MSA’s president, Chris Vickrey, recently launched a blog to provide timely commentary on important market developments. While not necessarily limited to healthcare topics, blog posts to date have focused on legislative initiatives for healthcare reform, with links to key primary documents.
The main objective of the healthcare reform bills being considered is to expand health insurance coverage, especially by reducing the number of uninsured Americans. That goal also benefits the pharmaceutical industry because, with better insurance coverage, people consume more healthcare products and services, including prescription drugs, thus expanding the market for pharmaceuticals. In return for the favor of expanding the healthcare market, the Obama administration has sought concessions from each group who stands to benefit, including insurance companies, hospitals, and pharmaceutical companies. Rather than fight the concessions, the Pharmaceutical Research and Manufacturers of America (PhRMA), under the leadership of president Billy Tauzin, reached an agreement with the Obama administration in June that the pharmaceutical industry would shoulder $80 billion in concessions over 10 years.
What is the composition of the $80 billion? While the precise breakdown has not been disclosed, we can make very rough estimates based on the main provisions in the Baucus bill that reduce pharmaceutical company revenues.
The first is the 50% pricing discount for the drugs Medicare beneficiaries purchase in the so-called “doughnut hole” in Medicare Part D, in which Medicare provides no subsidies for the cost of prescription drugs. The discount would not apply to prescription drug purchases by one of the costliest groups of beneficiaries, the dually eligible beneficiaries who are enrolled in both Medicare and Medicaid. Their drug purchases are always subsidized, so the doughnut hole does not apply to them. Nor would the discounts apply to high-income Medicare beneficiaries who must pay higher premiums in Part B. All other beneficiaries, however, would receive a 50% price discount on their drug purchases in the doughnut hole starting in July of 2010. A rough estimate of the cost of this provision to the pharmaceutical industry is $30 billion over 10 years.
The second is the increase in the statutory rebate rates for brand drug purchases in Medicaid from 15.1% to 23.1%. Rebates for blood clotting factors and for drugs approved for pediatric use only would increase from 15.1% to 17.1%. A rough estimate of the cost of this provision to the pharmaceutical industry is a minimum of $30 billion over 10 years.
A third component is the savings reaped through increased competition as a result of the introduction of follow-on biologics. While provisions relating to follow-on biologics currently are not part of the Baucus bill, provisions similar to those approved in the amended House Energy and Commerce Committee bill and the Senate HELP Committee bill, both of which allow for 12 years of marketing exclusivity, are expected to be included in any final bill. A rough estimate of the cost to the pharmaceutical industry of introducing follow-on biologics is $7 billion over 10 years.
The fourth component is a new fee of $2.3 billion per year that will be assessed on the pharmaceutical industry based upon each company’s market share in sales to public programs, including Medicare, Medicaid, the Veterans Administration program, and the TRICARE military program. Sales of orphan drugs would be exempt. Companies with annual sales of less than $400 million would receive discounted weights for calculating their sales for the purpose of determining market share, and companies with sales of less than $5 million would be exempt. Fees for 2010 will be based on calculated market share of sales in 2009. At $2.3 billion per year, the total cost to the pharmaceutical industry over 10 years is $23 billion. Moreover, by statute, these fees would not be deductible for US income tax purposes.
Adding these four components together results in a total burden to the pharmaceutical industry over 10 years of $90 billion, $10 billion more than the $80 billion pledged by PhRMA’s Billy Tauzin.
One of the flash points in the debate over healthcare reform legislation is whether the bills proposed in the House and the Senate would cut the benefits of Medicare beneficiaries. Of course, nothing can mobilize a group of senior citizens more quickly than a proposal to cut their benefits, and opponents of healthcare reform have claimed that the bills coming out of the House and Senate do just that. Are these claims valid?
The short answer is yes, at least for some beneficiaries who are enrolled in Medicare Advantage plans, which are private insurance company plans that receive Medicare dollars to deliver a package of benefits to replace Medicare Part A and Part B. One of the most signficant sources of savings in both the House and Senate bills is stems from changes in payments to Medicare Advantage plans.
Originally it was hoped that, by allowing private plans to participate in Medicare, beneficiaries might receive better coordinated care compared to fee-for-service Medicare and, if the private plans were more efficient than traditional Medicare, they might even save money for Medicare. For example, in a given region of the country, if Medicare beneficiaries on average consume medical services that cost the Medicare program $10,000 per year, there is the possibility that a private plan could deliver the same benefits for less than $10,000. If the Medicare program paid the plan $9,750 and the plan could deliver benefits for $9,500, the Medicare program would save $250 and the plan could make an extra profit of $250. To encourage plan participation, however, in recent years, for most areas (rates are actually set on a county-by-county basis), Congress has set the benchmark rates, which are the basis for payments to the Medicare Advantage plans well above the average per-beneficiary costs Medicare incurs in each area. The way the payment mechanism works is that plans bid against the benchmark rates for each county. If their bid is below the benchmark, they recieve their bid plus 75% of the difference between their bid and the benchmark, and the remaining 25% is retained by the Medicare program. So if the benchmark is $12,000 and the plan bids $11,000, the plan receives $11,750. According to the rules of Medicare Advantage, plans must use the extra $750 above the benchmark to provide extra benefits to beneficiaries. In this example, therefore, beneficiaries would receive an extra $750 in benefits. Compared to the regular fee-for-service Medicare program, however, the costs are much higher than the average per-beneficiary costs in each county. In this example, instead of incurring an average of $10,000 in costs, Medicare is paying the plan $11,750. And, while it is true that the beneficiaries in this case receive an extra $750 in benefits, Medicare is paying an extra $1,750 for those benefits. Because they can receive extra benefits, beneficiaries naturally like the Medicare Advantage program, and enrollment has soared in recent years. Now one in every four Medicare beneficiaries is enrolled in a Medicare Advantage plan.
Medicare program payments relative to FFS spending, 2009
In 2009, in comparison with traditional fee-for-service Medicare costs, Medicare is paying Medicare Advantage plans an extra 14%. It is these extra costs that Congress has taregeted for savings. The House bill sets the benchmark rates at 100% of the average per-beneficiary fee-for-service Medicare costs for each county. The Senate bill sets the bechmark rates at the weighted-average bids of each plan. In either case, the savings would be substantial. With lower benchmarks, however, plans will not be in a position to maintain the level of extra benefits they currently provide, so these extra benefits would be cut. Therefore, it is true that these extra benefits would be cut, but the traditional benefits of Medicare Part A and Part B would not be cut.
The Congressional Budget Office on Tuesday released a preliminary analysis of the chairman’s mark of America’s Healthy Future Act of 2009, which was released earlier that day by Senate Finance Committee Chairman Max Baucus.
The good news is that, according to the CBO, the Baucus plan would reduce the federal deficit by $49 billion dollars during the 10-year period ending in 2019. In 2019 alone, the plan achieves $16 billion in deficit reduction. Moreover, in contrast to the bill produced by the House committees, in which net outlays increased in the out years, the CBO expects the Baucus plan to further reduce the federal budget deficit after 2019, “as added revenues and cost savings are projected to grow more rapidly than the cost of the coverage expansion.”
Most of the savings are generated from two sources: 1) transitioning Medicare Advantage plans to a competitive bidding system, thereby reducing the federal subsidies that are paid to private plans; and 2) reducing annual Medicare market basket updates (annual increases in Medicare payments to providers to compensate for higher office expenses and other input costs). Cuts to the Medicare Advantage program were fully expected, as private plans on average currently receive significantly more than the costs in fee-for-service Medicare, and the reductions in the market basket updates are not overly severe, even though their cumulative impact is significant.
Of more concern, however, is a provision relating to payment for physicians’ services under Medicare Part B. Starting in 1998, as a way of controlling overall spending growth in Medicare, Congress implemented the sustainable growth rate (SGR) formula for the annual adjustment in fees paid to physicians in Medicare. Adhering to this formula, however, would have resulted in cuts to the fees paid to physicians, so Congress repeatedly has overridden the formula since 2003 to allow payment increases. But the formula was never repealed, so if Congress does nothing to override it each year, payments to physicians would automatically be cut by the cumulative difference between current payment rates and payments under the original formula. The Baucus plan once again overrides the SGR for 2010, allowing another increase in payments to physicians, but does nothing to repeal the SGR, meaning that cuts—estimated by the CBO to be approximately 25%—would begin in 2011. Because the cuts are not a change in current law, they are not scored as savings by the CBO. The issue, however, is whether it is realistic to expect that Congress would allow a drastic cut of 25% to stand. Certainly physicians will not stand by and allow these cuts to be implemented. Without these cuts, however, the deficit reductions promised by the Baucus plan would likely prove to be illusory.
So far, at least, critics of the Baucus plan have focused on other issues. In particular, many Democrats object to the exclusion of a public plan option in the insurance exchanges. Republicans, on the other hand, are objecting to including in the exchanges non-profit health insurance cooperatives, saying, in the words of Senate Minority Leader Mitch McConnell, that they are “just another name for a government plan.” From the CBO’s perspective, however, the cooperatives are a non-issue. “The proposed co-ops had very little effect on the estimates of total enrollment in the exchanges or federal costs because…they seem unlikely to establish a significant market presence in many areas of the country or to noticeably affect federal subsidy payments,” according to CBO Director Douglas Elmendorf.
But it is only a matter of time before attention gets focused on the issue of cuts to physicians’ payments, and I assume Senator Baucus knows this. Perhaps, his real plan is to use the threat of drastic cuts as a stick to force physicians to move away from a reliance on fee-for-service payments and toward adoption of alternative payment mechanisms, such as bundled payments, or the capitated payments that may come with participation in an accountable care organization. In the end, it may require the stick of payment cuts to force providers to consider the potential carrots they may receive through alternatives to fee-for-service Medicare.
In his speech on healthcare reform before a joint session of Congress last night, President Obama presented the rationale for reform as well as an outline of a plan he favors, and he also tried to dispel many of the misconceptions that have surfaced regarding the bills that have circulated in Congress.
The outlines of his plan are very similar to the proposal released by Senator Baucus over the weekend, but there were two important differences. One is that he would impose a mandate on employers to provide health insurance to their employees, although there would be exemptions for small businesses. The second is that he would provide a public insurance option among the choices from which individuals and small businesses could choose in insurance exchanges established in each state. In explaining the rationale for a public option, he said his concern was that there be meaningful competition among insurance plans. He cited the example of Alabama, where he said that 90% of the insurance market is controlled by just one company. He downplayed the importance of a public option, however, and said that he would be open to exploring alternatives, such as having a public option only in states where insurance companies were not providing affordable coverage, or using non-profit health insurance cooperatives instead of a government-run plan.
In an effort to garner Republican support, President Obama also said that he was willing to consider medical malpractice liability reforms, an issue that Republicans have repeatedly cited as a way of reducing healthcare costs. It is also an issue that the American Medical Association would like to see addressed, but none of the bills or proposals coming out of Congress so far have addressed this issue. Toward the closing of his speech, President Obama invoked the words of Senator Edward Kennedy and reminded everyone that Senator Kennedy had a history of working closely with key Republicans, including Senators Hatch, McCain, and Grassley, on healthcare issues. While he made a strong case for healthcare reform, whether President Obama succeeded in swaying any Republicans with his speech last night remains to be seen.
The Labor Day holiday yesterday was the final day of the summer recess for Congress, and both chambers are back in session today. One member of Congress who worked during the recess was Senator Max Baucus, who unveiled an 18-page “framework” for a healthcare reform bill over the weekend.
The broad outlines of the framework are familiar. It would include an individual mandate requiring most Americans to have health insurance. It would also create state insurance exchanges in which private insurance companies would compete to offer health insurance plans to individuals and small businesses, while subsidizing the cost of insurance for individuals or families with incomes up to 300% of the federal poverty level, as well as ensuring that individuals and families with incomes of up to 400% of the federal poverty level would have to pay no more than 13% of their income in health insurance premiums. Insurance reforms would prevent insurance companies from denying to coverage to individuals with pre-existing medical conditions and would also require insurance companies to cap beneficiaries’ out-of-pocket expenses. The Baucus proposal would also expand eligibility for Medicaid to 133% of the federal poverty level.
These provisions, which mirror provisions in the House bill, are relatively uncontroversial. Unlike the House bill, the Baucus proposal does not include a “play or pay” provision requiring employers to provide health insurance to their employees, but it would impose fees on employers whose employees receive subsidies on health insurance plans purchased through the new insurance exchanges.
The biggest sticking point on healthcare reform for Republicans in Congress, and even some conservative Democrats, has been over the inclusion of a public plan among the health insurance plans offered in the exchanges. The Baucus proposal does not include a public plan, but it does include a provision of non-profit health-insurance cooperatives to compete with private plans in the exchanges.
The other novel feature of the Baucus proposal is that it would impose excise taxes on insurance companies for high-end health insurance policies, defined as plans with premiums in excess of $8,000 per year for individuals and $21,000 per year for families. The rationale for taxing high-end insurance plans is that, because these plans so completely shield beneficiaries from medical treatment costs, beneficiaries have no incentive to seek cost-effective treatment. It is assumed that, by requiring insurance companies to pay a 35% tax on premiums received in excess of the thresholds, they will pass on their costs to employers in the form of higher premiums. Employers, therefore, may opt to offer their employees less generous health insurance plans, and, faced with higher potential out-of-pocket expenses, their employees may become more cost-conscious consumers of healthcare services.
Even if the costs eventually get passed onto employers, it sounds politically more palatable to tax insurance companies than employers. Some employers and unions offering such high-end plans, however, are self-insured, so they would also be subject to the tax. Moreover, not all high-premium plans offer excessive benefits. Some plans have high premiums because the employees covered are much older and sicker than average beneficiaries.
Still, although unions and public employees may be opposed to this financing option, it has the advantage of potentially contributing to a lower rate of healthcare inflation. Alternatives, such as simply taxing high-income individuals, would raise revenue but contribute nothing to lowering healthcare costs.
To raise additional revenue, across-the-board annual fees would be imposed on companies in several industries based upon their market shares, including $2.3 billion for the pharmaceutical industry, $4 billion for the medical device industry, $6 billion for the health insurance industry, and $750 million for clinical laboratories. Other provisions affecting the pharmaceutical industry include an increase in the Medicaid rebate to 23.1% and a requirement to discount the cost of drugs purchased in the Medicare Part D doughnut hole by 50%.
The lack of a public option in the Baucus proposal will likely infuriate many Democrats. In releasing a proposal that excludes a public plan, however, Senator Baucus is essentially calling the Republicans’ bluff. If Republicans are unwilling to support even his very moderate plan, then he will have made it clear that Republicans were not serious about seeking a compromise in the first place. On the other hand, if Republicans are willing to embrace his proposal, then the Senate will have a bill it can pass with bipartisan support. Excluding the public plan option may alienate many House Democrats, but both Democrats and Republicans appear to have been focusing on the public plan for ideological reasons rather than the impact it would have on choices available in the insurance exchanges. Either way, the outcome of negotiations today and tomorrow between Senator Baucus and key Republicans on the Senate Finance Committee may impact what President Obama says in his speech to Congress Wednesday night.
Senator Edward M. Kennedy, whose career in the Senate spanned 46 years, died Tuesday, August 25, at the age of 77. As Chairman of the Senate Health, Education, Labor and Pensions (HELP) Committee, Senator Kennedy was passionate about the need for healthcare reform, which he considered “the cause of my life,” and the fate of healthcare reform legislation in Congress is left in an even more precarious position with his passing.
After being diagnosed with a malignant glioma in May of last year, Mr. Kennedy’s appearances in Washington became increasingly less frequent, and he turned over the work of his committee to his friend and Democratic colleague, Christopher Dodd. Under Mr. Dodd’s leadership, the committee passed a healthcare reform bill on July 15, but further action in the Senate has been stalled while Senator Max Baucus, who heads the Senate Finance Committee, seeks to craft a bill covering key financing provisions that will have the support of Committee Ranking Member Charles Grassley and other key Republicans. Progress on reaching a bipartisan compromise, however, has been undermined by a groundswell of conservative opposition to reform efforts, which have characterized the bills as enabling a government “takeover” of the healthcare system. The passions the issue has aroused among the conservative base have made it difficult for Mr. Grassley, who faces a reelection campaign in 2010, to appear to be working with Democrats on passing a bill. Mr. Baucus has set a deadline of September 15 for reaching a compromise with Mr. Grassley and other Republicans. If he fails to reach a compromise, as appears increasingly likely, then Senate Democrats may seek to force through legislation by invoking a process called “reconciliation,” which requires only 51 votes to pass the Senate, thereby bypassing the typical 60 votes required to avoid a filibuster. Because the reconciliation process was designed only to avoid Senate impasses on budgetary measures, however, key healthcare reform provisions unrelated to the federal budget, such as private insurance market reforms, would likely need to be separated into a second bill that would require 60 votes to pass the Senate. With Mr. Kennedy’s death, Democrats now have only 59 seats in the Senate, and my effectively have only 58 votes, since the frail health of Senator Robert Byrd has resulted in his absence.
The fate of healthcare legislation in the Senate has put a spotlight on the issue of who will fill Senator Kennedy’s seat. By Massachusetts law, a special election is required to be held 145-160 days after the Senate seat is vacated, with no interim appointment, meaning the seat will be vacant during the important upcoming months. Prior to his death, however, Mr. Kennedy urged state legislators in Massachusetts to amend the law and allow Governor Deval Patrick, a Democrat, to appoint an interim replacement until the special election can be held. Prior to 2004, Massachusetts law enabled the governor to appoint a successor to a vacant Senate seat. Ironically, however, it was Democrats who amended the law at that time because they did not want Republican Governor Mitt Romney to appoint a Republican successor if Democrat John Kerry, the other Senator from Massachusetts, had won the presidential election that year. Changing back the law now, therefore, would risk charges of hypocrisy.
While known as a liberal, Senator Kennedy had a history of being able to forge bipartisan compromises with conservative Republican colleagues in order to pass important legislation. His absence in the Senate in recent months has certainly complicated the task of reaching a compromise with Republicans over healthcare reform legislation, and now it will be up to his colleagues to see if they can salvage the work of his HELP committee and further add to Senator Kennedy’s legislative legacy.
The Obama administration spent the early part of this week seeking to assuage concerns that it was backing away from supporting a “public option,” a health insurance plan sponsored by the federal government that would compete with private plans in offering healthcare insurance through insurance exchanges in each state.
The public option has become the most contentious issue in the debate over healthcare reform. Opponents claim that a public option would undermine the market for private insurance, mainly because it would not incur the expenses of marketing and having to negotiate reimbursement rates with a network of providers, thereby enabling it to charge lower insurance premiums than private plans. In my view, it is not a foregone conclusion that a public plan would necessarily have an unfair competitive advantage in attracting beneficiaries. As some observers have pointed out, it is possible that a public plan would attract a disproportionate number of very sick beneficiaries, thereby saddling it with higher medical costs and possibly forcing it to charge higher insurance premiums than private plans, particularly if risk adjustments based on beneficiaries’ health status do not fully cover the higher medical costs.
Nevertheless, while a public plan would not necessarily pose such a dire competitive threat to private insurance plans as its opponents claim, given the difficulty of explaining the complexities of healthcare reform, opponents have been successful in simplifying the issue of healthcare reform as a further intrusion of the federal government into the practice of medicine. Therefore, to move the discussion beyond the role the federal government would play in offering a new health insurance plan, the Obama administration sought to downplay the public option.
This move angered supporters of the public option, who believe that, without the competitive pressures of a public plan, private insurers will not be forced to rein in spending growth. But the experience of private plans in the Medicare Part D drug benefit demonstrates that, even in the absence of a public option, competition among private plans can serve to drive down costs.
As an alternative to a public option, there has been some support for facilitating the creation of non-profit healthcare cooperatives that would compete with private plans. In fact, there are successful models for such a proposal, such as Seattle-based Group Health Cooperative, which is known for providing cost-effective, high-quality care. The problem is that such examples are relatively rare, and establishing cooperative from scratch takes time, with no guarantees that a new cooperative will succeed in attracting a critical mass of beneficiaries or be able to negotiate competitive reimbursement rates with local providers. Competition in some local insurance markets, particularly in rural areas, is currently often limited, with one plan often holding a dominant market position. Because the lack of insurance market competition is likely rooted, at least in part, in the relative scarcity of healthcare providers in these areas, attempting to foster competition through insurance market reforms may end up having little or no impact. In any case, some prominent Republicans have already expressed their opposition to cooperatives, too, so abandoning the public option in favor of healthcare cooperatives might not be the recipe need to attract Republican support.
The impasse appears to have left the Obama administration wondering if there is any formula for reform that leading Senate Republicans would support. There is now talk of splitting healthcare reform legislation into two bills, one of which, by using the reconciliation process (see Who is Alan Frumin post dated August 7), could pass the Senate with the votes of just 51 Democrats. This bill would include the new spending measures, such as Medicaid expansion and subsidies for health insurance premiums of low income beneficiaries, as well as the financing of these measures, and possibly could include the public option. The second bill, which would need to pass the Senate with 60 votes to avoid a filibuster, would include reforms to the market for private healthcare insurance. Of course, the Obama administration is still hoping that Senator Baucus can forge some kind of compromise in the Senate Finance Committee that attracts Republican support, but they are preparing a plan to push through reform legislation in the event a compromise fails to materialize.
As Congress heads out for its summer recess, Senator Max Baucus, who chairs the Senate Finance Committee, is now saying he has set a deadline of September 15 for his committee to release its version of a healthcare reform bill. That date is important because it is exactly one month before the expiration of the reconciliation provision that would allow a healthcare reform bill to pass the Senate with a 51-vote majority, thereby bypassing the normal 60-vote majority required to avoid a filibuster.
Presumably, if Senator Baucus fails to reach a consensus on a bill with Republican Senators Grassley, Snowe, and Enzi by September 15, the Democrats will try to force through legislation before the reconciliation provision expires on October 15.
The reconciliation process, which was established by the Congressional Budget Act of 1974, was created to prevent Senate filibusters from derailing necessary budget bills. In accordance with the Byrd rule, named for its sponsor, Senator Robert Byrd, however, the Senate is prohibited from considering “extraneous matters” as part of a reconciliation bill. In essence, any provision in a bill that does not result in a change in outlays or revenues could be interpreted as “extraneous” to budget matters. Accordingly, if the Democrats try to force a healthcare reform bill through the Senate using reconciliation, any senator can challenge provisions in the bill, such as the requirements for insurance companies that are at the heart of the healthcare reform bill, as being extraneous. It is then up to the Senate parliamentarian, an obscure unelected official who advises the Senate on parliamentary rules, to determine if the provision being challenged is extraneous. If the Senate parliamentarian rules in favor of the challenge, the provision is taken out of the bill. A series of challenges under the Byrd rule, therefore, could strip many key provisions out of a healthcare reform bill, rendering it meaningless.
And who is the Senate parliamentarian? An official named Alan Frumin, who almost certainly would prefer to avoid being thrust into the spotlight in a battle over healthcare reform.
The phrase “dog days of summer,” apparently originally stemming from a reference to Sirius, the “Dog Star,” refers the hottest days of summer, typically extending from July through August, when it is too hot to get things done. It may also be an apt way of summing up where things stand on healthcare reform legislation.
If nothing else, this month was the month the “Blue Dog” Democrats had their place in the sun. Their opposition to the House bill slowed progress on a final House bill, but in the meantime they were able to force some compromises to be made in the bill.
Interestingly enough, the origin of the term “Blue Dog Democrat,” meaning a conservative Democrat, is connected with Billy Tauzin, the president and CEO of PhRMA. Mr Tauzin, starting in 1980, had been a Democratic Congressman from Louisiana. In the mid-1980s, a Louisiana artist named George Rodrigue began painting a series of pictures of a blue dog, paintings that eventually become relatively famous. Mr. Tauzin eventually co-founded a group of conservative Democrats who called themselves Blue Dogs to distinguish themselves from “yellow dog” Democrats, a term that apparently originated in the 1928 Presidential campaign of the New York Democrat Al Smith to describe loyal Democrats. While many Southern Democrats opposed the Smith’s nomination, others were such loyal Democrats that it was said that they would “vote for a yellow dog if he ran on the Democratic ticket." Blue Dog Democrats, by contrast, had no such party loyalties. Mr. Tauzin even ended up switching over and becoming a Republican.
In any case, it is now clear that there will be no votes in either the House or the Senate on a healthcare reform bill until September. Whether there will be any progress at all, such as draft legislation from the Senate Finance Committee, is still an open question.
In an attempt to shore up support for healthcare reform legislation, particularly among Blue Dog Democrats who have expressed concern that current draft bills do little to rein in long-term spending, the Obama administration is now proposing the establishment of an Independent Medicare Advisory Council (IMAC), which would be empowered to make recommendations on Medicare payment rates and other reforms.
It is worth recalling that former Senate Majority Leader Tom Daschle, President Obama’s original nominee for both HHS Secretary and Director of the White House Office of Health Reform, had been advocating the creation of a Federal Health Board, modeled on the Federal Reserve Board, with the independence and authority to make decisions about healthcare policy. Dr. Ezekiel Emanuel of the National Institutes of Health, who is the brother of White House Chief of Staff Rahm Emanuel and currently serves as a healthcare advisor to Peter Orszag, the Director of the Office of Management and Budget, has also advocated the creation of a Federal Health Board.
The idea of a Federal Health Board did not appear to have a very promising future, particularly after Mr. Daschle’s departure. After all, even if one concedes that Congressional meddling in Medicare policy has often served narrow political interests rather than the broader goal of high-quality, cost-effective healthcare, removing decisions from the political process and, instead, putting them in the hands of “experts” is inherently undemocratic.
Although the idea of a Federal Health Board appeared to be aborted, Senator Rockefeller proposed elevating the status of MedPAC so that it could play a similar role, an idea that the administration supported, but neither the House bill nor the Senate HELP Committee bill included such a provision.
Now, with the IMAC idea apparently gaining traction, we appear to have come full circle. Changing the name may make the idea more palatable, but the differences with the Federal Health Board idea may not simply be a matter of cosmetics. In contrast to a Federal Health Board, IMAC’s ability to set policy would only partially be insulated from the political process. Peter Orszag described the process in a letter to House Speaker Nancy Pelosi last week:
This proposed legislation would require the President to approve or disapprove each set of the IMAC’s recommendations as a package. If the President accepts the IMAC’s recommendations, Congress would then have 30 days to intervene with a joint resolution before the Secretary of Health and Human Services is authorized to implement them. If either the President disapproves the recommendations of the IMAC or Congress passes such a joint resolution, the recommendations would be null and void, and current law would remain in effect. The review process would permit intervention if the IMAC’s reforms are not in keeping with the goals of Congress or the President, while retaining autonomy for implementing annual payment updates and other Medicare reforms for the IMAC.
Currently, Congress must act if it agrees with MedPAC’s recommendations and wants to implement them as law. By contrast, with IMAC, basically Congress would have to act if it wanted to prevent IMAC’s recommendations from being implemented into law. Given the difficulty Congress has on agreeing to any course of action, that provision alone may effectively insulate IMAC from the political process while, at least on the surface, making IMAC subject to Congressional oversight. We will see if President Obama raises the idea of IMAC in his press conference this evening on healthcare reform.
