The Senate is debating ways to reverse a 21 percent cut in Medicare physician payments that began on June 1. The legislation would also include additional Medicaid money for states. Meanwhile, the Department of Health and Human Services released new guidelines that would determine whether or not “grandfathered” health insurance plans could retain that status.
JACKIE JUDD: Good day. I am Jackie Judd with Health on the Hill. The Senate is working through a series of health care related proposals affecting doctors, the elderly, the unemployed and the states. It is a complicated mix. Here to bring us up to date, Mary Agnes Carey, senior correspondent for Kaiser Health News, and Noam Levey of the Los Angeles Times Tribune, Washington Bureau. Welcome to you both.
The bill is known as the “Extender bill.” It includes what is called the doc fix. It includes extended Medicaid funding for the states, and deals also with some Medicare reimbursement issues. Let’s start with you, Mary Agnes. Walk us through the doctor fix and the Medicaid funding issue.
MARY AGNES CAREY: As we go through these things we have to remember these provisions could change at any time. Majority leader in the Senate, Harry Reid, is trying to get votes for this package and so any of these things could change. Right now it looks as if they are looking at a two year Medicare physician payment fix.
Again, as we have talked about several times on June 1st a 21-percent pay cut for Medicare, physicians who accept Medicare reimbursement. That went into effect. Congress is trying to fix that. In the Senate, this bill would have about a 2-percent increase from June 1st of this year until the end of the year and an additional 1-percent increase for next year in 2011. This is the same legislation that passed in the House before they broke for the Memorial Day break.
A different provision, additional provision in the Senate bill that was not in the House bill is more Medicaid money for the states. Again, we have talked about this. With the recession, a lot of folks have lost their jobs. They have lost their coverage and they are looking to the Medicaid program for help.
Governors are looking to Washington for additional funding for Medicaid. This is in this current Senate package. They are also expecting, as the Floor debate continues, an amendment that would have this COBRA subsidy, again COBRA is additional insurance that you can buy from your employer if you lose your job, it’s very expensive.
There had been a 65-percent subsidy addition in the economic stimulus package that passed last year. That expired at the end of May. There is interest in increasing that. It is not in the House bill. It is expected to be an amendment on the Senate floor and it could get quite a bit of support.
JACKIE JUDD: There is also something in the Extender bill, Noam, related to Medicare reimbursement for doctors in different parts of a particular state, this one being California. But the way this goes could be a signal of what other states may face, so fill us in on that.
NOAM LEVEY: Well, this is sort of an interesting although very arcane part of the Medicare program.
JACKIE JUDD: Not for the doctor. [Laughter]
NOAM LEVEY: No, not for the doctors and not for the doctors particularly in California. But this is an issue nationally, and it has to do with the way that the Federal government tries to figure out the way to pay a doctor, depending on where he or she practices.
The idea underlying this is that doctors who practice in urban areas, which are typically more expensive, would be paid more than those that practice in rural areas, but the strange way the system has worked over the years, there are a lot of sort of ex-urban and suburban counties around the country that have become very high cost, but are still paid at a relatively lower rate. California has a lot of these.
There are some, like San Diego, which is paid at a rural rate, even though obviously it is one of the country’s largest cities, but other metropolitan areas have similar issues. This would fix the California system and the doctors in California who sort of came up with this formula for fixing it believe that it could be extended to other parts of the country in future years.
JACKIE JUDD: There is some opposition to it in the Senate.
NOAM LEVEY: There is. Senator Tom Coburn who is targeting specific provisions in the bill for spending, for increasing spending, has identified this and labeled this as a special carve-out for California, is trying to push an amendment that would strip it out. Not clear whether that would actually go anywhere, but there is a cost associated with this for the Federal government in the short term to fix this $400 million.
In the longer term, the interesting thing in California that could be a model nationally is that the rural doctors who have to take essentially a pay cut in the long run to offset raising the cost in some of these urban areas, and that is the proposal that California has come up with that may be a model.
JACKIE JUDD: And what is the thought about what kind of impact that could have on Medicare beneficiaries and whether they would have access to doctors who will take them?
NOAM LEVEY: Well, I mean this was one of the reasons why lawmakers in California have pushed this because if the reimbursement levels are so low that doctors in high cost areas like San Diego, Santa Barbara, again other parts of the country, if the rates are so low, doctors are saying we can’t afford to take new Medicare patients, and then it becomes an access issue everywhere.
JACKIE JUDD: Mary Agnes, you mentioned before the Medicaid funding, it was not included in the House version of the Extender bill. It is being considered in the Senate bill. Does Harry Reid think that if it passes the Senate, he could get enough support in the House to get it through Congress and to the President’s desk?
MARY AGNES CAREY: I’m sure that he shares that view and also House Speaker Nancy Pelosi had said before the Memorial Day break when both the Medicaid and the COBRA funding came out, she wanted to go back and have another bite of the apple and push it through, and so that is certainly their hope.
In the interim you have had a lot of conversation with governors, Republican side, Democratic side, who have said we need this money, we have counted on it for our budgets, and Congress has to help us. So that pressure will continue to mount, but again we must remember why were these provisions taken out of the House bill? It is because conservative House Democrats, fiscally conservative House Democrats known as the Blue Dogs and some other Democrats as well.
JACKIE JUDD: And they are not going away.
MARY AGNES CAREY: They are not going away. They voiced opposition. They don’t like these provisions. They want to be fiscally responsible in their words, so that will kind of be the counterbalance. How does the pressure to add these things go against the pressure to not add them, and how does that fight shake down, especially as we are heading into a November election?
JACKIE JUDD: How do you see the fight playing out?
NOAM LEVEY: Well, I think that is right. The proposal that came forward in the Senate that includes the Medicaid assistance for the states was done with the expectation that Nancy Pelosi could go to some of those Blue Dog Democrats, convince them to change their mind, but they are not there yet.
I don’t think they have the votes in the House yet to back that up, so that is going to be something to follow in the next few days to see how Nancy Pelosi can go back to those fiscally conservative Democrats, try to convince them to change their mind.
I think on COBRA, a lot less expectation that that’s going to make it. There are Governors pushing for Medicaid. There is not a really big powerful lobby for people who have lost their jobs, and I don’t think there is a way that they are going to figure out the money to pay for that.
JACKIE JUDD: The Department of Health and Human Services has been busy beginning to implement the Health Care Reform Law, and they just recently in the past day or two came out with some language related to what we call the “grandfathering” issue. Certain insurers and businesses could be exempt from some consumer protections, if they don’t change their policies. What constitutes a change is the question, I guess. What did HHS come up with?
MARY AGNES CAREY: Well, Kathleen Sebelius, the Secretary of Department of Health and Human Services (HHS) said they are trying to strike a balance where costs would not be shifted to workers and they wouldn’t see major cuts in their coverage. That was the balance they tried to strike.
There is debate on whether or not they achieved it, but for example a grandfathered plan could raise the premium, the health insurance previum, but it could not come out and say we are not going to cover a specific disease like diabetes, for example. To keep the grandfather status, they could not change the coinsurance. Here we are talking about a plan for example, maybe the employer pays 80-percent, the employee pays 20-percent, they could not increase that percentage.
So, there are rules on co-pays and deductibles, again with proponents of these regs saying they give employers some flexibility, insurers some flexibility, but they also allow consumers to be protected if they need to be protected and you need to have plans changed to give them more of those protections, but then again folks that oppose this say it is way too constrictive.
Some of the larger business groups, for example, and also the National Federation of Independent Business, one of the small business groups, coming out and saying it is way too restrictive, we don’t have the flexibility we need and their argument is also they don’t think the bill does enough to control costs so here taking away some of their leverage in other areas will also hurt their ability to look at those costs and deal with them.
JACKIE JUDD: Noam, is it fair to say that this grandfathering issue is the most significant test to date of what happens when the regulators begin filling in the blanks of what the lawmakers did with health care reform?
NOAM LEVEY: I think that is a fair statement. I mean, I think that it is important to keep in mind that we are not sure yet what the impact will be and so with each regulatory step, whenever we have seen regulations there was an expectation that that would sort of further clarify the impact of the law. I think we know a little bit more now in terms of what employers can and can’t do, but we don’t know how employers will respond to this rule.
So, for example, there is a big debate now among employer groups and consumer groups about how many employers will actually want this grandfather protection? How many of them will change their plans, will lose that protection, and what will that ultimately mean for employees?
So, the administration has estimated that as many as half of all employer plans will lose this grandfather protection over the next few years. That is a potentially large shift, but it still doesn’t necessarily mean that employers are going to drop their coverage all of a sudden.
They may keep their coverage. They may adjust it slightly, so we just don’t know and that is I think one of the difficult parts of sort of understanding what the regulatory process really means at this point.
JACKIE JUDD: We will keep an eye on it. Thank you both, Noam Levey, Mary Agnes Carey. Thank you for joining us. I’m Jackie Judd and this has been Health on the Hill.