News is surfacing from Washington, D.C. concerning the budget proposal being prepared by the House Budget Committee under the direction of Chairman Paul Ryan (R-WI).  Notably, news reports that the budget proposal is expected to “spare” Social Security, but will place Medicare and Medicaid front and center for an overhaul.

Every year, the Budget Committee puts together a budget resolution, which is largely a blueprint – but sets the tone for the 13 annual appropriations bills Congress is expected to pass.

Of key concern at this juncture is the federal deficit.  Over the past decade the deficit has gone from a $300 billion surplus to now nearing $15 trillion in debt.

According to a committee spokesperson, “Chairman Ryan has committed to put forward a budget that deals with the drivers of the debt.  He has committed to put forward a budget that helps spur job creation and economic growth. He has committed to put forward a budget that helps save the nation’s critical health and retirement security programs.”

What is expected, however, is a proposal that would alter the way in which federal dollars are spent on Medicaid, a state-federal partnership.  Ryan’s budget is likely to propose the federal share of Medicaid be converted into a block grant structure.  This would save money for the federal government by providing set amounts to states each year (adjusted for inflation annually), rather than today’s model which allows for more uncertainty of the costs.  In other words, if a state sees a major increase in its Medicaid volume, the federal share grows along with it with and has no mandated cap.

Under a block grant proposal, regardless of increased patient volume or other factors, states would receive a pre-determined federal share and would be required to manage the population using only those dollars.  Specifics on this option are still being panned out, though the Congressional Budget Office has reported that this provision could save up to $280 billion over 10 years. The proposal in total is still in draft stage and is expected to be unveiled next week.

The “sustainable growth rate” in the Medicare program is a flawed equation that leads to the proposal huge cuts to physician payments under the program each year.  However, when looking at the price tag, a mere $300 billion over 10 years, it’s easy to see why a permanent solution has been slow to come by.

However, the House Energy and Commerce Committee recently announced a bi-partisan effort to solicit ideas, feedback and proposals from national physician and hospital groups in an effort to permanently fix this flawed provision.  The key word is “permanently” as over the past decade, Congress has elected to only temporarily patch the problem passing a variety short-term fixes to prevent 15, 20, or even 30+ percent cuts to physician Medicare payments.  But like many efforts seeking to do the same – preventative procrastination hasn’t done much to solve the long-term, hugely expensive problem.

Problematically there is little agreement on a solution and the proposals vary greatly, and with so much emphasis on the federal deficit and budget debate in Washington D.C. its unclear what will come next on this issue.  However, the budget debate could present Congress with an opportunity for a fix, as it has become clear that in order to fix the nation’s budget – everything must be on the table.

The letter to stakeholders requests feedback by early April and the committee could hold as early as May. Key recipients include: The American Medical Association, American Academy of Family Physicians, American Hospital Association, Federation of American Hospitals, Medical Group Management Association and many others.

Late last month, with little time to spare, the U.S. Senate passed a 31-day patch that would prevent the scheduled 24 percent cut to physician payments.  The Physician Payment and Therapy Relief Act of 2010 was introduced by Senate Finance Committee Chairman Max Baucus (D-MT) and Raking Member Chuck Grassley (R-IA) as part of an effort to provide both a short-term and longer-term solution to pay for the Medicare Physician Payment Formula.

However, physicians still face these cuts as this temporary patch expires on December 31.  This week it was announced that Senate leaders may be close to reaching an agreement on a one-year fix.  Sources close to the negotiations say the deal would pay for the patch by making changes to the tax subsidy program under the health care reform law.  Majority Leader Harry Reid (D-NV), Minority Leader Mitch McConnell (R-KY), and Sens. Baucus and Grassley agreed to the deal, according to Congressional aides and lobbyists familiar with the proposal.

The one year extension would cost $19.2 billion and is financed by reconfiguring the method by which the government would recoup overpayments to individuals who receive tax credits to obtain health insurance through the “exchanges”.

Under health care reform, individuals at certain incomes are eligible receive federal tax credits to help them buy insurance. If a person misstates his/her income or if it changes, the law mandates repayment. The “doc fix” agreement raises the repayment obligation.

IHA supports a long-term solution to the physician payment cuts and continues to urge Congressional action on this issue.



IHA continues to work on resolving and coordinating efforts to address the serious concerns surrounding the controversial “clarification and restatement” of the direct physician supervision requirements included in the outpatient Prospective Payment System/ambulatory surgical center final rule for 2010.  The key issue being addressed surrounds the Centers for Medicare & Medicaid Services’ (CMS) requirement that a supervisor be immediately and physically present throughout the duration of outpatient therapeutic services.

IHA has been meeting in-person with each of the offices of Iowa’s congressional delegation and has drafted a delegation letter to CMS urging immediate action on this issue.  To date, Senator Tom Harkin, and Representatives Leonard Boswell, Steve King, Tom Latham, and Dave Loebsack have all confirmed their support on the issue and have agreed to sign onto the letter.  Staff from the offices of Senators Chuck Grassley and Harkin have also been in contact directly with CMS to outline their concerns and staff for Senate Finance Committee Chair Max Baucus have been in communication with CMS on this issue as well.

Earlier this week, CMS hosted a rural health open door forum conference call and spent most of the time discussing physician supervision.  CMS acknowledged the arising complications and encouraged hospitals to continue reaching out to help CMS understand the “real-world” impact of its policy.

CMS verbally qualified its position by stating that physicians or other allied professionals, recognized in the outpatient rule should be “fairly immediately available” and recognized that the rule doesn’t anticipate clinicians “hanging around the emergency department” with no knowledge of anticipated patient arrivals.  CMS stated that determination of “immediately available” is essentially at the discretion of the hospital.  CMS also acknowledged that this billing policy predominantly creates an issue with observation status, which is currently billed as a therapeutic service.  However, CMS stopped short of backing away from the rule as written, but confirmed that further written guidance will be provided on this topic.

IHA will continue working with Iowa’s Congressional Delegation, the Senate Finance Committee staff as well as the American Hospital Association to seek clarification and resolution of this issue.  Pending further guidance from CMS, IHA will survey Critical Access Hospital members to further refine its understanding of the scope of the problem and potential solutions.

The editorial page of the Boston Globe provides a brief item on the importance of evidence-based medicine with regard to reducing costs and improving health care.  The editorial points to two examples: A 2007 study that showed that drugs work just as well as stents in treating chest pain and a 2002 study that showed generic drugs work just as well as name brands. 

The central point of the editorial is that neither of these cost-saving approaches has been as widely adopted as one might expect.  Why?  Because the insurance companies – both public and private – have provided few, if any, incentives to adopt them. 

This is yet another illustration of how health care spending is being driven by something other than value.  Instead, it is driven by a system that rewards quantity – a physician who does more testing and procedures will be paid, even if those tests were not the best or possibly even unnecessary. 

The Globe emphasizes evidence-based best practices and notes that “Medicare should have the authority to weigh both comparative effectiveness and cost in steering doctors to the best practices.”  In other words, Effectiveness + Cost = Value. 

In Iowa, we are fortunate to have a health care system that, particularly in the community hospital setting, is dominated by a culture of patient-centered primary care.  This means care tends to be provided in a coordinated fashion with the primary care physician at its foundation.  Patient-centered primary care works when best practices are emphasized.  And when that happens, real value in health care is the result.  

This is why Medicare would save billions of dollars every year if it demanded, as the Globe editorial suggests, the same value from others that Iowa already provides.