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Baucus Plan Sparks Objections from Health Industry, Liberals and Unions

By Jane Norman, CQ HealthBeat Associate Editor

September 16, 2009 -- An odd marriage of health industry groups, unions, liberal advocates for the public option, and libertarians all found something to dislike in the long-awaited, $774 billion health overhaul proposal announced Wednesday by Senate Finance Committee Chairman Max Baucus, D-Mont.

Stephen J. Ubl, president and CEO of the Advanced Medical Technology Association (AdvaMed), said that the medical device industry considers a new $40 billion, 10-year tax on medical devices to be "unfair and counterproductive." The tax will cut money available for research and development of life-saving medical treatments, he said.

"We continue to believe there are better ways to reform the system than taxing countless products necessary to treat every patient who walks through the doors of a physician's office, hospital, or nursing home," said Ubl.

Doctors were unhappy that Baucus proposed only a one-year fix of the Medicare physician payment formula. Jack Lewin, CEO of the American College of Cardiology, said in a statement that the system, known as the Sustainable Growth Rate (SGR), can't be changed until a permanent solution is found.

"I shudder to think of how that one-year band-aid will lead us to spend the next year trying to fix that formula to prevent a payment disaster instead of working on the quality projects patients deserve," said Lewin. "Failure to permanently eliminate the SGR means patient access is threatened while Congress plays chicken with Medicare benefits year after year.

Union leaders were livid over a tax on insurance companies tied to high-benefit plans often extended to union members in negotiated contracts, and the substitution of co-ops for the public option. "Despite months of painful negotiations, the Senate Finance Committee proposal released today absolutely fails to meet the most basic health care needs of working families and it fails to meet the expectations we have set for our nation," said John Sweeney, president of the AFL-CIO.

Sweeney said that "outrageously, the plan imposes a 35 percent tax on high-cost health care plans without prohibiting insurers from passing on the tax to consumers who happen to be in groups that are older or sicker than average or live in high cost areas."

Baucus would reduce Medicare Advantage managed care payments to insurers, a move opposed by the insurance industry, Karen Ignagni, president and CEO of America's Health Insurance Plans, said that "we are committed to working with policymakers and stakeholders to find savings in the Medicare program, including Medicare Advantage, but it is important to ensure seniors' health care choices are protected."

She also said that insurance market changes the industry has backed would produce progress "without the need for a new untested government-created co-op that could disrupt the quality coverage on which millions of Americans rely today."

Aides to Baucus emphasized that many of the plan's provisions would go into effect soon, providing fast relief to the 46.3 million Americans who don't have insurance. Health insurance exchanges would be launched in 2010, and Medicare beneficiaries would begin receiving more help with their drug costs in 2010. By 2010 states would be required to set up ombudsman's offices to help consumers navigate health insurance problems.

Yet a harsh reaction came from the liberal group, which issued a statement charging that Baucus has caved in to the insurance industry by producing a bill that doesn't include a government-sponsored plan to compete with private companies. "The insurance companies have found their champion in Sen. Baucus," said Justin Ruben, executive director of the group, which strongly backs the public option, adding that the only comfort is that Baucus "stands nearly alone" in supporting his chairman's mark.

"The Baucus bill is by far the weakest of all five bills that have come from both chambers of Congress, and the only one not to include the public health insurance option, which is key to lowering costs, expanding coverage, and injecting competition into the market," said Ruben. "The Baucus bill will not solve the health care crisis that plagues millions of Americans, and fails to meet the basic tenets on successful reform laid out by President Obama."

House Speaker Nancy Pelosi, D-Calif., praised the portions of the bill that resembled the House bill and said health care costs need to be controlled. "I believe the public option is the best way to achieve that goal," said Pelosi.

Ron Pollack, the head of the liberal-leaning group Families USA, issued a somewhat lukewarm statement in reaction, praising Baucus for his numerous hearings, congressional summit, white paper on health care and patience in seeking a bipartisan plan.

"Sen. Baucus has counseled everyone to make sure that the perfect does not become the enemy of the good," said Pollack. "It is no doubt in that spirit that he introduced his proposal today—a proposal that differs in key respects from the directions he would have preferred but one that he believes has a good chance to be enacted."

Praise for the elimination of the public option came from health expert Michael Tanner of the libertarian Cato Institute, as well as for the plan's encouragement of the establishment of interstate co-ops for selling insurance across state lines.

But the provision to increase Medicaid eligibility will strain state budgets, he said, and the employer mandate, while "watered down," is still present in the form of penalties for employers who don't provide insurance and hire low-income workers. The individual mandate is "highly punitive" and makes it unclear whether people could keep their current plans, Tanner said.

Among insurers, the reaction was mixed. Scott P. Serota, president and CEO of the Blue Cross and Blue Shield Association, said that the group approves of both the individual mandate and the age-rating provision in the plan, which would allow discounts to people under 25 who tend to be the least likely to buy insurance.

"However, we are greatly concerned that burdensome new taxes and fees aimed at insurers and other health care industry stakeholders would severely undermine the reforms that the chairman's mark aims to achieve," said Serota. "These unprecedented new taxes would make coverage much less affordable for individuals, their families, and employers."

Antonio M. Perez, the chairman of the Business Roundtable's Consumer Health and Retirement Initiative and chairman and CEO of Eastman Kodak Company, said in a statement that the large employers who are members of the group were encouraged by the legislation. He said the mark is a "bold framework" for change. "Baucus' bill reflects a step in the right direction on the long road toward health care reform. It is important, however, we remain vigilant about controlling the overall cost of reform," said Perez.

The National Community Pharmacists Association praised the bill, saying it includes several provisions to help them better serve patients, including setting federal upper limits for the reimbursement of Medicaid generic drugs at 175 percent of the weighted average of the average manufacturer's price (AMP). "While we're still analyzing the full impact of this change, no other health reform proposal goes so far to ensure community pharmacies can continue serving Medicaid beneficiaries," said the association.

John Rother, AARP executive vice president, said the Baucus plan is a move forward by eliminating the doughnut hole in the Medicare prescription drug program, and doing away with out-of-pocket expenses for screening and other preventive measures. "However, we continue to have concerns about provisions that would allow for large differences in premiums based on age that could leave millions of older Americans still unable to afford the coverage they need," said Rother.

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