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Consumer Group Gives Senate Health Reform Bill a B+

For Immediate Release:

WASHINGTON, Dec. 19 – With the addition of the managers' amendment, the Senate health reform bill earned a B+ from the consumer group U.S. Public Interest Research Group (U.S. PIRG) for its cost-containment provisions on Saturday.

"The delivery reforms in this bill are game-changers which significantly increase America's chances of reining in skyrocketing health care costs. The Senate should pass this bill,” said U.S. PIRG Health Care Advocate Larry McNeely.

Back in September, U.S. PIRG gave the bill as put forth by Sen. Max Baucus (D-MT) a B-, and noted that the final version’s grade inched up because of several cost-containment measures. (See below for explanation of the B- grade.)

The lack of a strong, cost-saving public option prevented U.S. PIRG from giving the bill an A, McNeely explained, noting that he and his organization remain supportive of the final legislation.

“Despite enormous opposition from health industry lobbies, Senate leadership has delivered a serious bill that will help lower health care costs,” McNeely said.

In recent weeks, U.S. PIRG endorsed an amendment to strengthen cost containment, offered by Democrat Freshmen Senators that was incorporated in the managers' amendment.

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SENATE HEALTH BILL REPORT CARD

To arrive at its grades, the health policy experts at the U.S. PIRG evaluated the bill to determine if it delivers what Americans want and need most from health reform: lower health care costs.

The grades are based on how well the bill addresses key causes of skyrocketing health care costs: uncompetitive insurance markets, high administrative costs, skewed incentives that discourage high-quality, cost-effective care, and the lack of unbiased research about which drugs or treatments work better.

 

Detail 
Current Grade
Original Grade of Finance Cmte Bill

Fixing Skewed Payment Incentives
A
A

Studying What Works Best
B+
B+

Increasing Competition in the Insurance Market
C+
C-

Taming High Administrative Costs
A
C+

DETAILS: Senate Bill Report Card (Overall grade: B+)

The Patient Protection and Affordable Care Act of 2009 as amended scores a solid B+ for its all-around cost containment provisions.  While Senator Max Baucus’ (D-MT) original health care plan only received a B-, the amendment’s new cost-saving measures brought the grade up to a B+. Only the lack of a strong, cost-saving public option prevents the bill from getting an A.

Grade Explanation

Fixing Skewed Incentives:  A

America’s cost and quality problems start with the payment system that Medicare and many private health insurance companies use. Under this system, known as “fee-for service,” health care providers receive payment for each visit with a patient, each test ordered, and each procedure performed. 

Payment is based solely on the quantity and complexity of care that the patient receives, regardless of how effective that care actually is or how well it is delivered. This payment structure penalizes those providers or hospitals who focus on disease prevention and treatment protocols which identify medical problems before they become acute. It also fails to encourage coordination of care between providers. At the same time, fee-for-service rewards hospitals and doctors who rely on a higher complexity and quantity of tests and treatments, with no connection to quality of care, or patient satisfaction or outcomes.

Worse, the minutiae of Medicare payment policy are set directly by Congress.  Over the years, well-heeled industry lobbies have used their clout and powerful friends to stop most real payment reforms to the fee-for-service system. Even pilot programs meant to incubate more efficient delivery of care cannot be expanded without congressional action.

The initial Senate Bill’s aggressive payment reforms, including value-based purchasing, bundled payments and physician feedback programs reward quality, well-coordinated care that delivers results rather than paying solely based on the number of tests and procedures. The amendment process ensured that pilot programs that successfully improved quality and held down costs could be expanded nationally, without further action from Congress.

The Independent Medicare Advisory Board included in the bill would help insulate policy decisions about payment and pharmaceutical and insurer subsidies within Medicare from special interest politics, thereby preserving Medicare for present and future beneficiaries.  An amendment sponsored by first year Senators strengthened the provision by ensuring it would study and present recommendations on private sector health spending, not just Medicare. 

The amendment process has pulled this grade up to an A.

Studying What Works Best:  B+ 

Our current health care system fails to give health care providers and patients the information needed to determine the best course of treatment. Only half of medical interventions are supported by adequate evidence of clinical effectiveness. For certain diseases which have an established, evidence-based treatment, studies show that patients receive the recommended care only 54% of the time.  Even when evidence exists and an established course of treatment is available, clinical guidelines can fail to account for differing effects of the same treatment on different populations, such as children or minorities. These gaps lead to the waste of precious health care dollars on care that is unnecessary and doesn’t work, They also undermine a family doctor’s or other care-giving professional’s ability to give American families the care on which they depend.

The bill establishes a permanent home and funding stream for comparative effectiveness research, ensuring that doctors can rely on the best science in helping patients make their care decisions, not the latest propaganda from an industry sales representative. While a strong start, the Finance bill is weaker than the House bill's alternative language, which gets an A for applying more protective conflict of interest requirements to board members overseeing the research studies.

No amendments strengthened or weakened these proposals, so its grade remains unchanged at B+.

Increasing Competition in the Insurance Market: C+  

A recent American Medical Association survey found that 94% of insurance marketplaces met the federal Department of Justice definition of “highly concentrated.”  That means that consumers in these markets were not getting the affordability and quality that a functioning, competitive market can provide.  When the dominant insurers in the market increase prices or skimp on coverage, consumers have few places to go for a better deal.

The best remedy to this problem is to offer to consumers the choice of a public, government-sponsored health insurance plan alongside private plans. The negotiating power of a large, nationwide plan would allow the public plan to leverage significant savings. Further, it would employ the cost-saving, quality-improving policies discussed in the rest of this report card. By offering a low cost alternative to private insurance, private insurers would have to innovate to bring their own costs down and so compete with the public plan. 

The only way to earn an A in this category is to include this public option, which the Senate bill does not.  However, the bill is not without some measures to increase competition. States would have the option to develop an alternative health reform plan, potentially including their own, state-level public options, provided they contained cost, extended coverage, and did not add to the federal deficit.  States could open their health insurance exchanges over time to all employers, including large ones, and consumers in every state will have the opportunity to choose plans like those which the Federal Employees Health Benefit Program provides to members of Congress. 

These improvements are enough to pull the grade up to a C+ for choice and competition.

Taming High Administrative Costs:  A

The health care system is far behind virtually every other American industry in integrating productivity-enhancing information technology systems. Electronic storage and sharing of clinical, administrative and financial health information not can only streamline administration – they also can assist doctors in providing better care.

In our fractured, Balkanized health care system, however, administrative inefficiencies abound. In addition to paper records and a lack of modern information technology, doctors are required to use an array of different forms, codes, and billing procedures. These systems are different for each insurer, and often reliant on paper records. As a result, some doctors can spend up to 45 minutes on paperwork for every hour of care they provide. 

To make matters worse, insurers in many states are not required to devote any fixed portion of the premium dollars consumers pay to medical care. As a result, insurers have less incentive to rein in unnecessarily large spending on inefficient administrative practices and untold layers of red tape.

With the inclusion of new administrative simplification language added by Freshmen Senators, the bill puts the country on a path to lower-cost, standardized administrative transactions, processes and forms. These new programs mesh well with the health information technology programs passed earlier this year in the American Recovery and Reinvestment Act. 

Additionally, the manager's amendment establishes insurer efficiency standards requiring 85% of premium dollars to be spent on care not administrative overhead and executive compensation for large group plans. For individual and small group plans, the standard would be 80%.

The amended bill earns an A on taming administrative costs.

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