“PUBLIC OPTION” COMPROMISE – WILL IT REALLY BREAK THE DEADLOCK?

Multiple sources this morning are reporting that Senate Democrats, behind closed doors, have reached agreement on several key matters associated with the “public option” debate – getting them closer to the necessary 60 votes. It will be sent for a Congressional Budget Office score today, which is expected to take two days, and the details will not be released until after the score is completed, so the compromise can be “tweaked” if deemed desirable at that time.

One reported agreement has come on a proposal to expand eligibility for Medicare to those 55 or older (currently one must normally be 65).

The American Medical Association (AMA), American Hospital Association, and Federation of American Hospitals (FAH) quickly charged that the proposal would harm the availability of treatment because Medicare reimbursement rates to health care providers are significantly below the cost to them of treating Medicare beneficiaries, something that is possible only because providers “cost shift” by charging privately insured individuals more than it costs to treat them and using the resulting surplus to make up for what they lose when treating Medicare patients.

AMA President Dr. J. James Rohack, noting that “the AMA has longstanding policy opposing the expansion of Medicare given the financial projections for the future. Currently, . . . 28% of Medicare patients looking for a new primary care physician are having trouble finding one.”

The American Hospital Association noted, “Medicare pays hospitals just 91 cents for each dollar of care provided, yet the proposal being considered would allow people 55-65 to enroll in Medicare instead of the insurance exchange . . . “

According to InsideHealthPolicy.com, FAH says that “[t]he buy-in policy would „crowd-out‟ private insurance, would be controlled by CMS [the federal government‟s Centers for Medicare and Medicaid Services] and would only pay Medicare rates. The FAH also suggested that members point to MedPAC, which has “„documented negative and declining Medicare hospital margins for seven years.’”

The agreement also reportedly incorporates a provision from Sen. Jay Rockefeller (D-W.V.) which would require insurers to spend at least 90 percent of premium money on medical care, rather than on administrative costs or profits. This is known as a medical loss ratio.

Although no language from Sen. Rockefeller‟s proposal has emerged, generally speaking, a medical loss ratio is the ratio between what the company actually pays out in claims or medical services and what it has left over to cover sales, marketing, underwriting, taxes, and other administrative expenses and profits.

This would occur at the same time as other provisions in the health care bill impose significant additional administrative expenses on insurers involving reporting on quality and efficiency as well as “managing” care to achieve greater “value” for the funds expended. With a narrower margin for administrative expenses, this restriction could lead to is the inability of insurers to operate in the black and have the effect of driving many of them out of the market.

Despite press reports describing a “breakthrough,” these consequences and the opposition they stir may mean that the end of the Senate‟s battle over health care restructuring may not be as imminent as Majority Leader Senator Harry Reid (D-Nev.) would hope.

MEDICARE DOCTORS, PATIENTS AFFECTED BY HEALTH BILL PROVISION PENALIZING 1 IN 10 DOCTORS ANNUALLY

[Revised October 23, 2009]

Under the Senate Finance Committee health care restructuring bill, doctors who authorize treatments for their Medicare patients that wind up in the top 10% of per capita cost for a year will lose 5% of their total Medicare reimbursements for that year.[1] In the game of musical chairs, there is always one chair less than the number of players – so no matter how fast the contestants run, someone will always be the loser when the music stops. Similarly, under the penalty provision, a moving target is created – by definition, there will ALWAYS be a top 10%, no matter how far down the total amount of money spent on Medicare is driven.

As one editorial puts it:

Forget results. This provision makes no account for the results of care, its quality or even its efficiency. It just says that if a doctor authorizes expensive care, no matter how successfully, the government will punish him by scrimping on what already is a low reimbursement rate for treating Medicare patients. The incentive, therefore, is for the doctor always to provide less care for his patients for fear of having his payments docked. And because no doctor will know who falls in the top 10 percent until year's end, or what total average costs will break the 10 percent threshold, the pressure will be intense to withhold care, and withhold care again, and then withhold it some more. Or at least to prescribe cheaper care, no matter how much less effective, in order to avoid the penalties.[2]

In committee debate, Senator Kent Conrad (D-ND) said,

"As I try to put my feet in the shoes of a doctor, I don’t know how you separate out overutilization that is really overutilization. There is no way of knowing when you go through the year, what you are going to do at the end of the year."

He expressed concern there could be unintended consequences, adding that the penalty “leaves me cold.”

In a September 21, 2009 letter to Chairman Max Baucus (D-MT), the American Medical Association attacked its wisdom, noting, "Private and state insurance programs have experienced serious problems with the accuracy and validity of episode grouper methodologies to ‘profile’ physicians."

Civil libertarian columnist Nat Hentoff has written,

"Medicare doctors will not be the only losers. As the doctors struggle to keep abreast of the continually falling limit of the money they can authorize for their contingent of patients, consider what those patients will lose in the quality of their treatment."[3]

Senator Jon Kyl (R-Az) is expected to offer an amendment after the bill comes to the Senate floor (presently expected during November 2009) to strike the penalty provision, similar to one he unsuccessfully offered in the Senate Finance Committee, which was endorsed by the Alliance of Specialty Medicine. The Alliance is a coalition of 11 national medical specialty societies representing more than 200,000 physicians.

NOTES:
[1] The provision is (from language available at the Senate Finance Committee website) in "SEC. 3003. IMPROVEMENTS TO THE PHYSICIAN FEEDBACK PROGRAM." Beginning on page 683, the bill reads:

“(b) INCENTIVES FOR AVOIDING EXCESS UTILIZATION.—Section 1848(a) of the Social Security Act (42 U.S.C. 1395w–4(a)), as amended by section 3002(b), is
amended by adding at the end the following new paragraph:

9) INCENTIVE FOR AVOIDING EXCESS UTILZATION.—
(A) IN GENERAL.—With respect to physicians’ services furnished by an applicable physician on or after January 1, 2014, the fee schedule amount for such services furnished by the applicable physician during the year (including the fee schedule amount for purposes of determining a payment based on such amount) shall be 95 percent of the fee schedule amount that would otherwise apply to such services under this subsection (determined after application of paragraphs (3), (5), (7),
and (8), but without regard to this paragraph).

(B) APPLICABLE PHYSICIAN.—In this paragraph: (i) IN GENERAL.—The term ‘applicable physician’ means a physician which the Secretary determines is at or above the 90th percentile of resource use (or, if applicable, the standard measure
of utilization specified under subparagraph (C))with respect to a composite measure per individual, such as the composite measure under the methodology established under subsection (n)(9)(C)(iii).

While these adjustments may reduce the degree to which physicians are disproportionately penalized if they have sicker patients or work in high-cost areas, they do not change the fundamental danger of this provision, which (as explained above) is to create continual pressure on doctors to make ever-increasing reductions in the treatments and tests they order for their
patients so as to avoid being in the penalized top 10%. The Congressional Budget Office rates this as taking almost $1 billion from Medicare payments over a period of 6 years. See CBO 10/07/09 letter to Chairman Baucus, Table, page 3 of 9.

[2] Washington Times, September 25.

[3] Nat Hentoff column.