President Barack Obama on Thursday unveiled a $3.1 trillion budget that includes a reserve fund of $630 billion over 10 years for healthcare reform, financed in part by cutting waste and changing payment incentives for physicians, hospitals, and insurers.
One of the biggest reimbursement changes involves a switch to bundled payments for hospitalizations. Under the model, providers would receive a single bundled payment to cover both a hospital stay as well as care for the patient for 30 days after release. The change intends to reduce the 18% of hospitalizations that result from readmissions, and the administration claims it will save $26 billion of wasted money over 10 years, in part by reducing payments to hospitals that have high rates of readmission.
Physicians would also be affected by the bundled payment change, but the budget is generally less clear regarding physician reimbursement, stating only that the payment system will be reformed. Few details are provided, other than a general goal to create "better incentives for high-quality care rather than simply more care."
The administration says these payment changes that align incentives for quality and efficiency, combined with greater accountability, can save $316 billion over three years. Much of that could come from Medicare Advantage.
The budget proposal notes that the government pays Medicare Advantage plans 14% more than what it spends for traditional fee-for-service plans, and Obama plans to establish payments through a competitive bidding system, which would save more than $175 billion over 10 years.
Karen Ignagni, president and CEO of America's Health Insurance Plans, immediately denounced the budget plan, claiming it would cut benefits for seniors. "Unfortunately, this proposal would force seniors enrolled in Medicare Advantage to fund a disproportionate share of the costs to reform the health care system," Ignagni said. "A cut of this scale would jeopardize the health security of more than 10 million seniors enrolled in Medicare Advantage and would turn back the clock on innovative payment incentives to improve the quality of care that patients receive."
What the insurance industry sees as cutting benefits, however, the Obama administration views as waste reduction. The Government Accountability Office has labeled Medicare a "high risk" for fraud and abuse, and the budget includes funding to help identify excessive payments and correct problems.
The administration acknowledges that the $634 billion is only a "down payment," and that additional funds will be needed to achieve universal coverage. The budget comes just days after the Center for Medicare and Medicaid Services projected that national health spending will reach $4.4 trillion and comprise just over one-fifth of GDP by 2018.
John Commins is the human resources and community and rural hospitals editor with HealthLeaders Media. He can be reached at jcommins@healthleadersmedia.com.
As General Motors, Chrysler, the autoworkers union, and the Obama administration enter negotiations and plot the future of the U.S. auto industry, one of the most delicate issues they face is what to do about the health benefits for retirees. The rising cost of healthcare is one of the key burdens confronting the companies as they try to avoid collapse, illustrating the drag that healthcare can exert on the U.S. economy.
Tens of thousands of Kaiser Permanente's California workers have signed a petition to leave United Healthcare Workers West and join the newly formed National Union of Healthcare Workers. The 50,000-employee bargaining unit is one of the largest among the nation's private-sector employers, and taking it over would be a significant coup for the NUHW. The group was created last month by former leaders of the UHW after the Oakland-based local was placed under trusteeship by its parent organization, the Service Employees International Union.
James Roosevelt, Jr., president and CEO of Tufts Health Plan and member of the Obama Presidential Transition Team, said federal policymakers can learn from Massachusetts' reform. "The beauty of what we accomplished in Massachusetts, in addition to providing healthcare coverage in a cost-effective manner, is the legislation shined a light of day on healthcare costs. It was never framed as a true public policy before," said Roosevelt.
In his healthcare proposals, Obama has linked healthcare reform to stimulating the economy. Without major reforms at the federal level, the numbers of uninsured Americans will swell to 54 million within a decade. Losing coverage and facing rising healthcare costs will force many into bankruptcy. Echoing comments made by Obama on Tuesday, Roosevelt, the grandson of President Franklin Roosevelt, said healthcare costs force an American to declare bankruptcy every 30 seconds. "That is wrong and it must change," he said.
The health plan executive said the nation must build its reform program on top of the current employer-based system and not create a new system, such as single-payer, from scratch. "I don't think we can copy any system from another country that started with a different system," he said.
Roosevelt said major healthcare reforms should focus on four areas:
Ensuring quality and effectiveness
Improving the primary care system
Providing transparency for cost and quality
Addressing racial and income disparities
"This is a tall order and I don't have all the answers . . . I will tell you that the winds of change have come to Washington. We do have an unprecedented opportunity. We are on the verge of a national program that is as historic as any legislation in our time," said Roosevelt.
Roosevelt, who predicted senators Ted Kennedy and Max Baucus will present a healthcare reform package in the fall, said the road to reform will not be easy. He suggested healthcare leaders, policymakers, and stakeholders should discuss costs, but the debate should not devolve into fear mongering and inflammatory statements, which he charged is already happening on the topic of comparative effectiveness.
Though Obama expects major healthcare reform within the year, Charlie Baker, president and CEO of Harvard Pilgrim Healthcare, suggested changes should be incremental. He warned that policymakers and industry leaders should not overpromise and under deliver.
"[Health care is] 18% of the [gross domestic product]. It's hard to turn it on a dime," said Baker.
Medicare
As part of his budget plan released that was released Thursday, Obama proposed paying doctors for quality rather than individual services. In order for Medicare to create a quality-based system that is supported by physicians, John Glaser, PhD, chief information officer at Partners Healthcare, a major integrated healthcare system in Boston, said CMS will have to provide "meaningful incentives," such as 10% to 20% increases for providing quality.
Baker said whoever becomes the next Health and Human Services secretary should fix Medicare first. He added Medicare drives the rest of the system and its payment system, which favors specialists over primary care physicians, is a reason why many doctors choose specialties over general practice. "If you don't change Medicare, it's hard to change anything else," said Baker.
Roosevelt, however, said Medicare problems alone are not enough to spark changes, but would need to be part of a larger healthcare reform plan.
Healthcare leaders at Thursday's event questioned whether 100% of physician practices will have electronic health records (EHR) within five years, which is a goal in the stimulus package. Glaser said the feds should create more realistic goals that show progress in areas of e-prescribing and quality reporting. While the stimulus bill calls for doctors to have EHRs, Jonathan Bush, cofounder, president, and CEO of athenahealth, which offers electronic medical records and practice management solutions to physician practices, said industry leaders should not expect to save money from EHRs. In fact, EHRs have a negative return on investment.
Glaser, however, said health officials should not affix a bottom-line return on investment because EHRs help improve care, reduce errors, and improve access to patient records—and there is no price tag on patient safety.
Glaser said Partners has worked to improve EHR efficiency, but acknowledged that doctors still spend more time filling out a digital prescription than it takes writing a prescription. Because of the added time, physicians have resisted the technology, which Glaser said shows the importance of paying doctors extra for using EHRs.
Another issue with the stimulus plan's language is that it requires "meaningful use" of EHRs. Glaser said the question is: What is actually considered "meaningful use" for doctors? He hopes the feds answer that question by the fall.
Comparative effectiveness
Though it comprises a mere $1.1 billion of the $150 billion healthcare portion of the $787 billion stimulus package, comparative effectiveness, which compares different treatments, has received the most opposition of any of the healthcare-related parts of the package. Conservative radio hosts, most notably Rush Limbaugh, have criticized the notion as a step toward socialized medicine.
Baker said the country needs a national debate on the issue. ". . .This one really hits a raw nerve about decision making and ultimately about coverage and what gets paid for and all the rest. I think this is a conversation we desperately need to have," said Baker.
A Pasco County, FL, fund that helped pay for speciality healthcare for uninsured patients is $4,000 in the red, leaving a clinic that refers them with no options. When Premier Community HealthCare Group, a nonprofit primary care clinic, saw uninsured patients who needed serious surgeries or tests, they referred them to the county's Human Services Department. The clinic typically refers about 25 patients a month, but is seeing more as people hit hard by the recession lose jobs and health benefits. About 60% of Premier's patients have no insurance. But this month, county officials told them the money for this fiscal year had all been spent. Because the county's fiscal year begins Oct. 1, that could force some patients to wait seven months for the tests or procedures they need.
Surgeons training at the University of Michigan Health System will no longer use live, healthy dogs to learn surgical procedures that can save people's lives, the university announced. The anesthetized animals were used to teach tracheotomies, how to fix collapsed lungs, and other emergency procedures. In a statement, the U-M Health System said its Graduate Medical Education Committee reviewed simulators and decided to make the switch to a sophisticated type of mannequin for the training. However, some consider animal models superior to simulators.