Health Care: What to Expect from the Obama Presidency and the Next Congress

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1 : What to Expect from the Obama Presidency and the Next Congress by David C. Main, Edgar D. Bueno and Melissa Starry December 5, 2008 During the presidential campaign, President-elect Obama spoke frequently of the problems plaguing the U.S. health care system. Now that he has been elected, to be joined by a largely Democratic Congress, what can be expected? A review of Obama s campaign positions as well as several recent developments, including the designation of former Senate Majority Leader Tom Daschle as Secretary of DHHS and the release of a 90-page comprehensive health care plan by Senator Max Baucus (D-MT), provides considerable insight as to the direction in which Obama and the Congress will steer the nation s health care system in the coming years. Obama s Campaign Position One of the major issues Obama continuously stressed in the campaign was that 47 million Americans lack health care insurance. Throughout the campaign, Obama argued that everyone should be entitled to quality, affordable, and portable health care coverage, and that no American should be denied insurance due to illness or a preexisting condition. Though stopping short of universal health care, the platform on which Obama campaigned calls for a national program that would cover every American, regardless of health status. This national program would be administered by a new government agency, the National Health Insurance Exchange, which would also be responsible for regulating the insurance industry. In addition, employers would be required to pay or play. That is, employers would be required either to provide coverage for all employees or contribute into the public program. Small businesses would receive a refundable tax credit of up to 50 percent on premiums paid by small businesses on behalf of their employees. Individuals and families who do not qualify for Medicaid or the State Children s Health Insurance Program ( SCHIP ) but still need financial assistance would receive an income-based federal subsidy to buy into the new public plan or purchase a private health care plan. Though all children would be required to have coverage, Obama s plan does not contain an across-the-board mandate for coverage of all adults. Pillsbury Winthrop Shaw Pittman LLP 1

2 Additionally, Obama s platform emphasizes quality improvement through preventive health care, electronic medical records and chronic disease management. His plan is to provide a $50 billion investment in health information technology, and he supports the implementation of programs to encourage team care that will improve coordination and integration for patients with chronic conditions. Tom Daschle s Role The selection of Tom Daschle as DHHS Secretary has received largely positive reviews for several reasons: his well-regarded role as Senate Majority Leader; his years on the Senate Finance Committee (which has jurisdiction over Medicare and Medicaid); his history and experience with both successful and unsuccessful legislative efforts in the health care arena, including the last attempt at reform in 1994; his ability to bridge gaps between the parties (as evidenced by his recent involvement in the formation of the Bipartisan Policy Center); as well as his focus on the American health care crisis, as highlighted in his February 2008 book. Daschle was also a close advisor to Obama throughout his Presidential campaign. Since his defeat in a hard-fought Senate campaign in 2004, Daschle has been serving as a board member of the Mayo Clinic as well as an adviser to health care clients at a DC lobbying firm. In February of this year, he published a book entitled Critical: What We Can Do About the Health-Care Crisis, which outlines the problems of our current health care system and the steps he deems necessary to repair it. Daschle proposes the creation of a Federal Health Board, an independent government-chartered body, that would be a foundation from which we could address all three fundamental problems in health care: skyrocketing costs, lack of access, and disparity in quality of care. 1 This Board (the Fed Health ) would operate in a fashion similar to the Federal Reserve Board. The Fed Health would be largely insulated from political pressure, yet would still be accountable to elected officials. [T]he Fed Health would ensure harmonization across public programs of health-care protocols, benefits, and transparency. Ultimately, the Fed Health would offer a public framework within which a private health-care system could operate more effectively and efficiently. 2 One of its major goals would be to set up basic coverage guidelines to limit payments for wasteful or unnecessary care. In a review of Daschle s book, which is perhaps quite telling, the President-elect himself states that Daschle brings fresh thinking to this problem, and his Federal Reserve for Health concept holds great promise for bridging this intellectual chasm and, at long last, giving the nation the healthcare it deserves. Daschle urges a merging of employer-based plans, Medicare and Medicaid, with the current Federal Health Benefits Program, which covers federal employees. The intent would be to lower costs in a way that would more efficiently provide universal coverage, as the lack of a comprehensive coverage system drains the economy, burdens our businesses, and limits providers ability to deliver efficient, high-quality care to patients. 3 The appointment of Tom Daschle indicates that Obama sees health care reform as a major priority. Daschle s legislative skills, the respect he has garnered throughout his career, his ability to work in a bipartisan fashion, and his expertise on the subject of health care are evidence that Obama would not 1 See Tom Daschle, Progressive Solutions to America s Health-Care Crisis, March 3, 2008, Huffington Post, available online at: 2 Id. 3 See Tom Daschle, Paying More but Getting Less: Myths and the Global Case for U.S. Health Reform, Center for American Progress (November 2005). Pillsbury Winthrop Shaw Pittman LLP 2

3 likely select him as DHHS Secretary (nor would Daschle likely accept) if he were not serious about spending large amounts of his current political capital on this initiative. Max Baucus s Health Reform Proposals Even before Obama has taken office, Senate Finance Committee Chairman Max Baucus released a 90-page white paper on November 12, 2008 outlining his proposal to overhaul the nation s health care system. Though not intended as a legislative proposal, the Call to Action provides policy options for Congress to consider in 2009, with an underlying objective of achieving universal health care, reducing health care costs, and improving quality. 4 Senator Baucus makes it very clear that he believes health care reform cannot wait any longer. One of the reasons for this is the financial condition of Medicare and Medicaid, which his committee oversees. There are several key ideas in Baucus proposal: (1) eliminate exclusions for preexisting conditions; (2) promote patient responsibility; (3) strengthen the employer-based system; (4) guarantee access to affordable coverage for individuals and small businesses; (5) strengthen Medicare, Medicaid, and SCHIP; (6) focus on prevention and wellness; and (7) address disparities in health care among racial and ethnic minorities. 5 The plan also contains a mandate that individuals obtain coverage if affordable coverage is available. Particularly striking are the many similarities between the plan on which Obama campaigned and Senator Baucus proposal. 6 One example is that the Baucus plan would also ensure access to affordable health insurance by creating a nationwide insurance pool, called the Health Insurance Exchange. However, the Baucus plan differs from Obama s in that it requires that individuals of all ages have health insurance if it is available. 7 According to his proposal, a mandate makes sense for three reasons: (1) it will help end cost shifting; (2) it will ensure that the insurance market functions effectively; and (3) it is essential to effective prevention and wellness efforts and managing chronic illness. 8 Of course, mandates are highly controversial and potentially unpopular. Obama may have omitted mandates for coverage of all adults in his campaign position for purely this reason: a plan containing such a mandate may be much more difficult to get through Congress. As further evidence that major reform is on the horizon, on November 19, 2008, Senator Edward Kennedy (D-MA) and Senator Baucus attended a meeting, including several other key Senate leaders, to discuss plans for meaningful health care reform within the next year. Baucus stated, We all agreed that there has not been a better time in modern American health care for major reform and we have to move very quickly to seize the opportunity and build momentum because it s difficult to anticipate what else is going to come up next year that will involve the Congress. 9 4 See Max Baucus, A Call to Action: Health Reform 2009, p. iv. (November 12, 2008). 5 Id. at In fact, it would not be surprising if President-elect Obama saw, and possibly approved of, this proposal prior to its formal publish date. 7 Id. at 15 ( Once affordable, high-quality, and meaningful health insurance options are available to all Americans, it will be each individual s responsibility to have coverage ). 8 See id. (noting that insurance works because policyholders pay into their plans when healthy, and have their medical bills paid when they are sick if a significant portion of Americans does not purchase coverage until sick, then premiums for all enrollees will increase to cover insurer outlays, and the problem of unaffordable coverage will persist ). 9 See David M. Herszenhorn, Senators Begin Setting Agenda on, New York Times Politics Blog, November 19, Pillsbury Winthrop Shaw Pittman LLP 3

4 Other Key Players That Will Shape the Debate Senator Ted Kennedy A longtime advocate for health care reform and currently suffering from a malignant brain tumor, Senator Kennedy will likely be a strong force for moving any version of health care reform legislation through the Congress. Even if his health does not permit him to work closely on the legislation, the desire among those in Congress to solidify Senator Kennedy s legacy will likely provide the effort with momentum and political capital. Representative Henry Waxman (D-CA) Congressman Waxman will be the next Chairman of the House Committee on Energy and Commerce, which has primary jurisdiction over many health issues. Senator John Kerry (D-MA) With his emphasis on health information technology and e-prescribing, Senator Kerry is a likely ally to help Obama realize his $50 billion commitment to health information technology. Senator Olympia Snowe (R-ME) Senator Snowe is on the Senate Finance Committee s Subcommittee on Health and is a key player in health information technology legislation. Senator Charles Grassley (R-IA) As the Ranking Member of the Senate Finance Committee and a close ally of Senator Baucus, Grassley maintains strong influence with special concerns about fraud and abuse and community benefit issues. Senator Ron Wyden (D-OR) Senator Wyden is known for his effectiveness and his creative and bipartisan approach to problem solving. His bipartisan Healthy Americans Act (S. 334) would guarantee universal, comprehensive, portable, non-discriminatory and affordable access to health insurance. Key Issues to be Resolved While there is bipartisan consensus in Congress on a number of health care reform issues, including strengthening health information technology, the battles to be fought this session will likely be related to the following issues: The extent of the health insurance mandate and the role of private employers The regulatory strings that will be attached e.g., pay for performance, the link between quality and reimbursement, patient privacy protection, benefits requirements, and fraud and abuse provisions Where will the money come from? The large price tag of the financial system bailout does not leave much left over for Medicare and aging Americans. To what extent will reimbursement of providers and vendors be affected? The role of Medicare Advantage will it survive? If so, in what form and how will it be regulated? The role of consumerism and patient choice, including tax incentives to allow consumers to make their own choices The role of states in insurance regulation Obama s National Health Insurance Exchange would move regulation of insurance companies from the states to the federal government Pillsbury Winthrop Shaw Pittman LLP 4

5 Waste, fraud and abuse how extensive and punitive will the enforcement of laws and regulations be? Any large influx of money into the health care system will be carefully monitored by the government to ensure compliance Change is Coming Recommendations Change is inevitable with every new administration, but there appears to be a likelihood of significant changes in health care in the coming session of Congress. Health care clients interested in joining the upcoming debate are advised to do the following: Be prepared for an increasingly regulatory environment and prepare to take part in the development of these regulations; Formulate your positions on key issues and be prepared to communicate your positions with your representatives; Work with your trade associations to assist in advocating your positions; Perform a compliance audit to ensure you are operating consistently with current state and federal regulations, as greater enforcement is likely under the new Administration. For further information, please contact: David C. Main (bio) david.main@pillsburylaw.com Edgar D. Bueno (bio) edgar.bueno@pillsburylaw.com Melissa M. Starry (bio) melissa.starry@pillsburylaw.com This publication is issued periodically to keep Pillsbury Winthrop Shaw Pittman LLP clients and other interested parties informed of current legal developments that may affect or otherwise be of interest to them. The comments contained herein do not constitute legal opinion and should not be regarded as a substitute for legal advice Pillsbury Winthrop Shaw Pittman LLP. All Rights Reserved. Pillsbury Winthrop Shaw Pittman LLP 5