Here’s a good analysis by the Associated Press of how the Patient Protection and Affordable Care Act (PPACA) might be affected by a Romney victory in next week’s presidential election.
In public health insurance, the Medicaid expansion might be curtailed. In commercial health coverage, payers are hoping for a repeal of the PPACA requirement they maintain minimum loss ratios of 80 percent and new tax levies on insurers.
But insurers aren’t keen on undoing the foundational political bargain of the PPACA’s individual insurance market reforms in which they must accept all applicants for coverage and individuals without other forms of public or private insurance must purchase coverage or face a tax penalty. There’s simply too much potential new business to be had with the mandate, the AP notes, citing a PricewaterhouseCoopers projection that it and state health benefit exchanges will generate $205 billion in new premium by 2021.
Nor is a Romney administration likely to pull the plug on state health benefit exchanges given the more than $2 billion invested in them thus far in the form of federal planning and establishment grants. Plus Romney has not publicly renounced the idea of public health insurance exchanges, a concept he innovated as governor of Massachusetts in 2006 by creating the nation’s first state run health benefit exchange, the Massachusetts Connector.
Speaking at a Univision forum Wednesday night, the Republican presidential nominee said that now and then Obama calls him the grandfather of Obamacare.
Romney said, “I don’t think he meant that as a compliment, but I’ll take it.” He went on to defend the Massachusetts law but says it is wrong for the federal government to take that approach.
Governor Romney was also the Godfather of former California Republican Governor Arnold Schwarzenegger’s omnibus health care reform plan in 2007-08 that was largely based on Romney’s Massachusetts reforms featuring a state health benefit exchange and an “individual mandate” that everyone have public or private health coverage. I know because I covered “ArnoldCare” nee RomneyCare from its beginnings to inglorious collapse in the state Senate as Sacramento health care correspondent for the Bureau of National Affairs.
Under the proposal, the major public and private players in each state would negotiate payment rates with service providers such as hospitals. The idea is to get away from paying for each individual test and procedure. Negotiated rates could be based on an entire course of treatment. Payments would have to fit within an overall budget that could grow no faster than the average rise in wages.
The spending limits would be enforced by an independent council, but crucial details need to be spelled out. In Massachusetts, for example, budget-busting providers will be required to file plans with the state laying out how they’ll amend their spendthrift ways.
The federal government would provide grants to states interested in developing their plans.
Tanden joined a brain trust of former administration officials floating the proposal recently in the New England Journal of Medicine. The group included Peter Orszag (former budget director), John Podesta (transition director), Donald Berwick (first Medicare chief), Ezekiel Emanuel (Orszag’s health policy guru), and Joshua Sharfstein (former No. 2 at the Food and Drug Administration). Also on board was former Senate Majority Leader Tom Daschle, D-S.D., Obama’s first pick to shepherd his health care overhaul.
This item from the Associated Press dubs the initiative “Health Care Overhaul, Version 2.0,” with the goal of establishing a “first-ever budget for the nation’s $2.8-trillion health care system, through negotiated limits on public and private spending in each state.”
The proposal represents an expansion of the accountable care organization concept in the Patient Protection and Affordable Care Act’s Medicare Shared Savings Program (Section 3022 of the PPACA) beyond Medicare to encompass private payments. It is a government led market intervention designed to shift the business model and economics of the health care industry away from the current model that rewards the provision of discrete medical procedures to an all inclusive, coordinated system of care.
Arguably, the existing health maintenance organization (HMO) is based on the same principle. But that hasn’t bent the so-called cost curve. The difference here is that the power of government would be brought to bear to hold down costs such as in Massachusetts. The Bay State recently enacted legislation that among other things, subjects providers to cost growth benchmarks. Those providers exceeding the benchmarks must file and implement a performance-improvement plan, with potential penalty up to $500,000 for failure to comply. The New England Journal of Medicine has more details on the Massachusetts law here.
The Bay State does another first in health care reform. First with a state-based health insurance exchange and a mandate that everyone have health coverage. Now the first state to attempt to bend the health care cost curve by force of law, albeit a paper tiger according to the story.
Here’s an excerpt from the story by WBUR and Kaiser Health News:
Under the new law, hospitals and doctors will have to cut their rate of cost growth about in half. So, instead of going up 6 to 8 percent per year, costs would only be allowed to rise 3.6 percent per year.
“No other state has tried to tie health care costs to the state’s economy,” said Massachusetts Association of Health Plans President Lora Pellegrini. “This is going to be really revolutionary and very important and I’m sure the nation’s watching.”
Michael Widmer, with the Massachusetts Taxpayers Foundation, says he thinks the health care industry will embrace the bill’s spending goals, even though they are what he considers aggressive.
“But on the other hand the legislation does not include triggers or punishments if the targets aren’t met,” he said.
This San Francisco Chronicle story is a retrospective on how omnibus Massachusetts health care reform enacted by the Romney administration in the middle of the previous decade became a template for California in 2007 and 2008. When the California reform effort under then-Gov. Arnold Schwarzenegger faltered in the Legislature amid opposition to the individual mandate and concerns the state could not afford it, the Obama administration subsequently adopted Massachusetts model in crafting its Patient Protection and Affordable Care Act.
Had the U.S. Supreme Court not left the law largely intact last month, California may well have picked up where it left off in 2008 with leading policymakers voicing support for the individual mandate. However, financing subsidies would have likely proven problematic just as four years ago as the Golden State continues to grapple with chronic budget deficits and high unemployment.
Late last week Boston.com’s White Coat Notes reported Massachusetts House leaders are proposing legislation that would create new state agency to monitor health spending and order reductions in hospital and doctor fees it finds excessive. Hospitals charging patients 20 percent or more above the comparable median statewide contracted price would be face a 10 percent tax surcharge that according to the article would support struggling hospitals. The California HealthCare Foundation’s CaliforniaHealthline has more details on the bill, H 4070.
Whatever happens in the Bay State bears watching inasmuch as its 2006 omnibus health care reforms served as a prototype for the federal Patient Protection and Affordable Care Act.
Meanwhile, CaliforniaHealthline reports a California ballot initiative that if qualified for the November 2012 ballot would have limited hospital profit margins to 25 was dropped by its sponsor, the Service Employees International Union (SEIU). The California Hospital Association had termed the measure along with another SEIU-sponsored initiative requiring nonprofit hospitals provide at least five percent of their care on a charitable basis a “thinly veiled negotiating tactic.”
Kaiser Health News (KHN) provides a roundup of federal and state options to regulate health insurance premiums. Reading between the lines, however, the story is really about a larger issue: regulatory action to hold down the cost of medical care that underlies the actuarial basis of premiums. Either indirectly by giving insurance regulators more authority to approve or reject filed premium rates or more directly as KHN reports:
Tired of complaints that underlying costs are the problem, but hearing no consensus from the health-care industry on how to solve it, Massachusetts Gov. Deval L. Patrick (D) introduced a broad proposal to overhaul the way health care is paid for. Part of the proposal would allow regulators to reject premium increases if insurers pay hospitals, doctors and others more than a limit set by the state.
Either way, to providers it smells like price controls. In California, that prospect has doctors so alarmed that they’ve allied with their traditional payer adversaries to oppose pending legislation (Assembly Bill 52) that would give the Golden State insurance and managed care plan regulators prior approval authority over health insurance rate filings and allow them to bar the use of rates deemed excessive, inadequate, or unfairly discriminatory.
Massachusetts Gov. Patrick’s concept bears watching and could have national implications insofar as that state’s health care reform served as a template for the federal Patient Protection and Affordable Care Act (PPACA).