Prospects for Federal Health Legislation in the 111 th Congress For the 2009 Health Care Forecast Conference Michael Hash Health Policy Alternatives, Inc. February 19, 2009

Policy Drivers Economic recovery drives policy agendaEconomic recovery drives policy agenda Deficit control issues likely to emergeDeficit control issues likely to emerge Health reform/entitlement reform linkedHealth reform/entitlement reform linked Effectiveness of political leadershipEffectiveness of political leadership  Presidential commitment  Peter Orszag ‘s zeal for cost control/effectiveness  Elusive consensus within Congress

Deepening Recession 3.5 million jobs lost since January 2008, 2.5 million of them since August 2008 Total nonfarm employment, US (in thousands) Source: Bureau of Labor Statistics, Employment, Hours, and Earnings from the Current Employment Statistics survey (National), February 6, 2008.

Annual federal deficit in billions 2009 Federal Deficit Reached $300 Billion in First Quarter; Expected to Exceed $1 Trillion with Enactment of Stimulus Bill Source: Congressional Budget Office, historic data, Economic and Budget Outlook, January 2009, and scoring of stimulus bills. $1.2 trillion + Surplus $1 trillion?

Health & Entitlement Reform Pressure on entitlement spending growth: – Medicare insolvency date advancing – Crowding out discretionary spending – Growing general revenue demands – Unsustainable growth in spending Possibility of “summit” or Commission to address entitlement programs Medicare savings for health reform or deficit reduction?

Major Entitlement Programs as a Share of the Budget Source: CBO, January 2001.

Health Reform Prospects Schedule driven by pace of recovery/political leadership Major players have similar plans Key policy issues:  Mandates – employer/individual  Public plan?  Insurance pooling rules  Cost containment? Other difficult conflicts to resolve  Ideology  Financing

Medicare Agenda for 2009 Avoid 21% scheduled cut in MD fees Higher payments for primary care Reduce rates for Medicare Advantage plans Part D: New public plan? Price setting? Hospital value-based purchasing President’s FY2010 budget???

Medicaid, COBRA, & HIT Stimulus Medicaid provisions:  Temporary increase in Medicaid matching rates  Higher rates for states with higher unemployment  Maintain current eligibility levels Subsidies for COBRA coverage HIT provisions:  Physician bonus/penalty payments (<$41,000/5 yrs.)  Hospital bonus/penalty payments (<$1.8 million/yr.1)

Delivery System Reform Medicare demo on “medical home” Bundled payments for episodes of care Centers of excellence programs Comparative effectiveness research