• Obama backs off from public option
• Grassley criticizes House reform bill
• Expanding preventive services not cost neutral: CBO

• Hospitals that quickly adopt new technologies have best outcomes
• Business group calls for cost containment, system transformation in reform legislation
• HHS studies effects of preexisting condition exclusions
• Reform proposals could help more than 13 million uninsured young adults

• NY extends health insurance coverage to unmarried children through age 29
• Insurers step up efforts to steer health reform debate

Obama backs off from public option

President Obama took to the road in an effort to dispel what he considers to be public misconceptions about several hot-button issues contained in House health care reform legislation. The two provisions drawing the most public wrath involve end-of-life decisions and a public option.

The White House has been backing away from the public option and instead, White House Press Secretary Robert Gibbs has characterized the issue in more general terms. According to Gibbs, the president wants final legislation to include a "mechanism" which provides adequate choice and competition. He has not ruled out other proposals under consideration. One alternative to a public option that is favored by Senate Finance Committee Chairman Max Baucus, D-Mont., is a non-profit network of health insurance co-operatives which are designed to increase coverage choices at competitive prices.

The president has argued that a public option would keep insurance companies "honest" and that increased competition by other plans would ultimately lower health care premiums. The White House launched a new website, www.whitehouse.gov/realitycheck, aimed at "getting the facts out" about key insurance reform proposals. The website, employing videos of several administration officials, tries to tackle head on what the White House considers to be misinformation about health care reform. Among the issues addressed in the videos are the rising public fear that seniors would lose their Medicare coverage and a government-run health plan would lead to rationing if Democrats pass a comprehensive reform package. CCH Washington Bureau, Aug. 14, 2009.

Grassley criticizes House reform bill

Senate Finance Committee ranking member Charles E. Grassley, R-Iowa, one of the six negotiators working to produce a health care reform bill in the Senate, strongly condemned the bill passed by Committees in the House of Representatives, calling it so "poorly cobbled" that it will have unintended consequences. During an Iowa town hall meeting held on August 13 he told the crowd that they were justified in their concerns over end of life provisions contained in the House bill.

He later stated that the Senate Finance Committee had dropped end-of-life provisions from consideration entirely because of the way they could be misinterpreted and implemented incorrectly. He said a public option was no longer viable either because creating a government-run program would likely lead to the rationing of care for everyone. CCH Washington Bureau, Aug. 14, 2009.

Expanding preventive services not cost neutral: CBO

While expanding preventive services, as proposed under health care reform legislation, would improve people's health, the Congressional Budget Office said that evidence suggests that for most preventive services, expanded utilization will lead to higher, not lower, national medical spending.

In a letter to Rep. Nathan Deal, (R-Ga.), ranking member of the House Committee on Energy and Commerce Subcommittee on Health, CBO Director Douglas Elmendorf noted that "even when the unit cost of a particular preventive service is low, costs can accumulate quickly when a large number of patients are treated preventively." In addition, private insurers may be discouraged from offering preventive services whose positive results are only seen in the future, since the insurer offering the preventive benefit will bear the cost of providing the service but will not likely be the beneficiary of any savings in the future that can be attributed to that preventive service.

Elmendorf cited a 2008 article published in the New England Journal of Medicine which summarized the findings of hundreds of studies on preventive care. The article concluded that only 20 percent of the services examined saved money.

Elmendorf also noted that some types of preventive care will increase longevity, which would increase federal spending in the long run as more people live longer and thus both Social Security and Medicare outlays will increase.

Elmendorf also noted that evidence on the cost of expanding wellness services such as encouraging healthy eating habits or exercise is limited. He highlighted one study that concluded that if U.S. obesity rates were cut in half, total Medicare spending by the elderly Medicare population would decline by 10 percent by 2030. CBO Letter, Aug. 7, 2009.

Hospitals that quickly adopt new technologies have best outcomes

Various studies have shown marked differences in health care spending across U.S. hospitals and regions and that higher spending is not associated with better outcomes. These studies suggest that there are inefficiencies in the U.S. health care system.

Can different adoption rates of new technologies across hospitals help to explain health outcome patterns? In "Technology Diffusion and Productivity Growth in Health Care" (NBER Working Paper 14865), Dartmouth College researchers Jonathan Skinner and Douglas Staiger concluded that, indeed, "small differences in the propensity to adopt technology can lead to wide and persistent productivity differences across hospitals."

For their study, the authors focused on treatment of heart attacks using three specific treatments: aspirin, beta blockers, and "clot-busting" drugs or surgical angioplasty. All of these treatments are relatively inexpensive, have proven effective in saving lives, and are determined by the physician, not the patient.

The researchers’ key findings include the following:

• The spread rate for each of the three heart attack treatment "technologies" is strongly correlated with the adoption of new technology, suggesting that hospitals that adopt one innovation early also are more likely to adopt other innovations. Hospitals with quicker adoption of technology tend to be major teaching hospitals, have higher patient volume, and are located in states with higher average income. "These hospitals may find it easier to adopt new technologies and place more value on early adoption," the researchers guessed.
• Differences in the rate of technology adoption lead to significant differences in treatment patterns. For example, beta blocker use varies from 65% among hospitals in the highest quintile of the hospitals with the fastest technology adoption rates to only 31% among hospitals in the lowest quintile. Similarly, aspirin use varies from 90% in the highest quintile to 65% in the lowest quintile.
• Heart attack survival rates in the fastest adopting hospitals are 3.3 percentage points higher than in the slowest adopting hospitals, or equal to one-third of the total improvement in heart attack survival rates over the past 20 years.
• Controlling for each hospital’s technology level, the cost of additional health care spending per life-year saved for heart attack patients falls to less than $100,000 from $355,000 without the technology controls. This finding suggests that hospitals that adopt technology faster choose lower levels of other health care treatments because the returns to traditional treatments are lower once technologies like aspirin and beta blockers have been adopted.

The authors largely attribute "the dramatic growth in survival over the past several decades [at least from heart attacks] to the diffusion of inexpensive and highly effective treatments, while the apparent point-in-time inefficiencies may result from a failure to control for hospital-specific rates of technology adoption."

In turn, hospitals’ and physicians’ lag in adoption of new technologies, "particularly a technology like aspirin that is so inexpensive and would appear to require little physician training to implement," might be largely due to the fact that "physicians historically have faced little pressure to change old habits." However, the authors concluded, "public reporting of technology use by hospitals, as was recently instituted in the case of beta blockers, may help to speed the pace of technology adoption and reduce inefficiencies in the provision of health care."

An electronic copy of the report may be purchased online for $5 from http://www.ssrn.com.

Business group calls for cost containment, system transformation in reform legislation

The National Business Coalition on Health (NBCH) has submitted letters to the White House and Congress emphasizing the importance of value-based purchasing as a critical strategy for health care reform. The NBCH sent the letters on behalf of its coalition network of public and private employers to President Barack Obama and House and Senate congressional leaders including specific recommendations to reinforce the importance of establishing a health care system built on value, with a clear return for every dollar spent. The letter to the President can be viewed on NBCH’s Web site.

"We can all agree that the current path we are on is unsustainable," said Andrew Webber, president and chief executive officer of the NBCH. "The U.S. spends nearly twice as much per citizen on health care than any other industrialized country, and ranks in the lowest quartile on population health status. Unless we change health care to focus on delivering value‑with focus on quality, health outcomes, and cost of care‑America’s ability to compete in a global economy is at risk."

The NBCH notes in its letter that the path to health care delivery reform and cost containment is value-based purchasing: "Simply stated, purchasers of health care services (i.e., employers, governments and consumers) need to measure, publicly report, and, most importantly, reward‑through payment and selection‑high performance and value in health care services and delivery."

Recommendations. The NBCH urged the White House and Congress to continue reform legislation efforts with a focus on the following value-based purchasing principles:

• measuring the comparative effectiveness and performance of health services and providers;
• making such information easily accessible and transparent to the public;
• reforming the fee-for-service payment system;
• empowering consumers to make better and more informed choices along the full spectrum of their health and health care journey; and
• creating a fail-safe mechanism and establishing an independent entity to insure that serious cost containment measures are taken in response to escalating health care costs.

For more information, visit http://www.nbch.org/.

HHS studies effects of preexisting condition exclusions

Insurance discrimination based on preexisting conditions makes adequate health insurance unavailable to millions of Americans, according to a report released by the Department of Health and Human Services (HHS).

The report revealed the following:

• In 45 states across the country, insurance companies can discriminate against people based on their preexisting conditions when they try to purchase health insurance directly from insurance companies in the individual insurance market. Insurers can deny them coverage, charge higher premiums, and/or refuse to cover that particular medical condition.
• 12.6 million non-elderly adults—36%of those who tried to purchase health insurance directly from an insurance company in the individual insurance market—were in fact discriminated against because of a preexisting condition.
• One in ten people with cancer said that they could not obtain health coverage, and 6% said they lost their coverage when they were diagnosed with the disease.
• It is legal in nine states for insurers to reject applicants who are survivors of domestic violence, citing the history of domestic violence as a preexisting condition.

The report is available at http://www.healthreform.gov/reports/denied_coverage/index.html.

Reform proposals could help more than 13 million uninsured young adults

Comprehensive health reform proposals now before Congress could help the more than 13 million uninsured young adults ages 19-29 gain coverage, and such reforms also would help ensure that those who now have coverage would not lose it, according to a new Commonwealth Fund report, Rite of Passage? Why Young Adults Become Uninsured and How New Policies Can Help, 2009 Update.

According to the report, in 2007, nearly 30% of young adults, or 13.2 million, were uninsured—an increase of 2.3 million since 2000. With the unemployment rate currently at 15% among those ages 20-24, up from 8.2% in 2007, more young adults are now likely uninsured.

"Loss of health insurance coverage impedes young adults’ access to the health system at precisely the time they should be establishing their own relationships with physicians, and puts them and their families at significant financial risk" said study author and Commonwealth Fund vice president Sara Collins. "It is critical that reform proposals provide comprehensive, affordable and continuous health insurance that young adults can count on regardless of where they work or whether they are in school."

A copy of the report is available at http://www.commonwealthfund.org.

NY extends health insurance coverage to unmarried children through age 29

A new law in New York will require group accident and health insurers issuing policies that cover dependent children to offer and, if requested by the policyholder, extend coverage under the policy to unmarried children through age 29, without regard to financial dependence. Children must not be insured by (or eligible for coverage under) any employer health benefit plan as an employee or member, and must live, work or reside in New York or the insurer's service area.

Extended dependent coverage must be made available at the inception of a new policy or, if not new, on the policy's anniversary date. In addition, written notice of the availability of such coverage must be delivered to the policyholder prior to the inception of the group policy and annually thereafter.

Similar provisions apply to group contracts issued by nonprofit medical indemnity, health and hospital service corporations (Secs. 4235 and 4305, as amended by A. 9038 (L. 2009), effective September 1, 2009).

Insurers step up efforts to steer health reform debate

Within the last two weeks, America’s Health Insurance Plans (AHIP) released a state-by-state comparison of a list of the highest fees billed by out-of-network physicians in the 30 largest states by population, reiterated its advocacy for an individual mandate in health reform, and restated its opposition to a public plan option.

An August 11 report, The Value of Provider Networks and the Role of Out-of-Network Provider Charges in Rising Health Care Costs, is "designed to illustrate the value of provider networks and a growing problem faced by consumers who want affordable, meaningful access to out-of-network providers," according to AHIP.

For example, the report lists fees billed and Medicare-allowed charges for lower-back spinal fusion in a variety of states, including these:

• In New York, out-of-network physicians billed $46,250, or 2,669% of the $1,732.36 allowed Medicare charge;
• In California, out-of-network physicians billed $36,000, or 2,143% of the $1,680.24 allowed Medicare charge;
• In Connecticut, out-of-network physicians billed $26,881, or 1,709% of the $1,572.95 allowed Medicare charge;
• In Illinois, out-of-network physicians billed $19,065, or 1,329% of the $1,434.08 allowed Medicare charge;
• In North Carolina, out-of-network physicians billed $13,957, or 1,025% of the $1,361.47 allowed Medicare charge.

According to the AHIP report, "Consumers who are charged exorbitant fees by out-of-network providers incur additional costs because the protection against balance billing generally does not extend to services provided out-of-network. This detracts from the ability of health plans to offer affordable access to out-of-network providers for those consumers who want the advantages of a network, but also maintain the option to go out-of-network if they choose."

Insurers typically reimburse for services from out-of-network providers at a significantly lower rate than they reimburse network providers. In addition, out-of-network providers are not bound by contract to accept an insurer’s reimbursement as payment in full.

The survey was conducted for AHIP by Dyckman & Associates, a Washington, D.C.-based firm specializing in health care consulting and litigation support services for the health care industry. For more information, visit http://www.ahipresearch.org/ValueofProviderNetworksSurvey.html.