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Labs face new fee cut to fund health insurance plan.

A proposal that would take millions of dollars in Medicare reimbursement away from clinical laboratories is back on the bargaining table, this time linked to a specific health reform measure designed to increase coverage for the uninsured.

The conventional wisdom in Washington this summer is that Congress will not approve sweeping changes in the health care system that has left some 35 million Americans without insurance. But the door is still open to smaller, incremental reforms, and that appears to be part of the Bush Administration's strategy for an entry to more fundamental course corrections. In the interim, a growing number of states are trying to move ahead with their own reforms, after tiring of waiting for leadership from Washington.

The Administration's lab proposal, first unveiled earlier this year, would reduce Medicare fee caps from 88% to 76% of the median of all carrier fee schedules. There would be some increases, however, based on inflation and other market factors.

The provision was rejected in a budget that Congress sent to the White House--and was promptly vetoed--this spring. Now the laboratory cuts are back on Capitol Hill for discussion in connection with plans to reform the health insurance market.

The Health Benefits for Self-Employed Individuals Act of 1992 would steadily increase the deductibility of privately purchased health insurance premiums from the current level of 25% to a full 100% by Jan. 1, 1996.

This health care access measure would decrease Federal tax revenues by $5 billion through 1997. Under a 1990 budget enforcement law, that forgone revenue must be offset elsewhere, presumably from among the $68 billion in cuts President Bush has proposed for the next five years.

A May 5 letter from Treasury Secretary Nicholas F. Brady to House Speaker Thomas Foley (D-Wash.) said, "Any of these mandatory outlay reductions would be acceptable to the Administration as an offset." It recommended, however, that the legislation be financed by the lab cuts and by putting hospital prospective payment updates on a calendar-year basis. The latter change would delay hospital rate increases by three months, from Oct. 1 to Jan. 1 of next year.

The Administration bill was introduced on May 14 by Sens. Robert Dole (R-Kans.) and John Chafee (R-R.I.). It was anticipated that Rep. Robert Michel (R-I11.) would follow suit on the House side.

From the official comments, it's unclear why hospital and lab payments were singled out as financing mechanisms for the insurance tax deductions. But it appears it was simply a case of finding savings amounts that roughly matched the forgone revenues.

Thus it will once again fall to the laboratory industry to try to stave off the fee schedule reductions. At a March hearing of a House Ways and Means subcommittee, Alvin M. Salton, BLD, said that the 12% decrease "would have a devastating effect on most independent community-based clinical labs."

Salton, a member of MLO's Editorial Advisory Board who was speaking on behalf of the American Association of Bioanalysts, argued, "Further reductions in the fee schedule are unreasonable in light of the substantial cuts that have already been imposed." The laboratory industry, he stated, accounts for less than 5% of all Medicare Part B expenditures, yet is the target of 72% of the Administration's proposed Part B cost savings for fiscal year 1993. It would be the fourth time the fee ceilings were ratcheted down since they were imposed in 1986.

Any action taken on health care this year will probably hinge on the mood of Congressional Democrats. One survey of 98 House members conducted by the Democratic Study Group found that 70% would prefer to work for a comprehensive overhaul of the system. Meanwhile, 11% said they favor incremental reform and 9% said they would like to publicize reform approaches without bringing one to a vote.

Sentiment may favor sweeping change, but the political reality is that Democrats must choose between sending up a loaded pack age President Bush is likely to veto, or an incremental bill or bills that would gain approval. And that's what makes the insurance deductions linked to laboratory cuts more threatening.

On the Senate floor, Dole observed that the insurance reforms in S. 2731 are similar to those previously introduced by Rep. Dan Rostenkowski (D411.) and Sen. Lloyd Bentsen (D-Tex.). In his remarks he made reference to the gridlock created by some 30 Congressional proposals, many of which address sweeping changes such as a "play or pay" system of mandatory employee benefits.

Referring to the insurance reforms, Dole stated, "Unfortunately, it appears election-year politics may prevent even this limited progress from being made. There are those who want to hold out for everything--and who may ultimately get nothing. I, for one, hope that won't be the case."

Other individual reform steps that bear watching include a portion of Rostenkowski's plan that would extend Medicare rates to the private sector. Under that approach, providers would be required to accept hospital DRG rates or physician relative value scale fees if they are adopted by private carriers. Two Federal advisory panels estimate the move would slash physician revenues by $20 to $30 billion, and hospital income by $16 to $20 billion.

Even that change would not be effective until 1994, and it seems clear that state legislators are not content to wait around for direction from Washington. Most of the new state initiatives focus on expanding access to health services for the uninsured.

Hawaii has stood alone for two decades as a state that offers at least some health care benefits to all residents. Massachusetts and Oregon have recent laws on the books, but regulatory and funding problems have kept them from being implemented. The latest programs have come from Florida, Minnesota, and Vermont.

In Florida, the significant health insurance gap resulted in a reform act that was signed into law by Gov. Lawton Chiles in March. The program would make health insurance universally available, through either an employer- or a state-sponsored plan.

Specifically, it asks for employers to provide coverage to all workers voluntarily. If the volunteer approach doesn't work, the state would tax those companies without a plan and institute state coverage. Currently, 18% of Florida's population is without insurance. compared with the national level of 14%. Most of the uninsured in Florida are employed.

Additional aspects of the plan include a Medicaid buy-in provision for families with annual incomes below $25,000, and a measure permitting the state to enroll Medicaid recipients into managed care programs.

In Minnesota, meanwhile, lawmakers have enacted a "Health Right" plan, which is designed to bridge the coverage gap for the uninsured through voluntary enrollment in four stages.

The initial phase, to begin this October, will open enrollment to low-income families with children who are already covered by an existing state health plan. Over the next two years, covered services will be expanded and enrollment offered to higher-income families and those without children.

Premiums are set according to a sliding, income-based scale and could reach more than $200 a month for a family with an annual income of $30,000. Lawmakers also approved a five-cents-a-pack increase in the state cigarette tax to offset program costs projected to reach $250 million a year by 1997. Most of the funding, however, is expected to come from a 2% tax on the revenues of doctors, hospitals, and other health care providers.

Elsewhere, a new law in Vermont establishes a commission to recommend how the state can best achieve universal coverage by October 1994. The three-member panel is charged with presenting a blueprint by Nov. 1, 1993.

Two ideas already in contention are a single-payer approach financed through public funds, and a regulated multi-payer system paid for by a mix of public and private funds.

The problem these states are running into in moving ahead with their designs is that most roads seem to lead back to Washington. Many of the provisions will require Federal waivers from Medicaid provisions or the Employee Retirement Income Security Act (ERISA). Upheld by the weight of case law, ERISA severely limits a state's ability to regulate or tax the benefit programs of employers who self insure.

Some Washington analysts who track nationwide health reform activity believe there is now a sufficient mass of state legislation to spur Congress into action--if not now, then at least after the fall elections. These analysts predict there will be no wholesale granting of waivers from ERISA and Medicaid regulations.

Others speculate that the next crop of rookie members of Congress will bring with them a mandate for action. An unusually high number of lawmakers, many saying even they were disgusted by the gridlock in Washington, decided not to seek reelection this fall. And many of their potential replacements are running on platforms that include health care reform.

Still, if neither the Federal nor state governments can get off the dime, the private sector may move ahead with new approaches. Observers say one step for insurers-- with or without legislation--will be to adopt physician reimbursement policies styled at least somewhat after Medicare's resource-based relative value scale (RBRVS).

The thinking is that Blue Cross and Blue Shield plans will be the logical leader of the movement because of their collective clout and the fact that they hold the majority of Medicare carrier contracts. Indeed, a spokesperson for the Blues' association predicted that 20% to 30% of all member plans will adopt some form of RBRVS in the next two to three years.
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Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Washington Report; medical laboratories
Author:Albertson, David
Publication:Medical Laboratory Observer
Article Type:Column
Date:Jul 1, 1992
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