Current Stakeholder Perspectives on Health Reform

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With the health reform debate currently focused on a handful of hot-button issues (as described in our article, "Differences Remaining in House and Senate Approaches"), it is easy to lose sight of the panoply of interests at stake as Congress inches nearer to the most significant overhaul of our health care system since the 1965 creation of Medicare and Medicaid. The reform process was formally launched last March with a feel-good White House summit at which all the key stakeholder groups pledged their cooperation and support. Now, as we draw close to the end of the messy, “sausage-making” process of assembling a bill that can actually pass both houses, it is timely to check in on these stakeholder groups—whether they still express support, where their concerns lie, and, for some of them, whether deals cut over the summer are still in force.

Hospitals. As hospital uncompensated care burdens continue to increase, the hospital industry has generally embraced health reform and its promise of expanded coverage. Although hospitals, like many providers, clearly stand to benefit from an expansion of the insured population, both the House and Senate bills contain significant Medicare and Medicaid payment reductions. The industry cut a deal over the summer with the White House and Senate Finance Committee Chair Max Baucus (D-MT) to limit industry cuts to $155 billion, comprised of reductions in Medicare payment updates and in Medicare and Medicaid “disproportionate share hospital” payments. For the most part, that deal is still holding in the Senate bill. Meanwhile, additional payment reforms designed to restructure the delivery system (see "Delivery System Reform: Do the House and Senate Bills Deliver?") could significantly increase hospitals’ financial burdens if they are unable to achieve the quality and efficiency targets behind these reforms. Moreover, hospitals are concerned that the expansion of the Medicaid program and the creation of a federally-run health plan could erode payment rates, creating offsetting uncompensated care burdens even as coverage expands.
Physicians. The most significant reform issue confronting physicians is an impending 21% reduction in Medicare rates that will take effect January 1, 2010, unless Congress takes action to prevent the cut. Both the House and Senate health reform bills would eliminate the 2010 scheduled cut. Attempts to include a permanent fix, however, in the health reform bill ultimately proved too expensive and were stripped out. Unless the payment formula is reformed, additional formula-driven cuts will occur in future years, perpetuating the now familiar cycle of temporary fixes. The House recently passed a separate bill that would reform the current formula to prevent the future cuts at a cost of $210 billion to the federal government; the prospects for passage of a similar Senate bill remain dim. Physicians are also watching closely—with interest and mounting concern—the myriad delivery and payment system reform efforts included in the legislation.
Pharmaceutical and Device Industries. The pharmaceutical and device industries stand to gain from an expanded customer base once the bills’ coverage expansions take effect. For this reason, these industries have generally supported reform. In an additional boon to the branded drug industry, both bills would provide a 12-year exclusivity period to branded biologics in exchange for permitting follow-on biologics to obtain marketing approval. At the same time, Congress is looking to the pharmaceutical and device industries to foot the bill for a portion of the expansion. As described in the related article on “Finding a Way to Pay for Health Reform,” both the House and Senate bills impose very significant financing burdens on the industry. While $80 billion in cuts were agreed to in advance in another White House-industry deal, there is pressure to extract more, especially as lawmakers aspire to close the so-called “donut hole” gap in coverage that continues to plague the Medicare prescription drug program. Moreover, in the Senate, a highly popular amendment to allow drug reimportation stalled progress on the overall bill for an entire week as a result of industry protests against further unraveling of the negotiated deal.
Health Insurers. The House and Senate bills would dramatically expand the number of individuals with private health insurance, thereby generating significant new business for the insurance industry. In contrast to the Clinton-era reform efforts, the industry approached the current debate supportive of reform, and is willing to accept new regulatory mandates in exchange for an anticipated surge in covered lives. However, as House and Senate leadership increasingly appeared to insist on the inclusion of a public plan, the opposition of insurers intensified, fueled by their concern that such a plan would have an unfair competitive edge if backed by the negotiating weight of the federal government. Moreover, as described in the related article on “Finding a Way to Pay for Health Reform,” both bills impose heavy fees on the industry to fund reform. Tensions between the industry and Congressional leadership have escalated in recent weeks, as the industry has stepped up its criticism of the current bills. Reflecting this tension, both the House and Senate have moved toward eliminating the antitrust exemption that health insurance has enjoyed for the last 64 years, and the Senate has even proposed to impose caps on the deductibility of compensation for insurance company executives.
Employers. Many employers, especially small employers, are concerned about the prospect of an employer mandate to provide coverage. The House bill would impose such a mandate, and the Senate bill would require employers to pay a fee for each employee who is subsidized under the bill to purchase his or her own coverage. Although the bills provide assistance to certain small employers to pay for coverage and, in limited cases, would permit the sale of health insurance across state lines in order to pool risk and reduce cost, many small employers remain concerned that coverage will remain unaffordable. At the same time, for employers both large and small who currently provide coverage, an expansion of employer-based insurance is a welcome “leveling of the playing field”—especially for those operating in highly competitive industries.
Labor. The major labor unions have long championed health reform that achieves universal coverage and provides a robust public plan option, but they remain leery of any reforms that could reduce the level of collectively bargained benefits their members currently enjoy. The Senate proposal to tax high-value health plans is one such reform that has stirred significant concern among organized labor, which views such a tax as unfairly targeting the generous health benefits that many unions have achieved through negotiations with employers.
Consumers. The primary concern for consumers of health care is affordability, particularly in view of the individual mandate that both the House and Senate bills impose. Many consumer advocates believe that a public plan will be the sole affordable option for many families, making this option, they argue, essential to expanded coverage. Although both bills provide subsidies to purchase coverage to individuals with household incomes up to 400% of the federal poverty level (approximately $88,000 for a family of four), families would be expected to pay premiums equal to up to 9.8% of income under the Senate bill and up to 12% of income under the House bill.