The Journal of Healthcare Contracting

The President’s Stimulus and Budget: Is Healthcare Reform Over Already?
By Curtis Rooney

Don’t be fooled by all the noise about healthcare reform. Between President Obama’s stimulus package and the proposed budget, healthcare reform is almost over - except the crying!

This statement is, of course, an exaggeration, because as of press time, the President’s budget proposal hadn’t become law yet. But if you look at what was done during the first month of the Obama Administration (compared to the entire second term of the Bush Administration), you’ll appreciate much better what has happened and what may happen in the future.

The American Recovery and Reinvestment Act of 2009 (H.R. 1), the $787 billion economic stimulus legislation signed into law by President Obama on Feb. 17, promised to make a "down payment" on healthcare reform by investing billions in information technology, Medicare hospital pay, Medicaid assistance to states, and healthcare research projects. The law contains the following healthcare-related items:

COBRA
Fortunately for you, if you’re reading this publication, it’s unlikely that you have been laid off! It may be cold comfort to know, however, that if you do lose your job (and as a consequence, your employer-provided health insurance) for any reason, under the COBRA law you may continue your coverage through your employer for up to 18 months. Although the law requires that you pay for your coverage yourself, the new law will subsidize 65 percent of this expense for up to nine months (assuming, of course, you were laid off after Aug. 31, 2008 through Dec. 31, 2009).

Medicare
The new law blocks a fiscal year (FY 2009) Medicare payment reduction to teaching hospitals related to capital payments for indirect medical education, and also blocks a payment cut to hospice providers related to a wage index payment add-on. In addition, the bill makes technical corrections to the Medicare, Medicaid, and SCHIP Extension Act of 2007 related to Medicare payments for long-term-care hospitals.

Medicaid
Because of job losses, hospitals in almost every state are experiencing a dramatic uptick in uncompensated care. As a result, the stimulus package included $87 billion to assist the state portion of the Medicaid program and other state-aid healthcare programs to pay for those eligible. According to a recent report by Thomson Reuters, 50 percent of the nation’s hospitals are losing money. Specifically, the bill:

Increased the Federal Medical Assistance Percentage funding for a 27-month period.
Provided a blanket increase to all states of 6.2 percent with a bonus structure that creates an additional decrease in state financial obligations for Medicaid based on increases in the state’s unemployment rate.
Increased states’ FY 2009 annual disproportionate-share-hospital allotments by 2.5 percent.
Increased states’ FY 2010 allotment by 2.5 percent above the new 2009 disproportionate-share-hospital allotment. (Extends the moratoria on Medicaid regulations for targeted case management, provider taxes, and school-based administration and transportation services through June 30, 2009. Added a moratorium on the Medicaid regulation for hospital outpatient services through June 30, 2009.)
Extended Transitional Medical Assistance beyond the current expiration date of June 30, 2009, to Dec. 31, 2010.
Extended the Qualified Individual program, which assists certain low-income individuals with Medicare Part B premiums, through Dec. 31, 2010.
Finally, temporarily applied Medicaid prompt pay requirements to nursing facilities and hospitals.

Important to hospitals, the new law also extended a moratorium on seven Medicaid regulations seen as a threat to hospital funding, and retained a measure to block a scheduled Medicare payment reduction to teaching hospitals. A temporary increase of $456 million was also to be provided to disproportionate-share hospitals.

Health information technology
The stimulus package contained $19 billion for healthcare information technology, such as electronic health records. It required the government to develop standards by 2010 that allow for the nationwide electronic exchange and use of health information. It also contained incentives under the Medicare and Medicaid programs to encourage doctors, hospitals, and other providers to use health IT to electronically exchange patients’ health information. The Congressional Budget Office estimates that approximately 90 percent of doctors and 70 percent of hospitals would adopt and use certified electronic health records within the next decade.

National Institutes of Health
The bill contained approximately $10 billion for cancer research to be conducted or dispensed by the National Institutes for Health.

Comparative effectiveness
More than $1 billion was earmarked for comparative-effectiveness research. Much has been written about this provision, but it is worth noting that the House version of the stimulus bill would have allowed government programs to consider cost in deciding which drug to pay for, allowing programs to opt for less expensive treatments. Hearing these concerns, the Senate included the word "clinical" as the standard of effectiveness. This ensured that the program would evaluate how a drug or device works, and not just how much it costs.

The budget
This brings us to the President’s budget. In addition to any number of unfortunate potential cuts to the Medicare and Medicaid programs, the President’s 146-page budget framework set aside $634 billion over 10 years as a "down payment" to provide health coverage for all. The final costs are likely to be much higher.

To pay for the proposed increases in coverage, the President hopes there will be savings from the efficiencies created from the spending of the programs described above and some additional reforms. He also proposed paying for the plan by increasing taxes on upper income individuals. The President’s stimulus package is the law of the land. What remains to be seen is whether Congress and the American people will follow the very real road map to healthcare reform that his budget lays in the near future. What is certain is that both documents lead the country down a very different road. Curtis Rooney is president of the Health Industry Group Purchasing Association (www.higpa.org), Washington, D.C.