Washington Update

1. Washington Update Bill Finerfrock Friday, September 14, 2012

2. Legislative issues that need to be addressed between now and the end of the year?

3. Legislative Appropriations Bills Bush Tax Cuts – Extend or discontinue? Payroll Tax Cut – Extend or discontinue? SGR “fix” – Extend or discontinue? Medicare extenders - Extend or Discontinue? Unemployment – Extend or Discontinue? Sequestration

4. Appropriations House and Senate Congressional leaders have agreed to adopt a 6 month Continuing Resolution which would fund the government for 6 months – October 1, 2012 to March 27, 2013.

5. Congressional Schedule over the next 3 weeks There are a possible 15 working days over the next three weeks. Of those: • Congress is currently scheduled to be out of Washington for 4 of those work days. • Congress is scheduled to “adjourn” on October 5th and then return after the election.

7. SGR Where are we and where are we going? Short term fix? Medium term fix? Permanent fix? 7

8. Projected SGR cut for 2013 It is estimated that the SGR related cut that will occur on January 1, 2013, absent Congressional intervention will be approximately 27%

9. SGR Options – Goal – Enact something before end of 2012 Short-term (2-3 month) extension of the current Conversion Factor (CF). Effective January 1, 2013 through February 28 or March 31, 2013. Medium Term extension of the current CF (12 months to two years) Permanentfix the SGR problem 9

10. Long-term SGR fix option? MedPAC Primary Care: 10 Year Freeze in the CF Non-Primary Care: 3-year cut (5.9% per year) followed by a 7 year freeze in the CF.

11. Debt Limit Deal (Sequestration) 11

12. Last August (2011), Congress and the President reached an agreement to raise the federal debt ceiling thereby avoiding a technical default on government loans. The Debt Limit deal required significant cuts in FUTURE federal spending – both discretionary AND entitlement programs. 12

13. Debt Limit Deal Because the Super Committee failed to make recommendations that were enacted, then automatic cuts of $1.2 Trillion are mandated to be equally divided between defense and non-defense spending via a process called “sequestration”.  13

14. Sequestration Sequestration is a process whereby the Office of Management and Budget is authorized to make across the board cuts in federal spending WITHOUT the need for specific Congressional approval of those cuts. 14

15. Across-the-board cuts are currently scheduled to take effect in January 2013, and would represent approximately a 7.8 percent annual cut in affected non-defense programs, along with roughly a 7.8 percent cut in defense programs in 2013. Medicare cuts are Capped at 3% and Medicaid and Veterans programs are exempt from Sequestration.

16. Sequestration The White House report detailing how automatic spending cuts (sequestration) would be implemented next year is set to be released next week.

17. Can Sequestration be avoided? Yes, if Congress agrees to spending cuts between now and January 2013, the amount of federal spending subject to sequestration can be limited or eliminated altogether. Or, Congress could just say, “Sorry, never mind…” 17

18. Is that Likely? 18

19. SGR and Sequestration The current budget ASSUMES that the SGR related cut scheduled to take effect on January 1, 2013 will go into effect. So any SGR fix that is not “paid for” would only increase the amount of money that would have to be cut to meet the Budget Deal target. 19

20. It’s an Election Year! We will be electing: A President All 435 Members of the House 33 United States Senators 20

21. United States Senate 112th Congress 51 Democrats 2 Independents* 47 Republicans * Both Independents caucus with the Democratic Caucus 113th Congress (polls are correct 46 Safe/Leaning GOP 46 Safe/Leaning Democrat 8 Toss Ups If Toss Ups go the way polls are as of 9/7, the make up of the 113th Congress would be…

22. 113th Congress – No Toss-Ups Senate 51 Republicans 47 Democrats 2 Independents* * The two projected Independents are expected to caucus with the Democrats (Sanders I-VT and King I-ME)

23. But – We Do Not have a National Election for President Battle Ground States Obama Romney Ohio 46.2 45.5 Virginia 47.3 46.7 Florida 47.3 46.7 Iowa 45.0 44.8 N.C. 45.3 47.3 Missouri 43.7 49.7 Wisconsin 48.2 46.8 Michigan 47.8 45.4

24. Electoral College As of September 7, 2012 - RCP Obama 221 Electoral Votes Romney 191 Electoral Votes Number needed to Win: 270* * There are a total of 538 Electors

25. House of Representatives Current projections are that the GOP will retain control of the House in the 113th Congress. However, the size of the majority is currently expected to be smaller in the next Congress.

26. United States House of Representatives 112th Congress 240 Republicans • Democrats 5 Vacancies 113th Congress 235 Republicans 200 Democrats

27. Who Knows What Day is Election Day? November 6th

28. Does it make a difference?

30. A Tale of Two Healthcare Futures PPACA – Command and Control. The Federal Government determines benefit and coverage policy, benefits, etc. Payer defines “value”. Employers and individuals are required to provide/have health insurance that meet minimum federal standards Romney/Ryan – Premium Support: The Federal Government runs the Medicare program the same way it (and most employers) provide healthcare coverage for employees. Government obtains bids from commercial insurers to provide same benefits as Medicare. Employers and individuals are incentivised to provide/have health insurance. Control of the Medicaid program is turned over to the states as a block grant.

31. Both approaches – at the core – seek to remove the government as a risk-bearing entity. The PPACA through ACOs and bundled payments wants to shift financial risk from the government to the provider. Romney-Ryan wants to shift financial risk from the government to private insurance companies.

32. Could a Romney Administration Repeal the PPACA? The Obama Administration is working to finalize the rules and regulations necessary to implement various provisions of the PPACA. A Romney Administration could rescind those regulations that have been promulgated and suspend action on any proposed rule not adopted. A GOP Controlled Congress could “starve” the agencies of the money needed to implement HCR.

33. Regulations Likely to be rescinded by a Romney Administration • Employer Mandate • Individual Mandate • Federal Exchanges • Medicaid Expansion • IPAB

34. Policies likely to be kept by a Romney Administration Children up to 26 covered under parents insurance No Pre-existing condition provisions in insurance contracts No Lifetime limits Guaranteed issue Innovations Initiative Fraud and Abuse prevention Innovation/Demonstration authority

35. PPACA Provisions going into effect in 2013

36. PPACA * The law provides new funding to state Medicaid programs that choose to cover preventive services for patients at little or no cost. * The PPACA requires states to pay primary care physicians no less than 100% of Medicare payment rates in 2013 and 2014 for primary care services. The increase is fully funded by the federal government. (Final Rule still pending).

37. Medicaid Equalization Will Medicaid equalization become the next SGR? Will Congress allow Medicaid payments to go down after 2014 or will these be extended year-to-year-to-year?

38. PPACA provisions that go into effect in 2014 Starting in 2014 if your employer doesn’t offer insurance, you will be able to buy it directly in an Affordable Insurance Exchange. An Exchange is a new transparent and competitive insurance marketplace where individuals and small businesses can buy affordable and qualified health benefit plans.  Exchanges will offer you a choice of health plans that meet certain benefits and cost standards.  Starting in 2014, Members of Congress will be getting their health care insurance through Exchanges.

39. Health Exchanges If a state refuses to set up a state run exchange, the federal government will step in and operate an exchange in that state. It will be illegal to sell an insurance policy with a pre-existing condition clause in the contract.

40. 2014 Under the new law, most individuals who can afford it will be required to obtain basic health insurance coverage or pay a fee to help offset the costs of caring for uninsured Americans.  If affordable coverage is not available to an individual, he or she will be eligible for an exemption.

41. Medicaid Expansion – If state adopts Americans who earn less than 133% of the poverty level (approximately $14,000 for an individual and $29,000 for a family of four) will be eligible to enroll in Medicaid. States will receive 100% federal funding for the first three years to support this expanded coverage, phasing to 90% federal funding in subsequent years.

42. Tax credits will become available for those with income between 100% and 400% of the poverty line who are not eligible for other affordable coverage. (In 2012, 400% of the poverty line comes out to about $44,000 for an individual or $89,000 for a family of four.) The tax credit is advanceable and refundable.   Some individuals may also qualify for reduced cost-sharing (copayments, co-insurance, and deductibles).

43. Under the new law, states will receive two more years of funding to continue coverage for children not eligible for Medicaid.

45. Innovation

46. Guiding Principles of Innovation CMS has identified what it calls the Triple Aim of Innovation: Better Health Better Care Lower Cost

47. What is the Goal OF PPACA authorized innovation? • Shift financial risk from the payer (government or commercial insurer) to the provider of care. • Link provider payments to quality rather than volume. • Move away from fee-for-service as the primary payment mechanism for physician services. 47

48. ACO – Accountable Care Organization

49. Accountable Care Organizations (ACOs) Are ACOs just a dressed up version of HMOs? Will ACOs lead to the “Walmartization” of American Health Care or truly reform the healthcare delivery system in a way that is beneficial to patients?

50. What About? Bundled Payments Value Based Purchasing