Medical Device Daily Washington Editor

The Senate Finance Committee recently released a thumbnail sketch of its healthcare reform proposal, which didn't sit well with proponents of a public option or with the healthcare sector, including insurers. According to the framework document, the government would hit device makers with a total of $4 billion in fees for each of 10 years, for a total of $40 billion, to help finance the expansion of medical coverage. Diagnostics makers did not make it under the radar screen either, expected to contribute $750 million annually.

However, makers of devices and diagnostics are not the only ones expected to pony up under the framework, which calls on the pharmaceutical industry to offer $2.3 billion annually and the health insurance industry to come up with $6 billion a year.

Reaction from the device industry was not welcoming. In a Sept. 8 statement, Steve Ubl, President/CEO of the Advanced Medical Technology Association (AdvaMed; Washington), said the association "supports broad-based healthcare reform that will ensure all Americans have access to quality, affordable healthcare," but that industry "will vigorously oppose the proposed $40 billion tax on medical devices and diagnostics that is included in the draft reform proposal."

Ubl argued that the levy is "a form of double taxation, since a portion of the hundreds of billions in cuts aimed at our customers, including hospitals, nursing homes, and home healthcare agencies will be passed on to us." Ubl added that small device firms, which are typically responsible for most of the cutting-edge technology, will take a hit as well, stating further "the fee imposed on clinical labs raises serious concerns in view of other cuts to payments for lab services."

Ubl finished the statement by promising to "continue to work with Congressional leaders and the White House to further real health reform and to eliminate this counterproductive proposal from any reform package considered by the Congress."

One of the features of the framework sure to stir up opposition in some quarters is the provision permitting states to form health insurance exchange mechanisms that would allow insurers to sell policies across state lines starting in 2015. Baucus even thought to include a provision to deal with the "young invincible" for young adults "who desire a less expensive catastrophic coverage plan.

The framework does not include a public option, but instead calls for a health insurance exchange starting next year that would standardize the format for comparisons of healthplans' costs and benefits. The framework would also require plans to publish the percentage of premium revenue "spent on items other than medical care."

The framework includes an enrollment mandate that allows exemptions for those with "religious objections consistent with those allowed under Medicare" and for those whose incomes fall under the federal poverty level. Native Americans would also be exempt. Those whose incomes fall between the federal poverty level (FPL) and three times that amount would be fined $750 a year per person for not enrolling, an amount capped at twice that sum. Incomes beyond 300% of the FPL would incur fines of $950 per person, limited to $3,800.

Medicare Part B doctor fees were also part of the framework, with the document noting that an expert panel – presumably not the Medicare Payment Advisory Commission – would be convened "to identify physicians' services that are overvalued," and any service areas that have grown conspicuously would be subjected to scrutiny to ensure the clinical appropriateness of that growth.

Baucus apparently backs the 90% imaging usage rate convention for Part B imaging services, the framework indicates. This has been a substantial bone of contention because of differences of opinion about the data underlying the assumption that such equipment is typically operated that much of the time during a typical work week. The Centers for Medicare & Medicaid Services proposed earlier this year to set the assumed usage rate at 90% (Medical Device Daily, July 6, 2009), although the Medicare Payment Advisory Commission has not taken a public stance on the matter.

Durable medical equipment bidding was also snared by the Senate Finance Committee document, which indicates that outlier spending in areas not covered by competitive bidding would be trimmed by 75% of the difference between the national average and that area's spending levels.

Mark McCarty, 703-268-5690;