(Blog post care of ITUP intern Kandis Driscoll...)

Heads up that a new maternity care bill -- well, new to this blog -- AB 1825 (De La Torre) is poised to reach the Senate floor.

Some background first... In California, there is no existing law requiring health insurers to designate which basic health care services are covered, so health insurers are not forced to provide coverage for maternity services. As a result, an estimated $21 million is paid for women who already have insurance, but are lacking or enduring substandard maternity care, and thus, seek this care through state programs, such as AIM, the Access for Infants and Mother’s program.

AB 1825 would require health insurers to submit to the CA Department of Insurance revised policy forms that provide coverage for specified maternity services, including prenatal care, ambulatory care maternity services, involuntary complications of pregnancy, neonatal care, inpatient hospital care with labor, delivery and postpartum care.

Status... AB 1825 is currently parked at the Senate Appropriations Committee due to a budgetary analysis stating that two staff positions will be needed for effective implementation, roughly totaling $100,000 each year. (In these lean budget years, most bills with any price tag at all get held up at Approps).

Despite this associated expense, Beth McGovern, legislative director of the California Commission on the Status of Women, believes the bill will actually save money. She is convinced that, "women who don't have health insurance are likely to delay or forego prenatal care, which increases the likelihood of pregnancy complications, and complications at birth…that often involves public cost to take care of both the patient and the child."

The committee is set to take up AB 1825 again in August once the state Legislature reconvenes. Will update readers then...

I'm working on a piece on health information technology with Kiwon but wanted to provide loyal ITUP blog readers with a preview that summarizes the final meaningful use rule released last week by CMS. Eligible professionals and hospitals must abide by these requirements in order to demonstrate 'meaningful use' of an electronic health record product and thus receive incentive payments (up to $44,000 for Medicare providers and $63,750 for Medicaid providers over 5 years) for the adoption of an EHR.

Check out our meaningful use table on objectives and outcome measures for the details.

Yesterday, HHS Secretary Kathleen Sebelius announced new rules under health reform that will require health plans to provide preventive services with no-cost sharing for enrollees so long as in-network providers deliver them. The requirements apply only to new health plans that start providing coverage after September 23, 2010 or existing plans who make substantial changes after the date.

For individuals in those plans, there will be no co-payments, deductibles, and out-of-pocket charges for a list of services in line with recommendations provided by the U.S. Preventive Services Task Force. The intention is to increase the utilization of preventive services for Americans, who currently use less than half the services recommended by their physicians.

With a list that includes cancer screenings, routine vaccinations and wellness visits for children, Sebelius predicts that the new requirements will extend benefits to 31 million U.S. residents who are newly covered through their employer and 10 million residents who sign-up for new individual plans.

For more, see yesterday's California Healthline.

Certainly, this is a huge step towards offering Americans more comprehensive care in tough economic times. We’d love to hear your comments!

Also on Tuesday, the CA Assembly Health Committee passed SB 810 (Leno), the California Universal Health Care Act. SB 810 would set up a single payer system in California, essentially replacing private insurance companies with a single health care pool into which all California residents pay. The system would be administered by the state and rates for health services, prescription drugs and medical supplies would be negotiated to and set by a designated commissioner.

State Senator Mark Leno (D-San Francisco) argued that a single payer system would reduce administrative costs, increase shared responsibility, promote choice, allow for actuarially sound reimbursements, streamline benefits, and increase efficiency. Funding for the bill would come from shifting the $200 billion that Californians currently spend on private coverage to the single payer system. SB 810 also calls for bulk purchasing of prescription drugs and medical equipment, estimated to save California $5.2 billion in the first year.

Read the SB 810 fact sheet.

SB 810 is nearly identical to SB 840 (Keuhl), legislation was introduced by Senator Sheila Kuehl in 2006 and again in 2008, and legislation vetoed twice by Governor Schwarzenegger. If it reaches the governor’s desk, SB 810 is expected to be vetoed as well.

The bill now goes to the Assembly Appropriations Committee...

On Tuesday, the Departments of Health and Human Services (HHS) issued regulations to implement health reform's new Patient’s Bill of Rights.

The Right's include:
• Children accessing insurance regardless of pre-existing conditions.
• Choosing a doctor or pediatrician from your plan’s provider network.
• Seeing an OB-GYN without needing a referral.
• Reviewing insurers’ premium increases.
• Getting the most from your premium dollars.
• No lifetime limits on coverage.
• Keeping young adults covered.
• No arbitrary rescissions of coverage.

For more, see the HHS Patient's Bill of Rights Factsheet.

In addition to tackling the High Risk Pool and 1115 Hospital Waiver, policy makers in Sacramento are also hard at work on legislation that will establish the framework for the California Health Insurance Exchange.

AB1602 (Perez) is set for hearing in the Senate Health Committee on June 30th, and SB 900 (Alquist/Steinberg) will be heard in Assembly Health on June 29th.

At or before both hearings, amended language for each bill will be presented. Among others topics, the bills will likely address:
• The general structure and governance of the Exchange;
• Whether the Exchange will be a public agency, a semi-government entity, or a separate, non-profit organization;
• How the individual and small business markets will operate within the Exchange; and
• To what extent health plans -- including local initiatives and county-organized health systems -- will participate in the Exchange.

Here are additional sources of information on the Exchange:
• ITUP's initial analysis and recommendations, April 19, 2010
• Legislative Analysts Office report, May 13, 2010
• Congressional Research Service report, April 15, 2010
• Kaiser Family Foundation brief, April, 28, 2010

According to a new RAND study published Tuesday in the journal Health Affairs, the federal health reform law is the best and most politically feasible option to extend health coverage to the most Americans while keeping government costs low.

RAND researchers analyzed more than 2,000 policy scenarios that differed on elements such as income eligibility for Medicaid, the size of companies subject to the bill’s requirements and the penalties for companies and individuals not complying with the bill’s provisions. The researchers concluded that, “on balance, the new law appears to have landed on a distinctive plain of the policy frontier, where costs and coverage levels achieved were reasonable and passage of the law was politically feasible.”

Read more here.

Athenahealth is a prominent provider of EHR and claims processing for physicians, and also runs an annual project dubbed PayerView. The project centralizes every piece of data from their network of nearly 24,000 providers in order to quantify and rank metrics on public and private payers such as claims denial percentage, patient eligibility checks, and days between services charge and actual payment. This year saw a significant reduction in denials (except for the Blues) with faster payments to providers. Below is a video from their blog describing the project:

It is precisely this type of transparency that will drive competition and innovation in the marketplace, which will make providers lives a lot easier while shedding a light on cost-containing efficiencies (or lack thereof) in the system. And health reform will vastly improve this evolution; while the PayerView project assesses provider-payer interactions, the Exchanges will also include customer-related metrics like satisfaction, price, medical loss ratio, and benefit design to create a 'triangle' of transparency between the patient, the health care provider, and the health plan.

Today, Secretary Sebelius issued a letter to Congressional leadership outlining the roll-out of reform's early deliverables. Below is an overview:

Dependent Coverage Expansion
The law states that by September 23rd, insurance plans must allow children up to age 26 to be able to stay on their parent's insurance plan; 65 insurance companies have voluntarily agreed to implement the provision earlier than that deadline. With young adults holding the highest rate of uninsurance by age group (30%), the provision will allow 1.2 million children to remain on their parents' insurance at a premium increase of as little as 0.7%.

Pre-Existing Conditions
Children with pre-existing conditions are slated to be completely protected from coverage denial in September; insurance companies agreed to this in full in March. As an equal clause for adults does not go into effect until 2014, $5 billion for high risk pools will be issued on July 1 to provider assistance. Applications were sent yesterday to the 30 states that indicated they wish to run their own pool (California included).

Early Retiree Insurance Program
The $5 billion program had its start date moved up to June 1 in order to provide earlier assistance to businesses that offer coverage to retirees age 55-64. Read the recently released HHS fact sheet here. Both self-funded and insured plans may apply, including plans sponsored by private entities, state and local governments, nonprofits, religious entities, and unions.

Medicare Part D Doughnut Hole
Seniors will begin to receive $250 rebate checks as soon as June 15, with 4 million beneficiaries receiving checks in 2010.

Medical Loss Ratios
The law will require insurance plans in the large group market to spend 85% of premium dollars on clinical services, and 80% in the small group market. The National Association of Insurance Commissioners (NAIC) is instructed to submit uniform definitions and methods of the MLRs by the end of the year, but recently agreed to accelerate submission of these definitions by June 1. It is imperative that these definitions only include services and expenses that actually relate to delivery and quality of care, as opposed to artificially inflating MLRs with administrative costs.

You can read more about these provisions (as well as submit comments) at the new Office of Consumer Information and Insurance Oversight (OCIIO) website.

Below is our third edition of reform's Impacts on California, with the widespread theme of cost-containment. In it, you will find an investigation of the "hard savings" (cadillac tax, medicare provisions, etc), incentive and payment reforms, delivery system overhauls (ACOs, prevention, care coordination), and data transparency provisions through standardization and information technology. The piece ends with specific recommendations for California to be successful in the post-reform world.

Improving the Value of Health Care: Cost-Containment in Federal Reform

The main arguments supporting widespread adoption of electronic health records are well documented; accurate prescriptions, seamless transfer of imaging and diagnostics, access to vital health information anywhere on the planet, paperless hospitals and doctors offices, and dosing/prescription error notifications. Also well-known are the efforts to take advantage of the volumes of data that can be gathered; disease management strategies based on your personal characteristics (age, race, medical history, even genetics), quality initiatives in inpatient care, and telemedicine.

A very interesting NEJM article summarized another EHR use, where an internal medicine practice documented exactly how much time their primary care physicians dedicated to 'outside' work not involving a patient. ON TOP of 18.1 visits, the snapshot finds that each physician performs, per day:

-23.7 telephone calls, most of which the doc handled directly
-16.8 emails, most for interpreting test results
-12.1 prescription refills, not including those part of a patient visit
-19.5 lab reports
-11.1 imaging reports
-13.9 consult reports

Not only does this data shed light on today's problem of the actual duties assigned to an overworked primary care physician, but highlights the opportunity to maximize productivity across any aspect of the health care system. Transparency has the ability to maximize efficiency and minimize waste, and will allow us to invest our resources most appropriately. In a country with over double the average per capita spending on health care at nearly 18% of GDP (and vastly lower health outcomes in multiple categories), studies like this truly exhibit the unbound potential of EHRs and HIT.

One of the chief arguments among health reform skeptics is that many of the 'perceived savings' used to finance the bill will never actually materialize and we will be left with another unsustainable entitlement. Further, the naysayers proclaim that any real savings will just simply come from cuts in Medicare and Medicaid. There are numerous provisions in the bill that rebut these falsities (protections ensuring Exchange subsidy sustainability, redirection of uncompensated care funding that is already spent, bending the curve through the excise tax/MedPAC with teeth, and an INCREASE in reimbursement to primary care providers in Medicare/caid), but I want to stress that the fundamental concern is absolutely valid: How do we modernize the 20th century bureaucratic behemoths that are Medicare and Medicaid in order to ensure their sustainability as more nimble programs in the 21st century? The answer to this question becomes even more crucial given the programs' assured expansions (Medicare from an aging society and Medicaid from expansion to 133% FPL).

An unlikely private industry source suggested a possible course of action for Medicaid today. The source, UnitedHealth Group, suggests that a number of practices could yield significant savings, focused mainly around coordinating care, modernizing technology and administrative processes, and shifting expensive long-term care (now 2/3 of Medicaid costs) from nursing homes to community-based and homed-based care. In all, the report estimated up to $366 billion in savings to states and the feds from:

Increased use of coordinated care $82B
Coordinated care to expansion population $11B
Shift away from long-term care to community-based care $140B
Administrative modernization $133B

To be clear UnitedHealth has a clear stake in these strategies, and admits their AmeriChoice program can be utilized to tackle 2/3rds of these costs. With the vested interest in mind, though, public private partnerships like this will be crucial if advocates are serious about modernizing these 20th century institutions into coordinated and wired bodies. And now, with health reform moving to eliminate the appalling profit-motivated action of the insurance industry, broader alliances with health plans and efficiency-minded systems may be just the answer to this question.

The Committee for a Responsible Federal Budget reiterated an important point that can not be understated: Health Care Reform is a Continuous Process and Will Require Continued Vigilance from Policymakers. The legislation passed last week will eventually secure the long-sought goal of near-universal coverage, the moral imperative that was arguably the core of this year's effort. But most recognize that the cost-containment methods are modest at best. Health reform round 2 will focus on this, because it must.

While the CBO predicts the Affordable Care Act will reduce the deficit ($154 billion by 2020, and $1.3 trillion in the second decade), CRFB recognizes that Medicare and Medicaid are still unsustainable and these savings are very vulnerable to repeal or watering down. The main drivers of deficit reduction (see graph below) are the excise tax and the Independent Payment Advisory Board, IPAB.

The excise tax (now delayed until 2018) is designed to put downward pressure on health spending by offsetting some of the effects of the employer provided insurance tax exclusion (which drives up costs). It does this by virtue of being indexed at general inflation, which is much lower than medical inflation, thus including more plans over time. Meanwhile, the IPAB will oversee Medicare cost growth and set savings targets in the program and suggest further reform. The authors note that the strengths of the two mechanisms are also the catalysts of opposition, but stress that they should not be weakened. The issue of the 'doc-fix,' or Sustainable Growth Rate (SGR) formula, was also removed from the legislation because of its high costs and will surely need to be addressed.

The CBO actually estimated the effect of health reform if it included a deficit-financed doc fix, a repeal of the excise tax and IPAB, and if insurance subsidies grew with the same formula after 2018 as before (under the current law, they are scheduled to slow after 2019). It's not pretty:

The authors conclude that as this helps demonstrate, the very features that make these provisions difficult to sustain is also what makes them so important for bringing down costs. These provisions must be maintained or even expanded - rather than becoming victims of the political system. When policymakers move to "round two" of health care reform, they may need to start by revisiting some of the cost control proposals that were not included in the final package, including medical malpractice reform, broader cost sharing, and real reforms to the employer-sponsored insurance tax exclusion. Many important pilot programs in the legislation will offer important lessons as well, and comparative effectiveness research will indeed help guide needed value efficiencies.

Below is a set of slides for your reference, analyzing many of the effects of federal health reform in California. The slides exhibit current trends in health costs and coverage, estimate the degree of coverage expansion and subsidies in California as a result of reform, and highlight next steps in the reform process. As always, questions or comments are welcomed.

Federal Health Reform in California (PDF)

Federal Health Reform in California (PowerPoint Slide Show)

A new study released in Health Affairs highlights a potential cause of out-of-control growth in health care expenditure. The interesting trend, taking California as a bellwether case-study, suggests that cost growth is a result of an increased integration/consolidation of provider market share in response to low public payment rates. These health system 'mergers' (such as hospital acquisitions, IPAs and HMOs) increase market power, thus allowing for a 'monopolized' increase in payment rates. Insurers argue that these increases in costs result in a parallel increase in premiums.

More interesting, the study suggests that the proposed Accountable Care Organizations (ACOs) and other care integration models in federal health reform could result in similar higher rates for private payers. Interviews in the study suggest that the ultimate intention of care coordination/disease management (from a provider perspective) may simply be increased market share. The authors also suggest that current antitrust policy has not been effective in challenging hospital mergers. They conclude that "unless market mechanisms can be found to discipline providers’ use of their growing market power, it seems inevitable that policy makers will need to turn to regulatory approaches, such as putting price caps on negotiated private-sector rates and adopting all-payer rate setting."

Maryland just so happens to have a working all-payer rate setting regulation (coupled with relief for lower hospital Medicare/Medicaid reimbursement rates), and as seen by the graph below has effectively been able to control cost growth without jeopardizing quality. Read more about the mechanism in a recent post.

In other news, sources indicate that a revised White House 'Compromise 2.0' bill will be unveiled on Wednesday that will most likely include Republican ideas from last week's Health Care Summit like easing the interstate sale of insurance and stronger malpractice reform language. The bill is intended to be a modest package, and Obama will likely outline that it be pursued through reconciliation to be passed into law alongside the Senate bill.

AHIP President Karen Ignagni released a statement regarding the rampant individual market premium increases, though declined to comment on the industry's profit earnings. Nevertheless, her comments reinforce the need for reform of the deteriorating system:

It’s time to stop the politics of vilification and focus on what Americans need most: real health care reform that addresses the serious and urgent problems facing our nation.

Increases in the cost of coverage in the individual market shine a spotlight on the urgent need to reduce the growth of underlying medical costs and to bring everyone into the system. If reform doesn’t address these pieces, it will not solve the serious problems that individuals, families, and employers face. That is why health plans have proposed fundamental reform of health insurance markets and a long-term strategy to reduce rising health care costs.

I explained the issue further in a recent television interview, and read today's HHS report that investigates the trend occurring in many other states while explaining how reform improves the status quo.

Senate whip count update: 34 Senators are now on record in support of reconciliation and 20 support inclusion of a public option.

I have written in the past here and here on the state's landmark 2006 reform passage and current developments. The state is very important to follow as many of the elements in the federal efforts are already in play in Massachusetts. To sum up, the 2006 reform includes an individual mandate, an exchange with consumer protections, and low-income subsidies. The state has successfully achieved near-universal coverage without crowding out employer based markets or other private insurance, and is wildly popular among the citizenry. With 'Phase I' accomplished, efforts are now centered on effective cost-containment that naysayers claim are "bankrupting the state." True, the current growth rate is unsustainable, but this sense of urgency allows lawmakers to aggressively pursue effective strategies to cut costs.

The Governor of Massachusetts unveiled legislation yesterday that would help to address the rapid growth of health care costs by giving the state power to review and reject payment rate increases beyond 3.2% (the current medical inflation rate) by doctors, hospitals, insurers, and medical imaging centers. The law would also prevent health-insurance plans sold to small businesses from raising premiums by more than 1.5 times the rate of medical inflation, and impose a two-year moratorium on lawmakers mandating new health benefits that plans must cover. Watch Governor Patrick's explanation here.

The idea is commonly known as 'all-payer rate setting,' and was used in the 70s and 80s to level varying payments for common services in order to lower health care costs. Nearly 30 states enacted the practice then, but the rise of managed competition caused all but Maryland to drop the law and today, countries such as France, Germany, and the Netherlands have similar all-payer rate setting regulation. Read more about the potential for savings here, where a recent Health Affairs article finds that the law has saved Maryland more than $40 billion since 1976 and a similar system across all states could have saved over $1.8 trillion.

"The most astounding provision I've heard of late is the 'savings' realized by delaying July Medi-Cal payments into August. Not only is this a mere accounting gimmick, but it also imposes a fine of $40 million on the state that goes to the federal governmet as part of the ARRA 'timely payment' clause. Lawmakers could probably go to a Pay Day Loan Shop and get a better interest rate than that!"

-Jean Ross, California Budget Project

Kent Conrad revealed a possible timeline for health reform, as Obama today called for a bipartisan discussion before moving forward on a vote:

According to budgetary rules, any reconciliation instructions expire once a budget resolution is passed, traditionally an April action. This means Democrats could aim to decide how best to proceed on health reform by the February recess (beginning on Feb. 11), pass a jobs bill shortly after the break, and complete the necessary action for health reform (i.e. a reconciliation bill) by the Easter break. Next week should reveal the process in greater detail.

In the meantime, Anthem Blue Cross has reported that it will raise premium rates for Californians in their individual market (nearly 800,000 lives) by as much as 39% starting March 1, as a result of higher health costs. From the LA Times:

Individual policies are often the only option for those who are uninsured, self-employed or do not receive health coverage through employers. Insurers are free to cherry-pick the healthiest customers in the lightly regulated individual market. They can raise rates at any time as long as they notify the state Department of Insurance and prove that they are spending at least 70% of premiums on medical care. The size of the individual rate increases prompted state Insurance Commissioner Steve Poizner recently to call for a review of Anthem's charges.

To avoid a similar fate, Aetna is planning to force up to 650,000 individuals to drop their coverage next year in an effort to improve on a less-than-anticipated profit margin in 2009. Rest assured, the insurer still managed a 13% profit while spending more than $2 million on lobbying last year.

...is what we spent on health care in the United States in 2009 ($2.5 trillion in total) says the Office of the Actuary, Center for Medicare and Medicaid Services (CMS) in a Health Affairs paper released today. The short piece is required reading for anyone interested in where current/future health care dollars come from and go to. You can read some of the major findings below:

-In 2009 the health share of gross domestic product (GDP) is expected to have increased 1.1% to 17.3%—the largest single-year increase since 1960.

-Slow growth in private market spending (3.0%, $1.5 trillion total) reflects the toll of the recession, while public spending increased markedly (8.7%, 1.2 trillion total) as a result of higher unemployment (9.9% increase in Cobra spending) and Medicaid enrollment (6.5% increase). See below:

-The share of health care dollars paid by government will increase to the 50% milestone by 2012, and 52% by 2019. See below:

-The effects of population growth and the changing age-sex mix are expected to be minor, contributing 0.9% and 0.4%, respectively, to annual growth for 2009–2019.

-By 2020 over 19% of the GDP will be dedicated to health care, about one in five dollars spent in the U.S. totaling $4.5 trillion annually at an annual growth rate of 6.1% (almost 2% faster than inflation).

This trajectory is clearly unsustainable, unless we choose to spend an increasingly larger portion of our economy on health care (without any apparent benefit to actual health outcomes) while also cutting public benefits/raising taxes to keep up....or Congress can pass the health reform bill that begins to address these problems while also providing health security to millions.