Health Care Reform

I know that many of you have been trying to keep up with the ‘moving parts” of the current health care reform debate.  In the U.S. Senate, presently there are two committees working on a variety of proposals. In the U.S. House of Representatives, there are three committees also working on reform.  The working documents for some of these plans are 600 to 700 pages in length and things are moving rapidly as each committee works on their proposal.

The President wants the Congress to pass a health care reform plan in October 2009 that will make sweeping changes.  Today, the U.S. spends more than $2.5 trillion on health care and there are many individuals who believe we could be more effective with how that money is spent.  Reform is needed.  Certainly, there is hope in this historic moment for finding coverage for those who do not have health insurance.

One of the major problems our representatives encounter in this debate is how to pay for the reform.  Estimates last week place the price tag at $1 to $1.6 trillion dollars. There are several ways to pay for this which include: additional taxes, cuts to existing programs, innovation and more effective use of the dollars we spend.  It will probably take something from all categories in order to close the gap between what is needed to finance the reform and what we as a nation have available to spend on health care.

Currently many changes are being discussed, among which are:
-changes to the Market Basket Index or a reduction in what Medicare pays for inpatient and outpatient services;
-reductions in payment to hospitals who treat a greater share of indigent or Medicaid and Medicare patients;
-reductions in funding for medical education;
-adding another ‘Public Plan’ which would be like Medicare and Medicaid but directed to a different group of people;
-expanding eligibility to Medicaid so that more people would qualify;
-reducing payments to hospitals who have too many readmissions for heart and pneumonia patients;
-reductions in Medicare to hospitals that are unable to perform with process measures like providing the pneumonia vaccine;
-bundling certain payments to hospitals and post acute providers like nursing homes and rehabilitation;
-reducing administrative costs through the use of standardization and computers; limits on physician-owned hospitals and self-referrals;
-and reducing Medicare and Medicaid payments to hospitals for hospital-acquired conditions. 

Additionally, new pilot projects or models are being proposed to improve coordination of care  – - pilot projects like Accountable Care Organizations (ACOs) to  align physician and hospital payments; a medical home model of managing patient care; reducing disparities in care; creating a new bureau of health information; and additional monetary penalties for compliance issues as well as a more active effort to prevent and remove the cost of noncompliance in the Medicare and Medicaid program.

Wow, that is a great deal to keep up with as we consider the scope and size of what is proposed.  At this moment, we are focusing on the impact of one of these changes, adding another ‘Public Plan.’  I would like to update you with some additional thoughts to consider.  If you are inclined, I have provided the names and addresses of our representatives so that you can act on this information in a way that you think would best help your voice to be heard as the discussion continues in Washington.

The Public Plan Option
It is difficult to take a position on something without knowing all the details, but at this point it is clear that a ‘Public Plan’ (paying like Medicare) would add to the problem of another government program that did not cover the full cost of caring for patients.  When you hear someone say that Medicare and Medicaid pays ‘cost’, you need know that there are many costs that are disallowed by these programs.  For example, these disallowed costs range from simple items like the cost of telephones and televisions.  These items are considered to be ‘luxuries’ and any cost associated with providing them to patients is disallowed.  Likewise, any costs associated with physician call pay for emergency/trauma services or CRNA salaries in the operating rooms is also disallowed by the Medicare and Medicaid programs on the hospital cost report.  On the whole, these ‘disallowed costs’ are a part of providing services to patients.  Therefore, we would be concerned about another ‘Public Plan’ which would add to the underpayment by paying rates at Medicare and Medicaid levels.

Hospitals in South Carolina already experience a loss or negative margin in the care of Medicare patients.  As you can see from the graph below our statewide aggregate Medicare margin in 2007 is a negative margin of 14.1 percent.


Medicare Margins Sate Only.xls

A second issue to consider with the ‘Public Plan’ is related to who may be allowed into the plan and whether or not employers will drop their employer based plans, moving their work force to a ‘Public Plan.’  For better or worse, hospitals depend on cost shifting to commercial insurance patients to cover the cost not covered by Medicare, Medicaid or charity patients.  This is how the health care system has developed in the U.S. in the last fifty years and any dramatic change to this fact will have much larger consequences on the ability to offer and support many current services.  If a new ‘Public Plan’ follows a system of underpaying providers and at the same time makes the group smaller who bear the burden of the underpayment, then the ability to offset Medicare and Medicaid losses with gains from commercially insured patients will no longer be available.  Hospitals would be forced to ‘ration’ care by eliminating high cost services that deliver care to the most severely ill patients.

Most agree the current system of rapidly rising costs and millions of uninsured people is not sustainable.  Most agree that the reforms should also concentrate on the health of the public so that costs do not continue to rise.  The addition of a new ‘Public Plan’ to the insurance market may help drive competition among insurers, but perhaps it should be limited to those without insurance or through some ‘means testing,’ where those who are outside the reach of Medicaid would have insurance coverage.  The adoption of a much larger and open ‘Public Plan’ would harm ’safety net’ hospitals like McLeod and would limit some services to people in the future, even if they had insurance.

This is our Legislative Delegation contact information below. If you are inclined, I have provided the names and addresses of our representatives so that you can act on this information in a way that you think would best help your voice to be heard.  I will be happy to review any comments you have about the ‘Public Plan’ based upon information you are receiving.

The Honorable James E. Clyburn
United States House of Representatives
Washington, D.C. 20515

The Honorable John M. Spratt, Jr.
United States House of Representatives
Washington, D.C.  20515

The Honorable Lindsey Graham
United States Senate
Washington, D.C.  20510

The Honorable Jim DeMint
United States Senate
Washington, D.C.  20510

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