Medicolegal Issues

Healthcare Reform


The struggle over U.S. healthcare reform has consumed Congress for most of the year. It has dominated media coverage and fueled informal debates in all parts of the country. A resolution to the heated back-and-forth should arrive by Thanksgiving in the form of meaningful healthcare legislation, according to Vice President Joe Biden. Then again, Sen. Jim DeMint (R-S.C.) has pledged to cancel the Democrats’ planned festivities, preventing what he and other opponents have described as a “government takeover” of the healthcare system.

Amid the emotional tug-of-war and evolving bills, the nonpartisan Congressional Budget Office (CBO) has laid out the stakes. In a June letter to the Senate Budget Committee, CBO Director Douglas W. Elmendorf begins: “In the absence of significant changes in policy, rising costs for healthcare will cause federal spending to grow much faster than the economy, putting the federal budget on an unsustainable path.”

Most experts, analysts, and politicians agree that something must be done. It’s all a matter of what and how much it will cost. In the spirit of Thanksgiving, let’s talk turkey about the healthcare reform proposals that may or may not survive the holiday, and the key players who will determine whether this year’s reform effort stays alive—or gets stuffed.

Main Points of Disagreement

Whether healthcare reform should include a public option for a national insurance plan, smaller nonprofit co-ops, or nothing of the sort has dominated the debate over the competing proposals in Congress. But it’s hardly the only major disagreement.

Beyond the sticky matter of how to pay for everything, businesses instinctively have opposed any requirement that employers offer health insurance to their employees. Then again, that opposition seems to be softening as more details of the plan are released.

In principle, widespread agreement exists on the notion that individuals should have guaranteed issue and renewability of their healthcare insurance, regardless of pre-existing conditions. Far less clear, however, is the matter of how much those individuals will have to pay for their policies.

Main Points of Agreement

Not everyone is on board, but any healthcare reform bill that emerges from Congress is likely to contain three main elements, according to Leighton Ku, director of the Center for Health Policy Research at George Washington University in Washington, D.C.

1. Expansion of Medicaid

Details are still in flux, and some lawmakers have grumbled about the potential cost to states, but Ku says broad agreement exists for an expansion of Medicaid that would cover individuals and families who earn up to 133 percent or so of the federal poverty line. Estimates suggest that an additional 9 million uninsured, low-income adults could be covered. “That’s a huge swath right there that we can take out of the uninsured category,” he says.

2. Health Insurance Exchanges

Think of exchanges as the Travelocity or Orbitz for health-insurance plans, complete with coupons for the needy. Sliding-scale tax credits or vouchers could be used by low- to moderate-income people to buy insurance in publicly available, government-regulated marketplaces where such parameters as premiums and coverage could be compared. “The concept is that by setting up standards and having a place where it’s all together, it would create a competition,” Ku says.

In essence, more competition could lead to cost reductions.

3. An Individual Mandate

Hardship exemptions are likely, but people who can afford it will be expected to buy insurance or pay a penalty. Republican rumblings suggest that agreement on this point may not be as widespread as initially thought.

Main Players

President Obama has made healthcare reform the centerpiece of his first-year agenda. If he is to succeed, organizations like AARP will be key in winning over skeptical seniors. But the real power lies with a handful of Congressional leaders who have the ability to make or break any legislation. A brief rundown:


The illness and death of longtime healthcare reform advocate Sen. Edward Kennedy (D-Mass.) shifted the Congressional spotlight to Sen. Max Baucus (D-Mont.), right, chairman of the Senate Finance Committee and leader of the committee’s “Gang of Six” negotiators—three Democrats and three Republicans. In mid-September, Baucus unveiled his preliminary “mark” of the America’s Healthy Future Act. He did so without any Republican endorsement.

The overhaul is less expensive and more moderate than the America’s Affordable Health Choices Act, introduced in the House of Representatives, and a partial bill passed earlier by Sen. Kennedy’s Health, Education, Labor and Pensions (HELP) Committee. Nevertheless, progressives and conservatives criticized the Baucus plan. Even so, Sen. Olympia Snowe (R-Maine) has become a major focus of Democrats’ efforts to find 60 votes and avoid a Republican filibuster, though the seating of a replacement for Sen. Kennedy would help Democrats regain a filibuster-proof majority. One key point: Analysts say bringing Sen. Snowe on board might not win other Republican votes, but she might offer cover for such conservative Democratic senators as Mary Landrieu (D-La.) and Ben Nelson (D-Neb.).

As a last resort, Democrats have raised the possibility of using reconciliation, an arcane process originally intended for budgetary items. Reconciliation requires only a 51-vote majority, but complicated rules and a promised Republican challenge could lead to chaos.


Speaker Nancy Pelosi (D-Calif.), left, and Rep. Henry Waxman (D-Calif.) have dominated the stage, but they have had to balance the priorities of the chamber’s progressive wing with the concerns of the “Blue Dog” contingent of conservative Democrats.

Paying For It All

Meaningful reform without breaking the bank is a common refrain in healthcare discussions. Despite heated disputes over taxes, fees, fines, and service cuts to help defray costs, two main mechanisms for savings have emerged, according to the Center for Health Policy Research’s Ku:

1. Curbing Medicare Advantage

With the creation of Medicare drug benefits in 2003, Medicare’s managed-care plans run by private companies were revamped and renamed Medicare Advantage Plans. In return for extra benefits or lower co-payments, the 22% of Medicare beneficiaries enrolled in these plans are generally limited to in-network doctors or hospitals. Based on Medicare Payment Advisory Commission estimates, Medicare reimburses the private plans, on average, 14% more than standard Medicare fee-for-service plans—or an additional $12 billion in 2009.

One cost-cutting idea would be to restore a level playing field, Ku says, and pay managed care on par with Medicare and Medicaid. “This is one of the largest components of savings that people are anticipating,” he adds. A backlash by seniors, however, has led to a “grandfathering” clause that would protect the extra benefits in certain parts of the country, potentially reducing the overall savings.

2. Disproportionate Share Hospital (DSH) Cuts

Both Medicare and Medicaid pay extra to hospitals that serve a high proportion of needy patients. The savings mechanism here is less clear, but the expectation is that because the number of uninsured patients will drop dramatically with legislation, the DSH payments could be scaled back as well. The cuts, phased in over a decade, could amount to tens of billions of dollars in overall savings, though the House and Senate Finance bills differ in how deep the trims should be.

For More Information

  • Kaiser Family Foundation

    The foundation’s comprehensive “Health Reform” page offers a side-by-side comparison of 12 healthcare proposals, including both Democratic and Republican bills.

  • Congressional Budget Office

    The nonpartisan office has already weighed in on the economic effects of preliminary versions of the competing healthcare reform bills, and will likely do so again.


    A project of The University of Pennsylvania’s Annenberg Public Policy Center, the site has debunked dozens of healthcare reform myths.


    The Truth-O-Meter, a project of the St. Petersburg Times, has put recent healthcare assertions into categories ranging from “True” (substantiated assertions) to “Pants on Fire” (for absurd untruths).


    SHM updates health reform progress and offers a monthly “Washington Update” outlining the society’s policy positions and activities.

Other Proposals to Keep an Eye On

By the Numbers

46.3 million

People living in the United States without health insurance in 2008, or 15.4% of the population

Source: U.S. Census Bureau

  • Addition of a hospital value-based purchasing (VBP) program to Medicare, which would tie incentive payments to performance on various quality measures;
  • Expansion of the Physician’s Quality Reporting Initiative (PQRI), with a 1% payment penalty by 2012 for nonparticipants;
  • Creation of a CMS payment innovation center to try out new payment structures, with the goal of improving quality and reducing Medicare costs; and
  • Establishment of a Medicare pilot initiative called the Community Care Transitions Program, which would spend $500 million over 10 years on efforts to reduce preventable rehospitalizations; SHM’s Project BOOST (Better Outcomes for Older Adults through Safe Transitions) likely would qualify.

Four Proposals Hospitalists Should Know About

1. Fixes to Medicare’s Physician Fee Schedule

Four Proposals Hospitalists Should Know About

The House bill would provide $228.5 billion to repeal the sustainable growth rate (SGR) used to determine the annual physician fee schedule and eliminate accumulated SGR debt, preventing a potential 21.5% cut in 2010 reimbursement fees. The more cost-conscious Senate Finance bill, by contrast, provides a one-year patch, providing a 0.5% update instead of any cut, but it leaves the SGR in place. “We understand the budgetary constraints that Senator Baucus is working with, but we’re disappointed that the SGR is getting another patch,” says Eric Siegal, MD, FHM, chair of SHM’s Public Policy Committee. “If we’re going to talk about restructuring healthcare, then we also need a payment system that is stable and that is not subject to the yearly whims of Congress.”

2. Medical Liability Reform

The Senate Finance plan’s nonbinding “Sense of the Senate,” which encourages states to pursue alternatives to the current civil litigation system, is a “missed opportunity,” according to Dr. Siegal. “We think that the Senate Finance Committee should have gone further with this,” he says, noting that medical liability is a significant driver of unnecessary healthcare expenses. The House bill is more robust in pushing medical malpractice reform by offering states federal assistance, Dr. Siegal says, but still leaves room for improvement.

3. Primary-Care Bonus Payments

Conceptually, the Senate and the House bills offer similar proposals to improve reimbursements for primary care, something Dr. Siegal says SHM has consistently and strongly supported “as a way of preventing further erosion of the primary-care infrastructure.” Depending on how the Senate Finance plan defines “primary care,” hospitalists might benefit directly. “Even if you get past the issue of whether it hits our pocketbook favorably,” Dr. Siegal says, “it is in the strategic interest of our specialty to have a strong primary-care base.”

4. Bundled Payments

Proposals in both the Senate and House bills for a pilot program aimed at bundling payments around an episode of care have been greeted cautiously by hospitalists, as have other new payment proposals. Robust and meaningful demonstration projects, Dr. Siegal says, are necessary to get a better sense of what the consequences could be, intended or otherwise. “Any time you’re talking about changes to the fundamental architecture of how we pay people for what they do, you’d better spend some time looking into what the implications of that are,” he says. TH

Bryn Nelson is a freelance writer based in Seattle.


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