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August 6, 2009  •  Volume 25, Number 16
Next Issue: August 20, 2009
© 2009 College of American Pathologists

In This Issue:

Special Report: Health Care Reform Legislation Passes Three House Committees, Sets Stage for September Showdown

Special Report: Health Care Reform Legislation Passes Three House Committees, Sets Stage for September Showdown

Last week the House of Representatives adjourned for its summer recess after three key committees (Ways and Means, Energy and Commerce, and Education and Labor) passed different versions of the far-reaching healthcare reform legislation America’s Affordable Health Choices Act of 2009 (H.R. 3200).

This week the Senate will adjourn without introducing a formal bill, although the Senate Finance Committee will continue its work on a bi-partisan package, and the Senate Health, Education, Labor and Pensions Committee has proposed legislation focused primarily on health insurance reforms.

Lawmakers and physicians agree on the need for an overhaul that will expand coverage, reverse or slow America’s spiraling health care costs, and improve the quality of care. However, the proposals to achieve these goals vary considerably—lawmakers have already considered over 700 amendments, and additional modifications are likely to come as healthcare reform moves through the legislative process.

America’s Affordable Health Choices Act of 2009 (H.R. 3200)

H.R. 3200, first introduced on July 14, represents a sea change in the U.S. health care delivery system, addressing key Obama administration objectives which include expanding coverage to all US citizens, cost containment, and new models to improve patient outcomes and measure quality of care.

Although the ultimate outcome of H.R. 3200 is impossible to predict, based on CAP’s analysis of the legislation passed by the three House committees, pathologists are likely to feel the greatest impact from initiatives focusing on delivery system reform, physician and laboratory payment and quality measurement.

Expanding Coverage

The bill’s sweeping reforms begin with expanding coverage to all Americans by easing the rules for obtaining health insurance and targeting standard insurance company practices like denying coverage based on a pre-existing condition, or selectively refusing to renew coverage.

The bill includes provisions to establish a health insurance exchange in which private plans as well as a public plan option would compete to offer coverage to consumers. With significant input from key stakeholders including the more fiscally conservative Blue Dog Democrats, the Energy and Commerce committee added an alternative to the public plan, called the Consumer Operated and Oriented Program, providing grants and loans for the establishment of not-for-profit, member-run health insurance co-ops, where individuals and small businesses can shop for coverage at group rates. It also would require the public plan to compete on a level playing field with private insurance companies with respect to regulatory requirements.

As passed by that committee, the public plan option would also require the Secretary of Health and Human Services to negotiate physician services payment rates, which could not be lower than Medicare or higher than the average rates paid by private plans in a newly established Health Insurance Exchange. This is an improvement over provisions passed in the House Ways and Means Committee that would have pegged physician payments in the public plan option to Medicare rates.

These changes are raising the ire of progressive Democrats who demand a strong public plan along the lines of Medicare.

Delivery System Reform

Congressional efforts to reform the health care delivery system have focused on promoting patient-centered coordinated care models that would provide comprehensive preventive care and treatment for patients.

Rep. Mary Bono Mack (R-CA) and Rep. Peter Welch (D-VT), sponsored an amendment that would mandate the Centers for Medicare and Medicaid Services (CMS) to conduct a demonstration project to evaluate the role of pathologist-initiated consultations on test selection and assisting in optimal therapy management as a method to improve patient care and control costs. The College is advocating for pathologists to play a more proactive, consultative role in medical test ordering, diagnosis, and treatment selection. The amendment gained support amongst legislators, but was not adopted before the August recess. CAP staff will continue to work with policymakers to advance this demonstration.

Demonstration projects currently included in the legislation will evaluate medical homes and Accountable Care Organizations (ACOs) to determine whether and what kinds of new payment models and quality thresholds could increase quality while reducing costs.

In an effort to increase the number of primary care physicians, this group would see a 5 percent increase in Medicare payment reimbursement under a provision in the bill. The legislation currently calls for the payment bonus to be financed by a trust fund. However, if enacted as a budget neutral increase, it could disproportionally reduce payments to pathologists and other physicians.

Physician and Laboratory Payment

In good news for all physicians, the legislation includes reforms to eliminate the accumulated costs associated with the Sustainable Growth Rate (SGR) formula for 2010 and prescribes a cost based update based on the Medicare Economic Index for that year while further reforms are implemented.

A new system would be established starting in 2011 allowing for growth based on the gross domestic product (GDP) plus two percent for evaluation and management and preventive services, and for all other services, the update would be based on GDP plus one percent. Additional reforms supported by the CAP include removing physician-administrated drugs and clinical diagnostic laboratory tests from the update formula calculation.

The College supports replacing the current update formula with a stable payment system that includes positive updates that accurately reflect increases in medical practice costs. While the two-tiered update structure allows for greater growth for primary care services, it is an improvement over provisions considered previously by Congress to establish multiple update targets with the potential for pathology services to be placed with fast growing services resulting in steep payment reductions.

The bill also begins to examine the prospect of bundling codes that are frequently billed together. The legislation directs the Secretary of HHS to regularly review the fee schedule rates for physician services paid for by Medicare and increases the Secretary’s authority to adjust fee schedule rates, including bundled code payment for rates that are found to be misvalued or inaccurate.

H.R. 3200 specifies criteria to be used in identifying codes for examination, specifically those that are frequently billed together and that have low relative values. The bill allows the agency to use contractors to analyze, conduct surveys, and make recommendations on appropriate adjustments. It also grants the Secretary authority to make appropriate coding revisions which may include consolidation of individual services into bundled codes for payment under the fee schedule.

Also under H.R. 3200, the Technical Component “grandfather” provision would be extended for another two years through 2011. Without this extension, the “grandfather” would expire at the end of this year.

A new annual “productivity adjustment” to the Clinical Laboratory Fee Schedule is also contained in the bill. This adjustment would prevent reduction of the Medicare annual update for clinical laboratory services where the annual adjustment to the fee schedule is negative, as it will be in 2010, or where the application of the productivity adjustment would result in a negative annual adjustment.

A proposal from the President to strengthen the role of an independent body in determining Medicare payment rates for providers failed to gain traction in the committees and was not adopted. The proposal called for empowerment of the Medicare Payment Advisory Commission (MedPAC) or a newly established Independent Medicare Advisory Council (IMAC) to set rates, shifting authority from Congress. Seventy-five Members of Congress responded with a letter condemning the move, which would limit Congressional authority to an up or down vote on the recommendations from the council. The College also opposed the measure, sending a letter to House and Senate leaders urging that the ultimate decision on payment rates should continue to be left to Congress, as this would allow all physicians who are on the front line of diagnosis and treatment to collectively debate and discuss with their representatives how Medicare policies affect their practice.

Containing Healthcare Costs

Efforts to contain costs have fallen short, with nearly all versions of the bill projected by the Congressional Budget Office to cost more than $1 trillion over 10 years. However, several initiatives under consideration and study are aimed at changing how healthcare services are delivered with the expectation of reducing healthcare costs over time.

One such delivery system reform in the bill focuses on a demonstration project for Accountable Care Organizations (ACOs) The legislation describes the ACOs as groups of physicians organized around a common delivery system (including a hospital), an independent practice association, a group practice, or other common practice organizations. Ultimately, quality of care measures would be reported at the ACO level as well. The attempt here is to integrate aspects of care to achieve better coordination, increase efficiencies, and establish payment based on quality and cost-savings.

Late last year Congress made a strategic decision to invest in health information technology with the goal of ultimately reducing healthcare costs and improving outcomes. H.R. 3200 does not add to or alter this.


The bill includes provisions for the continuation of the Physician Quality Reporting Initiative (PQRI) and expansion of the Comparative Effectiveness Research (CER) program as a means of moving toward and tracking higher quality outcomes, value and effectiveness.

CER provisions in the legislation will restrict the use of Federal funds in its adoption, prohibit cost effectiveness as a determining factor in CER, and would establish a Center for Comparative Effectiveness Research to conduct, support and synthesize research with respect to the outcomes, effectiveness, and appropriateness of health care services and procedures. The medical community continues to seek assurances in the bill that the CER would not be used to determine coverage or payment for services.

PQRI is extended for another two years in the bill. However, it does not include provisions to improve the measures review process, as advocated by the College.

Next Steps

The two primary committees in the Senate with jurisdiction over health care issues, specifically the Senate Health, Education, Labor, and Pensions (HELP) Committee and Senate Finance Committee, are also in the process of preparing their health care reform bills. The Senate HELP Committee, Chaired by Senator Ted Kennedy (D-MA), passed their own version of the America’s Affordable Health Choices Act of 2009 on July 15th. Among other provisions, this particular bill prevents insurance companies from denying coverage based on pre-existing conditions, offers subsidies to low-income citizens to expand coverage for the uninsured, creates state-run insurance “gateways” in-lieu of a formal health insurance exchange, and also establishes a public health insurance option known as “Community Health Insurance Plans.”

The Senate Finance Committee is expected to introduce its own version of the American’s Affordable Health Choices Act of 2009 when Congress reconvenes. Until then, a bipartisan group of Committee members has been working to produce what may be the only bipartisan version of healthcare reform to emerge from Congress. It is uncertain whether the Committee will be able to do this. Even with some bipartisan support, there are still Senate Democrats pushing for a strong public plan option, and Senate Republicans worried that the measure will be too far reaching. Fearing that they are losing precious time, some Democratic leaders in the Senate have set a deadline of Sept. 15 for producing a bipartisan compromise in the Finance Committee.

There is already news that the Senate Finance Committee bill will include language to create an independent panel that would have significant authority over Medicare rate setting. Additional initiatives rumored to be in Senate Finance Committee bill include: higher premiums and deductibles for medications for some beneficiaries under Medicare and copayments for clinical lab tests. The Senate is also expected to propose a short-term fix to the SGR, rather than a replacement of the SGR as proposed in the House.

The House is expected to conduct a full floor vote of health care reform legislation in September. However, before a bill can be voted on, the different bills passed out of the three Committees’ will have to be melded into one. Due to the controversial compromise on the public plan made between progressive Democrats and the fiscally conservative Blue Dogs this could be challenging.

Facing a similar challenge, the Senate will also have to reconcile the legislation reported out of its HELP and Finance committees before a bill is voted on by the full Senate.

The College will continue to monitor these developments in health care reform legislation, and will report back to CAP members in upcoming issues of Statline.

Comment On This Article

Additional Information

Read the College’s letter to the House Ways and Means Committee on MedPAC/IMAC Proposal (PDF, 677 K)


Status of Bill by Committee
Ways and Means Committee
The House Ways and Means Committee has jurisdiction over Medicare, taxes, and the authority of the Federal Government to borrow money.
Date of Passage:July 17
Final Vote:23-18
Key Amendments:No major amendments
Education and Labor Committee
The House Committee on Education and Labor has jurisdiction over measures relating to education and labor issues, including influence over workers’ health and safety.
Date of Passage:July 17
Final Vote:26-22
Key Amendments:No major amendments
Energy and Commerce Committee
The House Energy and Commerce Committee serves as the principal guide for the House in matters relating to the public’s health and marketplace interests.
Date of Passage:July 31
Final Vote:31-28
Key AmendmentsPublic Plan Option: Requires Secretary of HHS to negotiate payment rates in the public plan so they would not be lower than Medicare or higher than the average rates paid by private plans in the Health Insurance Exchange. Requirements for physicians and other providers to opt-out of participating in the public plan are specified.

CO-OP: Establishes a Consumer Operated and Oriented Plan (CO-OP) program, through which grants and loans will be made for the creation and initial operation of not-for-profit, member-run health insurance co-ops that provide insurance through the exchange.

Center for Medicare and Medicaid Payment Innovation: A Center for Medicare and Medicaid Payment Innovation would be established to test the effect of payment models on spending and quality of life under the Medicare and Medicaid programs. The Secretary may implement the model on a nationwide basis if it improves quality without increasing spending and/or reduces spending without reducing quality.


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