As the August recess brought the Congressional debate over health care reform initiatives and bills to an uneventful close, the debate over reform efforts literally raged in town hall meetings across America. Demonstrations at some public town hall meetings became violent, bringing them to a halt with the assistance of local police. While all attention has been focused on whether the uproar from these protestors reflect authentic passions or manufactured fury from paid political operatives, meaningful discourse covering health reform policy options could scarcely be found. In this edition of the LLBL Health Care Reform Weekly Update, we highlight the sentiment of the American public toward health care reform, as reflected in the actual polling numbers, and examine the policy behind two features likely to find their way into final health care reform legislation which are not often discussed.

Americans Voicing Strong Opinions About Health Care Reform

Three large opinion polls conducted in late July and early August reflect that health care has grabbed the attention of the American public. The results are amazingly consistent in some areas but vary widely in others. The issue of health reform appears to be breaking into several common themes – the way medical care is delivered, paying for health care and health reform as a method to achieve more or better coverage at lower expense.

A survey from the Harvard School of Public Health and the Robert Woods Johnson Foundation shows that health care is ranked as the second highest public priority, right behind the economy. In that same poll, 69 percent of Americans think the nation’s health care system is “fair” or “poor”, 20 percent think the delivery of health care is “good” and only eight percent believe it is “excellent.” However, a CNN/Opinion Research poll showed that a high number of respondents felt their own medical care was satisfactory (83 percent) but a lesser number were satisfied with their own insurance or health coverage (74 percent).

Six out of ten Americans believe that the cost of medical care is one of the two top problems in health care, according to the Harvard/Robert Woods Johnson survey. The cost of care was reflected in a Quinnipiac University poll, where 72 percent of the people polled think that reform will add to the nation’s budget deficit, despite President Obama’s pledge to ensure that the deficit will not be impacted by the health reform programs, and 42 percent feel that their personal health care costs will increase. Sixty-six percent of those surveyed in the Quinnipiac poll think they will pay higher taxes as a result of health reform.

The health reform proposals now working their way through Congress were also addressed in the polls. Sixty-one percent of Americans would rather purchase their health care from the private sector versus 25 percent from a government program, according to the Quinnipiac survey, while only three in ten people thought the President’s health care proposals would help their families, according to the CNN survey. Perhaps most telling, however, was data from the CNN poll that indicated that 50 percent of those who oppose the current health reform plans are likely to attend a town hall meeting, versus only 37 percent who support one of the reform plans. That polling data already appears to be playing out as Congressional town hall meetings are becoming standing room only events attracting significant local media coverage.

Physician Ownership of Hospitals Under Attack

Physician-owned hospitals are under attack in the House Tri-Committee health care reform bill. The House bill contains language prohibiting physician ownership in hospitals via an amendment to the Stark Law. The Stark Law currently provides an exception to unlawful self referrals allowing physicians to refer patients to a hospital in which the physicians have an ownership interest provided the physician’s investment is in the entire hospital.

Under the Tri-Committee bill, existing hospitals with physician ownership and a Medicare provider agreement on January 1, 2009, are grandfathered and, thus, excepted from the bill’s prohibitions. The percentage of physician ownership in a grandfathered hospital or in an entity whose assets include the hospital cannot in the future exceed the percentage as of the date the legislation is enacted. In addition, a grandfathered hospital is prohibited from increasing the number of operating rooms, beds or procedure rooms that it had on the enactment date of the legislation. A hospital may seek an exception allowing it to increase physician ownership or expand its facility or capacity by applying to the Department of Health and Human Services pursuant to a process to be developed by the Department that must include certain elements set forth in the bill. The bill also contains provisions designed to ensure bona fide ownership and investment by physicians. These provisions are similar to the federal Anti-Kickback Act safe harbor for small investments with a few additional requirements. Members of the Senate Finance Committee also have expressed concerns over physician ownership in hospitals and have indicated their intent to include restrictions in the Senate Finance Committee’s health reform bill.

The current attack on physician-owned hospitals has been exacerbated by articles that have cast the national spotlight on McAllen, Texas, as the most expensive place for the care of Medicare patients and the largely negative press surrounding a large physician-owned hospital located in that area. President Obama has even mentioned McAllen as a concern and reason for reform. Proponents of changing the Stark Law to restrict physician ownership in hospitals in the future argue that physician ownership can lead to overutilization of services, cherry picking of the higher reimbursement cases and lower quality of care due to smaller or nonexistent emergency departments, few to no physicians on site at times, and poor drug monitoring. On the other hand, opponents of the proposed Stark Law amendment argue that many physician-owned hospitals are general hospitals and not specialized and provide needed care to the community. Opponents also stress that studies illustrate the positive economic impact of physician-owned hospitals as well as the high customer satisfaction scores that these hospitals have received in surveys carried out by the Centers for Medicare & Medicaid Services.

Is Medicaid Expansion a Good Policy Option?

Two-thirds of the 46 million uninsured Americans are low income individuals. Understandably, a key objective of health care reform is to provide low wage earners, who currently do not qualify for public health insurance programs and who cannot afford private insurance, with access to affordable health insurance coverage. The policy debate revolves around whether, and to what extent, the federal government should increase funding to public health insurance programs – such as Medicaid and CHIP – to provide coverage to these uninsureds or use federal dollars to subsidize the purchase of private health insurance. The health reform bills under discussion in both the Senate and House of Representatives employ some combination of Medicaid expansion (especially in broadening Medicaid eligibility criteria) and the application of various means to make private health insurance affordable to individuals and families with low or modest incomes. Still, many are asking - is Medicaid expansion a good policy option?

Potential Benefits:

Medicaid expansion should strengthen the health care safety net which is responsible for most of the care furnished to Medicaid patients. Today, safety net physician groups and hospitals that treat, on a fee-for-service basis, many low income patients who do not currently qualify for Medicaid are forced to write off uncollected fees for their services. Should these patients obtain health care coverage, safety net providers would be able to reduce the amount of uncompensated care which they furnish.

  • Improving the financial performance of safety net providers should ease the pressure to charge private health insurers higher rates to cover provider losses.
  • If private insurers can hold down medical costs being charged by providers, the savings should be reflected in lower premiums charged by insurers.
  • Expanding the Medicaid eligible population means that health insurers who offer managed Medicaid products can add to their enrollment. A good percentage of these additional Medicaid eligibles are likely to be young adults and, therefore, better risks for insurers.

Proposed Shortcomings:

  • Since Medicaid is jointly funded by federal and state governments, the states’ governors are concerned that expanding Medicaid eligibility will ultimately result in cost shifting to the states whose budgets cannot absorb the added costs. As a result, we could see higher state taxes to cover the increased burden at the state level or, as we have seen in California, the ratcheting down of benefits covered under Medicaid.
  • Because Medicaid reimbursement rates typically are lower than the rates paid by other payors, a shortage of primary care physicians and other providers to treat the newly-insured could be more acute in the Medicaid population.
  • If too many individuals or families at middle income levels have access to a Medicaid option, private insurers offering standardized, lower-cost health options (which could be mandated by the government) may be competing head-to-head with newlyeligible Medicaid enrollees without the advantages of Medicaid’s lower cost structure.

Using Medicaid expansion as a means of reducing the number of uninsured has been met with wide support. However, how to pay for that expansion has been the subject of more vigorous debate. Governors from both political parties are particularly nervous about the prospect of adding new Medicaid obligations as Congress looks to the states for help with funding at a time when state budget cuts already have necessitated reductions in Medicaid benefits. Although Medicaid expansion is a popular health care reform option, Congress will have to be nimble to avoid shifting the health care crisis to another front.

What Happens Next?

Congress is officially in recess until after Labor Day, and Congressional representatives are holding local meetings and taking comments from constituents about health reform. The three House Committees have each passed their own version of the Tri-Committee bill, but the Energy and Commerce Committee still has a number of amendments to address in September. The House Rules Committee will then work with the Committees and House leadership to pull the three versions into one piece of legislation.

In the Senate, the Health Committee, chaired by Democrat Christopher Dodd, has approved a bill, but the Senate Finance Committee has jurisdiction over the Medicare spending and tax provisions to pay for the reforms. The sub-committee of six negotiators from the Senate Finance Committee continue to work on a bi-partisan bill, with a tentative deadline of September 15 for a bill that the full Committee would review. Democratic leaders would then merge the bills from the two Committees for full Senate review.