PO Box 41015

Washington, DC20018

877-299-6497

Achieving Workable Federal Health Care Reform Legislation:

A Nonprofit Health Care Perspective

October 2009

Executive Summary

The Alliance for Advancing Nonprofit Health Care applauds the efforts of Congressional leaders and President Obama to craft and enact health care reform legislation this year.

The current bills, however, contain many complex, controversial and untested provisions, while failing to include sufficient reformsto reduce the growth of health care costs over the long run.Consequently, these bills could have very detrimental impacts on the federal budget, the economy, the nonprofit health care Sector, and the cost of health insurance for many businesses and Americans not receiving government subsidies.

The Alliance urges a more pragmatic, incremental approach, starting with the following set of legislative actions this year.

Health Insurance Affordability

  1. Establish an independent body to issue evidence-based care guidelines for use by all public and private payers in benefit coverage and utilization management decisions and in provider reward programs.
  2. Reform the medical malpractice laws to eliminate defensive medicine practices and other problems.
  3. Expand federal funding support to health care providers to accelerate the adoption of health information technology (fully functional and interoperable electronic health records).
  4. Fast-track Medicare provider payment experiments and then, beginning in FY 2013, require that all Medicare-participating hospitals and physicians choose to be paid under either:
  5. The traditional fee-for-service payment system with increasingly stringent annual rate increase adjustments; or
  6. One of several value-based payment options using global budgets or bundled episode-of-care rates, developed by an expert panel, with annual rate increases tied to medical cost inflation.

Health Insurance Accessibility

  1. Impose a substantial federal surtax on any private health insurer not complying with a set of guaranteed issue, continuous enrollment, adjusted community rate, waiting period and other requirements.
  2. Establish a national catastrophic medical expense program under Medicare, funded through a progressive increase in the Medicare tax, to protect individuals and families as well as private health insurers and self-funded plans from adverse selection.
  3. Provide subsidies to low-income, uninsured individuals, and support any expansions in Medicaid coverage and eligibility, through a broad-based progressive tax.

Cross-Cutting Strategies

  1. Require federally tax-exempt health care organizations to demonstrate in Form 990 reporting their active engagement in continuous joint planning efforts with other nonprofit health care organizations that have overlapping service areas to identify and address one or more pressing health care access or community health problems.Simultaneously, federal leaders should use the bully pulpit to encourage leaders of state and local government, businesses, consumer groups and other stakeholders to join in such regional planning efforts.
  2. Exempt collaborative efforts among health care providers and/or health plans designed to benefit local communities from per se anti-trust violation.

PO Box 41015

Washington, DC20018

877-299-6497

Achieving Workable Federal Health Care Reform Legislation:

A Nonprofit Health Care Perspective

October 2009

The Alliance for Advancing Nonprofit Health Careapplauds the efforts of President Obama and Congressional leaders to craft and enact health care reform legislation.

The country clearly has an historic opportunity to make meaningful reforms, a goal long sought by the Alliance, an organization that uniquely combines the perspectives of nonprofit health care providers and insurers--serving communities, not shareholders.

To this point in the reform deliberations, the Alliance has been relying on other national health care groups that have significant nonprofit constituencies to provide input on various major issues under debate. Based on the bills that are emerging from Congress, however, the Alliance must now speak out to ensure that self-interests do not prevail over community interests.

Health care in America is large, complicated, diverse and, above all else, local. Consequently, massive change is not simply risk-laden, but unworkable. Without a major redesign of the proposed legislation, reflecting more sensible incremental change, we face the real prospect of no legislation—or bad legislation.

While the opportunity is still at hand, the Alliance urges a pragmatic legislative proposal that benefits individuals and the economy while avoiding unintended costs and harm. Specifically, we offer the following as the first steps of many to transform the nation’s health care system. Many of these steps represent a recasting of selected provisions in the various bills to achieve a similar result in a more practical manner.

Health Insurance Affordability

Affordability is the key stone for meaningful health care reform. Without managing its health care costs, the nation can only make empty promises to itself about health insurance affordability.

Achieving affordability is a continuous process, a race with no end. We must begin the race by taking three initial steps. Two of these are aimed at eliminating unnecessary care—care that does not produce improvements. The third is aimed at increasing the efficiency and effectiveness of care.

  1. Co-contract and co-fund, in concert with private health insurers and self-funded employers, with an independent body to develop and publish evidence-based care guidelines, coordinating its efforts with appropriate public and private health care research organizations. Medicare, Medicaid, private health insurers and self-funded employers should use these guidelines to make benefit coverage and utilization management decisions and to establish mechanisms for rewarding those health care provider organizations and practitioners demonstrating improved practices and results. States should be encouraged to establish external review processes to ensure that these guidelines are used appropriately in setting medical policy and processing claims.

Quite simply, no one can argue that our health care system should provide or pay for carethat is unnecessary or otherwise medically inappropriate.

  1. Reform the medical malpractice tort liability system to eliminate defensive medicine practices, frivolous law suits, and unreasonable penalties.
  1. Expand federal funding support to health care providers to accelerate the adoption of health information technology (fully functional and interoperable electronic health records):
  1. In addition to the Medicare and Medicaid incentive payments to be provided to hospitals, physicians and community health centers under the American Recovery and Reinvestment Act, provide similar Medicare and Medicaid payment incentives to nursing homes, home care agencies, hospices and adult day health centers that are meaningful users of electronic health records;and
  1. Provide direct federal grants to nonprofit health care providers and physicians able to demonstrate that they lack sufficient capital or access to capital to make the necessary front-end investments in electronic health records, in lieu of any future after-the-fact Medicare or Medicaid incentive payments; and
  1. In recognition of the Medicare program’s power to create positive change through its financial leverage, fast-track experiments with new payment methods focusing on value, not volume, and then, beginning in FY 2013, require that hospitals and physicians in the Medicare program[1] choose to be paid under either:
  1. The traditional fee-for-service payment system with increasingly stringent annual rate increase adjustments; or
  1. One of several value-based payment options using global budgets or bundled episode-of-care rates, with annual increases based on an index reflecting changes in the costs of goods, wages and other services. These options should be developed by a panel of experts in payment methodologies and operational leaders in the health care field across the spectrum of health care settings.

Under all of the payment options, providers will be rewarded for superior quality andpenalized for inferior quality.

Health Insurance Accessibility

Meaningful bending of the health care cost curve will take time. Improvements in the accessibility of benefit coverage and care cannot and should not wait. They must begin now, including protecting people from bankruptcy due to their needs for health care.

  1. Impose a substantial federal surtax on any private health insurer that does not:
  1. Provide continuous open enrollment for those with continuous coverage or who have a HIPAA-qualifying event, with guarantee issue and renewability of coverage
  2. Offer coverage in both the individual and small group markets in each state where the insurer is licensed
  1. Offer the same range of products in individual and small group markets in each state where the insurer is licensed
  2. Offer community-adjusted rates on all of its products in individual and small group markets in each state where the insurer is licensed (allowing rating variation in each product to be specified by each state, but to be no less restrictive than a 5 to 1 age ratio, with additional adjustments for tobacco use and geography)
  3. Limit waiting periods for pre-existing conditions to one year (with a maximum six-month look back) for those individuals without continuous coverage. Specific pre-existing condition and any other eligibility decisions should be subject to external review (Without a mandate on individuals to purchase coverage, an initial waiting period for pre-existing conditions is necessary to protect insurers from adverse selection)
  1. Establish a national catastrophic medical expense program under Medicare, funded througha progressive increase in the Medicare tax, to protect individuals and families fromcatastrophic health care costs. This is analogous to inclusion of end-stage renal disease carein the Medicare program. Also, it will protect private health insurers and self-funded plansfrom adverse selection in providing coverage regardless of the individual’s health status.
  1. Provide subsidies to low-income, uninsured individuals, and support any expansions in Medicaid coverage and eligibility, through a broad-based progressive tax.

Cross-Cutting Strategies

Regardless of our nation’s strategies to improve the health care system, in every region of the country there will remain important gaps in access to care as well as community health and cost problems. Interventions in these areas holds great promise for improving health and controlling health care costs over the long run, and the Alliance offers two immediate inter-related steps.

  1. Require federally tax-exempt health care organizations to demonstrate in Form 990 reporting that they are actively engaged in continuous joint planning efforts with at least other nonprofit health care organizations that have overlapping service areas to identify and address one or more pressing health care access or community health problems. Simultaneously, federal leaders should use the bully pulpit to encourage leaders of state and local government, businesses, consumer groups and other stakeholders to join in such regional planning efforts. Pooling ideas, expertise and other resources among all relevant stakeholder groups can yield the greatest returns on their investments in community health access, and cost interventions.
  1. Exempt collaborative efforts among health care providers and/or health plans designed to benefit local communities from per se anti-trust violation.

Conclusion

The time to act is now. If we act imprudently, however, we will lose more than we gain. We must act now with common sense, putting people and practicality above ideology.

The Alliance looks forward to exploring these and any other targeted health care reforms with members of the Congress, the Obama Administration, and opinion leaders.

Questions or comments can be directed to Bruce McPherson, President and CEO, Alliance for Advancing Nonprofit Health Care, at 877-299-6497 or .

[1]Nonprofit nursing homes and other post-acute care providers cannot absorb further Medicare and Medicaid payment cuts. They need the latitude to be paid reasonably under the traditional Medicare payment system or to negotiate other types of payment arrangements with hospitals and physicians.