The Facts

Senator Kennedy’s Senior Health Policy Advisor John McDonough, one of the key architects of the health reform effort, spoke at McDermott’s Washington, D.C., office last week on the outlook for health reform. Other speakers included principals from Speaker Pelosi's health care advisory team, Families USA and America’s Health Insurance Plans.

McDonough affirmed that systemic health reform will happen in this Congress. Unlike in the Clinton years, all stakeholders are aligned and coordinating towards this end.

Both the House and Senate intend to pass bills by the August 2009 recess. If Republicans block reform in 2009, the Democrats will change tactics to accomplish reform through budget reconciliation, which is not subject to filibuster.

Highlighted below are John McDonough’s core predictions revealed last week at McDermott and our insights on how those policies, if adopted, would affect the health care industry.

What’s At Stake

Everything is at stake. McDonough identified six areas of focus:

  1. Coverage

Congressional Staff Prediction: The goal is to cover everyone. Medicaid could be expanded to cover those at 100 percent of the Federal Poverty Line. A sliding scale of subsidies could be available for those earning up to 400 percent of the Federal Poverty Line. “Affordable” coverage must be available for everyone else, which necessitates insurance market reform: guarantee-issue coverage with no preexisting condition exclusions, a form of modified community rating and an insurance exchange that would perform a connector-like function.

McDermott’s Insight: Providers would be relieved of the uninsured, but may have more patients covered by Medicaid, Medicare or another federal payor; insurers would be playing in a new sandbox.

  1. Delivery System

Congressional Staff Prediction: Delivery system reform equates to payment reform. There will be a shift away from payment systems that reward volume rather than value. Look for Accountable Care Organizations, chronic disease management programs, transparency, increased use of Health Information Technology (HIT) and comparative effectiveness research.

McDermott’s Insight: Providers would be subject to new conditions and measurements related to payment. New business opportunities would arise for those in the HIT sector and enterprises related to valuing the quality of care delivered. Health industry manufacturers able to demonstrate value would benefit.

  1. Prevention and Wellness

Congressional Staff Prediction: The goal of health reform is to reorient our system from a “sick care” system to a “wellness” system.

McDermott’s Insight: Providers would enjoy coverage of preventive services. Manufacturers in preventive diagnostics would benefit.

  1. Fraud and Abuse

Congressional Staff Prediction: New provisions would seek to further ferret out fraud and abuse.

McDermott’s Insight: Providers and manufacturers could expect new layers of review, reporting requirements and more rigorous oversight. Providers with sophisticated and current compliance programs will have advantages.

  1. Long-Term Care Assistance

Congressional Staff Prediction: Congress would provide some financial assistance or incentives to facilitate the purchase of long-term care policies, such as a payroll deduction mechanism.

McDermott’s Insight: Long-term care providers could benefit from fewer uninsured patients. Acute care providers may find ventures with long-term care providers beneficial.

  1. Financing

Congressional Staff Prediction: Success depends on how we pay for reform. McDonough gave a nod to President Obama’s split approach calling for a reserve fund of $600 billion, half from new revenue and half from system savings.

McDermott’s Insight: Providers could face significant new cuts in Medicare and Medicaid payments. Manufacturers’ products would face new obstacles in realizing favorable public program reimbursement. Medicare Advantage Plans will face reduced payments through strategies such as new competitive bidding processes.

What You Should Do

Assess to what extent you are comfortable with others reshaping the health care delivery system without your involvement and input.