State of the Union: Time To Trim the Regulatory Fat in Health Care?

by Dan Diamond, California Healthline Contributing Editor

As president, Barack Obama has presided over the largest expansion of U.S. health care services since the creation of Medicare.

But that doesn't mean the president is immune to cutting back, too.

As Obama continues to shift away from touting the Affordable Care Act and focus on its implementation, it's clear that streamlining federal regulations will be a top priority for the White House this year.

And as one of the nation's most heavily regulated sectors, health care stands to be significantly affected.

How To Interpret Last Night's Address

Don't overweight the State of the Union's importance.

Brendan Nyhan, a Dartmouth University professor and political scientist, offered a reminder this week that the address is more political theatre than actual strategic plan.

But what Obama did or didn't stress is an interesting barometer of his priorities, or at least a good metaphor for health care's relative importance.

Two years ago, the president spoke for several minutes -- a total of 570 words -- in urging Congress to pass the Affordable Care Act.

Last night, Obama devoted just 44 words to his health reforms -- never once touting the law's actual impact, like 2.5 million young Americans gaining coverage through the ACA.

In comparison, the president spent more than 130 words on his renewed cause of streamlining the government.

Obama twice referenced the need to do away with federal "red tape," a term he never used in his first three addresses to Congress.

Health Care's Regulatory Burden

Few sectors have more regulatory red tape than health care.

Just ask a doctor.

U.S. physicians already spend nearly four times as much as their Canadian counterparts on administrative tasks, such as filing claims and billing for patient care, according to a recent Health Affairs study.

One study takeaway: the sheer volume of insurance-related paperwork. Staff for U.S. physicians spent 53.1 hours per physician on administrative tasks each week, compared with 15.9 hours for physicians in Ontario. The study also found that time spent on administrative tasks costs each U.S. physician $82,975 annually, compared with $22,205 each for Canadian physicians

And new laws may not necessarily help. The ACA's Physician Payments Sunshine Act -- designed to shine a light on industry contributions -- "will benefit only accountants, bureaucrats and lawyers," a Harvard Medical School physician grumbled this week in a Wall Street Journal editorial.

There's also the inherent inertia that keeps regulatory burdens in place, from hard-to-overturn government restrictions to outside interest groups that seek to preserve the status quo.

Speaking to "Road to Reform" last month, Princeton University professor Uwe Reinhardt warned that health care is plagued by a "politically powerful constituency for waste" that helps inflate spending and boost bureaucracy.

What's Already Underway

Obama last night discussed his executive order that federal agencies must "eliminate rules that don’t make sense. ... We've already announced over 500 reforms, and just a fraction of them will save business and citizens more than $10 billion over the next five years."

Here's how that effort is playing out in health care.

CMS three months ago nixed several federal regulations for health care providers and debuted new rules that allow:

  • Hospitals in the same system to have their own governing boards;
  • Nurse practitioners and other non-physicians to have more responsibilities;
  • Smaller hospitals to outsource some lab tests and radiology tasks; and
  • Ambulatory surgery centers to eliminate time-consuming and unnecessary patient rights regulations.

According to HHS Secretary Kathleen Sebelius, the changes "eliminate unnecessary and obsolete standards and free up resources" for providers to focus on patient care. HHS also added that the changes will save the industry $1.1 billion next year and $5 billion over five years.

More streamlining is likely on the way, too.

In an important development, the administration official who oversaw the White House's regulatory brush-clearing -- Jeff Zients, the nation's first Chief Performance Officer -- has been announced as the new head of the White House's Office of Management and Budget.

(Zients previously served as CEO of the Advisory Board Company, which produces California Healthline for the California HealthCare Foundation.)

In his new role, Zients' explicit responsibility will be to advise the White House on ways to cut spending, reduce duplication and stay within the federal budget. It's a powerful perch, and OMB directors have a habit of shaping presidential spending priorities.

For example, Obama's first OMB head was Peter Orszag, who had made controlling health care costs the centerpiece of his work as the Congressional Budget Office's director. His counsel was crucial in spurring the president to prioritize health reform as a strategy to boost the flagging U.S. economy.

Will the White House's attempt to rein in regulations ultimately help patients and providers? "Road to Reform" will keep an eye on the state of the health care union across 2012.

Here's what else is happening across the nation.

Administration Actions

  • Last week, HHS confirmed that most health insurers and employers by Aug. 1 must comply with a federal health reform law regulation to cover preventive services and contraceptives for women with no additional cost-sharing (Pear, New York Times, 1/20). The Obama administration rejected a request for a broad exemption by not-for-profit religious groups and employers that oppose birth control on religious grounds (Aizenman, Washington Post, 1/20). However, religious organizations will have until Aug. 1, 2013, to comply with the requirement (Morgan, Reuters, 1/20).

Challenges to Reform

Effects on Businesses

  • A 10% tax on indoor tanning included in the federal health reform law has had a limited effect, according to an Archives of Dermatology study. The study found that about one in four Illinois tanning salons surveyed experienced a slight decline in business since the tax took effect. The study's authors noted that salon owners are permitted to pay the tax without passing the cost on to their customers, which could mitigate the effect of the tariff. About 80% of the salons passed the entire cost along to their customers, while 7% split the tax with their clients (Seaman, Reuters, 1/19).

Eye on the Courts

  • The outcomes of two Medicaid-related lawsuits before the U.S. Supreme Court could substantially change the federal government's role in the program. In one case -- the multistate lawsuit challenging the federal health reform law -- the plaintiffs argue that the Medicaid expansion, scheduled for 2014, coerces states to participate in the program. In the second case, which originated in California, the Supreme Court will determine whether individual beneficiaries and health care providers can sue states that make Medicaid cuts. Some legal observers say that if the Supreme Court rules in favor of the plaintiffs in both cases, federal law no longer will have significant influence on states' Medicaid operations (Feder, Politico, 1/17).

In the States

  • Last week, the Colorado House voted 33-31 to pass a bill (HR 1003) that petitions Congress to call a constitutional convention to repeal the federal health reform law (Sealover, Denver Business Journal, 1/19).
  • In a letter sent to the White House last week, 19 rural Massachusetts hospital associations urged President Obama to reverse a health reform loophole that would boost the state's hospital funding by up to $367 million per year while hospitals in other states lose funding (Pecquet, "Healthwatch," The Hill, 1/20).
  • Last week, Wisconsin Gov. Scott Walker (R) returned nearly $38 million that the state received under the federal health reform law for the implementation of a health insurance exchange. Walker originally intended to keep the funding while the U.S. Supreme Court considered the constitutionality of the overhaul (Hess, Greater Milwaukee Business Journal, 1/18).

On the Hill

  • Last week, the House Ways and Means Committee voted 23-13 to approve a bill (HR 1173) that would repeal the Community Living Assistance Services and Supports Act (Baker, "Healthwatch," The Hill, 1/18). The program -- which the Obama administration suspended in October 2011 -- was created to provide insurance to workers if they become unable to care for themselves because of injury or illness (Kasperowicz, "Healthwatch," The Hill, 1/17). A final House floor vote is expected next month (Zigmond, Modern Healthcare, 1/18).

Rolling Out Reform

  • On Monday, the Patient-Centered Outcomes Research Institute -- a group of 15 experts created by the federal health reform law to assess the effectiveness of medical procedures -- began seeking public comment on its newly released draft research agenda (Pecquet, "Healthwatch," The Hill, 1/23). The 22-page agenda highlights five priority areas of comparative effectiveness study, including improving health care systems and communicating research (McKinney, Modern Healthcare, 1/23).
  • Bipartisan opposition stemming from budgetary, membership and confirmation concerns has created uncertainty about the future of the Independent Payment Advisory Board established by the federal health reform law. Recent cuts to the panel's budget and challenges in appointing experts to the panel might further delay IPAB. The delay could buy time for a more Republican Congress to push for repeal, or for controversy over the panel to subside so both parties can compromise on a modified version of IPAB (Kenen, Politico, 1/23).
  • During Families USA's 17th annual conference last week, community health advocates said the federal health reform law will help address health disparities in racial and ethnic groups. According to the advocates, the additional coverage options created by the overhaul will help address disparities in areas such as infant mortality and diabetes and obesity rates (Attias, CQ HealthBeat, 1/20).

Promoting Reform

  • In an interview on "The Daily Show with Jon Stewart" on Monday, HHS Secretary Kathleen Sebelius discussed a recent proposal to allow states to determine the "essential benefits" required of plans in the state insurance exchanges under the federal health reform law. Host Jon Stewart asked Sebelius why states should be trusted to determine benefits, when many currently lack strong insurance regulations. He also pressed Sebelius on whether HHS would grant states waivers from those requirements (Baker, "Healthwatch," The Hill, 1/23).

Studying Its Effects

  • Three out of four uninsured U.S. residents live in states that have not made any significant progress in establishing health insurance exchanges under the federal health reform law, according to an Associated Press analysis and coverage estimates from the Urban Institute. The analysis found that 20 states -- which are home to 42% of the U.S.' uninsured population -- either have made no progress in establishing an exchange or their progress is unclear. Critics say the result could mean disparities in coverage of the nation's uninsured that is slated for expansion in 2014 (Alonso-Zaldivar, AP/San Francisco Chronicle, 1/23).
  • Pilot programs established under the federal health reform law to study Medicare payment reform did not produce significant savings or improve health care quality, according to a Congressional Budget Office brief (Zigmond, Modern Healthcare, 1/18). On average, the 34 programs that were part of six demonstration projects to improve care coordination for patients with chronic diseases had little or no effect on hospital admissions or Medicare spending. Meanwhile, only one of four programs that offered financial incentives for higher quality care reduced spending, according to CBO (Baker, "Healthwatch," The Hill, 1/18).

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