Thursday, September 26, 2013

Positives and Negatives of health care reform

http://www.kaiserhealthnews.org/stories/2009/august/11/health-industry-winners-and-losers.aspx

For Major Health Industry Players, Reform's Positives Outweigh Negatives

Aug 11, 2009
When Congress and the White House began talking about a health care overhaul, the industries that profit from the $2.5 trillion system were understandably nervous.

Graphic: Pluses and Minuses


But as the legislation takes shape, it appears much of the anxiety was misplaced. Most of the major health care players, including hospitals, health insurers and pharmaceutical companies, are likely to benefit – some handsomely – over the long term.

While hospitals and drug makers have made deals with President Barack Obama and the Senate Finance Committee to help finance the overhaul, in the end their profits could soar as more people have insurance coverage.

"Everyone has been nicked a little bit, but they are all flesh wounds," said Nancy Chockley, president of the National Institute for Health Care Management, a nonpartisan health policy research organization funded by Blue Cross and Blue Shield plans and government grants.

To be sure, lawmakers have yet to reach agreement on key issues that could have far-reaching effects on insurance companies and providers. They include proposals to set up a government-run health plan to compete with insurers and an independent commission to exert broad authority over Medicare spending.

And it isn't clear whether the highly publicized deals -- in which the industries agreed on savings to help pay for overhaul -- will hold.

But for now, "it appears the goal of the health overhaul is to expand coverage and contain costs, but without imposing too much pain on any one industry sector," said Jack Hoadley, a health policy analyst at Georgetown University.

Here's a scorecard showing where the various industries stand:

HOSPITALS

Worried they would have to pay too high a price for the overhaul, the hospitals were the first industry sector to make a deal with Obama and the Senate Finance Committee. Hospital groups agreed to give up $155 billion in Medicare funds over the next decade, or about an 8 percent cut. But the industry believes it will gain $170 billion by having to treat fewer uninsured patients.

"The hospitals did quite well for themselves," said Sheryl Skolnick, a hospital analyst with CRT Capital Group in Stamford, Conn.

But Skolnick and other experts note that health overhaul will affect individual hospitals differently. For instance, hospitals that treat greater numbers of uninsured -- generally urban and public hospitals -- will gain the most, while those most dependent on Medicare may face the biggest financial risks because of proposed cuts.

Pluses:
  • An individual insurance mandate and subsidies for low-income Americans to buy coverage will mean more paying patients for hospitals.
  • Hospitals were assured that cuts in Medicare and federal Disproportionate Share funding that compensates hospitals for treating the uninsured won't occur until insurance expansion is in place. And even then, about 60 percent of the funding will remain to help hospitals treat illegal immigrants and Medicaid recipients.
Minuses:
  • Loss of $155 billion in federal funding over a decade.
  • Obama and Senate Finance Committee Chairman Max Baucus, D-Mont., want to create an independent commission that would have broad powers over Medicare spending. The industry wants Congress to retain control over Medicare because the industry has more influence over lawmakers.
Mixed:
  • While hospitals oppose a government run health plan, they have won assurances from Obama and House committees that they will have the ability to negotiate the reimbursement rates above what Medicare pays . This is important because hospitals generally lose money on Medicare, which pays less than private insurers. Nonetheless, hospitals are still nervous about any plan to negotiate with the federal government.
  • Plans to expand Medicaid, the state-federal health program for the poor, will reduce the number of uninsured patients, but the program typically pays lower reimbursements than private insurers or Medicare.
HEALTH INSURERS
Health insurers have become the most vilified industry in the reform debate lately. That's partly because their profits and cost-control strategies make them an easy target, and partly because Democrats are nervous that support for the health overhaul is slipping in the polls and want to remind Americans about problems with the current health system.

Last spring, the insurance industry offered its own deal to policymakers: If the government would require all Americans to have insurance coverage, the insurers would agree to accept all applicants and not charge higher premiums because of a person's medical history.

But the industry has staunchly opposed a government-run public plan, saying it would lead to a government takeover of the health insurance field.

"The insurance industry won't be big gainers from reform if they are the whipping boy for all that is wrong in health care," Chockley said.

Pluses:
  • A proposed individual health insurance mandate has strong House and Senate support. The mandate along with subsidies to help low income Americans pay for coverage, could bring insurers tens of millions of new customers.
Minuses:
  • House Democrats and the administration are trying to eliminate bonus Medicare payments to Medicare Advantage plans, private health programs that cover one in five seniors.
  • The House committees’ bills require health insurers to spend a certain minimum percentage of their premium dollars on health costs, which the industry opposes.
  • The Senate Finance Committee is considering a tax on so-called "Cadillac" -- high-cost -- health plans. Insurers say the tax would get passed on to health plan customers.
Mixed:
  • Four of five congressional committees have approved a health overhaul with a public option. But the crucial Finance Committee package is likely to have instead a nonprofit cooperative that would function more like a public utility.
PHARMACEUTICAL COMPANIES

In a deal with the White House and the Senate Finance Committee, the drug industry has agreed to put up about $80 billion to help finance the expansion of health coverage. But the industry is likely to make that up by having more Americans insured so they can buy brand-name drugs.

In the deal, the drug industry pledged to sell brand-name drugs for half price to senior citizens when they hit the gap or "doughnut hole" in their Medicare Part D benefit. In the coverage gap, seniors have to pay the full cost of drugs on their own. The discount would start soon after the health overhaul bill is approved.

Another part of the $80 billion deal includes drugmakers paying higher rebates for medicines sold to individuals eligible for both Medicaid and Medicare. Drug industry rebates were reduced when the Medicare prescription drug benefit was established in 2003, but the overhaul bill would restore some.

In the deal, the pharmaceutical industry has won concessions from the White House that drug reimportation laws would not be changed to make it easier for Americans to buy less expensive drugs from abroad.

But it did not win any promises that would preclude congressional attempts to allow the government to negotiate lower drug prices under Medicare.

"If the price negotiation goes away, I think there is a real good chance the drug industry stands to gain from health reform," said Frank Palumbo, director of the Center on Drugs and Public Policy at the University of Maryland.

Pluses:
  • Expensive biologic drugs would get 12 years of exclusivity protection from cheaper competing medicines under the approved House bills and Senate proposals. Obama, the AARP and some lawmakers were calling for either a 5-year or 7-year limit. While biologic drugs are only a small portion of industry sales, they represent the fastest growing segment of the market.
  • More Americans with health insurance means more people will be able to buy medicines. The overhaul bills in the House would gradually close the Medicare "doughnut hole" by 2023, which would increase consumer demand.
Minuses:
  • The House Energy and Commerce overhaul bill calls for allowing the federal government to negotiate Medicare Part D prescription drug prices directly with drugmakers. Such negotiation has been prohibited by Congress . The industry would prefer to negotiate with the more than 250 Medicare drug plans because it has significantly more leverage with the plans than with the government.
DOCTORS

Pluses:
  • Congress plans to eliminate the current Medicare physician payment formula that each year threatens to cut doctor payments by nearly 20 percent unless Congress acts. The payment fix will give doctors an extra $230 billion over the next decade, according to the Congressional Budget Office. "Doctors are being given a pass in health reform," said Gail Wilensky, senior fellow at Project Hope.
Minuses:
  • No significant medical liability changes are in any of the overhaul bills.
Mixed:
  • Medicaid would be expanded in all the House bills. The amounts vary but could cover everyone in families with incomes as high as 150 percent of the federal poverty level, which is $33,075 for a family of four. While the expansion means more patients have insurance, Medicaid pays much lower rates compared to Medicare and private insurance.
  • The public plan option under the House bills would allow doctors to negotiate rates with the government that are above Medicare rates, but it is uncertain how much leverage doctors would have negotiating with the government.
  • Primary care doctors would probably benefit from the creation of an independent Medicare commission because the panel would be more likely to increase their fees and lower specialists' rates.
NURSING HOMES

Because most nursing home patients are covered by Medicare or Medicaid, reducing the number of uninsured doesn't really help the facilities. As a result, the industry doesn't see much gain in the overhaul.

Pluses:
  • The House Energy and Commerce Committee bill would establish a national long-term care insurance program. Beneficiaries would receive a daily cash benefit of about $50 to $75 — money they could use to pay for home care, adult day care, assisted living and nursing homes.
Minuses:
  • Nursing homes would see their Medicare reimbursements cut by 3 to 5 percent, or as much as $45 billion, over the next decade. While Medicare comprises only about 13 percent of nursing home revenue, the industry relies on the money to offset low Medicaid reimbursement.

No comments:

Post a Comment

Economic news - CNNMoney.com