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Agenda Background on Health Reform
Obama Budget Proposals
Current State of Play
Key Provisions of the House Tri-Committee and Senate HELP Bills
Senate Finance Committee Proposal
J&J Positions on HCR
Outlook
Annual Federal Deficit
-$500
$0
$500
$1,000
$1,500
$2,000
2000 2001 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
By Year
U.S
. $ in b
illions
Obama Budget Projects Large Deficits Throughout the Next 10 Years
Source: Office of Management and Budget, Updated Summary Tables, FY 2010 Budget, May 2009
Surplus
2009 Deficit Projected to be 12.9% of GDP
President Obama -- FY2010 Budget:Eight Principles of Health Care Reform
1. Guarantee Choice
2. Make Health Coverage Affordable
3. Protect Families’ Financial Health
4. Invest in Prevention & Wellness
5. Provide Portability of Coverage
6. Aim for Universality
7. Improve Patient Safety & Quality Care
8. Maintain Long-Term Fiscal Sustainability
Obama Health Care Reserve Fund FY 2010 - 2019
Major Financing Components of the Proposed FundCompetitive bidding for
Medicare Advantage
Other healthcare spending reductions
Lowering tax deductions in the highest income-tax bracket
and other tax changes
Medicare & Medicaid Savings
$309 billion
Tax Increases
$326 billion
$177 billion $132 billion $326 billion Total: $635 billion over 10 years *
* Additional Resources to be Identified with Congress
The Budget describes the $635 billion fund as a “down payment” on health care reform. Most experts believe that $1 trillion or more may be required over 10 years to fully finance coverage expansions for the uninsured.
Breakdown of the Health Reform Reserve Fund By Source
10-Yr Savings (2010-19)
$ in Billions
% of Total Reserve Fund
DRUG MANUFACTURERS: $26B 4%
Medicaid Rebate Expansions ($20B) : (1)Increase rebate percentage from 15.1% to 22.1%; (2) Extend to MCOs; and (3) Apply rebates to new formulations of existing drugs
Follow-On Biologics Pathway ($6B)
HOSPITALS:
(1) Quality Incentive Payments; (2) Reduce Hospital Re-admissions; & (3) Bundle Acute and Post-Acute Reimbursement in Medicare
$37B 6%
MEDICARE MANAGED CARE, Competitive Bidding $177B 28%
HOME HEALTH PROVIDERS $34B 5%
HIGHER INCOME BENEFICIARY PREMIUMS $8B 1%
LIMIT TAX RATE AT WHICH ITEMIZED REDUCTIONS REDUCE TAX LIABILITY AND OTHER TAX PROVISIONS
$326B 51%
OTHER SPENDING REDUCTIONS $27B 4%
TOTAL Reserve Fund by Source $635B
State of Play House Tri Committee bill
-- Passed Ways & Means Committee
-- Passed Education & Labor Committee
-- Energy and Commerce. Not yet passed. Chaired by Waxman, largest group of “Blue Dog” Democrats could stall or Waxman may bypass his own committee
Senate HELP (Health, Education, Labor, Pensions) Committee passed bill in Committee
Senate Finance Committee has not marked up a bill – still working on financing, since cap on health benefits exclusion taken off the table.
House Tri-Committee Bill: Key Coverage Provisions Cost: $1.04T. By 2019, # of uninsured would be
reduced by 37M, leaving 17M uninsured (half of whom would be unauthorized immigrants)
Key Coverage Provisions:
-- Individual mandate
-- Employer “Pay-or-Play” Payments: Savings: $163B
-- Medicaid eligibility expansion (including childless adults) to 133% FPL, effective 2013. Cost: $438B
-- Insurance Exchanges: subsidies to those between 133% to 400% of FPL to purchase insurance through an exchange. Cost: $773B
-- Tax credits to small employers. Cost: $53B
-- Public plan: Medicare Rates plus 5% (allows HHS Sec. to negotiate drug prices)
House Tri-Committee Bill: Other Key Coverage Provisions Insurance reforms: prohibits pre-existing condition
exclusions, requires guaranteed issue and renewal, prohibits medical underwriting, and requires modified community rating (insurers can only vary rates by age, geography, family composition)
Out-of-Pocket Maximum of $5K and lower limits for low-income in the exchange. No annual or lifetime limits allowed
ADAP TROOP: Allows costs incurred by ADAP programs to count against Medicare Part D TROOP
Medicaid: Optional Medicaid coverage of low-income HIV-infected individuals with incomes below eligibility levels for individuals with disabilities. Sunsets 2013.
House Tri-Committee Bill: Key Financing Proposals Reductions in Medicare FFS annual updates. Savings: $196B
Medicare Advantage: Set at Medicare FFS. Savings: $156B
Part D: Medicaid Rebates Applied to Dual Eligibles and PhRMA 50% discounts in the donut hole. Net Savings: $30B
Obama Budget Medicaid Rebate Expansions: Savings $18B
Income sur-tax on families and individuals with incomes above $350K and $280K respectively. $544B in new revenue
Fixing the physician SGR not offset. ($220B)
Senate HELP Legislation Significantly less expensive: $615B over 10 yrs
Does not include Medicaid eligibility expansions or financing proposals (SFC jurisdiction)
Has similarities with the House bill on coverage expansion (individual mandate, employer pay-or-play, insurance reforms, state exchanges, public plan)
Positive Biosimilar or Follow-On Biologics Provisions (12 yrs of Data Exclusivity)
340B Drug Pricing Expansions (also in House)
Positive wellness and prevention incentives
Senate Finance Committee Legislation Not yet introduced
Most likely to be representative of what can be enacted into law.
Will include similar coverage expansion proposals as HELP and House. Likely less generous subsidies, benefit packages and overall lower cost.
Likely a “cooperative” for a public plan.
Will include financing proposals consistent with agreements negotiated with PhRMA, the hospitals and other organizations
Positive Comparative Effectiveness Research authority
Johnson & Johnson Positions on HCR
We support…• Universal access to coverage• Maintaining private-public
mix• Prevention, chronic disease
management benefits• Reimbursement that rewards
outcomes• Comparative effectiveness
focused on clinical not cost • Insurance reforms• Positive Biosimilar
legislation in the HELP and Eshoo Bills.
We oppose…• Government plan, with
Medicare rates• Non-interference repeal,
price controls• Erosion of employer
coverage• Budget and financing that
undercut access and innovation, harm global competitiveness
Prospects for Reform Ambitious Goals: Senate & House bills completed
by August Congressional recess; bill sent to President by October.
Overall financing issues and impact on the Federal Budget becoming more of a focus
Comprehensive vs. incremental reform?
Fast-track “reconciliation” process could be adopted in the Fall if bi-partisan negotiations falter in the House
Key Issues for debate: financing; public plan option
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