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Policy makers have begun to design proposals to make affordable, quality health care available to all Americans.  President-elect Obama has made health care reform one of his top priorities. Analysts argue that improving access to health care should be part of an economic recovery plan.

The most comprehensive statement to date on what a health reform proposal should look like comes from Senator Max Baucus (D. Montana), the chairman of the Senate Finance Committee, which has jurisdiction over Medicare. He describes Call to Action:  Health Reform 2000, the White Paper he issued on November 12, 2008, as his vision to address health care coverage, quality, and cost, but not as a legislative proposal.   His recommendations are designed "so that after ten years the U.S. would spend no more on health care than is currently projected, but we would spend those resources more efficiently and would provide better-quality coverage to all Americans." [1]  Senator Baucus' well thought-out and researched White Paper builds on Medicare in many of its designs.

Increasing Access to Affordable Coverage

The Baucus White Paper envisions a system similar to the Massachusetts model, where most Americans would continue to receive health insurance through their employers. Both employers and individuals would be able to purchase insurance through a "Health Insurance Exchange" that offers state, regional, and national insurance plans that meet the requirements of a new "Independent Health Coverage Council." Everyone would be required to obtain health coverage, with the Internal Revenue Service or some other government entity enforcing the mandate.

Employees would be offered "Section 125 plans" that would allow them to pay health insurance premiums through their employer's payroll deduction with pre-tax dollars.  Large employers not offering health insurance would have to contribute to a fund for the uninsured. A new tax credit would be offered to businesses with the fewest workers and the lowest wages. Employers that go through the Health Insurance Exchange would have to enroll all their employees through the Exchange, not just the employees with the greatest health care costs.

Under the Baucus plan, health insurers would have to offer, through the Health Insurance Exchange, health plans that could be classified as high-, medium- or low-benefit options.  Plans could be actuarially equivalent within benefit categories.  Premium differences would reflect different benefit packages.   The Health Insurance Exchange would also include a public plan option, similar to Medicare, that would offer the same level of benefits and set premiums in the same manner as the private plans.  The Health Insurance Exchange would be funded initially through federal funds; a small assessment on premiums could be imposed in subsequent years to make the Exchange self-sustaining.

The Independent Health Coverage Council would define key terms such as coverage and affordability, and ensure income-related annual limits on out-of-pocket costs.  It would set standards for chronic care management and quality reporting, and collect and report on performance of network providers, using standards that are consistent with the standards used by Medicare to the extent practicable.  The Independent Health Coverage Council would administer premium subsidies, which would be available in the form of a refundable tax credit for individuals and families who purchase insurance through the Exchange and who have incomes at or below four hundred percent of the federal poverty level.  Senator Baucus would include other protections for health care consumers. He would prohibit the denial of coverage and discrimination based on pre-existing conditions, develop standards for rating insurance policies, and limit the ability to price based on age.  Coverage for prevention and wellness services would increase, including reductions in, or elimination of, cost-sharing for preventive services in Medicare.  The proposal establishes the temporary "RightChoices" program to provide the uninsured with immediate access to preventive services and treatment for chronic conditions.  Finally, Senator Baucus would increase and standardize methods of data collection to address racial and ethnic health disparities.

The White Paper recognizes the importance of public programs in the health care system.  Medicaid would be expanded by creating a national eligibility minimum of 100 percent of the federal poverty level. The plan would standardize and simplify eligibility verifications and renewals.  Federal payments to states for their Medicaid programs would increase when economic downturns occurred.  The State Children's Health Insurance Program (SCHIP) would also be expanded; health care for Native Americans and Alaska Natives would receive increased funding.

Under the Baucus plan, people aged 55 to 64 would be able to buy into Medicare immediately.  The immediate expansion of health insurance for this group is in recognition of the fact that those who are uninsured in this age group have fewer options to purchase insurance on the individual market, are charged higher premiums than are charged other groups, and often have greater health care needs.  Providing insurance to uninsured individuals in the pre-Medicare population could keep this population healthier and thereby reduce future Medicare costs. People who purchase Medicare would pay premiums that represent the cost to Medicare of their insurance.   The buy-in would be temporary until the Health Insurance Exchange is established.  At that time those who had bought into Medicare could remain in Medicare; others would purchase insurance through the Exchange.  The White Paper also calls for the elimination of the 24-month waiting period for Social Security Disability Insurance recipients.

Improving Value by Reforming the Health Delivery System

Like many other policy makers, Senator Baucus wants to "bend the curve" of growth in national health care spending by refocusing the health care delivery system towards improvement in patient care and investment in the health care infrastructure.  His proposals in this regard look toward Medicare "because of its unique ability to lead the way for system-wide changes."[2]  He envisions that both public and private insurance will follow Medicare and build on its innovations.

The first step is to strengthen the role of primary care and chronic care management.  The White Paper proposes revising Medicare payments by using claims history to identify primary care services.  Senator Baucus recognizes that increasing payments to primary care providers in a budget neutral manner would result in corresponding cuts to specialist services.  The controversial proposal would require collaboration with physicians and other practitioners.

The Medicare "Medical Home" demonstration would be expanded, with a focus on providers who are committed to providing primary care and care management services.  The White Paper looks toward standards proposed by MedPAC and the National Committee for Quality Assurance (NCQA), and includes consideration of the role of non-physician providers in the medical home model.  Collaboration between Medicare and ongoing demonstrations sites that include Medicaid and private insurers would be encouraged.  Medicare would be encouraged to test other primary care models and disease management programs.

Senator Baucus promotes building on and refining many of the Medicare payment mechanisms.  He discusses pay-for-performance programs, revising and refocusing the physician payment system, and looking at collaborative practice models.  He would establish a new institute to conduct comparative effectiveness research. The goal is to provide information to help physicians determine the most appropriate treatment for each patient.  The White Paper also promotes the increased use of health information technology.

The final element of health system delivery reform involves assistance to the health care workforce.  This could include placing a greater emphasis on providing training in certain areas such as primary care, geriatrics, preventives services, nurse practitioners and physician assistants.  There would need to be steps to encourage racial and ethnic minorities to enter the health work force.

Financing a More Efficient Health Care System

The last component of the White Paper addresses financing issues.  Senator Baucus proposes adopting recommendations of the Office of Inspector General to focus on prevention of fraud, waste, and abuse.  These include improved screening of providers and suppliers in Medicare, Medicaid, and SCHIP; payment methodologies such as competitive bidding that discourage fraud, waste, and abuse; promotion of compliance; increased oversight and continuous monitoring; and quick response when fraud is detected.

The White Paper proposes three areas for increased transparency:  physician-industry relationships, physician self-referral, and cost and quality.  In regard to the latter, Senator Baucus would look to Medicare to play a leadership role.  The White Paper acknowledges that information currently available is inadequate, and that practical factors may limit the value and usefulness of cost and quality information.  Nevertheless, the White Paper recommends that Medicare make its data more widely available, and that the full cost of employer-provided health care should be transparent to employees.

Senator Baucus also looks to malpractice reform as a way to finance a more efficient health care system.  Recognizing that reducing malpractice premiums would not substantially effect overall health spending, the White Paper acknowledges that some providers order more tests to avoid liability, thereby contributing to unnecessary health care spending.  The White Paper also acknowledges that the current system is not effective at compensating victims or reducing the occurrence of malpractices.  Senator Baucus recommends providing grants to states to create alternatives to tort litigation to increase access to recovery for patients with small claims.

Financing reform includes reforming payments to Medicare Advantage plans.   Senator Baucus adopts the MedPAC recommendation of leveling the playing field between traditional Medicare and Medicare Advantage plans. He would consider several ways of doing this, including looking at how insurers' costs differ by region. One suggestion is to establish a blend of local and national Medicare costs, meaning that payments in high cost areas might be reduced while payments in low-cost areas might increase.  Senator Baucus also raises concerns about payments to Part D plans, and suggests extending Medicaid price discounts to drugs used by people who are dually eligible for Medicare and Medicaid.

Although the Baucus plan does not address long-term care, the White Paper discusses the need to consider options to expand access to Medicaid home and community-based services. Other options include supports to prevent the progression of disability and to assist people to stay at home, assistance to family caregivers, and pilots of new models of institutional care.

While Senator Baucus believes that eliminating the current tax exclusion for employer-based health insurance premiums would be too disruptive, he is willing to consider more targeted reforms such as a cap on the amount of the premium that could be excluded.  Another option would be to make the tax exclusion vary by income, so that low wage earners would have a 100% exclusion, with the percentage phasing down as income increased.

Conclusion

Senator Baucus' White Paper provides a well-thought-out framework for discussing an overhaul of the health care system.  While improving and reforming Medicare is not the primary goal, many of the recommendations in the White Paper will do just that – reducing cost sharing for preventive benefits as part of an effort to promote preventive care, increasing care coordination, reforming payments to providers to encourage quality care, and reducing payments to Medicare Advantage plans.  Senator Baucus also recognizes that Medicare can provide a model for reforms that will make health care affordable and accessible for everyone.

For more information, contact attorney Vicki Gottlich (vgotlich @ medicareadvocacy.org) in the Center for Medicare Advocacy's Washington DC office at (202) 293-5760.