What to Expect in Health Reform

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Now that the CHIP program is reauthorized and the economic stimulus legislation is signed into law, the spotlight will shift to longer-term health system reform. Though President Obama’s health reform team is without a leader, watch for the first outlines of the Administration’s health reform plans in the preliminary fiscal year 2010 budget that he is expected to release in the next few weeks. Most observers expect the president to seek to avoid the mistakes of the Clinton-era reform efforts and provide only a broad framework for reform, leaving the details to Congress. And Congress has already begun the process.

In November 2008, Senator Baucus released a 98-page “white paper,” Call to Action: Health Reform 2009, identifying priorities for reform. Although Call to Action purports to be a “vision and not a legislative proposal,” it is an important starting point in the process. Senator Kennedy, for whom universal coverage is “the cause of my life” and whose leadership is viewed as key to success, has been working on legislation since last fall. The two Senators recently affirmed their commitment to enacting comprehensive health care reform this year. While there are some differences of opinion regarding timing, the underlying commitment is shared by key players on the House side as well. And Republicans in each chamber have designated their own task forces to work on reform. Despite their diminished numbers, Republicans can be expected to take full advantage of the powers of the minority in this process, particularly on the Senate side. Their mark will clearly be left on any reform package enacted into law.

The scope of reform is another unknown. While much attention is focused on how, and how much, to expand coverage, other complex and interrelated issues can be expected to factor into the debate. A few of these items include:

Strengthening the employer-based insurance system through tax incentives, expanded use of Section 125 cafeteria plans and possibly penalties for larger employers who do not offer coverage;
Establishing a health insurance “exchange” to provide more choice among private health plans and possibly a public health plan;
Improving the quality of care by introducing “value-based purchasing,” or pay for performance, into the Medicare program;
Expanding the use of biogenerics by creating an FDA approval pathway for follow-on biologics;
Adding a public plan under Medicare Part D and authorizing CMS to negotiate drug prices directly with pharmaceutical companies;
Providing yet another “fix,” be it temporary or longer term, to the Sustainable Growth Rate formula that leads to perpetual cuts in Medicare physician fee schedule payments (the current fix expires at the end of the year);
Reducing payments to Medicare Advantage plans to the level of traditional Medicare;
Controlling the cost of insurance through a government-sponsored reinsurance mechanism to protect insurers and employers from catastrophic costs;
Reducing disparities in care and outcomes among racial and ethnic minorities; and
Reforming entitlements, including Medicare, in keeping with the president’s campaign pledge that he would do so.

To be sure, the political, fiscal and policy challenges ahead are not to be underestimated. Yet the president continues to reaffirm his intent to reform the health care system, and at this point the Democratic leadership in Congress is equally committed to the cause. Whether or not a bill becomes law, one thing is certain - expect to see a flurry of activity, a cacophony of debate and wide-ranging policy prescriptions in the weeks and months ahead.