Medical Device Daily Washington Editor

Vice President Joseph Biden reported yesterday that the Obama administration has struck a deal with the hospital industry to shave as much as $155 billion from federal payments over a decade.

Biden said that hospitals have committed to "$155 billion in Medicare and Medicaid savings" via "a combination of delivery system reforms" and "reductions in annual inflationary updates."

"Reform is on track and it is coming" Biden said, adding, "we have never . . . been as close as we are today" to an overhaul of healthcare in the U.S. Regarding the subject of the press conference, he said "hospitals have acknowledged that significant healthcare savings can be achieved by improving efficiencies [and] realigning incentives to reward quality of care instead of quantity of procedures." He described the deal, said to have been worked out with Senate Finance Committee chairman Max Baucus (D-Montana), as a plan of savings to allow "healthcare reform that is deficit neutral."

Wire services abounded with reports Tuesday that President Obama and Baucus had agreed in principal to a mechanism by which government could recoup payments made to hospitals for care provided to the uninsured. The rubric mentioned in many reports was that the Centers for Medicare & Medicaid Services would trim those payments by about 10% per year after 2014, which is projected to save Uncle Sam $40 billion in the ensuing decade. This would serve as the budgetary offset for an expansion of Medicaid, with the Senate Finance Committee proposing to expand eligibility to 133% of the federal poverty level (FPL) while the Senate Health, Education, Labor and Pensions Committee will likely propose a set point of 150% of the FPL.

The idea of using increased enrollment of low-income Americans in public plans to enable the Centers for Medicare & Medicaid Services to trim payments to hospitals for otherwise uncompensated care has been batted around in policy circles for some time, and was discussed briefly in a Senate Finance Committee earlier this year (Medical Device Daily, May 14, 2009).

Tax exclusion on shaky ground

Another detail in the overall architecture of reform may be primed to blow up in the faces of reformers as several members of the Senate's Democratic majority have hinted that they have grown skittish over plans to reduce the tax-exempt status of healthcare premiums. Senate Budget Committee chairman Kent Conrad (D-North Dakota) is on record as acknowledging that recent polls indicate a distaste among a large majority of Americans for pulling back on the exemption. Conrad is quoted as saying that he sees opposition "in the 70% range" and that "when you go out and ask people across the country their initial reaction is they don't like it."

On the other hand, Sen. Max Baucus (D-Montana), chairman of the Senate Finance Committee, is said to be sticking with the plan to at least trim back on the exclusion, which is widely seen in the committee as essential in keeping healthcare reform in a budget-neutral state. Behind all the negotiations is a push to get a bill onto and off the Senate floor before the August recess so that the Senate bill and its counterpart in the House can be reconciled by October.

House leaders bugged over coverage

Meanwhile on the other side of Capitol Hill, members of the three committees working on the House draft slammed a report appearing recently in Congress Daily said to have alleged that CBO has scored the work of the House tri-committee healthcare bill. The press officers of the House Ways and Means, Energy and Commerce, and Education and Labor Committees released a statement Tuesday blasting the CD report as "premature and entirely fabricated." The statement also claims "none of the reporters working on this piece contacted our press offices to fact-check their story," pointing out that the draft is still a work in progress.

Long-term care bill in the works

Long-term care is also part of the reform agenda, and a new version of a bill that first surfaced in 2007 has been revived by Sen. Ted Kennedy (D-Massachusetts). The bill, dubbed the Community Living Assistance Services and Supports (CLASS) Act would provide a cash per-diem of $50 or more, which could be used to pay for in-home services or nursing home expenses.

As currently written, the bill would set up a long-term care insurance program into which enrollees would pay $65 a month for five years before they could file any claims. The CLASS Act, which would become section 191 in the Affordable Health Choices Act currently under consideration in the Senate HELP Committee, is projected by CBO to save the federal government almost $58 billion in the first decade, but the CBO memo also remarks that those savings hinge largely on the surplus run up during the five-year vesting period of the first wave of enrollees. In the program's second decade, CBO notes, "the effects of the program could be quite different." CBO suggests that one fix for the long-term health of the long-term care program might be to reduce benefits and increase premiums.