FEDERAL HEALTH CARE REFORM COMPARISON OF BAUCUS AND OBAMA PLANS AND NCSL POLICY Prepared by: Joy Johnson Wilson, Health Policy Director

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1 FEDERAL HEALTH CARE REFORM COMPARISON OF BAUCUS AND OBAMA PLANS AND NCSL POLICY Prepared by: Joy Johnson Wilson, Health Policy Director INSURANCE REFORM INDIVIDUAL MANDATE Individual Insurance Mandate Proposes to impose a requirement for all Americans to have health insurance. Enforcement may be done through the tax code. Proposes to require that all children be covered. Proposes an unspecified tax penalty for failure to comply. EMPLOYER MANDATE Employer Mandate for Large and Mid-Sized Employers Large employers that choose not to provide health care coverage to their employees would be required to contribute to a fund that is likely to be based on the percentage of a percentage of payroll that will consider the size and annual revenue of each employer. A similar provision is included for midsized employers, but the employer contribution would likely be smaller. Requires all employers to contribute to health coverage for their employees or to pay a tax to help support the national plan. (Exempts start-up and very small businesses) Proposes an unspecified tax penalty for failure to comply. GUARANTEED ACCESS TO AFFORDABLE

2 Page 2 COVERAGE FOR INDIVIDUALS AND SMALL BUSINESSES Low Income Premium Subsidy [See "Tax Provisions - Premium Subsidies] Provides for an unspecified incomebased subsidy for health premiums purchased through the National Health Insurance Exchange or a new proposed public program. Young Adult Coverage No provision. Would allow young adults, up to age 25 to continue coverage through their parent's plan. Section 125 Plans All except the smallest employers would offer a Section 125 plan. 1 Similar to the Baucus plan. Health Insurance Exchange Overview and Funding Establishes the Health Insurance Exchange, an independent entity, the primary purpose of which would be to organize affordable health insurance options, create understandable, comparable information about those options, and develop a standard application for enrollment in a chosen plan. Federal funds would be needed to start up the Exchange, but it would be selfsustaining within a few years. One option for making it so is a small assessment on premiums to fund activities of the Exchange. Insurers would include the assessment as part of their premiums and could remit it on a monthly or quarterly basis. Keeping insurance premiums in the Exchange affordable must be the guiding principle Proposes to create a National Health Insurance Exchange that is similar to the Health Insurance Exchanged proposed by Senator Baucus. 1 Section 125 plans allow employees to pay their health insurance premiums through their employer's payroll deduction with pretax dollars. Premiums paid with pre-tax dollars are not subject to federal and state taxes.

3 Page 3 in setting any assessment. Employer Requirements Participating employers would be required to enroll all employees through the Exchange not only the sickest and most costly to insure. Insurance Plan Requirements Insurance plans participating in the Exchange could operate nationally, regionally, statewide, or locally. So that plans could be easily compared, qualifying insurers would have to offer products that could be classified as high-, medium- or low-benefit options. Benefit packages could differ within reason, but all structures would have to be actuarially equivalent within benefit categories in order to prevent insurers from using benefit design to discourage enrollment by people with health conditions. Differences in premiums between packages would be due to the difference in benefits and not the differences in expected risk. Participating insurers would have to charge the same price for the same products inside and outside the Exchange. All plans participating in the Exchange would be subject to the same rating rules included in the insurance market reforms described later in this chapter. State Regulatory Role Plans participating in the Exchange would be subject to oversight by states

4 Page 4 with regard to consumer protections (e.g., grievance procedures, external review, oversight of agent practices and training, market conduct). In addition, participating private plans would be subject to state regulation related to solvency, reserve requirements, and premium taxes. State benefit mandates Risk Adjustment The Exchange would have authority to implement mechanisms to ensure that plans enrolling sicker-than-expected people would not suffer a financial disadvantage compared to those enrolling healthier people. New Public Plan Option The Exchange would also include a new public plan option, similar to Medicare. This option would abide by the same rules as private insurance plans participating in the Exchange (e.g., offer the same levels of benefits and set the premiums the same way). Rates paid to health care providers by this option would be determined by balancing the goals of increasing competition and ensuring access for patients to high-quality health care. (A number of options could be considered to determine who runs the plan, who is eligible for it, and how to ensure that the public-private insurance competition lowers costs and improves quality. The Independent Health Coverage Council, described below,

5 Page 5 would inform these decisions. ) Independent Health Coverage Council Authorizes the establishment of the Independent Health Coverage Council, a board of directors, to guide key health care reform decisions. The members of the Council would be appointed by the President with the advice and consent of the Senate for set, staggered terms. The President would choose Council members who were geographically diverse and have expertise in insurance, health benefit design, actuarial science, economics, medicine, business, and consumer protections. The Council and the Exchange would both be subject to regular reviews and oversight by the Comptroller General, however, so that Congress and the public can closely monitor their activities. Insurance Market Reforms Prohibits insurance companies from denying coverage to any individual nor discriminate against individuals with pre-existing conditions. Rules for rating insurance policies will be specified in statute after consultation with the National Association of Insurance Commissioners, consumer advocates, plans and others. The ability of insurance companies to rate on age would be limited. The rating rules for the Exchange would apply in the Exchange as well as in private non-group and small group markets to avoid severe adverse No provision. Prohibits insurance companies from denying coverage to any individual nor discriminate against individuals with pre-existing conditions. Establishes a reinsurance pool for catastrophic costs.

6 Page 6 selection. BENEFITS Independent Health Coverage Council TAX PROVISIONS The Independent Health Coverage Council [See above]would guide key health care reform decisions. Small Business Tax Credit Provides a targeted tax credit that small firms could use towards the cost of purchasing health care coverage. Initially, the credit would be available to qualifying small businesses that operate in states with patient-friendly insurance rating rules. After the initial implementation, the tax credit would be available to small businesses that purchase coverage for all of their employees in the Health Insurance Exchange and make a meaningful contribution towards the cost of the premium for their employees health care. The credit would be based on a firm s size and earnings per employee. The smallest firms with the lowest average earnings will be eligible to receive a credit equal to half of the average total premium cost for employer-sponsored insurance in the firm s state. This credit will be phased down as firm size and average earnings increase. The benefit package would be similar to that offered under the Federal Employee Health Benefit Program (FEHBP). Creates a Small Business Health Tax Credit that would provide small businesses with a refundable tax credit equal to up to 50 percent on premiums paid on behalf of their employees. Premium Subsidies Provides for refundable tax credits for individuals and families with incomes at or below four times the FPL who purchased coverage through the Health Insurance Exchange.

7 Page 7 The Independent Health Coverage Council would define what an affordable premium is, taking into account the reasonable percent of income to be spent on health care coverage. The premium subsidy would make up the difference between the amount suggested by the Council and the premium amount charged by the plan. The amount of the subsidy may be based on a benchmark that would be equal to a locally adjusted, average premium in the Exchange. Modify Tax Exclusion Proposes to consider targeted reforms to the tax exclusion, such as: (1) capping the amount of health care premiums that can be excluded from employee wages for income and payroll tax purposes; or (2) making the exclusion could be available on a sliding scale based on income: people with low wages could be allowed to exclude 100 percent of the premiums offered through their employers, with the percent allowed phasing down or out with income. PUBLIC PROGRAMS MEDICAID Eligibility Expansion Establish national eligibility minimum at 100% FPL States would be required to maintain current eligibility, including optional eligibility categories and eligibility levels above 100% FPL as part of a maintenance of effort (MOE) provision. No provision. Provides for an unspecified expansion. Program Administration Establish uniform and simplified NCSL Medicaid Policy

8 Page 8 verification and renewal rules. Federal assistance for outreach activities. Federal assistance to modernize eligibility and enrollment data systems. Federal Financial Assistance The plan would invest new federal resources (unspecified) to help states pay for increased enrollment. Emergency Assistance Provides for an increase in federal matching assistance (FMAP) when a predetermined combination of circumstances measuring the timing, duration and depth of an economic downturn occurs. 2 STATE CHILDREN'S HEALTH INSURANCE PROGRAM (SCHIP) SCHIP Expansion Requires states to cover all children who are not Medicaid-eligible in families with incomes at or below 250% of FPL. Requires states with SCHIP income eligibility above 250% of FPL, to maintain current eligibility levels. The plan would invest new federal resources (unspecified) to help states pay for increased enrollment. MEDICAID AND STATE CHILDREN'S HEALTH INSURANCE PROGRAM (SCHIP) NCSL Medicaid Policy Provides for an unspecified expansion. NCSL SCHIP Reauthorization Policy. Eliminate Waiting Period Proposes to eliminate the waiting NCSL SCHIP Reauthorization Policy. 2 The details of an economic indicator-based trigger and the level of assistance must be responsible without being too rigid or too lax. Determining the specific trigger requires careful construction in order to ensure that state economic distress is measured reliably and accurately. Similarly, the amount and duration of the FMAP increase must be calibrated to provide states with enough support at the right time.

9 Page 9 for Legal Immigrants for Medicaid and SCHIP period before which eligible legal immigrants can gain access to Medicaid and SCHIP. 3 RIGHT CHOICES Right Choices Program Proposes to establish RightChoices, a temporary program to provide the uninsured with immediate access to a set of proven preventive services such as a health risk assessment, physical exam, immunizations, and age and gender appropriate cancer screenings recommended by the U.S. Preventive Services Task Force. To cover the cost of this care, states would receive a three-year capped allotment based on factors such as the percentage of uninsured and the prevalence of these chronic illnesses. These grants could also support the development of models to better manage, monitor, and treat these chronically ill individuals such as certified community care teams. It could also be used for outreach to eligible, uninsured Americans. Based on a patient s risk, a care plan would be developed to maintain good health, and reduce the medical risks and costs of poor health. The RightChoices card would also provide referral to community resources such as smoking cessation and nutrition programs that have demonstrated success in changing and 3 Currently, legal immigrant children and pregnant women are subject to a five-year waiting period before they can become eligible for Medicaid or SCHIP.

10 Page 10 supporting healthy lifestyle choices. Any individual eligible for RightChoices who is not eligible for or enrolled in a private plan or public program such as Medicaid or Medicare, but whose RightChoices screening detects and diagnoses one or more of the most common, costly chronic conditions would qualify to receive treatment for those conditions. Treatment would be provided on a temporary basis until viable coverage options are available under the Health Insurance Exchange. HEALTH CARE FOR NATIVE AMERICANS AND ALASKA NATIVES Federal Financial Assistance MEDICARE Individuals with incomes below 200 percent of the Federal poverty level could receive treatment at no cost. Increases funding for the Indian Health Services (IHS). Encourages enrollment in Medicare, Medicaid, and SCHIP for those who are eligible to defray costs borne by the IHS. Medicare Buy-In Establishes an option for people ages to buy-in to the Medicare program. No provision. Phase Out Disability Waiting Period Begin to phase-out the two-year waiting period for Medicare coverage for people with disabilities. President-Elect Obama sponsored legislation to phase-out the two-year waiting period while he was a Senator. NCSL Social Security Disability Policy Private Insurance Plans in Medicare The Baucus plan would seek to better understand how insurers costs differ by region of the country in designing new policies to eliminate the remaining No provision.

11 Page 11 excess spending in the Medicare Advantage (MA) program. MIPPA has already directed MedPAC to compare Medicare and private insurance costs and develop alternative ways of setting MA payments. MA payments should be reformed to achieve neutrality with traditional Medicare at the national level. Medicare Overpayments No provision Proposes to eliminate Medicare overpayments. PREVENTION AND WELLNESS PROVISIONS Guaranteed Access to Clinical Preventive Services and Referral to Community Resources Coverage for Prevention in Federal Health Programs and Private Plan Options See "Right Choices" under Public Programs. Proposes to reduce or eliminate copayments for recommended preventive services under Medicare. Medicaid and CHIP beneficiaries would receive recommended preventive services without co-payments. Urges Congress to explore evidencebased approaches for obesity prevention and treatment through demonstration projects in Medicare, Medicaid, and CHIP. Urges the use of demonstration programs to test approaches that have shown clinical value in functioning settings. The Health Insurance Exchange would require participating plans to include certain preventive services in its benefit Similar to the Baucus plan.

12 Page 12 package, based on recommendations by appropriate entities such as the U.S Preventive Services Task Force, the Advisory Committee on Immunization Practices, National Institutes of Health, Centers for Disease Control and Prevention, and Institute of Medicine. National Focus on Wellness Provides grants to states or communities to implement innovative, evidence-based prevention and wellness programs at the local level. The programs would employ best practices identified by the Department of Health and Human Services, the Institute of Medicine (IOM), and the Task Force on Community Preventive Services. Grants would encourage local governments, employers, schools, health care systems, other community organizations, and individuals to work together and support healthy lifestyles. Supports efforts by small businesses to create healthier work environments with tax credits or other subsidies for proven wellness programs. Urges Congress to authorize a study to identify the various federal programs that can help prevent the development of chronic disease and suggest options to more effectively coordinate efforts going forward. PRESCRIPTION DRUG REFORMS Proposes to: provide unspecified funding for community-based initiatives; promote expanding and rewarding employer-based initiatives; expand school-based screening programs, clinical services, physical education, and health education programs; and restrict tobacco and alcohol advertising to children. Drug Importation No provision. Permits the reimportation of prescription drugs when the prices are lower than those in the United States. NCSL Medicare Part D No provision. Permits HHS to negotiate with drug

13 Page 13 companies with respect to prices. Generic Drug Provisions No provision. Proposes to increase the use of generic drugs in government programs. HEALTH DISPARITIES Data Collection Require plans participating in the Exchange to collect and report data based on race, ethnicity, and gender. Proposes to include appropriate levels of funding to federal agencies responsible for this type of data collection, such as the National Health Interview Survey (NHIS) and the National Health Care Survey (NHCS). QUALITY Strengthening the Role of Primary Care and Chronic Case Management Ensuring Accurate Payments for Primary Care Services The plan would seek a continued focus on the high value of primary carerelated services, with corresponding reductions in relative values for overvalued services. Proposes to adjust fee schedule rates to reflect priorities that the health care system must adopt to bend the health care cost curve and improve quality over time. Additional Payments for Primary Care Providers Proposes to increase Medicare reimbursement levels for primary care. Recommends that bonus payments take Proposes to prohibit large drug companies from keeping generic competition out of the market.

14 Page 14 into account the complexity of the provider s patient panel to nsure that underserved populations are not left behind. Provides that payment reimbursement changes be made budget-neutral. Budget-neutral changes to Medicare payments mean that any increase to primary care providers requires a corresponding cut to specialist services. Patient-Centered Medical Home Community Health Centers and Rural Health Centers Refocusing Payment Incentives Toward Quality Hospital Quality Reporting and Next- Generation Quality-Based Payment Reform Includes provisions to improve quality care in the inpatient hospital setting through establishing a hospital pay-forperformance program, which is sometimes also referred to as valuebased purchasing, in Medicare. Physician Quality Reporting Initiative Builds on the Physician Quality Reporting Initiative (PQRI) and the provider feedback program as a next step in improving patient care. Provider Feedback Program and Episode Groupers Quality Improvement for Other Providers and Private Plans Urges Congress to explore pay-for-

15 Page 15 performance requirements for private plans that participate in Medicare. Reforming the Sustainable Growth Rate Formula Calls for reform of the current system used to update physician payments. Promoting Provider Collaboration and Accountability Reducing Hospital Readmissions Requires CMS to provide confidential feedback to hospitals and physicians regarding resource use for select hospitalization episodes. This data would need to be detailed enough to help providers understand spending and resource consumption, particularly for higher-cost beneficiaries. Once providers better understand how they perform relative to their peers, they could begin to address problem areas. The plan would then require hospitalspecific information on readmissions be made available to the public. Creates new financial incentives in Medicare to encourage providers to take greater responsibility for the coordination of care for hospital inpatients. These changes would include reduced payment rates for hospitals with readmission rates above a certain benchmark. In the initial years, this plan would focus on reducing re-hospitalizations for a limited number of conditions that are known to have a high rate of readmissions, such as congestive heart failure, chronic obstructive pulmonary disease (COPD), and coronary artery bypass graft. But over time, the program would be expanded. In Requires hospitals and providers to collect and publicly report measures of healthcare costs and quality.

16 Page 16 circumstances where a readmission is unavoidable, hospitals would not be penalized. Bundled Payments Proposes to allow Medicare to pay bundled or global payments for all services provided to a patient during hospitalization and for some amount of time post discharge. Physician Group Practice Demonstration and Accountable Care Organizations Calls for CMS to establish a framework for reforming and expanding the PGP demonstration after its fifth year, which would end in March The plan for expansion should give providers a pathway toward accountability and shared savings, but should not restrict beneficiary choice. This effort is consistent with other delivery system reforms proposed in this paper, including expansion of the medical home, greater adoption of health IT, and transparency regarding provider quality and costs. Gainsharing Allowing providers to share among themselves savings from improved efficiency and quality, also known as gainsharing, is one potential strategy to encourage provider collaboration. Improving the Health Care Infrastructure Comparative Effectiveness Research Creates The Health Care Comparative Effectiveness Research Institute envisioned in the Comparative Effectiveness Research Act of It Comparative Effectiveness Research Similar to Baucus plan. Health Information Technology Proposes to provide $10 billion Comparative Effectiveness Research Health Information Technology

17 Page 17 would be a private, nonprofit annually for five years for health IT. Health Care Workforce corporation with a Board of Governors Establishes phase-in requirements for appointed from the public and private implementation of health IT. sectors by the U.S. Comptroller General. Health Care Workforce The Institute would be created as an independent entity to remove the potential for political influence on the development of national research priorities. Health Information Technology Proposes three strategies to encourage the adoption and use of health IT: (1) financial incentives, (2) assistance to providers in navigating the health IT market and implementing systems, and (3) promotion of information sharing among providers. Health Care Workforce Urges Congress to dedicate the time and attention to graduate medical education (GME) in Medicare. Identifies the following policy solutions that should be considered as part of health care reform: (1) Evaluating whether changes are needed to the number of allowable GME training slots; (2) Exploring options to increasing the residency cap for certain specialty areas; (3) Determining ways to modernize the GME benefit through policies to allow training in other treatment settings and encouraging a focus on care coordination; (4) Increasing accountability of indirect medical education (IME) funding; and; (5) Working with the Senate Health, Education, Labor and Pensions (HELP) Proposes to offer funding to nursing schools and tuition assistance to nursing students.

18 Page 18 Committee to address workforce shortages and support increased racial and ethnic diversity within the health care workforce by strengthening public health programs in these areas. FRAUD, WASTE & ABUSE Fraud, Waste and Abuse Urges the government to do a better job of screening those allowed to become providers and suppliers in Medicare, Medicaid, and SCHIP. Recommends the development of government payment methodologies that discourage, rather than encourage, providers or suppliers from engaging in fraud, waste, or abuse. Calls for moving forward on the delayed Medicare competitive bidding program. Urges the government to work with providers and suppliers to promote compliance with program requirements and quality and safety standards could actually increase it. Calls for the federal government to conduct vigilant oversight of Medicare, Medicaid, and SCHIP and continuously monitor for evidence of fraud, waste, and abuse. Increased Transparency The plan focuses on three areas that would benefit from greater transparency: physician-industry relationships, physician self-referral, and cost and quality information. Physician-Industry Relationships

19 Page 19 Physician Self-Referral Cost and Quality Transparency MEDICAL MALPRACTICE Medical Malpractice The Fair and Reliable Medical Justice Act serves as a foundation for this element of the health reform plan. Like the legislation, the Baucus plan would call on states to develop alternatives for resolving conflicts and compensating patients who are the victims of medical errors. In addition to receiving Federal assistance to establish an alternative model, states would also receive assistance to collect data about medical errors, which would help keep patients better informed and create an opportunity for providers to learn from each other. LONG TERM CARE Long Term Care Services and Supports The plan would: Consider options to further expand access to Home and Community-Based Care Services (HCBS) in Medicaid. Proposes to strengthen antitrust laws on malpractice insurers. NCSL Medical Malpractice Policy. NCSL opposes federal efforts to preempt existing state laws or state constitutional provisions in the area of medical malpractice lawsuits, specifically federal legislation that would preempt state laws and/or constitutions in the following manner: (1) Preempt state laws governing the applicable statute of limitations in such cases; (2) Preempt state laws governing the awarding of damages by mandating a mandatory uniform amount of damages of any kind (compensatory, noneconomic or punitive) at the federal level; (3) Preempting state laws governing the drafting of pleadings and introduction of evidence in such cases; and (4) Preempting state laws and/or constitutions governing the awarding of attorney's fees. This policy is within the jurisdiction of the NCSL Standing Committee on Law and Justice. No provision. NCSL Long Term Care Policy.

20 Page 20 These options include providing states with new tools and incentives to make them more available to more beneficiaries and exploring options to better coordinate care for dual-eligible individuals under Medicare and Medicaid. Encourage states to explore new options that improve access to longterm care services and supports to prevent the progression of disability and to help individuals remain in their own homes. By intervening earlier with targeted assistance, states can help prevent or delay costly institutionalizations and provide a more patient-centered benefit. Explore inefficiencies and conflicting incentives within Medicare and Medicaid to improve the quality of care and decrease costs. Provide support for family caregivers. Include options to recruit, train, and retain a robust workforce that can ensure high-quality care.[mentions providing educational and training opportunities to adults who are participating in the Temporary Assistance for Needy Families (TANF) program, as a group of individuals who could provide an important resource in meeting our nation s workforce needs.] Pilot new models of institutional care, such as the Green House model, that has shown promise for both improving the quality of life and care in these settings.

21 Page 21 Incorporate several options to reform the delivery system to provide better care coordination and chronic disease management. Explore policies that make quality longterm care insurance products more affordable and accessible. Consider investment in aging and disability resource centers (ADRCs) and programs that limit secondary disabilities by promoting nutrition, exercise and fall prevention.