The U.S. Senate Committee on Finance held their final roundtable discussion titled “Financing Comprehensive Health Care Reform” on May 12, 2009. [Visit the committee's website for member and witness statements.] On Monday, May 18, Senate Finance Committee Chairman Max Baucus (D-MT) and Ranking Member Charles Grassley (R-IA) released a paper outlining the options discussed during the roundtable, Financing Comprehensive Health Care Reform: Proposed Health System Savings and Revenue Options. This paper addresses key issues such as ensuring appropriate payment, capturing productivity gains, and reducing geographic variation in spending.

» Download “Financing Comprehensive Health Care Reform: Proposed Health System Savings and Revenue Option" (PDF, 290K)

The Society’s health policy staff continues to work along with other medical society lobbyists to raise our concerns regarding many of the proposals to members and staff of the key health care committees — Senate Finance, Senate Health Education-Labor-Pension (HELP), House Ways and Means and House Energy and Commerce.

Highlight of the Delivery Options Relevant to Physicians

Ensuring Appropriate Payment

• Adjusting annual market basket updates. Policy options to adjust annual market basket updates for Medicare fee-for-service providers are described in the MedPAC 2009 Report to Congress. These include reducing or eliminating market basket updates in 2010 for any provider payment area recommended by MedPAC. These market basket changes could be adjusted from the MedPAC recommended levels or could be accomplished over multiple years. 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.
  
  Specific MedPAC 2009 recommendations regarding adjustments to the market basket
• • Increase payment rates for the acute inpatient and outpatient prospective payment systems in 2010 by the projected rate of increase of the hospital market basket index, concurrent with the implementation of a quality incentive payment program
  • Increase the physician services payment in 2010 by 1.1 percent and include a budget neutral payment adjustment for primary care services
  • Increase payments to ambulatory surgical centers by 0.6 percent in calendar year 2010 and require additional data regarding quality and cost
  • For outpatient dialysis services, Congress should maintain current law and update the composite rate in calendar year 2010 by 1 percent
  • Eliminate the payment update for skilled nursing facilities in fiscal year 2010
  • For home health services, Congress should eliminate the market basket increase for 2010 and advance the planned reductions so that payment in 2010 are reduced by 5.5% from 2009 levels. In addition, the Congress should direct the Secretary to rebase the payments in 2011 and assess different payment mechanisms
  • The update to the payment rates for inpatient rehabilitation facility services should be eliminated for fiscal year 2010
  • Secretary should update the payment rates for long-term care hospitals for fiscal year 2010 by the projected rate of increase in the rehabilitation, psychiatric, and long-term care hospital market basket index less the Commission’s adjustment for productivity growth
  • Congress should direct the Secretary to reform the hospice payments in a budget neutral way to (1) have relatively higher payments per day at the beginning of an episode and relatively lower payments per day at the end of an episode, (2) include a relatively high payment for the costs associated with a patient death, and (3) implement the payment system changes in 2013, with a brief transition period
• Updating payment rates for home health services: One option may include implementing MedPAC’s recommendations regarding market basket adjustments in 2010 and contemplating further adjustments given the current levels of payments in the program. Specifically, MedPAC recommended that Congress should eliminate the market basket increase for 2010 and advance the planned reductions so that payment in 2010 are reduced by 5.5% from 2009 levels. In addition, the Congress should direct the Secretary to rebase the payments in 2011 and assess different payment mechanisms. Another option may be to direct the Secretary to “re-base” home health payments to better reflect the current number and mix of HH services and their level of intensity and to take into account the relative margins related to specific conditions and service areas. Other options may include establishing a provider-specific annual cap on the number of allowable outlier episodes that home health agencies can be reimbursed for in a year.
• Updating payment rates for inpatient services: 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. Another option would be to adjust DSH payment levels over time as the need for these resources decrease as more individuals become insured as a result of health care reform. An additional option would be to consolidate Medicare and Medicaid payments to hospitals as a way to streamline and better account for and coordinate federal funding within the DSH and GME payment areas.
• Adjusting reimbursement for high-growth, over-valued physician services. The committee will explore options that would make payments to Part B providers more rational through reforms that appropriately value services, such as the MedPAC recommendation to increase the utilization rate for calculating the payment for advanced diagnostic imaging services. Specifically, MedPAC recommended an increase to the equipment use standard for expensive imaging machines from 25 hours to 45 hours per week. Another option the committee could consider would be to establish an expert panel to assist CMS in evaluating and adjusting payment for potentially misvalued physician services.
• More appropriate payment for DME. The Office of Inspector General (OIG) at the Department of Health and Human Services has identified potentially overvalued DME items and services, such as oxygen-related DME, DME use in nursing homes, during skilled nursing home stays, or assisted living programs, etc. Some contend reimbursement for certain DME items and services are under-reimbursed. The committee will explore options to improve payment accuracy for DME items and services.
• Increase the Medicaid Brand-Name and Generic Drug Rebate Amounts. One option the Committee could consider is increasing Medicaid’s flat rebate from 15.1 percent to as much as 23.1 percent. Under this option, the Medicaid best price provision would remain unchanged. Another option to consider is an increase in the basic Medicaid rebate for non-innovator, multisource drugs from 11 percent to 13 percent of average manufacturer price (AMP).
• Extend to and collect rebates on behalf of managed care organizations (MCOs). Under one option for the Committee’s consideration, prescription drug manufacturers could be required to pay a rebate on drugs purchased for beneficiaries in the risk-based managed care component of Medicaid that is similar to the rebate required in the FFS component of the program. The drug manufacturers could be required to pay the Medicaid FFS rebate directly to states. This option does not prohibit MCOs from negotiating additional rebates above the amount defined by law.
• Application of rebates to new formulation of existing drugs. This option would consider line-extensions of existing drugs as if they were the original product for purposes of calculating the additional rebate. Under this option, when a new, extended release version of an existing drug is introduced, the additional rebate obligation for that new drug would be either the AMP percentage that is owed under current law or the AMP percentage owed for the original drug, whichever is greater.

Capturing Productivity Gains

Policy options in this area may include requiring annual market basket adjustments for certain fee-for-service providers to be adjusted by some or all of the expected productivity gains as a way to improve the accuracy of Medicare payments. Various options could be considered in this area, including requiring productivity adjustments beginning in fiscal year 2011 and in subsequent years or requiring this change only for a set time period.

Reducing Geographic Variation in Spending

Various policy options could be considered in this area to reduce inappropriate spending variations across and within geographic areas. One option would be to broadly review all Medicare Part A and B spending and propose spending reductions in areas where per beneficiary spending is above a certain threshold compared with the national average. 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 option would require similar analysis of Medicare Parts A and B spending, but require spending reductions only for individual providers who are above a certain threshold in spending compared to their peers in their local area. Spending per beneficiary for Medicare Parts A and B also would be adjusted under this option to reflect differences in the price of inputs and the health status of the local population. In all cases, policy options in this area would need to be weighed against delivery system reform options that are under consideration, which are also intended to reduce geographic variations in spending.

Modify the requirements for tax-exempt hospitals

The Committee could consider a policy option that would codify organizational and operational requirements for determining whether a hospital is a charitable organization for purposes of section 501(c)(3) tax-exempt status. Such requirements include, among other things, that section 501(c)(3) hospitals regularly conduct a community needs analysis, provide a minimum annual level of charitable patient care, not refuse service based on a patient's inability to pay, and follow certain procedures before instituting collection actions against patients. Certain hospitals that are critical to the communities they serve or which have an independent basis for tax exemption (e.g., as an educational or scientific research organization) are excluded from the minimum charity care requirement. The proposal includes provisions designed to ensure proper reporting and transparency of operations. In addition, the proposal provides for excise taxes, or “intermediate sanctions,” designed to encourage compliance with the operational requirements. These intermediate sanctions could be imposed, for example, in situations where revocation of tax-exempt status is viewed as inappropriate.