Topics this week:
- State of the Union Recap Part 1 – Obama supports further Medicare cuts to levels proposed by Simpson & Bowles
- State of the Union Recap Part 2 – Obama pledges to invest in medical research and control the cost of higher education
- Insurance Marketplaces in Majority of States to be run by Federal Government
- Obama and Congress Work Towards Sequester Fix
- Health Policy 101: What is the difference between “bundled payments” and “fee for service”?
1. State of the Union Recap Part 1 – Obama supports further Medicare cuts to levels proposed by Simpson & Bowles
On Tuesday, February 12th, President Obama gave the first State of the Union address of his 2nd term. Nearly half of the speech focused on foreign policy, the economy and the budget. With respect to health care, the president indicated that further spending cuts are on the horizon for Medicare saying:
“On Medicare, I’m prepared to enact reforms that will achieve the same amount of health care savings by the beginning
of the next decade as the reforms proposed by the bipartisan Simpson-Bowles commission.”
He continued to say that these cuts would be achieved by 1) reducing taxpayer subsidies to pharmaceutical companies, 2) reducing benefits for wealthy seniors, and 3) changing the payment model from a “fee for service” to a more outcomes based system.
The Simpson-Bowles Commission is the bipartisan group of congressional leaders that Obama chartered during his first year in office to determine a plan for reducing the budget deficit. This group proposed $4 trillion in budget cuts over the next decade, of which $341 billion would come from health care savings. Since then, $2.5 trillion of these cuts have already been enacted.
Notably, one week after the State of the Union on Tuesday, February 19th, Erskine Bowles and Alan Simpson, co-chairs of the original commission, proposed an updated version of their plan recommending additional cuts to the federal budget. They propose increasing budget cuts from the remaining $1.5 trillion of their old plan that has not yet been implemented to $2.4 trillion. Of these additional cuts, they recommend an additional $600 billion from Medicare stating in their report that “the aging of the population represents a significant driver of our growing debt.”
With the sequester deadline of March 1st fast approaching, it remains to be seen which aspects of Simpson-Bowles will be enacted by the President and the divided Congress.
Sources:
- http://www.nytimes.com/2013/02/13/us/politics/obamas-2013-state-of-the-union-address.html?pagewanted=all&_r=0
- http://www.washingtonpost.com/blogs/wonkblog/wp/2013/02/13/obamas-2013-state-of-the-union-address-in-graphs/
- http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/TheMomentofTruth12_1_2010.pdf
- http://tv.msnbc.com/2013/02/19/behold-new-simpson-bowles-fiscal-plan-now-with-more-cuts/
- http://www.click2houston.com/news/money/New-Bowles-Simpson-deficit-plan-would-cut-2-4-trillion/-/1735962/18980596/-/qytt6y/-/index.html
----------
2. State of the Union Recap Part 2 – Obama pledges to invest in medical research and control the cost of higher education
During his State of the Union Address, President Obama spoke frequently of the need to cut federal spending, but held out medical research as an exception:
“Every dollar we invested to map the human genome returned $140 to our economy. Today, our scientists are mapping
the human brain to unlock the answers to Alzheimer’s; developing drugs to regenerate damaged organs. Now is not the
time to gut these job-creating investments in science and innovation. Now is the time to reach a level of research and
development not seen since the height of the Space Race.”
The Human Genome Project (HGP) stands out as an example where increased investment was more beneficial to the country than spending cuts. The HGP began in 1990 costing $3.8 billion and is estimated to have returned over $800 billion in revenue since then through commercialization of technical and medical innovations coming out of the project.
In his speech, the President hinted towards a new project he plans to propose as early as next month called the “Brain Activity Map Project” (BAMP). This will be a federally funded effort in collaboration with leading scientists to develop nanotechnology for mapping human brain activity at a molecular level. His hope is that the BAMP will do for neuroscience what the HGP did for genetics. Such a project could not only provide new treatments for Alzheimer’s, Schizophrenia and Autism, but could also provide new innovations in artificial intelligence and novel applications for nanotechnology.
President Obama also addressed the increasing cost of higher education in his speech:
“But taxpayers cannot continue to subsidize the soaring cost of higher education. Colleges must do their part to keep
costs down, and it’s our job to make sure they do.”
Currently $150 billion in federal aid goes to students for university loans and grants. The President proposes to amend the Higher Education Act (HEA) to include 1) affordability and 2) student outcomes post graduation as criteria for future accreditation and qualification for receiving federal student aid.
Sources:
- http://www.nytimes.com/2013/02/13/us/politics/obamas-2013-state-of-the-union-address.html?pagewanted=all&_r=0
- https://www.aamc.org/advocacy/washhigh/highlights2013/328324/021513presidentaddressesissuesofacademicmedicineinstateoftheunio.html
- http://www.whitehouse.gov/sites/default/files/uploads/sotu_2013_blueprint_embargo.pdf
----------
3. Insurance Marketplaces in Majority of States to be run by Federal Government
As of this month, twenty-six states have opted to have their health insurance exchanges operated by the federal government as part of the health reforms brought on by implementation of the Affordable Care Act. The exchanges, expected to be available to all on October 1st of this year, will be the pathway to insurance for millions of Americans looking to shop for health insurance policies via these marketplaces. States had the opportunity to either design their own exchange or to have the federal government exchange serve as their state’s marketplace. The majority of states choosing to have the federal government involved are Republican-led and include Texas, Florida, and Pennsylvania.
These federal marketplaces will be accessible online and there have been preliminary developments reported on how the Department Health and Human Services will involve various entities to determine an individual’s eligibility for insurance and the types of health plans accessible.
The rest of the states have opted to operate their own health insurance exchanges or to engage in a state-federal partnership to run them. More information about which states chose these options is available via the Center for Consumer Information and Insurance Oversight.
For more information you may refer to a prior Health Policy 101 on the topic: Insurance Exchanges
Source:
- http://www.kaiserhealthnews.org/Stories/2013/February/15/state-federal-exchange-partnership-deadline.aspx
----------
4. Obama & Congress Work Towards Sequester Fix
Unless Congress acts before the looming March 1st deadline, there will be automatic budget cuts applied to major federal departments including health care and the National Institutes of Health. On Tuesday, President Obama urged Congress to take action that would prevent these cuts, termed the sequester, and postpone them from happening until the end of the year.
Congress is faced with having to approve an alternative plan for producing savings through a combination of spending cuts to programs such as Medicare and raises in taxes, or to allow the sequester to go into effect. The administration favors an alternative plan to sequestration and has noted the drastic effects it would have on a number of federal agencies including those in major health areas. For example, “the National Institutes of Health would lose $1.6 billion, trimming research on cancer, drying up money for hundreds of other research projects and eliminating up 20,000 private research positions nationwide. Health departments would give 424,000 fewer tests for the AIDS virus this year. More than 373,000 seriously ill people may not receive needed mental health services.”
The ultimate plan remains unclear and will continue to develop in the coming weeks. Still, it is evident that the health sector will have much at stake as the plans unfold for generating the savings needed for the country’s budget.
Sources:
- http://www.washingtonpost.com/business/economy/obama-to-press-for-sequester-fix/2013/02/19/e647cd70-7a5d-11e2-82e8-61a46c2cde3d_story.html
- http://www.washingtonpost.com/business/a-look-at-how-administration-says-automatic-budget-cuts-would-diminish-government-services/2013/02/15/4993ab28-774e-11e2-b102-948929030e64_story.html
----------
5. Health Policy 101: What is the difference between “bundled payments” and “fee for service”?
In President Obama’s State of the Union Address he described one mechanism for reducing health care costs as changing the way that medical bills are paid:
“We’ll bring down costs by changing the way our government pays for Medicare, because our medical bills shouldn’t be
based on the number of tests ordered or days spent in the hospital – they should be based on the quality of care that our
seniors receive.”
Traditionally medical bills have followed a fee for service model where patients are billed separately for each procedure, physician and health care worker interaction. For example, if a patient has cardiac bypass surgery, they will later be billed separately for use of the hospital facilities, the surgeon’s procedure, the anesthesiologist’s services, etc. The challenge in this model is that it provides little incentive for health care providers to be cost efficient. In fact, the reverse incentive is often true where doing more tests and procedures leads to higher revenues received by the hospital.
The Affordable Care Act includes measures to shift the US Health Care model from fee for service to bundled payments. Using the previous example, the patient receiving cardiac bypass surgery would be billed a single amount, regardless of how long they stayed in the hospital or how many tests and procedures were performed. This model creates incentive for the health care provider to provide efficient care – if the actual cost of the patient episode is less than the bundled payment amount, then they get to keep the difference. Conversely, if the actual cost exceeds the bundled payment amount, the health care provider loses money.
While the philosophy behind bundled payments is sound, its execution has been problematic. Physicians and health care organizations are concerned about who will have decision authority on setting the bundled payment amount for a given type of patient episode, and whether the amount will be high enough for them to be fairly compensated. Within health care organizations, various constituents are concerned that the bundled payment may be unfairly distributed across the different providers who participated in the patient’s care.
It is not clear what the future model will look like, but current trends in health policy suggest physicians should expect some form of bundled payments to become more prevalent in the coming years.
Sources:
- http://www.nytimes.com/2013/02/13/us/politics/obamas-2013-state-of-the-union-address.html?pagewanted=all&_r=0
- http://www.ama-assn.org/ama/pub/physician-resources/practice-management-center/claims-revenue-cycle/managed-care-contracting/evaluating-payment-options/bundled-payments.page
OSR Legislative Affairs Update 1-24-13 01/24/2013
0 Comments
Topics this week:
Many hospitals provide charitable care to their communities, acting as a ‘safety net’ of uninsured and underinsured patients. This is a very costly service provided to the community, and to help cover some of the cost incurred many hospitals received funds from Medicare and Medicaid DSH programs. Historically DSH represents the largest federal funding for uncompensated care, with over $11.3 Billion paid out for care in 2012. With the implementation of the ACA, Center For Medicare & Medicaid Services (CMS) predicts the number of uninsured to fall, and so the eligibility for DSH funds must change. Currently CMS is revising the formula for how hospitals will receive funding. Starting in FY2014 DSH payments will be cut to 25% of what they were projected to be under the preexisting formula. The remaining 75% of funds will be reduced proportionate to the number of uninsured patients treated since 2013. Any additional money that is unused will then become part of a ‘pool’ of funds for hospitals to qualify for based on the amount of ‘uncompensated care.’ To prepare for the change of DSH distribution, stakeholders are discussing how to to measure and report the changes in uninsured patients from 2013-2014, as well as how to measure and define ‘uncompensated care’. The AAMC, as well as other contributors to the discussion, argue that GME cost as well as government payment shortfalls should be included in the determination of ‘uncompensated care’.
Sources:
http://www.jdsupra.com/legalnews/national-provider-call-on-fy-2014-medica-37572/
http://www.medicaid.gov/AffordableCareAct/Provisions/Provider-Payments.html
http://www.apha.org/NR/rdonlyres/328D24F3-9C75-4CC5-9494-7F1532EE828A/0/NHELP_DSH_QA_final.pdf
https://www.aamc.org/advocacy/washhigh/
----------
2. GME: Children’s Hospital GME Program
The Children’s Hospital Graduate Medical Education Payment Program provides federal funds for free standing Children’s hospitals to maintain their GME programs. CHGME was created in 1999 because Children’s hospitals have a small Medicare population, making the collection of traditional Medicare Direct/Indirect Graduate Medical Education (GME) funds limited. Currently, there are 55 US hospitals that benefited from the $265 million dollars in FY2012, less than 1% of the total GME funds. Last year the 112th congress twice approved this bill with bipartisan support, however was unable to see it passed. Chair Joe Pitts (R-Pa.) and Frank Pallone (D-N.J.) of the House Energy and Commerce Health Subcommittee reintroduced the Children’s Hospital GME Support Reauthorization Act. This act, if passed, will secure funding for the CHGME program through FY2017 with a maximum of $330 million a year.
In addition to the CHGME bill, the committee will also be reviewing HR 225 to allow the National Institutes of Health (NIH) to fund pediatric research networks.
Sources:
http://bhpr.hrsa.gov/childrenshospitalgme/index.html
http://thehill.com/blogs/healthwatch/mental-health/278095-week-ahead-mental-health-debate-moves-to-congress
https://www.aamc.org/advocacy/washhigh/
http://childrenshospitals.typepad.com/withallourmight/2013/01/bill-to-reauthrorize-chgme-and-promote-pediatric-research-introduced-in-house.html
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3. Health and Human Services (HHS) awards $1.5 Billion for State Exchanges
To support the development of insurance exchanges under the ACA the federal health department announced $1.5 billion of new grants. Health insurance exchanges are a central component of the ACA helping consumers to have more control of their healthcare choices. Please read more about in our Health Policy 101: Insurance Exchanges.
Sources:
http://thehill.com/blogs/healthwatch/health-reform-implementation/277757-hhs-announces-15b-for-state-exchanges
http://www.kaiserhealthnews.org/Daily-Reports/2013/January/18/exchanges-and-health-law-implementation.aspx
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4. Gun Violence and Mental Illness
President Obama recently released his plan to address gun violence in the US by signing a $500 million directive with 23 separate executive orders. Of these actions to curb gun violence, 4 were aimed directly at mental health services. These directives included:
i. The release of clarification to health care professionals that no federal law prohibits them from reporting threats of violence to the appropriate authorities
ii. The release of a letter to state health officials clarifying the scope of Medicaid coverage of mental health services
iii. A commitment to finalized mental health parity regulations
iv. Launch a national dialogue on mental health
Another clarification that was made was that there are no federal laws that prohibit a physician from asking about firearm possession and safety during an examination. One of the fastest ways that some states will be able to provide additional mental health services is by opting for Medicaid expansion under the ACA which would provide federal mental-health funds.
Sources:
http://www.medscape.com/viewarticle/777730
http://www.kaiserhealthnews.org/Daily-Reports/2013/January/18/mental-health-and-gun-violence.aspx
http://www.medscape.com/viewarticle/778013
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5. Health Policy 101: Graduate Medical Education (GME) funding
Today newly graduated physicians go on to complete their Graduate Medical Education (GME), otherwise known as residency, with one of more than 1,100 teaching hospitals across the country. During their residency, physicians receive instruction from more experienced physicians as well as a salary and benefits. Before World War II, few medical school graduates went on to complete graduate medical education (GME). At that time GME was funded largely by hospitals who built the expense of teaching and supporting training physicians into patient costs. In 1965, with the creation of Medicare, the federal government concluded that “…educational activities enhance the quality of care in an institution, and it is intended, until the community undertakes to bear such education cost in some other way, that a part of the net cost of such activities (including stipends of trainees, as well as compensation of teachers and other costs) should be borne to an appropriate extent by the hospital insurance program (Medicare).”
To this day the majority of funding for GME comes from the federal Medicare budget with funds also being contributed by the Department of Veteran’s Affairs, state, and private funds. Annually the federal government contributes about $9.5 billion Medicare dollars and $2 billion Medicaid dollars to the training of physicians. Funding from the federal government for GME comes through several channels:
1. Direct GME (DME): covering the salaries of residents as well as their supervising physicians’ time (this accounts for approximately $3 billion of the $9.5 billion spent on GME annually by Medicare)
2. Indirect GME (IME): covers added costs associated with being a teaching hospital such as increased inpatient say, increased tests and ancillary services, greater severity of illness, etc. (this accounts for approximately $5.5 billion of the $9.5 billion spent on GME annually by Medicare)
3. Children’s Hospital GME: provides funding specifically for Children’s Hospitals which, due to their patient population, has fewer opportunities to qualify for Medicare funds (this accounts for approximately $265 million dollars spent on GME annually by the Health Resources and Services Administration, HRSA)
In 1997 with the passage of the Balanced Budget Act, significant caps were placed on the number of residency spots that federal dollars will fund. This limits the total GME dollars that a teaching hospital can receive as the amount of funds are largely determined by the number of residents. Currently, the number of residency spots that Medicare will fund is still maintained at 1997 numbers, leading many to wonder how a looming doctor shortage can be averted without increasing the opportunities for residency training which is now an established requirement for medical licensure.
In addition to a limit on the number of residency spots that will be supported by federal GME funds, the amount of funding has also been slowing decreasing for the residency positions. The current projected reduction in GME funding for FY 2013 has a 10% cut to IME ($9.7 billion over 10 years), as well as $177 million dollar cut to Children’s Hospital GME funds.
Sources:
http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1495035/
http://www.healthaffairs.org/healthpolicybriefs/brief.php?brief_id=73
https://www.aamc.org/newsroom/reporter/march2012/276736/budget.html
Your loyal Legislative Affairs team,
Brad Hunter – Northeast Region
Robert Sanchez – Central Region
Sean Vanlandingham – Southern Region
Claire Sadler – Western Region
Alexandra Printz – National Delegate
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To access previous updates see our blog at:
https://www.aamc.org/members/osr/communications/legislative_affairs/
For more Health Care Policy news go to:
https://www.aamc.org/members/osr/communications/legislative_affairs/49198/legislative_affairs_resources.html
On Tuesday, February 12th, President Obama gave the first State of the Union address of his 2nd term. Nearly half of the speech focused on foreign policy, the economy and the budget. With respect to health care, the president indicated that further spending cuts are on the horizon for Medicare saying:
“On Medicare, I’m prepared to enact reforms that will achieve the same amount of health care savings by the beginning
of the next decade as the reforms proposed by the bipartisan Simpson-Bowles commission.”
He continued to say that these cuts would be achieved by 1) reducing taxpayer subsidies to pharmaceutical companies, 2) reducing benefits for wealthy seniors, and 3) changing the payment model from a “fee for service” to a more outcomes based system.
The Simpson-Bowles Commission is the bipartisan group of congressional leaders that Obama chartered during his first year in office to determine a plan for reducing the budget deficit. This group proposed $4 trillion in budget cuts over the next decade, of which $341 billion would come from health care savings. Since then, $2.5 trillion of these cuts have already been enacted.
Notably, one week after the State of the Union on Tuesday, February 19th, Erskine Bowles and Alan Simpson, co-chairs of the original commission, proposed an updated version of their plan recommending additional cuts to the federal budget. They propose increasing budget cuts from the remaining $1.5 trillion of their old plan that has not yet been implemented to $2.4 trillion. Of these additional cuts, they recommend an additional $600 billion from Medicare stating in their report that “the aging of the population represents a significant driver of our growing debt.”
With the sequester deadline of March 1st fast approaching, it remains to be seen which aspects of Simpson-Bowles will be enacted by the President and the divided Congress.
Sources:
- http://www.nytimes.com/2013/02/13/us/politics/obamas-2013-state-of-the-union-address.html?pagewanted=all&_r=0
- http://www.washingtonpost.com/blogs/wonkblog/wp/2013/02/13/obamas-2013-state-of-the-union-address-in-graphs/
- http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/TheMomentofTruth12_1_2010.pdf
- http://tv.msnbc.com/2013/02/19/behold-new-simpson-bowles-fiscal-plan-now-with-more-cuts/
- http://www.click2houston.com/news/money/New-Bowles-Simpson-deficit-plan-would-cut-2-4-trillion/-/1735962/18980596/-/qytt6y/-/index.html
----------
2. State of the Union Recap Part 2 – Obama pledges to invest in medical research and control the cost of higher education
During his State of the Union Address, President Obama spoke frequently of the need to cut federal spending, but held out medical research as an exception:
“Every dollar we invested to map the human genome returned $140 to our economy. Today, our scientists are mapping
the human brain to unlock the answers to Alzheimer’s; developing drugs to regenerate damaged organs. Now is not the
time to gut these job-creating investments in science and innovation. Now is the time to reach a level of research and
development not seen since the height of the Space Race.”
The Human Genome Project (HGP) stands out as an example where increased investment was more beneficial to the country than spending cuts. The HGP began in 1990 costing $3.8 billion and is estimated to have returned over $800 billion in revenue since then through commercialization of technical and medical innovations coming out of the project.
In his speech, the President hinted towards a new project he plans to propose as early as next month called the “Brain Activity Map Project” (BAMP). This will be a federally funded effort in collaboration with leading scientists to develop nanotechnology for mapping human brain activity at a molecular level. His hope is that the BAMP will do for neuroscience what the HGP did for genetics. Such a project could not only provide new treatments for Alzheimer’s, Schizophrenia and Autism, but could also provide new innovations in artificial intelligence and novel applications for nanotechnology.
President Obama also addressed the increasing cost of higher education in his speech:
“But taxpayers cannot continue to subsidize the soaring cost of higher education. Colleges must do their part to keep
costs down, and it’s our job to make sure they do.”
Currently $150 billion in federal aid goes to students for university loans and grants. The President proposes to amend the Higher Education Act (HEA) to include 1) affordability and 2) student outcomes post graduation as criteria for future accreditation and qualification for receiving federal student aid.
Sources:
- http://www.nytimes.com/2013/02/13/us/politics/obamas-2013-state-of-the-union-address.html?pagewanted=all&_r=0
- https://www.aamc.org/advocacy/washhigh/highlights2013/328324/021513presidentaddressesissuesofacademicmedicineinstateoftheunio.html
- http://www.whitehouse.gov/sites/default/files/uploads/sotu_2013_blueprint_embargo.pdf
----------
3. Insurance Marketplaces in Majority of States to be run by Federal Government
As of this month, twenty-six states have opted to have their health insurance exchanges operated by the federal government as part of the health reforms brought on by implementation of the Affordable Care Act. The exchanges, expected to be available to all on October 1st of this year, will be the pathway to insurance for millions of Americans looking to shop for health insurance policies via these marketplaces. States had the opportunity to either design their own exchange or to have the federal government exchange serve as their state’s marketplace. The majority of states choosing to have the federal government involved are Republican-led and include Texas, Florida, and Pennsylvania.
These federal marketplaces will be accessible online and there have been preliminary developments reported on how the Department Health and Human Services will involve various entities to determine an individual’s eligibility for insurance and the types of health plans accessible.
The rest of the states have opted to operate their own health insurance exchanges or to engage in a state-federal partnership to run them. More information about which states chose these options is available via the Center for Consumer Information and Insurance Oversight.
For more information you may refer to a prior Health Policy 101 on the topic: Insurance Exchanges
Source:
- http://www.kaiserhealthnews.org/Stories/2013/February/15/state-federal-exchange-partnership-deadline.aspx
----------
4. Obama & Congress Work Towards Sequester Fix
Unless Congress acts before the looming March 1st deadline, there will be automatic budget cuts applied to major federal departments including health care and the National Institutes of Health. On Tuesday, President Obama urged Congress to take action that would prevent these cuts, termed the sequester, and postpone them from happening until the end of the year.
Congress is faced with having to approve an alternative plan for producing savings through a combination of spending cuts to programs such as Medicare and raises in taxes, or to allow the sequester to go into effect. The administration favors an alternative plan to sequestration and has noted the drastic effects it would have on a number of federal agencies including those in major health areas. For example, “the National Institutes of Health would lose $1.6 billion, trimming research on cancer, drying up money for hundreds of other research projects and eliminating up 20,000 private research positions nationwide. Health departments would give 424,000 fewer tests for the AIDS virus this year. More than 373,000 seriously ill people may not receive needed mental health services.”
The ultimate plan remains unclear and will continue to develop in the coming weeks. Still, it is evident that the health sector will have much at stake as the plans unfold for generating the savings needed for the country’s budget.
Sources:
- http://www.washingtonpost.com/business/economy/obama-to-press-for-sequester-fix/2013/02/19/e647cd70-7a5d-11e2-82e8-61a46c2cde3d_story.html
- http://www.washingtonpost.com/business/a-look-at-how-administration-says-automatic-budget-cuts-would-diminish-government-services/2013/02/15/4993ab28-774e-11e2-b102-948929030e64_story.html
----------
5. Health Policy 101: What is the difference between “bundled payments” and “fee for service”?
In President Obama’s State of the Union Address he described one mechanism for reducing health care costs as changing the way that medical bills are paid:
“We’ll bring down costs by changing the way our government pays for Medicare, because our medical bills shouldn’t be
based on the number of tests ordered or days spent in the hospital – they should be based on the quality of care that our
seniors receive.”
Traditionally medical bills have followed a fee for service model where patients are billed separately for each procedure, physician and health care worker interaction. For example, if a patient has cardiac bypass surgery, they will later be billed separately for use of the hospital facilities, the surgeon’s procedure, the anesthesiologist’s services, etc. The challenge in this model is that it provides little incentive for health care providers to be cost efficient. In fact, the reverse incentive is often true where doing more tests and procedures leads to higher revenues received by the hospital.
The Affordable Care Act includes measures to shift the US Health Care model from fee for service to bundled payments. Using the previous example, the patient receiving cardiac bypass surgery would be billed a single amount, regardless of how long they stayed in the hospital or how many tests and procedures were performed. This model creates incentive for the health care provider to provide efficient care – if the actual cost of the patient episode is less than the bundled payment amount, then they get to keep the difference. Conversely, if the actual cost exceeds the bundled payment amount, the health care provider loses money.
While the philosophy behind bundled payments is sound, its execution has been problematic. Physicians and health care organizations are concerned about who will have decision authority on setting the bundled payment amount for a given type of patient episode, and whether the amount will be high enough for them to be fairly compensated. Within health care organizations, various constituents are concerned that the bundled payment may be unfairly distributed across the different providers who participated in the patient’s care.
It is not clear what the future model will look like, but current trends in health policy suggest physicians should expect some form of bundled payments to become more prevalent in the coming years.
Sources:
- http://www.nytimes.com/2013/02/13/us/politics/obamas-2013-state-of-the-union-address.html?pagewanted=all&_r=0
- http://www.ama-assn.org/ama/pub/physician-resources/practice-management-center/claims-revenue-cycle/managed-care-contracting/evaluating-payment-options/bundled-payments.page
OSR Legislative Affairs Update 1-24-13 01/24/2013
0 Comments
Topics this week:
- Disproportionate Share Hospital (DSH) Payment Reform
- GME: Children’s Hospital GME Program
- Health and Human Services (HHS) awards $1.5 Billion for State Exchanges
- Gun Violence and Mental Illness
- Health Policy 101: Graduate Medical Education (GME) funding
Many hospitals provide charitable care to their communities, acting as a ‘safety net’ of uninsured and underinsured patients. This is a very costly service provided to the community, and to help cover some of the cost incurred many hospitals received funds from Medicare and Medicaid DSH programs. Historically DSH represents the largest federal funding for uncompensated care, with over $11.3 Billion paid out for care in 2012. With the implementation of the ACA, Center For Medicare & Medicaid Services (CMS) predicts the number of uninsured to fall, and so the eligibility for DSH funds must change. Currently CMS is revising the formula for how hospitals will receive funding. Starting in FY2014 DSH payments will be cut to 25% of what they were projected to be under the preexisting formula. The remaining 75% of funds will be reduced proportionate to the number of uninsured patients treated since 2013. Any additional money that is unused will then become part of a ‘pool’ of funds for hospitals to qualify for based on the amount of ‘uncompensated care.’ To prepare for the change of DSH distribution, stakeholders are discussing how to to measure and report the changes in uninsured patients from 2013-2014, as well as how to measure and define ‘uncompensated care’. The AAMC, as well as other contributors to the discussion, argue that GME cost as well as government payment shortfalls should be included in the determination of ‘uncompensated care’.
Sources:
http://www.jdsupra.com/legalnews/national-provider-call-on-fy-2014-medica-37572/
http://www.medicaid.gov/AffordableCareAct/Provisions/Provider-Payments.html
http://www.apha.org/NR/rdonlyres/328D24F3-9C75-4CC5-9494-7F1532EE828A/0/NHELP_DSH_QA_final.pdf
https://www.aamc.org/advocacy/washhigh/
----------
2. GME: Children’s Hospital GME Program
The Children’s Hospital Graduate Medical Education Payment Program provides federal funds for free standing Children’s hospitals to maintain their GME programs. CHGME was created in 1999 because Children’s hospitals have a small Medicare population, making the collection of traditional Medicare Direct/Indirect Graduate Medical Education (GME) funds limited. Currently, there are 55 US hospitals that benefited from the $265 million dollars in FY2012, less than 1% of the total GME funds. Last year the 112th congress twice approved this bill with bipartisan support, however was unable to see it passed. Chair Joe Pitts (R-Pa.) and Frank Pallone (D-N.J.) of the House Energy and Commerce Health Subcommittee reintroduced the Children’s Hospital GME Support Reauthorization Act. This act, if passed, will secure funding for the CHGME program through FY2017 with a maximum of $330 million a year.
In addition to the CHGME bill, the committee will also be reviewing HR 225 to allow the National Institutes of Health (NIH) to fund pediatric research networks.
Sources:
http://bhpr.hrsa.gov/childrenshospitalgme/index.html
http://thehill.com/blogs/healthwatch/mental-health/278095-week-ahead-mental-health-debate-moves-to-congress
https://www.aamc.org/advocacy/washhigh/
http://childrenshospitals.typepad.com/withallourmight/2013/01/bill-to-reauthrorize-chgme-and-promote-pediatric-research-introduced-in-house.html
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3. Health and Human Services (HHS) awards $1.5 Billion for State Exchanges
To support the development of insurance exchanges under the ACA the federal health department announced $1.5 billion of new grants. Health insurance exchanges are a central component of the ACA helping consumers to have more control of their healthcare choices. Please read more about in our Health Policy 101: Insurance Exchanges.
Sources:
http://thehill.com/blogs/healthwatch/health-reform-implementation/277757-hhs-announces-15b-for-state-exchanges
http://www.kaiserhealthnews.org/Daily-Reports/2013/January/18/exchanges-and-health-law-implementation.aspx
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4. Gun Violence and Mental Illness
President Obama recently released his plan to address gun violence in the US by signing a $500 million directive with 23 separate executive orders. Of these actions to curb gun violence, 4 were aimed directly at mental health services. These directives included:
i. The release of clarification to health care professionals that no federal law prohibits them from reporting threats of violence to the appropriate authorities
ii. The release of a letter to state health officials clarifying the scope of Medicaid coverage of mental health services
iii. A commitment to finalized mental health parity regulations
iv. Launch a national dialogue on mental health
Another clarification that was made was that there are no federal laws that prohibit a physician from asking about firearm possession and safety during an examination. One of the fastest ways that some states will be able to provide additional mental health services is by opting for Medicaid expansion under the ACA which would provide federal mental-health funds.
Sources:
http://www.medscape.com/viewarticle/777730
http://www.kaiserhealthnews.org/Daily-Reports/2013/January/18/mental-health-and-gun-violence.aspx
http://www.medscape.com/viewarticle/778013
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5. Health Policy 101: Graduate Medical Education (GME) funding
Today newly graduated physicians go on to complete their Graduate Medical Education (GME), otherwise known as residency, with one of more than 1,100 teaching hospitals across the country. During their residency, physicians receive instruction from more experienced physicians as well as a salary and benefits. Before World War II, few medical school graduates went on to complete graduate medical education (GME). At that time GME was funded largely by hospitals who built the expense of teaching and supporting training physicians into patient costs. In 1965, with the creation of Medicare, the federal government concluded that “…educational activities enhance the quality of care in an institution, and it is intended, until the community undertakes to bear such education cost in some other way, that a part of the net cost of such activities (including stipends of trainees, as well as compensation of teachers and other costs) should be borne to an appropriate extent by the hospital insurance program (Medicare).”
To this day the majority of funding for GME comes from the federal Medicare budget with funds also being contributed by the Department of Veteran’s Affairs, state, and private funds. Annually the federal government contributes about $9.5 billion Medicare dollars and $2 billion Medicaid dollars to the training of physicians. Funding from the federal government for GME comes through several channels:
1. Direct GME (DME): covering the salaries of residents as well as their supervising physicians’ time (this accounts for approximately $3 billion of the $9.5 billion spent on GME annually by Medicare)
2. Indirect GME (IME): covers added costs associated with being a teaching hospital such as increased inpatient say, increased tests and ancillary services, greater severity of illness, etc. (this accounts for approximately $5.5 billion of the $9.5 billion spent on GME annually by Medicare)
3. Children’s Hospital GME: provides funding specifically for Children’s Hospitals which, due to their patient population, has fewer opportunities to qualify for Medicare funds (this accounts for approximately $265 million dollars spent on GME annually by the Health Resources and Services Administration, HRSA)
In 1997 with the passage of the Balanced Budget Act, significant caps were placed on the number of residency spots that federal dollars will fund. This limits the total GME dollars that a teaching hospital can receive as the amount of funds are largely determined by the number of residents. Currently, the number of residency spots that Medicare will fund is still maintained at 1997 numbers, leading many to wonder how a looming doctor shortage can be averted without increasing the opportunities for residency training which is now an established requirement for medical licensure.
In addition to a limit on the number of residency spots that will be supported by federal GME funds, the amount of funding has also been slowing decreasing for the residency positions. The current projected reduction in GME funding for FY 2013 has a 10% cut to IME ($9.7 billion over 10 years), as well as $177 million dollar cut to Children’s Hospital GME funds.
Sources:
http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1495035/
http://www.healthaffairs.org/healthpolicybriefs/brief.php?brief_id=73
https://www.aamc.org/newsroom/reporter/march2012/276736/budget.html
Your loyal Legislative Affairs team,
Brad Hunter – Northeast Region
Robert Sanchez – Central Region
Sean Vanlandingham – Southern Region
Claire Sadler – Western Region
Alexandra Printz – National Delegate
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To access previous updates see our blog at:
https://www.aamc.org/members/osr/communications/legislative_affairs/
For more Health Care Policy news go to:
https://www.aamc.org/members/osr/communications/legislative_affairs/49198/legislative_affairs_resources.html