The Devil is in the Details

The broad outlines of this year’s healthcare reform legislation are now in focus. It looks like it will include an individual mandate;

• Massachusetts-style insurance exchanges, with subsidies to low-income beneficiaries who are not eligible for Medicaid
• an obligation for employers to either offer insurance to their employees or pay a per-employee annual penalty, with exclusions for small employers
• possibly a watered-down public plan that would compete with private plans in the exchange; modest expansions of Medicaid and SCHIP
• modified benchmark formulas for Medicare Advantage plans to reduce federal subsidies
• expansion of pay-for-performance programs and bundled payments in Medicare
• incentives for primary care physicians to provide care coordination in Medicare
• pilot programs for alternative reimbursement systems for Accountable Care Organizations in Medicare.

In addition to these reforms of federal programs, in the pharmaceutical field there is likely to be an add-on for follow-on biologics, and there may even be legislation that would prohibit “reverse payments” in patent infringement settlement agreements between brand and generic drug manufacturers.

Of course, I could be wrong. Over the past seven months, my track record as a healthcare reform prognosticator is not exactly stellar, changing with each shift in the winds. In the immediate aftermath of last November’s election, as Tom Daschle’s name was being mentioned as a possible pick for HHS Secretary, I believed that Daschle’s idea of creating a Federal Health Board was not likely to be part of any Obama administration proposal for healthcare reform. Weeks later, when Daschle had been nominated as HHS Secretary and Director of the White House Office of Health Reform, and Jeanne Lambrew, Daschle’s co-author on Critical: What We Can Do About the Health-Care Crisis, was nominated as Deputy Director of the White House Office of Health Reform, I changed my mind, deciding that their book would serve as a blueprint for proposed reforms, with a prominent role for a Federal Health Board. Weeks after that, when Daschle withdrew his nomination, I changed my mind again, deciding that the whole process was in a state of disarray. Before long, however, signs of progress—and consensus-building—began to emerge, pivoting in particular around Senator Baucus and Senator Kennedy.

These days, the only one talking about a Federal Health Board idea is the always-lovable Senator Charles Grassley, and he wants it known that he is against the idea (as noted in this interview article last week in the new and wonderful Kaiser Health News site).

Even if the broad outlines of healthcare legislation are more or less set, however, the details matter, too. At the end of last week, Senator Kennedy’s office released what was described as a “draft of a draft” of healthcare reform legislation, the American Health Choices Act. This 170-page document, however, really focuses on just two aspects of healthcare reform: 1) the creation of insurance exchanges, here called “gateways,” with an individual mandate and employer “play or pay” provisions; and 2) the creation of a new and voluntary insurance program, the Community Living Assistance Services and Supports Act (CLASS Act), which would provide assistance to individuals who become incapacitated and need to either be placed in an assisted living facility or need the help of a visiting nurse in their home.

One of the most divisive issues in the healthcare reform debate is whether a public plan would be created to compete with private plans in health insurance exchanges. The draft language for the American Health Choices Act makes passing reference to an “affordable access plan” that would be created by the HHS Secretary and that would reimburse providers at Medicare rates plus 10%. No further details on this public plan are offered. We will also have to wait to find out how Senator Kennedy intends to raise revenues in order to make his plan budget neutral. While there is broad public support for healthcare reform, it is exactly these types of details that could mobilize opposition to specific proposals for reform.