December 2008
Feature Story

Karen Lusky

The stage appears to be set for the Obama administration and Democratic Congress to tackle what ails the U.S. health care system, from growing rolls of uninsured to health care spending expected to equal one-fourth of the gross domestic product by 2025. The lab and pathology communities are considering where they will best fit into what’s to come—and the opportunities and challenges that lie ahead.

Attempting to revamp the health care system isn’t without precedent, of course—the Clinton administration gave it a go—but times have changed and so has the nature and urgency of the reform debate. Today “the elephant in the room” is the economy, “a huge, fundamental challenge,” unlike anything we have faced maybe in decades, said Chris Jennings, past senior health policy advisor to president Clinton, in an audioconference sponsored by the American Clinical Laboratory Association in mid-November. And unlike the last major reform effort in 1993–1994, leading economists in the government today fully recognize that our costly and inefficient health care system is “perhaps the greatest threat to our budget, our competitiveness, and our economy.”

Jennings also pointed to a growing understanding by the public and policymakers that the uninsured have a “major cost shifting impact on the insured as well as the providers and manufacturers who are attempting to care for them.” There’s also “an emergence of the quality value debate” to a level never seen before. Jennings said the Congressional Budget Office director himself goes around the country citing the RAND study, which indicated fully a third of the more than $2 trillion annual health care expenditure is dedicated to care that doesn’t improve medical outcomes. That comes to about $700 billion, “an interesting parallel number,” Jennings said, referring to Congress’ bailout package for the financial sector.

While Jennings laid out the case for Congress possibly passing comprehensive health care reform over the next four years, other pundits predict that health care reform may be more modest and incremental, predictably including reauthorization of the State Children’s Health Insurance Program, or SCHIP, in 2009.

Dean Rosen, who served as health policy director to the former Senate majority leader William Frist, MD, predicts lawmakers will take a more moderate approach that produces significant reform. But he doesn’t foresee fundamental change in how care is financed and provided because there isn’t “enough money, enough alignment [among lawmakers], and the issue isn’t straightforward enough—it’s extremely complicated,” he says.

Even so, senator Max Baucus (D-Mont.), chair of the Senate Finance Committee, which oversees Medicare and Medicaid, on Nov. 12 released a health care reform proposal that lays the groundwork for major changes.

Mirroring president-elect Barack Obama’s health policy model in many ways, the blueprint takes reform a step further by requiring universal coverage. Americans could keep their own health insurance or buy it through a national health insurance exchange in which private health plans could not discriminate against consumers based on their preexisting conditions. The exchange would also include a new government-funded plan similar to Medicare for people who are otherwise uninsurable.

Employers, except for small firms, would be required to provide coverage or contribute to a fund to help cover those who remain uninsured. Small businesses could receive subsidies to pay for insurance, as could families who qualify for them. Until the insurance exchange is in place, Americans aged 55 to 64 could immediately buy insurance through Medicare. (The government would calculate the premium so that the buy-in would be budget neutral, according to the plan.) The plan also expands Medicaid and SCHIP coverage—in other words, providing an avenue for obtaining health coverage for everyone.

Rosen believes the Baucus plan includes “some big ideas that people on the left will like, and some things that probably don’t go far enough for people on the left.” And in it are things Republicans might embrace, he adds, such as changes to the tax code, health information technology, individual choice, pay for performance, and reforming the health care delivery system under Medicare.

He doesn’t see the Baucus plan or any individual plan as being “the one” at this point, “but it includes a lot of ideas for the Democratic Congress moving forward.”

Roy Ramthun, former senior health policy advisor to president George W. Bush, predicts Republicans will object to the Baucus plan’s individual and employer mandates to buy insurance, and the Medicare expansion. “Most think the Medicare program is already in financial jeopardy, so expanding and adding to it is the exact wrong thing to do,” he says. “They believe the employer mandate will just force more companies to drop coverage because they won’t be able to afford it.” And the individual mandate has the same problem as the one in Massachusetts, whose health care model is almost identical to the Baucus plan, minus the Medicare expansion, he says.

“All the people [in Massachusetts] getting subsidized have signed up, and all those who have to pay are sitting on the sidelines,” Ramthun says. And “it’s busting their budget up there.”

The Obama administration’s goal, however, according to Jennings, is to develop broad bipartisan support for reform. He notes that former senator Tom Daschle, who will be the new Health and Human Services secretary, has been working with the Bipartisan Policy Center along with other former Senate majority leaders like himself over the past year to develop broad bipartisan health care reform recommendations, expected to be released in January. And, in Jennings’ view, the focus on the need to achieve that magic 60 Democratic votes in the Senate to prevent a filibuster was a “little bit overblown.” The hope for health care reform is to get a much higher number of votes than that to illustrate bipartisan support, he told CAP TODAY.

Many say, however, that the direction reform ultimately takes depends largely on whether lawmakers are willing to pile more debt on a federal budget deficit already headed toward the $1 trillion mark.

Health care lobbyist and attorney Donald Lavanty points out that “president-elect Obama has said we should just forget about the deficit for a year or two and get people feeling comfortable with the economy no matter what it takes.” And if lawmakers set aside the “pay as you go” congressional rules, Lavanty says, “they can expand coverage to all insured children, as well as revamp Medicare rules, including the sustainable growth rate for physician payments, and use that as a program to jump off for making Medicare available to the uninsured.”

Lavanty doesn’t see the U.S. ending up with a national health insurance plan “a la Great Britain or Canada.” Instead, he foresees “more a metamorphosis of what we have to expand on—Medicare—which is really a national health insurance plan for the elderly and poor at this point. Those are the roots by which you can reach out to the population that’s uninsured.”

The fear in the lab community is that Congress may start reallocating reimbursement streams to finance major health care reform and other priorities. Lawyer Peter Kazon of Washington, DC, says the 4.5 percent consumer price index update to the lab fee schedule, which goes into effect Jan. 1, could be a “nice, big, juicy target potentially.” Congress couldn’t take it away for January 2009, but it could look at it closely in the future, he says.

In the view of ACLA president Alan Mertz, enough is enough in terms of labs forking over any more of their long-awaited update. “Scheduled lab payment updates have not been fully updated 14 of the past 16 years and were frozen the past five years,” he says. And labs turned over $600 million of their update over the next five years to get competitive bidding repealed in July, which technically only cost the government $10 to $20 million, Mertz says. “So we’ve ‘given at the office’ already.”

As for the good news, Mertz predicts the new administration and Congress will place more emphasis on health screening and prevention. “I see that everywhere. It’s in Mr. Obama’s plan; it’s in senator Baucus’ plan.”

The lab community will be focusing its efforts on informing key congressional players in the health care debate about the value of lab testing in preventing disease and improving outcomes in chronic conditions—an educational effort that helped secure repeal of Part B competitive bidding for labs.

Pathologist Thomas Sodeman, MD, of Mooresville, NC, who describes himself as a 30-year veteran of health care, sees an opportunity for pathologists that might be “enhanced” in the current economic climate and any reform effort. And that is “to begin to play a better consultative role to support physicians who may in the past have turned to subspecialists to answer their questions related to a patient’s lab testing issues. Rather than add to the patient’s expense by using a subspecialist, they could consult with the pathologist in order to provide care to the patient,” he says.

CAP president Jared Schwartz, MD, PhD, believes pathologists could help improve patient outcomes by helping primary care providers, including physicians, nurse practitioners, and physician assistants, keep up on which tests to order and how to interpret and act on the results. If cognitive billing for physicians were implemented, which pays physicians for their problem solving rather than procedures, he says, it could potentially compensate pathologists for the considerable amount of time they now spend providing that type of information to physicians.

Pathologists, of course, will play a growing role in helping clinicians appropriately use personalized medicine, which targets therapy and aims to avoid unnecessary, even harmful, care. And, says CAP governor James Robb, MD, consultant to the National Cancer Institute, key legislation being drafted at press time by senator Edward Kennedy (D-Mass.) and his staff will potentially lay the framework for funding and regulating personalized health care, using cancer as the platform.

Also in the mix in terms of laboratory legislation is a bill introduced last summer (H.R. 6761) that seeks to modernize the clinical laboratory fee schedule. The Clinical Laboratory Management Association and the American Society for Clinical Laboratory Science, which support the bill, plan to have lawmakers reintroduce it in the 111th Congress, says Katharine Ayres, CLMA’s director of legislative and regulatory affairs.

The legislation, says ACLA’s Mertz, “would essentially set up a negotiated rulemaking process where labs and other stakeholders would be tasked to come up with a new fee schedule.” ACLA, CAP, and other groups in the Clinical Laboratory Coalition have reservations about the bill and are working with the CLMA and ASCLS to resolve them.

Ayres says “the bill doesn’t dictate what the fee schedule will look like but rather puts in place a process for every conceivable stakeholder to have a say in what the fee schedule will look like.” Congress will look at health care payment reform, to be sure, she says. “And given that the fee schedule is 24 years old, if we aren’t part of that reform, we will be 24 years behind.”

Reimbursement expert Charles Root, PhD, founder and president of CodeMap in Barrington, Ill., says “the obvious suggestion for reforming the fee schedule would be to turn it into some sort of resource-based system like the physician fee schedule.” Doing so will produce “winners and losers,” given that some of the testing is obviously less expensive to perform than it was 30 years ago. But “if Congress sees lab associations bickering or not supporting the bill, the measure won’t stay on their agenda.” Eventually the Centers for Medicare and Medicaid Services, perhaps as part of a more general Medicare reform program, could target the fee schedule with a primary objective of saving money, he cautions.

Dr. Root says it would not surprise him if the government ended up treating health insurers as if they were public utilities, whereby the plans would have to seek permission for rate hikes, for example, and could make more money if they were more efficient. He doesn’t think that approach would stifle innovation for laboratory tests, which currently do not command high dollar reimbursement. But it could affect systems that command high prices relative to cost of manufacture, like stents and biotech products, Dr. Root says. “What goes into a pacemaker isn’t much different than what goes into a cell phone,” he says. The pharmaceutical industry is the most extreme in that regard, he adds.

Reining in excesses may be one aspect of reforming a system with runaway spending. But one of the greatest challenges in fixing the U.S. health care system is how to do so without undermining its innovation and areas of excellence.

In that regard, former Bush advisor Ramthun has concerns about comparative effectiveness research, a potential reform strategy that would examine the impact of a new treatment or technology on outcomes.

“Comparative effectiveness is in the Baucus plan ... and it’s frequently mentioned by policy folks here in Washington as something that we need ... to quote, unquote, spend money more wisely,” Ramthun says. As for who would do the research, he says, “they sound like they want to use something similar to the existing Agency for Healthcare Research and Quality” or maybe create a “sister organization” to do it.

The problem with the concept is that if Medicare—and private insurers, depending on how much the government ends up regulating them—refuses to pay for a treatment found to be comparatively ineffective, patients will have to pay for it through some other means or go without it, Ramthun says. That could have a “very chilling effect” on private investment in new technology, he predicts.

Figuring out what’s more effective isn’t always that simple, he says. For example, a next-generation medication may not be any more efficacious than what’s already on the market, but if it ends up improving patient compliance because it’s easier to take, it could improve outcomes.

Former Clinton advisor Jennings says reform should reward innovation even more. He predicts we’ll see a “multitier vision” that is unlikely to threaten innovation. For one, there is sure to be talk about increasing research and development investments by the National Institutes of Health and extending the R&D tax credit, he says.

And “comparative effectiveness could arguably, if done right, provide actual independent validation for innovation that would both drive and reward it financially,” Jennings says. Also, if you cover more people, there’s the potential for more market share for innovation, he adds. Currently, 45 million people rarely access that type of technology, but they may do so if they have coverage for it, Jennings points out.

“Clearly, we both over- and underutilize health care in this country, and we need to get to appropriate clinical use of health care,” which should be the goal of any federal health care policy, he says.

Of course, ideas like boosting the use of preventive services and providing universal coverage could fall apart if the health care workforce shortage causes patients to wait for months to see a primary care provider or specialist, which is sometimes the case now even when people have the best of insurance, Dr. Schwartz says. “That’s going to be an extraordinarily difficult problem to solve,” he cautions—one he sees many countries around the world grappling with regardless of what type of payment system they have in place.

The challenge in health care reform is to see the big picture and anticipate the consequences, both positive and negative, to various strategies, Dr. Schwartz concludes. And it might help, he says, for people to keep in mind what H.L. Mencken said: “There is always a well-known solution to every human problem—neat, plausible, and wrong.”