Health Care Law Reform : Health Care Lawyer & Attorney : McDermott Will & Emery Law Firm : Managed Care, Product Regulations

The Facts

On July 31, 2009, the House Energy and Commerce Committee approved HR 3200, the America’s Affordable Health Choices Act, by a 31-28 vote. Five Democrats joined all committee Republicans in voting against the measure. Passage followed lengthy negotiations with Democrats on the committee, first with fiscally conservative “Blue Dog” Democrats and then with liberal Democrats in the Congressional Progressive Caucus. Modifications to the underlying bill include the following:

• Requirements that a new public health insurance option must use a formulary and must negotiate payment rates with providers rather than setting rates at 5 percent above Medicare payment levels
• A requirement that insurers selling plans in the new health insurance exchange obtain government approval for premium increases exceeding 150 percent of the annual medical inflation increase
• A provision allowing the Secretary of Health and Human Services to negotiate drug prices with pharmaceutical companies under the Part D prescription drug benefit
• A provision allowing 12 years of market exclusivity for new brand name biologic drugs
• An increase in the small businesses exemption from “pay or play” requirements (the new penalties will be phased in, beginning at 2 percent for businesses with annual payrolls of $500,000 to $585,000, rising gradually to 8 percent for businesses with payrolls over $750,000)
• An expansion of the accountable care organization pilot program to include Medicaid

What’s at Stake

All three House committees with jurisdiction have now approved systemic health reform legislation. The three work products will be merged, and House floor action will occur after the congressional recess, which ends September 7, 2009. This means that systemic health reform is moving forward, although the Energy and Commerce Committee experience demonstrated that the fractious Democratic Caucus in the House has not yet coalesced around a shared vision for health reform legislation. 

Steps to Consider

Examine the legislation approved by the three House committees and the Senate HELP Committee, and assess the impact on your operation. Consider attending your legislators’ home state town hall meetings on health reform during the recess. Continually evaluate ongoing business decisions in light of the direction health reform is taking.

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The Facts

Health reform legislation approved by the House Energy and Commerce Committee on July 31, 2009, includes an amendment to strike the so-called Part D “non-interference” clause, which prohibits the Secretary of the U.S. Department of Health and Human Services (the Secretary) from interfering with negotiations between pharmaceutical manufacturers, pharmacies and Part D Plan Sponsors.  Click here for an overview of the underlying legislation.

The amendment would authorize the Secretary to directly negotiate with pharmaceutical manufacturers the prices—including discounts, rebates and other price concessions— that may be charged to Part D Plan Sponsors for covered Part D drugs. The negotiated prices would apply beginning in CY 2011, and would not prevent Part D Plan Sponsors from obtaining further reductions or discounts.

What’s at Stake

Inclusion of this amendment renews debate on the role of competition within the Medicare prescription drug benefit, and whether the federal government or private health plans are better suited to achieve greater reductions on prescription drug costs for Medicare beneficiaries (and taxpayers).  That this concept is part of health reform legislation also is noteworthy for potentially signaling a first step towards federal price setting for pharmaceuticals.

Steps to Consider

Part D Plan Sponsors, pharmacies and pharmaceutical manufacturers alike should closely watch reconciliation of the Energy and Commerce Committee’s bill with the bills adopted by the two other House committees of jurisdiction to see the fate of this clause. Whether the Senate Finance Committee includes such a provision in its draft legislation also will be significant. 

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The Facts

Health care reform legislation introduced in the House, the America's Affordable Health Choices Act of 2009, provides key details on financing health system reform. Significant revenue-raising proposals include the following:

• A surcharge on high-income individuals of 1 percent on adjusted gross income between $350,000 and $500,000 (married filing a joint return), a 1.5 percent surcharge on incomes between $500,000 and $1 million, and a 5.4 percent surcharge on income in excess of $1 million, to raise $543.9 billion over 10 years
• Corporate and international tax proposals that have narrow application or were widely expected by the business community, or both, including a further delay in the application of worldwide interest allocation rules relevant to U.S.-based multinationals for foreign tax credit purposes, denial of treaty benefits for groups parented by non-treaty country entities, and the long-anticipated codification of the economic substance doctrine applicable to a wide range of taxpayers, to raise $37.2 billion over 10 years

What's at Stake

As the House and Senate seek to pay for health system reform, it is expected that one-third to one-half of the cost of reform will be paid for through increased revenue from the tax code. Certain companies and high-income individuals may see significant increases in their tax liability. The Senate Finance Committee is considering a range of revenue-raising options. If the Senate selects different revenue-raising provisions, then the House and Senate will have to reconcile their differences in Conference, which could make passage of a bill more difficult.

Steps to Consider

• Watch the Senate Finance Committee, which is working to craft its own revenue raising proposals for health reform. It is expected that the Senate will turn to revenue-raising provisions not included in the House bill.  
• Small businesses should pay close attention to the surcharge proposal because many small businesses report profits on individual tax returns. Some members of the House are clamoring for changes to the surtax prior to House floor action. 
• Thus far, tax writers have indicated that the more controversial corporate and international revenue-raising provisions in the president’s budget will not be considered as part of health care reform, but companies should monitor the situation. 

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The Facts

On July 14, 2009, the chairmen of three House Committees with jurisdiction over health policy introduced the America’s Affordable Health Choices Act of 2009. The fraud and abuse provisions from the first House bill remain with some changes to strengthen penalties or make technical corrections. The bill also includes several new provisions and provides for $100 million additional annual funding of the Health Care Fraud and Abuse Control Fund.

Changes or technical corrections to existing provisions include the following:

• Authorization for the Secretary to disenroll certain providers of services or suppliers for failing to establish a compliance program with required core elements
• Clarification that a provider's repayment of an overpayment does not limit the provider's potential exposure to other governmental actions such as interest, fines, civil or criminal sanctions it if is later determined that the overpayment was related to fraud by the provider or supplier or by provider or suppliers employees or agents
• Expansion of the requirement for physician face-to-face encounters with patients prior to certifying eligibility for home health services to also mandate this requirement prior to ordering durable medical equipment or any other service if the Secretary determines it would reduce the risk of fraud waste and abuse 

New provisions include the following:

• Language addressing the period and effect of the Office of Inspector General exclusion authority
• A requirement for billing agents and clearinghouses to register with the Secretary
• Amendments to conform the Civil Monetary Penalties law to the recent False Claims Act amendments

What’s at Stake?

The health care reform fraud and abuse provisions have a wide reach and touch on nearly every aspect of providing health care—from enrolling as a provider to payment for services. Strict enforcement and penalty provisions will raise the compliance bar to new heights.

Steps to Consider

Consider how current compliance programs, policies and procedures, including those for repaying overpayments, will need to be modified to manage proactively the government’s increased focus on fraud and abuse.

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Democrats in the U.S. House of Representatives issued on July 14, 2009, a revised health care reform bill: America’s Affordable Health Choices Act of 2009. 

A whopping 1,018 pages long, the draft legislation addresses many of the key topics relating to health care reform, including the following:

• Medicare and Medicaid reforms
• Creation of health insurance exchanges in local service area, all of which would include a public plan option
• Provisions to promote preventive and wellness services
• Measures to improve efforts to combat fraud, waste and abuse

The revised bill also includes new provisions, such as a proposed tax on self-insured health plans, to fund the proposed health care reform.

Click here for a description of the legislation, released in conjunction with the bill.

Click here for a section-by-section summary of the bill.

Click here for a document comparing this July 14, 2009, bill to the initial draft bill issued by House Democrats on June 17, 2009.  Click here for a summary of top-line changes between the June 17, 2009, and July 14, 2009, versions of the legislation.

Click here for additional information about the proposed legislation, including descriptive documents released in connection with the bill, that is available on the House Committee on Energy and Commerce website.

Click here for a timeline in which the proposed legislation would be implemented.

Click here for the Congressional Budget Office's preliminary analysis of the legislation's cost.

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