage of this opportunity to pass health care reform."


Len Nichols, an economist with the New America Foundation, said "politicians who think they want to sell the status quo are going to have a harder time selling that" because of the study.

By John Reichard, CQ HealthBeat Editor

May 20, 2009 -- The Obama administration's top health information appointee noted Wednesday that there's considerable skepticism since lawmakers put almost $20 billion or so into the stimulus law to further adoption of the technology that it can deliver on promises to improve quality and lower costs. But he said it can play a "critical" role in a revamped health system because of the importance of information in health care decision making.

David Blumenthal, appointed by President Obama to head the HHS Office of the National Coordinator on Health Information Technology, told a Brookings Institution seminar that the intellectual challenge of designing an improved health care system is solvable but the problem the nation faces is mostly about getting to some type of consensus on system changes among the various groups involved in the health care system. "Remarkable progress" is being made toward that end this year, he said.

Blumenthal says that in the "enormous agenda" of streamlining the health care economy to produce lower rates of spending growth, health information technology has a critical role "because it is a manager of information—and we are above all in the health care industry about using information to make decisions. Anything we can do to make the management of information more effective to get better information to the point of key decisions at the right time is going to ultimately improve the quality of those decisions and the products that our health care system produces."

Blumenthal noted that his own office has moved into the spotlight since the stimulus legislation passed because its budget has grown from some $60 million to $2 billion, reflecting the grant programs it will handle for programs such as building up a health IT workforce, establishing resources to help providers adopt the technology and aiding the creation of broad health care information networks.

As it takes on less of a role as a bystander advising the HHS secretary to a more central position responsible for fostering the adoption of the technology, the office will seek much public input in developing a regulation governing increased Medicare and Medicaid payments to doctors who make "meaningful use" of the technology, Blumenthal said. The definition won't pop out "fully formed" from the federal government without "enormous" public input, he said. "Meaningful use" is focusing policy makers on payment for the outcomes of the use of the technology rather than on the processes involved in the technology, he said.

"We're going to have to talk about what we will measure to decide whether meaningful use is occurring—an enormous challenge in itself," he noted.

Stimulus money coming to providers to help with adoption costs may be the key factor for some providers, but overall, Blumenthal said "this is not about the technology, and ultimately I hope it's not about the money. If we can show physicians and hospitals that they can be better at their basic work with this technology than they could ever be without it, if we can show the value that it provides day in and day out in the provision of patient care, if we can show that same thing to the American public, then I think the money will be a sweetener but not a determinant of adoption."

It is fast becoming clear that to become a competent health professional requires a facility with health information technology, Blumenthal said. He predicted that it ultimately will be so much a part of the culture of the practice of medicine that just as the federal government doesn't provide stethoscopes and examination tables, so too will health IT be adopted without full government reimbursement, he said.

By John Reichard, CQ HealthBeat Editor

May 18, 2009 -- The Senate Finance Committee package of options released Monday to fund a coverage overhaul includes a wide array of changes in the Medicare and Medicaid programs, ranging from reducing payment updates to different health care sectors to reducing geographic variations in spending. The panel seems to be taking the approach that just about everybody is going to have to take a hit to fund a dramatic expansion of coverage.

The committee will conduct a "walk-through" of the options at a closed-door meeting Wednesday. The panel also is looking at taxes on alcohol and sweetened beverages, among many approaches to funding a package that could cost well over $1 trillion over 10 years. The package also includes a variety of other financing options outside the Medicare and Medicaid programs.

Medicare adjusts payments each year to various sectors through "market basket" changes meant to compensate for the rising costs of delivering the particular type of treatment involved. The options document notes that the Medicare Payment Advisory Commission (MedPAC) filed a report in March recommending reductions or elimination of market basket increases in a number of cases. The Finance Committee may make changes in addition to those recommended by MedPAC.

"These market basket changes could be adjusted from the MedPAC recommended levels or could be accomplished over multiple years," the options paper says. "An additional option in this area may include establishing differential payment updates for low and high-margin areas for fiscal year 2010 as well as in additional years," the paper says, apparently referring to profit margins.

The document also says that market basket adjustments for certain fee-for-service providers may be required to be adjusted "by some or all of the expected productivity gains as a way to improve the accuracy of Medicare payments." Options include "requiring productivity adjustments beginning in fiscal year 2011 and in subsequent years or requiring this change only for a set time period."

In the home health field, the paper notes that MedPAC has recommended eliminating the market basket increase in 2010. The Finance document says this recommendation could be accepted as well as making "further adjustments given the current levels of payments in the program." Another option could be to "re-base" home health payments to better reflect the current number, mix, and intensity of services "and to take into account the relative margins related to specific conditions and service areas." Other options may include limiting the number of payments an agency could receive for "outlier" cases involving unusually high costs.

The paper also contemplates changes in funding for graduate medical education (GME) and "DSH" payments, meant to compensate hospitals that treat a disproportionate share of poor people. In fiscal 2009, Medicare DSH spending will total $10.1 billion and $9.1 billion in Medicaid, the paper notes.

"Options include adjusting current GME and DSH payment levels to better reflect the actual costs hospitals currently incur in treating the low-income and uninsured and in training medical residents," the paper notes. "Another option would be to adjust DSH payment levels over time as the need for these resources decreases as more individuals become insured as a result of health care reform."

Still another approach would "consolidate Medicare and Medicaid payments to hospitals as a way to streamline and better account for and coordinate federal funding with the DSH and GME payment areas," the paper says.

Cuts in Medicare payments for imaging are on the table. The current method assumes that imaging machines are operated 50 percent of the time—but assuming a higher use rate would lower payments for advanced imaging technology while raising payments for other types of physician services. Another option would be to establish an expert panel to help the Centers for Medicare and Medicaid Services adjust payments "for potentially misvalued physician services," the options paper states.

It also eyes changes in Medicare payments for "durable medical equipment" (DME) needed at home to treat a beneficiary's illness or injury. The Office of the Inspector General "has identified potentially overvalued DME items and services," the paper says.

Changes to adjust for geographic variations in Medicare spending would cut a wide swath through the health care sector. One option would be to broadly review spending in both Part A of the program covering inpatient care and Part B covering doctor and related services outside the hospital. Spending cuts could be proposed "in areas where per beneficiary spending is above a certain threshold compared with the national average," the paper says.

"In this option, spending per beneficiary for Medicare Parts A and B would be adjusted to reflect differences in the price of inputs and the health status of the local population."

Another approach would require a similar analysis, "but require spending reductions only for individual providers who are above a certain threshold in spending compared to their peers in their local area."

The Finance Committee also will consider changes in Medicare out-of-pocket spending requirements to protect beneficiaries against catastrophic expense while at the same time require some minimal level of cost-sharing so that supplemental "Medigap" policies do not block beneficiaries from some sensitivity to the costs of using multiple services.

Drug companies could face provisions increasing rebates they must give in return for Medicaid coverage from 15.1 percent to as much as 23.1 percent. And they may have to pay the rebates for Medicaid HMO enrollees.

By Alex Wayne, CQ Staff

May 18, 2009 -- To pay for an expansion of health insurance to nearly every American, lawmakers are considering taxing beverages believed to be unhealthy—alcohol and, for the first time, sweetened beverages such as sports drinks, fruit punch, and soda.

The leaders of the Senate Finance Committee released a document Monday outlining an increase in the federal excise tax on alcohol and proposing a tax on sugared drinks among the options to pay for a health care overhaul that could cost more than $1 trillion over 10 years. The document is the last of three that committee Chairman Max Baucus, D-Mont., and ranking Republican Charles E. Grassley of Iowa planned to release before they try to draft overhaul legislation in June.

Committee members will privately discuss the financing proposals Wednesday. The document says that Baucus and Grassley don't support all of the proposals, but it does not specify which proposals are backed by either man.

At a meeting May 12 to discuss how to pay for an overhaul, Finance members focused on taxing the value of employee health benefits. That proposal is further developed in the document released Monday.

Under current law, workers are not taxed on the value of the health insurance provided by their employers, allowing them to pay their premiums with pretax income. This tax exclusion is enormously costly for the government: about $133 billion in 2008. And some economists argue that the exclusion encourages overuse of health care resources, because expensive insurance plans offering generous coverage get as much of a tax break as lower-cost plans with more coverage limits.

Congress is unlikely to eliminate the exclusion—a move that would prompt opposition from both employers and labor unions. But the Finance Committee document proposes ways it could be limited or capped.

Legislation might simply cap the exclusion, taxing benefits that exceed a specific dollar value or taxing the benefits of workers whose incomes exceed a specific amount, such as $200,000—the example the document uses.

Or lawmakers could get more creative, the document suggests, and limit the exclusion based on some formula that takes into account workers' incomes, the value of health insurance, the cost of living in different regions of the country, and inflation.

Lawmakers might also provide workers a tax credit or deduction—or a combination—to replace the tax benefit they lose by limiting the exclusion.

The document proposes a number of ways to raise money from within the health care system by changing what the government pays health providers, including hospitals, physicians, and drug companies, under Medicare and Medicaid. Adopting any of those proposals will provoke a lobbying fight by the affected providers.

The document also includes a proposal to means-test premiums that seniors pay in Medicare's prescription drug program. Congress began requiring higher-income seniors—those earning at least $85,000 a year—to pay a higher premium for Medicare outpatient insurance, known as Part B, in 2007. But that requirement does not extend to the drug benefit, known as Part D.

Beverage Industries Oppose Proposal

The proposals to increase taxes on alcohol and create a tax on sugared beverages provoked strong opposition from those industries. The document does not specify how it would tax soda and other beverages containing sugar or other sweeteners. But the tax would be aimed only at beverages believed to contribute to obesity because of the calories in their sweeteners; drinks containing zero-calorie sweeteners, such as diet soda, would be excluded.

Kevin Keane, a senior vice president at the American Beverage Association, which represents soft drink makers, noted that recent attempts to levy similar taxes in New York and Maine were unsuccessful in the face of public opposition. "We don't think that the public and, ultimately, lawmakers will have a great taste for taxing soft drinks," he said.

Alcoholic beverages are taxed at varying rates depending on the type of beverage and amount of alcohol. Table wine and beer generally are taxed at lower rates than liquor.

The document proposes taxing alcoholic beverages at one rate tied to the amount of alcohol they contain. It suggests a rate of $16 per proof gallon, which would be higher for all types of beverages. The tax on beer would more than double, and the tax on wine would more than triple.

By Jane Norman, CQ HealthBeat Associate Editor

May 22, 2009 -- In a study that could have implications for the health overhaul in Congress, researchers have found that there's not necessarily a link between more expensive hospital services and the quality of care for chronically ill patients. In some instances, the care actually declined when spending went up.

The study on the Web site of Health Affairs, a public policy magazine, was conducted by researchers from Dartmouth College and Harvard University and analyzed care for Medicare beneficiaries in their last two years of life. Included were 2,172 U.S. hospitals across the country. The National Institute on Aging provided funding.

Laura Yasaitis of Dartmouth said in a statement that the researchers found no evidence that hospitals with higher spending on patients at the end of life provided better care, whether the hospitals were scattered across the country or in one region, or were academic medical centers. "In fact, in some cases hospitals that spent more provided worse care," said Yasaitis, a student at Dartmouth Medical School and a researcher at the Dartmouth Institute for Health Policy and Clinical Practice.

The other researchers were Elliott Fisher and Jonathan Skinner of Dartmouth and Amitabh Chandra at Harvard's Kennedy School of Government. Chandra said some hospitals in the same region provided exemplary care for lower costs, pointing to the need for better reporting of both costs and quality and a greater understanding of what leads to an improvement in performance.

Lawmakers working on health care are focused on finding ways to reduce rising costs in the U.S. health care system and at the same time provide a higher quality of care and expanded access. President Obama has said his priorities are to control costs, guarantee doctor choice, and assure high-quality, affordable health care.

The study looked at end-of-life spending for patients with three common conditions—heart attacks, pneumonia, and congestive heart failure. It took the analysis down to a hospital-by-hospital level, rather than studies in the past done at the regional level, though individual hospitals were not named.

Average end-of-life spending was $16,059 for the lowest-spending fifth of hospitals and the average was $34,742 in the highest-spending fifth of hospitals.

Quality was measured by using data from a program that measures the percentage of patients receiving a specific, often low-cost, evidenced-based therapy. That would include, for example, whether aspirin was given at arrival and discharge to those who had suffered heart attacks, and whether patients with pneumonia received a blood culture before being administered their first antibiotic.

For all of the quality indicators studied, the association with spending was either zero or negative, the study said. The researchers also said their study might be limited because the quality measures they used might penalize hospitals that treat sicker patients, and also because they looked at process-of-care measures rather than outcomes.

Quality was measured by using data from a program that measures the percentage of patients receiving a specific, often low-cost, evidenced-based therapy. That would include, for example, whether aspirin was given at arrival and discharge to those who had suffered heart attacks, and whether patients with pneumonia received a blood culture before being administered their first antibiotic.

For all of the quality indicators studied, the association with spending was either zero or negative, the study said. The researchers also said their study might be limited because the quality measures they used might penalize hospitals that treat sicker patients, and also because they looked at process-of-care measures rather than outcomes.