Stimulus Package Has Billions for Healthcare

Wayne J. Guglielmo

March 27, 2009

March 27, 2009 — Despite a full plate that seems to be getting fuller all the time, the Obama administration has made healthcare reform a top priority.

In his budget, the President establishes a reserve fund of more than $630 billion over 10 years to finance fundamental reform, while also appropriating billions directly to support more immediate healthcare initiatives. Lawmakers in Congress have already responded with proposals of their own, including one to keep any reserve fund budget neutral. But, whatever happens to the President's budget priorities in the next few months, Washington has already injected billions of healthcare dollars into the system via the stimulus package passed and signed into law in February.

Of the $787 billion in the American Recovery and Reinvestment Act of 2009 (ARRA), roughly $150 billion is directed to healthcare. A big chunk of this amount is slated for 2 areas that have been placed under tremendous stress by the current economic downturn — Medicaid, the federal-state health program for low-income individuals and families, and COBRA, the law that assists laid-off workers to continue their employer-sponsored healthcare coverage for 18 months or longer. ARRA appropriates $86.6 billion and $24.7 billion, respectively, for Medicaid and COBRA. The aim is not simply to provide relief but stimulus, with the hope of making the road to recovery less long and winding.

But ARRA does something else, too. "Clearly, the stimulus was not purely stimulative," Paul B. Ginsburg, president of the nonpartisan Center for Studying Health System Change in Washington, DC, told Medscape Medical News. "The thinking among lawmakers was, 'Let's use it for some things that will move reform ahead.' " Those things include significant new appropriations for comparative effectiveness research, health information technology, and prevention and wellness.

Here is a rundown of both the relief and reform items in the stimulus package, with an eye to what their near- and long-term effect on healthcare is likely to be.

Relief for Troubled Times

With more than 45 million uninsured Americans in 2008, the recession has made a bad situation worse, both for low-income people and for the previously employed who have lost their coverage. The stimulus targets these groups in different ways:

Enhanced federal Medicaid match. The nearly $87 billion that ARRA appropriates to Medicaid is taking the form of a temporary increase — 27 months — in FMAP, the federal government's share of what it costs a state to run its Medicaid program. With states already struggling with high program costs, "the enhanced match gives them the ability to provide services to an increased number of people," said Joy Johnson Wilson, the chief federal policy analyst for the National Conference of State Legislatures in Washinton, DC.

All states are receiving a base increase of 6.2%, with the prospect of higher increases for states with significant hikes in their quarterly unemployment rates. The stimulus also ensures that no state's FMAP will drop for fiscal years 2009 and 2010. Thus, if a state's federal match was higher in 2008 than in 2009, it would still get the 2008 FMAP in 2009.

To qualify, states may not have eligibility standards in place that are more restrictive than they had in place on July 1, 2008. This stops them from cutting new groups or populations of people — but it also keeps them from adding them. States are permitted, however, to cut benefits or provider payments, which Ms. Wilson thinks some may have to do if unemployment rates keep going up during the next 27 months. "Despite the enhanced federal match, the states under these circumstances may need to cut benefits or do something else to sustain their programs," she told Medscape Medical News.

COBRA assistance. The law, passed in 1986, enables laid-off workers who might otherwise have to purchase private insurance to stay in the less-expensive group health market, at least temporarily. With the rise in insurance costs, however, COBRA premiums have themselves become prohibitively expensive, totaling nearly $13,000 in 2007 for a family policy, according to the Kaiser Family Foundation.

ARRA provides a 65% subsidy for workers who formerly participated in their employer's health insurance program and whose income for 2009 will not exceed a certain ceiling — $125,000 for an individual or $250,000 for a family. The program is temporary, so workers terminated involuntarily after the end of this year will not be eligible. Still, Paul Ginsburg of the Center for Studying Health System Change calls it "a bold stroke in policy," one that it's not impossible to think "could come back as permanent policy, especially if broader healthcare reform doesn't succeed."

Jumpstarting the Reform Process

The stimulus package pushes this process forward in some small and some not-so-small ways:

Comparative effectiveness research (CER). Judging from the reaction to date, the $1.1 billion appropriated to CER is viewed as a small but very significant step forward. "If I'm going to compare the effectiveness of a medication to a medical device, say, I'll need to have that study funded," said J. James Rohack, MD, president-elect of the American Medical Association and a senior staff cardiologist at Scott & White Clinic in Temple, Texas. "In our current model, all the device or drugmaker has to show is that its medication or medical device is safe. Neither company has a lot of incentive to fund a head-to-head effectiveness comparison. And so this is a role the government can play — freeing up money to fund such research."

The ARRA calls for the government to name a Federal Coordinating Council to oversee the research, which it has already done. The ARRA also directs $300 million in effectiveness funds to the Agency for Healthcare Research and Quality (AHRQ), which has promised "to make the most of this additional funding." Another $400 million of this money is slated for the National Institutes of Health (NIH) and the office of the Department of Health and Human Services Secretary.

Whatever research is developed will not guide coverage determinations for public and private payers; nor will it result in new national clinical guidelines, something Dr. Rohack thinks lawmakers got exactly right: "If you have information that's valid and credible, the doctor and patient can arrive at the most effective treatment option. Right now, we don't have that information, except for sporadic literature searches. The hope is that the new research will fill in the existing gaps."

Health information technology (HIT). ARRA directs a significant $19.2 billion to this area, which the government estimates will lead over time to better quality of care, better care coordination, less duplication of services, fewer medical errors, and, ultimately, more cost savings. The biggest chunk of money — $17 billion — will come in the form of Medicare and Medicaid incentives to entice physicians and hospitals to adopt electronic health records (EHRs). Besides carrots, the government also has penalties for nonadopters. Beginning in 2015, physicians who have not adopted HIT will be subject to decreasing Medicare payments, up to a 3% reduction by 2017 and beyond.

Is this carrot-and-stick approach the way to go? Yes, says Patricia B. Wise, vice president of the Healthcare Information and Management Systems Society (HIMSS), headquartered in Chicago. "If the nation is going to move forward in all the areas that President Obama has called for, that means all Americans should have an [EHR] by 2014, not a portion of them."

Ms. Wise is quick to add, however, that it is equally critical for the government to make good on another key provision of the stimulus — developing standards for the uses and exchanges of electronic health data. Such interoperability standards, as they're known, are essential if we're really going to reap the rewards of HIT, said Ms. Wise, Dr. Rohack, and other commentators. "It's not enough simply to make an electronic version of the paper record," Ms. Wise told Medscape Medical News. "We need to be encouraging the data exchange between those records."

In line with this, ARRA also contains provisions that strengthen — and, in some instances, expand — rules from the Health Insurance Portability and

Accountability Act (HIPAA) that protect patient information. Among other changes, ARRA includes tough new standards for business associates of covered entities, establishes a federal breach notification requirement, and expands the existing accounting rules. On the last point, physicians and other covered entities who disclose protected information in an EHR must account for this disclosure, even if it's in connection with treatment, payment, or healthcare operation. Will this impede HIT adoption? Right now, it's too early to tell. "I don't think we have heard the last on this," said Jo-Ellyn Klein, an attorney with Akin Gump, in Washington, DC.

The stimulus package makes other down payments on reform, including $10 billion for NIH, which has already directed $60 million to support autism research; $1.5 billion for community health centers; $1 billion for wellness and prevention programs; and $500 million for training primary care providers for medically underserved areas.

In the rush to pass the stimulus, lawmakers in Congress were often vague in how exactly they wanted all this money spent, which Mr. Ginsburg thinks may be a blessing in disguise. "Often bad policy results when Congress tries to micromanage healthcare," he said.

He also thinks the stimulus had another good effect — it lightened the load of future healthcare reform: "There are some things — like HIT — that such reform doesn't have to grapple with as much because they got a big jumpstart in the stimulus package."

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