HEALTH INDUSTRY ONLINE - Congressmen Stark And Pallone Outline Healthcare Priorities For The 110Th Congress

Yesterday, members of Strasburger's Health Industry Team in Washington, D.C., attended an interactive breakfast forum sponsored by the National Law Journal and Edelman. The forum was entitled "Health Care Priorities in the 110th Congress." The featured speakers included U.S. Representative Pete Stark from California, the new Chairman of the House Ways and Means Health Subcommittee, and U.S. Representative Frank Pallone from New Jersey, the new Chairman of the House Energy and Commerce Health Subcommittee. In addition, three senior staff members on corresponding Senate Subcommittees and the Senior Policy Advisor for the Office of House Speaker Nancy Pelosi participated in the interactive forum. ¹ The forum focused on healthcare issues to expect under the new Democratic majority now that six weeks have passed, allowing congressional members to flesh out their wish lists and can-do lists. It was an enlightening meeting.

All participants agreed that the following healthcare issues need to be addressed by the 110th Congress:

1. President Bush's proposed budget is dead on arrival (a phrase borrowed from Senator Max Baucus). This was really not so much a healthcare issue as it was the consensus prediction of the forum participants.

2. The Medicare Modernization Act of 2003 created a soft "trigger mechanism" to spur Congressional action on escalating costs. If the Medicare Trustee reported in two consecutive years that at some point in the following seven years general fund revenues would have to be tapped to pay at least 45% of Medicare costs, the president will be required to submit corrective action to Congress. Such corrective action must be considered on an expedited basis. The Medicare Trustee made a trigger report in FY 2006. The next report is due in March of this year, and it is generally expected that the report will include information that will qualify FY 2007 as a soft trigger year. Many of the congressional staff thought this would not be as volatile an issue as it would otherwise appear.

3. The State Children's Health Insurance Program (SCHIP) (pronounced "S-Chip" by Congressmen Stark and Pallone) is the most important piece of legislation to be addressed this year. Both Congressman Stark and Congressman Pallone felt the SCHIP legislation must be addressed early. SCHIP requires re-authorization during this congressional session. Unless Congress changes the budget baseline rules for SCHIP, SCHIP funding will remain frozen at FY 2007 levels for the long term. President Bush included a freeze in his proposed budget. Many states that were looking at increasing their coverage to more children are putting their programs on hold until additional funding is assured. In addition to the funding issue, many of the children who are eligible for coverage under SCHIP in many states did not get enrolled. Remedying that situation requires additional hearings and, most likely, additional funding.

4. The Medicare drug program is also on the table for discussion, and that is where consensus among forum participants ended. Some participants believed that the Medicare drug program needed to be able to negotiate with the drug manufacturers for best prices. Others believed the best prices were available now and that introducing formularies would result in higher prices. The one thing everyone agreed upon was encouraging the move to generics and to generic biologics, like insulin.

5. Reimbursement rates for physicians need to be discussed.² The primary concern involving physician reimbursement rates centers on the annual effect of the Sustainable Growth Rate ("SGR"). Instead of dealing with the 5%-6% deficits required by the SGR every year, all of the forum participants would like to see this process amended in some way so that physician reimbursement is dealt with in a long-term, meaningful way. Mark Hayes suggested that the SGR and insufficient physician reimbursement is responsible, at least in part, for physicians becoming entrepreneurial by expanding into other areas like ownership of ancillaries such as MRIs and ASCs. He said that specialty hospitals are the tip of the iceberg. Physician ownership of ancillaries and specialty facilities was clearly not a good outcome from Mr. Hayes' perspective.

6. Health Information Technology ("HIT") is on everyone's list. Both Congressman Stark and Congressman Pallone think that Congress needs to find a funding mechanism for hospitals and physicians to purchase HIT necessary to: (a) track quality measures; (b) support electronic health records; and (c) collect data that will be useful in determining new quality measures as time goes on. Congressman Pallone suggested grants from the federal government or perhaps increased reimbursement from Medicare could provide the support needed to purchase and implement HIT.

Congressman Stark was more specific. First, he thinks that one national HIT system is required. From his perspective, a national HIT system is the only way that all of the data can be accessed for meaningful statistics. As an example, with a national HIT system, a single database could be created that would allow researchers to track what happens five to ten years after a particular type of surgery or other procedure. Also, as changes and improvements are made to the system, they are available to everyone.

Further, Congressman Stark is unequivocal in his belief that the federal government has to pay for HIT. He sees this as a way to avoid completely any inappropriate relationships between hospitals and physicians. In other words, the hospitals would have no need to offer software to physicians as it would be available from the government.

Congressman Stark's proposal includes physicians (and, presumably, all health care providers who serve Medicare/Medicaid beneficiaries) purchasing HIT through government-sanctioned systems with a 5-year payment program to the HIT vendor. In the first year, the government payors will provide the physician an increase in his/her reimbursement of 10% more per procedure. In year two, physicians receive 8% more; in year three, 6% more; in year four, 4% more; and in year five, 2% more than they would have otherwise received. By the end of the fifth year, the HIT is in place and paid for. At the end of the fifth year, any physician who does not subscribe to the government HIT system gets no reimbursement. Congressman Stark points to the VISTA system within the Department of Veterans Affairs as a system that already exists and that works.

7. Congressman Stark also said that there were two areas he thought deserved some special oversight, which he was willing to provide through the Health Subcommittee: (a) the Medicare Advantage Plans; and (b) the Pharmaceutical Plans. He said that payment cuts in both systems could be a source of substantial savings.

8. In addition, Congressman Stark raised a few other issues by providing two additional personal priorities: (a) preventing the privatization of Medicare through the Republican-proposed voucher system; and (b) expanding health care coverage. Given all the other issues requiring immediate congressional attention, he did not foresee getting universal coverage until after the 2008 presidential election. He also reminded the attendees of the AmeriCare bill, introduced several years ago, which provides Medicare for all as a last resort, and of the MediKids bill, which would put all children into the program at birth with the option of parental opt-out if they had other means of providing health care.

¹Mark Hayes, Minority Health Policy Director, Senate Committee on Finance (works with Senator Grassley); Kate Leone, Senior Health Counsel, Office of Senate Majority Leader Harry Reid; Shana Christrup, the Republican Health Policy Director for the Senate Health, Education Labor and Pensions (HELP) Committee; Wendell Primus is the Senior Policy Advisor to Speaker of the House Nancy Pelosi.
²In our Health Industry Online (PDF) dated January 3, 2006, we discussed the Sustainable Growth Rate and its effect on physician payments.