Upon achievement of final health system reform legislation, McDermott Will & Emery will host a special half-day web-based program in early 2010. McDermott's distinguished health care and employee benefits lawyers will identify your business' most urgent and significant concerns under the legislation. Our focus will be to assist your strategic decision making in the immediate aftermath of this historic legislation.
More information will be available soon.
The Facts
After months of heated debate and an unprecedented all-day White House health reform summit on February 25, 2010, President Obama has begun the final push toward passage of comprehensive health reform. Current negotiations involving Senate Democratic leader Harry Reid and House Speaker Nancy Pelosi are focused on the president’s proposal, which is largely based on the bill approved by the Senate on December 24, 2009, but which also reflects compromises reached between Senate and House Democrats.
On March 2, 2010, the president submitted a letter to congressional leaders indicating that he is open to further examining the following four issues raised by Republicans during the summit:
Click here for the letter.
And, on March 3, 2010, just a little under a year after his initial speech announcing his intent to overhaul the health care system, President Obama made it clear during his 20-minute speech that he intends to utilize the reconciliation process, resulting in an up-or-down vote on a merged measure. Click here for the speech transcript. The president also made it clear that he expects Democrats to support this strategy, regardless of their re-election prospects and concerns.
What’s at Stake
Succeeding with this strategy, however, will not be easy. Not only will Speaker Pelosi have difficulty rounding up the necessary votes in the House, but Senate Republicans may attempt to forestall the process by offering a myriad of amendments. However, if the president and bipartisan negotiations are successful, a health reform plan may be enacted by early April 2010.
Steps to Consider
All in the health sector, including health care consumers, should analyze any revisions to the president’s proposal and should continue to closely monitor the progress of the health reform debate.
The Facts
After seven hours of extraordinary political theater at the White House health care summit on February 25, 2010, President Obama is no closer to winning Republican support for his reform plan. Click here for summit transcripts. Indeed, Republicans claim a majority of the public opposes the Democrats’ health overhaul plan and have called for “starting from scratch.” Although the summit was unsuccessful in resolving the bipartisan split, it effectively restored health reform to center stage, and Democrats are forging ahead with new vigor.
Because the January election of Senator Scott Brown (R-MA) deprived Democrats of a filibuster-proof super-majority in the Senate, Democrats are expected to use an expedited budget reconciliation process to move reform legislation. While the precise details will be determined by both parliamentary requirements and political considerations, it is expected that the House—once assured that specific changes are forthcoming—will approve the Senate-passed health reform bill (HR 3590). The Senate will then pass a “side-car” health reform bill through the reconciliation process, which requires only a simple 51-vote majority. This “side-car” will make changes to HR 3590 designed to be responsive to the concerns of House Democrats. These changes will likely include increased subsidies to assist lower income Americans to purchase health insurance and changes to minimize the impact of the “Cadillac tax” on high-cost insurance plans. The House would also approve the reconciliation bill. The president would then need to sign into law both the Senate-passed health reform bill and the reconciliation bill that amends it.
What’s at Stake
The president and congressional leaders do not currently have the Democratic votes needed to pass health reform legislation without any Republican support, but the campaign to find those votes is in full swing. If the votes are secured, massive health overhaul could be enacted in the near-term.
Steps to Consider
The president will likely issue revisions to his reform plan, which may reflect incorporation of some Republican ideas. Despite this, no Republican support is expected. All in the health sector, including health care consumers, should analyze any revisions to the president’s proposal and continue to monitor the progress of the health reform debate.
The Facts
In preparation for the bipartisan White House health care summit on February 25, 2010, President Obama unveiled on February 22 his own health care reform proposal. The president's plan largely tracks the health reform bill passed by the Senate in December 2009. The proposal, estimated to cost $950 billion over 10 years, would cover an additional 31 million people and is intended to serve as a springboard for bipartisan discussion at the summit. It is unlikely, however, that the proposal will draw bipartisan support given that the proposal appears to have been crafted to attract additional support from liberal Democratic members of the House of Representatives. Already, the early read from the Congressional Progressive Caucus is positive. The president and Democratic leaders are hopeful that this new proposal, along with the high-profile White House summit and recently announced double-digit premium increases by some insurers, will help produce health reform legislation soon.
Like the December Senate bill, the president’s proposal does not include a public option or the more restrictive abortion language passed by the House. Some key differences made to provisions in the Senate bill include the following:
What’s at Stake
If the current gridlock over health care reform cannot be resolved in a bipartisan manner, Democrats will likely attempt to use the budget reconciliation process, which requires only a simple majority vote in the Senate, to pass health reform legislation.
Steps to Consider
All in the health sector, including health care consumers, should evaluate the president’s proposal and continue to monitor the progress of the health reform debate.
The Facts
Both the House health reform bill, H.R. 3962 (Affordable Health Care for America Act), and the Senate health reform bill, H.R. 3590 (Patient Protection and Affordable Care Act), include provisions establishing one or more health insurance marketplaces (exchanges). The exchanges would serve as an organized and transparent marketplace designed to facilitate access to, evaluation of and purchase of qualified health insurance plans by individuals and small businesses. Premium subsidies would be available through the exchange, and benefit packages would be structured in standardized tiers. An exchange would seek to create a large enough risk pool so that competition among insurers would increase not only with respect to pricing but on quality and service aspects as well. Insurance market reforms in both bills would disallow preexisting condition exclusions and impose medical loss ratio requirements.
There are key differences between the House and Senate proposals. The House bill would create one national exchange overseen by a new federal agency, the Health Choices Administration (HCA), with an opt-out provision for states under certain circumstances. The HCA would oversee the health plans and premiums charged for policies available through the exchange. Under the House bill, the exchange would be the exclusive marketplace for all individual (non-group) policies, other than grandfathered policies. Insurers would be required to bid to participate in the exchange, with the HCA able to negotiate terms before allowing a plan to participate in the exchange. By contrast, the Senate bill provides for each state to establish and administer its own exchange, subject to compliance with minimum federal standards, with federal intervention if a state does not provide an exchange.
What’s at Stake
The exchanges will be at the crux of revamping the individual and small business markets. Whether there is a single national exchange or separate state exchanges will have significant implications for providers, payors and consumers. The House proposal could offer greater economies of scale and potential efficiencies for products offered across state lines, but would represent a significant shift from how insurance is currently regulated at the state level. The Senate proposal would retain the benefit of the local market knowledge of the states and would preclude an additional layer of federal regulation.
Steps to Consider
Understand the impact of the exchanges on structure and oversight of the insurance market, evaluate current plans and prepare for refinements needed to transition to new exchanges.
The Facts
Although Senate Democrats recently lost their filibuster-proof supermajority, President Obama reiterated in his January 27, 2010, State of the Union address that he is intent on achieving health reform this year. The president exhorted Congress not to “run for the hills,” and invited Congress to instead “come together and finish the job for the American people.” In an effort to encourage Republicans and Democrats to work together, the president invited congressional leaders to a bipartisan, half-day summit on health reform on February 25, 2010. Click here for the president’s invitation letter and invitation list.
House Speaker Nancy Pelosi proclaimed: “You go through the gate. If the gate’s closed, you go over the fence. If the fence is too high, we’ll pole-vault in. If that doesn’t work, we’ll parachute in. But we’re going to get health care reform passed for the American people.” Senate Majority Leader Harry Reid’s spokesman underscored these sentiments, stating: "We remain confident we will pass health reform this year.”
Whether comprehensive legislation, piecemeal legislation or no health reform legislation is passed this year will affect not only the health sector and health care consumers, but also the mid-term elections this November.
What’s at Stake
Given the comprehensive nature of health reform legislation, every aspect of health care is at stake.
Steps to Consider
Providers, plans, pharmaceutical manufacturers, device makers, and all in the health sector or affected by the health sector, including health care consumers, should continue to carefully monitor the progress of the health reform debate and evaluate the impact of the various proposals.
The Facts
On January 13, 2010, the U.S. Department of Health and Human Services (HHS) proposed requirements for hospitals, physicians and other eligible providers to earn incentives for the adoption and “meaningful use” of “certified electronic health record (EHR) technology.” Incentives in the form of enhanced Medicare and Medicaid reimbursement are received by demonstrating meaningful use of certified EHR technology. The incentives start in 2011, but become penalties by 2015 through reduced reimbursements for those who do not achieve meaningful use. This initial set of standards is intended to begin to define “a common language to ensure accurate and secure health information exchange across different EHR systems.” Certified EHR technology can be either a “complete EHR or a combination of EHR modules" to enable providers to adapt to innovations in a rapidly evolving industry while ensuring access to a wide array of technology options, from vendor-based products, to homegrown technology, to hosted services on a subscription basis, to open source products. For more information, see McDermott Will & Emery’s White Paper “HHS Establishes the Initial Pathway for Qualifying for HITECH Act Incentives Dollars for Meaningful Use of Certified Electronic Health Record Technology.”
What’s at Stake
Eligible hospitals and professionals may receive incentive payments for achieving and may avoid penalties for failing to achieve meaningful use of certified EHR technology. Some hospitals and doctors have already expressed concern about the all or nothing structure of the proposed rule, which requires providers to meet 23 criteria at once, or fail to qualify at all. Vendors of EHR systems or EHR modules must ensure their products have the features and functionality to be certified and to enable meaningful use although the certifying bodies have yet to be certified.
Steps to Consider
Providers, vendors of health information technology and other interested parties should consider submitting comments to HHS prior to the March 15, 2010, deadline.
In selecting an EHR, ensure that the EHR product by itself or combined with other EHR modules will achieve, or be modified by the vendor to achieve, certification. Assess interoperability of modules. Consider contractual commitments covering interoperability, certification and meaningful use.
Vendors should develop a road map or work-around to ensure that products will be certified and that they will enable meaningful use. Vendors should be ready to address customer demand for assurances.
The Facts
Medicare Advantage (MA) Program changes, among other Medicare-related provisions, have appeared in drafts of jobs legislation under development on Capitol Hill. Select proposals include the following:
Senate Majority Leader Harry Reid (D-NV), however, elected to move forward with draft legislation that excludes all health-related provisions. These proposed MA Program changes, among other health-related proposals, may be included in this bill, or another piece of legislation, later this month.
What’s at Stake
The proposal to modify the national per capita MA growth rate would neutralize the cut in the Medicare physician fee schedule that is statutorily required to be incorporated into MA Plan benchmarks.
Steps to Consider
MA Organizations should continue to monitor and analyze proposed changes to CY 2011 benchmarks as CY 2011 MA Plan bid submissions are developed in advance of the Monday, June 7, 2010 bid submission deadline.
The Facts
The Senate health reform bill would establish a 15-member Independent Payment Advisory Board (IPAB) with significant authority with respect to Medicare payment rates. Beginning in 2014, in any year in which the Medicare per capita growth rate exceeded a target growth rate, the IPAB would be required to recommend Medicare spending reductions. The recommendations would become law unless Congress passed an alternative proposal that achieved the same level of budgetary savings. Subject to some limitations—hospitals, for example, would be exempt until 2020—the IPAB could recommend spending reductions affecting Medicare providers and suppliers, as well as Medicare Advantage and Prescription Drug Plans. In years in which the IPAB would not be required to make recommendations, it would be required to submit an advisory report. Every two years, the IPAB would make recommendations on slowing the growth of private health expenditures.
The proposed IPAB has drawn significant criticism from advocacy groups, and a similar provision is not included in the House bill. However, the Senate’s IPAB proposal has strong support from President Obama and is expected to emerge in some form in any final comprehensive health reform package.
What’s at Stake
Medicare providers and suppliers could be subject to significant payment cuts if the proposed IPAB is enacted and overall Medicare spending continues to increase at its current rate. A group of providers and advocacy groups, including the American Hospital Association, joined in a January 11, 2010, letter opposing the IPAB, noting that it would not be accountable to anyone but the president (who appoints its members). Shifting payment authority from Congress to an independent commission would be a significant change, and is viewed as one of the most meaningful measures in health reform legislation with respect to bending the cost curve in health spending.
Steps to Consider
The Facts
On January 14, 2010, congressional leaders and the White House announced that they had reached a compromise with labor unions to proceed with the excise tax on so-called Cadillac, or high-cost, health plans. The excise tax was included in the Patient Protection and Affordable Care Act (H.R. 3590) passed by the Senate. The provisions of that bill called for a 40 percent excise tax on insurance companies and plan administrators for any employer-sponsored health coverage whose value exceeded $8,500 per year for individuals and $23,000 for families. The tax was to take effect in 2013.
The compromise reached last week with the labor unions dictates that the thresholds for the tax will be slightly higher than in the Senate bill—$8,900 for individuals and $24,000 for families. These threshold levels would be increased based upon age, gender and geography to prevent the tax from disproportionately affecting people in high-cost groups. Additionally, starting in 2015, dental and vision coverage will not contribute to the thresholds. Most importantly for the labor unions and their employers, the new compromise exempts collectively bargained health plans and state and local government employees from the tax until 2018. This exception was made to accommodate for the fact that many unions negotiated better health benefits for their members at the expense of wage increases.
The tax is expected to raise $90 billion in revenue over the next 10 years. By contrast, the original Senate bill would have raised $149 billion over 10 years.
What’s at Stake
Businesses with high-cost health care plans hiring non-union employees would feel the effects as early as 2013 under this compromise proposal. Businesses with collectively bargained health care plans are likely to benefit from the exemption from the excise tax until 2018, which gives unions time to renegotiate their agreements with employers.
Steps to Consider
Businesses should evaluate their health care plans to determine to what extent they will be affected by this tax. Insurers should assess the impact of the tax on the coverage they offer.
The Facts
Both the recently passed Senate and House health care reform bills contain provisions that affect retiree health benefits. Both bills remove the tax exemption for Medicare Part D subsidies received by employers who provide retiree prescription drug coverage. In addition, the House bill prohibits employers from changing a retiree’s available benefits once the individual has retired, and the Senate bill contains a 40 percent excise tax on retiree health benefits that exceed certain thresholds ($9,850 for single coverage and $26,000 for family coverage). Both bills decrease the Medicare prescription drug coverage gap by $500 (with the House bill completely eliminating the gap by 2019) and provide a 50 percent discount on brand-name drugs to retirees affected by the coverage gap.
What’s at Stake
These provisions have the potential to decrease employer-provided retiree health and prescription drug benefits. Employers will find it much more expensive to provide these benefits without the tax exemption for the prescription drug coverage subsidy and with the threat of a 40 percent excise tax on health coverage beyond the stated threshold. This extra cost may serve as a deterrent to providing such benefits. In addition, the inability to alter the benefits offered to retirees provides an incentive to decrease or eliminate retiree benefits so employers are not obligated to provide such coverage indefinitely. Further, the reduction in the Medicare coverage gap and discount on drugs will influence employers to eliminate prescription drug coverage because these increases bring the Medicare drug benefit to a level closer to that of employer-provided coverage.
Steps to Consider
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