Health Reform Update from Dr. Michael Kitchell

August 27, 2009

Health Reform Update from Dr. Michael Kitchell

Since the House and Senate are now in recess, and the Senate Finance Committee is a long way from finishing its work and releasing a bill, I wanted to give you a summary of the current situation in Washington. The House bill is 1,017 pages long, which makes it nearly impossible to summarize in a succinct manner (so I thank you for your understanding with the length of this message).

The process
Keep in mind that once the House and Senate reconvene, each chamber has work to do before legislation is passed. The three committees in the House (Energy and Commerce, Ways and Means and Education and Labor) will have to merge their bills and then the full House will vote on that legislation. In the Senate, the Senate Finance Committee must adopt legislation which will then be merged with the HELP committee bill. Then the full Senate will consider that legislation.

After each chamber has passed a bill, any differences between the House and Senate versions must be ironed out in a Conference Committee. Once the Conference Committee settles on a final version, both the House and Senate must vote on the new bill. The version passed by both chambers will then be sent to the President for his signature. I can't stress enough that it's early in the process, so we need to keep a level head as we review the various proposals. You can rest assured that those who will be negatively impacted by the House bill will gather to change or defeat. We can expect more controversy and changes before anything is made into law.

Important points about the House bill

  1. The increased coverage of uninsured Americans is going to cost between $600 billion (Senate Finance Committee plan) and $1 trillion (the House 3200 plan) over ten years, and even then, only 37 million out of the 46 million uninsured Americans would be covered in 2013, when the new plans finally start. How to pay for this is a problem, since no one wants to pay higher taxes.

  2. In the House 3200 bill, the plan coverage would be primarily financed through premiums for either the public option or private plans. These plans, unlike Medicare, are supposed to be self supporting, though to help low income Americans afford these premiums there would be tax-funded subsidies (called affordability credits). This funding would require a tax increase for higher income Americans. A penalty of 2.5% of adjusted gross income above a certain level would be assessed if an individual is not covered, i.e., a mandate for all Americans (or almost all employers) to purchase coverage.

  3. The House bill eliminates the SGR 21.5% physician Medicare cut and the scheduled 5% cuts that are to go into effect in subsequent years. The AMA felt this was the major reason to support the House bill. Primary care would also receive a 5% increase with this bill.

  4. The House bill has a national health insurance exchange with a public option that is government-run, but physicians do have the right to negotiate payment rates with these public plans that would pay better than Medicare.

  5. Insurance companies would have to stop charging more for pre-existing conditions. They could only charge different premiums for age, family size, and regions (no gender or other differences).

  6. In the House plan, most businesses will be required to pay for their employees' premiums (only the smallest employers will be exempt). Employers who are not small enough to be exempt will offer insurance or pay a penalty of up to 8% of their payroll. If the premiums in these plans are over 12% of the employee's income, there would be government subsidies for low income employees' premiums. Obviously, the businesses that have to pay more are not enthusiastic about this plan.

  7. The House bill has an agreement to ask the Institute of Medicine (IOM) to study and implement a "Value Index" which would reward high quality, low spending states like Iowa. IOM would also review the geographic practice cost indices (GPCIs) and make sure they are accurate. Eight billion dollars are available to correct the GPCIs. I am confident the GPCIs will be found to be inaccurate, and I am convinced that we need to change the payment system to reward value (quality/cost), or else we will continue to get more of what we don't want – more expensive and low quality care. I believe this is the only way we can make health care affordable without "rationing."

  8. Physicians would be paid for advanced directive counseling for end-of-life care, which is what most of our Iowa physicians do even though there is no specific code for it. Assisted suicide would be banned by these regulations. There are no "death panels" in this bill.

The GPCI impact in Marshalltown
Our Marshalltown physician colleagues were not given enough credit in the recent Des Moines Register article for their highly efficient care. Marshalltown's Medicare payments per patient were about $4,100 per year, less than 1/3 of those in some other areas of the U.S. Higher quality care is more cost efficient. Our state received the Commonwealth Fund's second highest rating in the country for health care systems. No other state had a higher rating for the combination of quality and cost-effective care. In the Des Moines Register article there was speculation about why our Medicare costs are so much lower than other areas, and one idea was that our patients don't go to the doctor as often. It is a myth that Iowans go to the doctor less often. According to MedPAC, Iowans go to the doctor and ER exactly at the national average--we just simply do fewer procedures and give less expensive, more cost-effective care. But instead of being rewarded, we get paid less because of the GPCIs.

The AMA's position on the House bill
The AMA has taken some criticism from many physicians for supporting the House 3200 bill, mostly because of the government-run public option and the cost. We will have to wait and see what the Senate Finance committee bill finally includes, but it is clear from Senator Grassley that it will not have a government run public option. Instead, it is likely to offer non-profit cooperatives. The Senate Finance committee bill will be less expensive, around $600 billion over 10 years, and it will more than likely tax insurers who offer high-priced premiums for "Cadillac" coverage. It is not likely to have a large tax increase either. I anticipate the Senate Finance Committee's bill may have an easier time since it will be bi-partisan, but this health reform debate in D.C . will be interesting and unpredictable. You can read more about the AMA's position on the House 3200 bill at www.ama-assn.org/go/reform.

My perspective is that the AMA board gave support to the 3200 bill because they felt physicians need to remain at the table to negotiate the best results from the final process, which has a long way to go after legislation is agreed on by the House and Senate. The AMA felt that walking away from the negotiations would result in a worse bill or no bill, and I can say without a doubt that no physician wants a 21.5% cut on January 1.

The IMS position
The Iowa Medical Society has not taken a position on the House 3200 bill, and we will be reviewing the Senate Finance Committee bill carefully. I will be in Washington, D.C. on September 9 to speak with our Congressional members about the issues that matter to Iowa's physicians and patients. Let me know if you have questions and comments.

Michael Kitchell, MD
IMS President