View from Washington AAHAM Maryland September 15 th, 2009 Update from the American Hospital Association

Overview Recent regulatory action Health reform –political environment –Current Status –Future Timeline

Medicare Inpatient PPS Rule Sets rates for FY 2010…starting October 1, 2009 Final rule issued July 31 Key issues: –Behavioral offset –Capital IME FY 2010 Market basket 2.1 % Coding % Outliers % % “Other” % Net update %

Child Health Care

American Recovery and Reinvestment Act of 2009

Reform: Harder than it looks

Financial Bailouts

“Something” likely to happen this year Need to stay engaged

KEY ISSUES AT A GLANCE IssuePresidentHouse DirectionSenate Finance Committee Direction Coverage95-97 percent of all Americans Total hospital payment reductions $224 - $254 billion in revised budget…agreed to $155 billion cap $155 billion + $36 billion per year (public program) in WM/EL $155 billion Update factors$110 billion reduction$119 billion reduction$103 billion reduction DSH$106 billion reduction$16 billion reduction$50 billion reduction Public program in exchange using Medicare rates Not specificWM/EL: included EC: included with negotiated rates and state co-ops option Co-op approach with negotiated rates ReadmissionsBroad policy that penalizes hospitals ($8.4 billion) Broad policy that penalizes hospitals ($19 billion) Targeted policy according to AHA principles ($2 billion) Delivery system reforms Specific timetable for broad implementation Pilot projects and demonstrations IMACSupportDropped“Super MedPAC” VBP$12.1 billion reductionUnder considerationBudget neutral according to AHA principles

On the House side…Tri Committee Bill Achieves coverage expansion (97 percent) Use of national exchange with public program linked to Medicare rates –$36 billion per year in reduced hospital revenue (Lewin) Market-basket reductions of $119 billion over ten years for all elements (MB-1.3) Aggressive readmission policy ($16 billion over ten years) America ’ s Affordable Health Choices Act of 2009 (H.R. 3200) [Major Financing Provisions]

Financing provisions in H.R DSH –Medicare: $10.2 billion starting in 2017 linked to expanded coverage…and readjustments –Medicaid: $6.4 billion starting in 2017 and HHS Secretary to make recommendations to Congress on appropriate targeting No cuts in the indirect medical education adjustment Revenue: surcharge on high-income individuals Total savings: $155 billion plus public program impact

Three House committees report bills House Education and Labor Committee House Ways and Means Committee House Energy and Commerce Committee –Allows the HHS Secretary to negotiate public plan payments to providers based on rates between “current aggregate Medicare rates” and “aggregate rates paid by private insurers” –Also allows states to set up cooperatives –No Independent Medicare Advisory Council America ’ s Affordable Health Choices Act of 2009 (H.R. 3200)

Next step in the House House leadership and Rules Committee to merge three bills Key hospital issues: –“Public” program design –Readmissions policy Challenge: striking balance between Blue Dogs and Progressive Caucus

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Reform: Harder than it looks

57 “Any bill that does not provide, at a minimum, for a public option with reimbursement rates based on Medicare rates—not negotiated rates— is unacceptable.”

AHA Take on House Bill But, we have several concerns: –An expansive, new government program that reimburses providers based on Medicare rates; –An overly aggressive policy on readmissions that penalizes hospitals for readmissions that are not avoidable; and –Accountable care organizations that do not permit hospitals to play a leadership role

HELP Committee –Mark-up complete Finance Committee –Chairman’s mark unveiled in outline. –Legislation expected this week. –Mark up week of September 21. The Kennedy Factor In the Senate

“It’s very clear that there are not enough votes in the United States Senate for a public option.” Sen. Kent Conrad (D-ND) Congress Daily AM August 20, 2009

Senate Finance Committee Gang of Six Max Baucus Chuck Grassley (D-MT) (R-IA) Jeff Bingaman Kent Conrad Mike Enzi Olympia Snowe (D-NM) (D-ND) (R-WY) (R-ME)

“Public Program is a “co-op” alternative. Insurance Market Reforms Medicaid Expansions to $133% of FPL Subsidies and Individual Mandate. Revenue package –Tax on “Cadillac” plans –Super MedPAC –MA Competitive Bidding –$155 from hospital Senate Finance Committee Outline

NEXT STEPS

“There are no compromises on many of the issues. However, if you’re not at the table, you’re on the menu.” Sen. Mike Enzi (R-WY) Politico August 26, 2009

“…But yes, I do believe it’s possible to reach an agreement. …But if other members of Congress are hearing what I’m hearing, people are saying, “Slow down. Do it a little more carefully. Make sure you know what you’re doing. And maybe even do it a little more incrementally.”” Sen. Charles Grassley (R-IA) Congress Daily AM August 25, 2009

“I think we should disregard timetables… I don’t want it to be a rush to judgment, at least on my part.” Sen. Olympia Snowe (R-ME) Bureau of National Affairs August 4, 2009

Plan B: Reconciliation?

On reconciliation… “That’s not the best way, but that could be the only way.” Former Sen. Tom Daschle (D-SD) Congress Daily AM August 21, 2009

“If the Republicans are not able to produce an agreement…we will have contingencies in place…these plans will likely be considered only as a last resort, but make no mistake about it: they remain on the table. Health care reform is just too important to let this window pass by.” Washington Times August 4, 2009

Reform: Harder than it looks Paying For Health Care Paying For Health Care Once they agree on substance, the “payfors” remain controversial. Taxes on Individuals ? ‘Cadillac’ Health Plans ? Other Options ?

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Presidential Push Speech to Joint Session of Congress New Details ?? Not much on substance. New Momentum Congress is energized! Bi-partisanship?? Ted Kennedy Factor? Joe Wilson (R-SC)? TIME WILL TELL

Going Forward Bipartisanship Balanced approach Phase-ins and transitions are very important Reforms must enhance—not undermine— the medical advancements and innovation that Americans value Hospitals need to be prepared for: –More transparency –More accountability –More integration –More risk

40 View from Washington AAHAM Maryland September 15th, 2009 Update from the American Hospital Association