Healthcare Reform at an Impasse: Impact of Reform on O&P Patients and Providers

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By Peter W. Thomas, JD, and Theresa Morgan

Shift in Focus from Healthcare to the Economy


In his State of the Union speech in late January, President Barack Obama pressed Congress for final passage of a health-reform bill but primarily emphasized the economy as his highest priority this year. He proposed a three-year freeze on federal spending not related to national security, a move that is read by many as a sign of the pressure the administration is under to reign in the budget deficit. This proposal would save $250 billion over three years, a relatively small sum compared with the size of the overall deficit, projected to be approximately $1 trillion each year for the next three years.

The focus on the economy and job creation has diverted the spotlight from healthcare reform, an expensive federal undertaking that would eventually lower the deficit, according to the Congressional Budget Office. Many in Congress and rank-and-file Americans are skeptical of this claim, but the President continued to make the case that the current status of healthcare in America is unsustainable on its current track. It is for this reason that presidential proposals to increase jobs and reform healthcare will likely be exempt from his proposed spending freeze.

In addition, the Administration released a detailed federal budget for fiscal year 2011 in early February. In it, the President includes his proposal to have Congress adopt stringent pay-as-you-go budget rules that would bar lawmakers from passing programs that increase deficits. He also stated that he would create a bipartisan presidential commission to study and recommend to Congress further reductions in spending, primarily in the mandatory spending categories of Social Security, Medicare, and Medicaid. While these reforms may be necessary for our country, they present significant risks from an O&P-provider and consumer perspective.

Also in late January, the Senate approved a $1.9-trillion increase to the federal debt limit, setting the new limit at $14.3 trillion. The Senate passed an amendment to the debt-ceiling increase legislation, which paves the way for a five-year Medicare physician-payment fix that would be exempt from the pay-as-you-go rules. It is rumored that a permanent fix could be tacked onto a jobs bill that Senate Democrats are compiling. The bill's main component would be an extension of unemployment benefits. The legislation may also contain an extension to the exceptions process for Medicare outpatient-therapy caps and extend federal Medicaid payments to the states using what's known as Federal Medical Assistance Percentages (FMAP) funding, originally designated in the Economic Stimulus Package.

Even with the pressure mounting for Congress to cut the deficit, the Senate failed to pass an amendment to the debt measure that would have created a congressional budget commission. Moderates in the Senate were applying pressure for Congress to create an independent budget commission to develop a plan to reduce entitlement spending and decrease the nation's debt. If passed, the amendment to the debt-limit measure would have created a bipartisan commission comprised of lawmakers and administration officials that would propose debt- and deficit-reduction policies that could touch on any aspect of the budget and tax code.

If the physician fee fix is added to the jobs bill, reform proponents could lose much-needed momentum to help pass healthcare-reform legislation before March. If Congress does not act, physicians face a 21-percent cut in Medicare reimbursement. The pressure to avoid that cut is strong, and so most agree that it will get done with or without the addition of broader healthcare reforms.

Political Update on Healthcare Reform Debate

Massachusetts Special Election
In the wake of Massachusetts' special election results, Democratic congressional leaders and the White House are deliberating the next steps for healthcare-reform legislation. Republican candidate Scott Brown beat Democratic candidate Martha Coakley, delivering a stinging loss to Democrats who until then held a 60-vote, filibuster-proof supermajority in the Senate. Coakley's defeat was especially disappointing to healthcare-reform advocates, who were hoping to replace the late Sen. Ted Kennedy (D) with a similarly inclined healthcare-reform champion. Brown campaigned that he would cast the deciding vote against the pending health-reform bill if elected to the Senate but also suggested that he does not oppose what he views as more reasonable healthcare reforms.

Both chambers of Congress have passed healthcare-reform bills, with the Senate passing a more conservative bill along party lines on Christmas Eve morning. The House bill includes a national public plan and an employer mandate, both omitted from the Senate legislation. For several weeks after that Senate vote, lawmakers and staff had been working non-stop to reach compromises on the many points of difference between the two bills. The House planned to take up a revised version of the Senate bill and send it back to the Senate for a final vote. However, negotiations came to a screeching halt while leaders revised their plans in the aftermath of the special election.

Congressional leaders and the White House are working on alternative plans, including one that would involve the House passing the Senate version of the bill, avoiding the need to send the comprehensive legislation back to the upper chamber; it is not expected that after seating Brown, Democrats would be able to avoid a filibuster in the Senate. House lawmakers who object to a number of the provisions in the Senate's current version could alter the larger bill through separate legislation that the Senate would vote on using the reconciliation process, which would require only a simple majority, not a full 60-vote margin.

This plan has not gained much traction in the House, primarily because an amendments package has yet to emerge, and there's no guarantee that the Senate will take up such a bill. In addition, all provisions that do not impact the federal budget would be stripped from such a bill under a technical Senate rule known as the "Byrd Rule."

Also in January, House Speaker Nancy Pelosi (D-CA) announced that the House would begin considering a number of smaller health-reform bills seeking to gain bipartisan support for elements of the more comprehensive bill. One such bill is expected to remove the long-standing anti-trust exemption for health-insurance companies in order to attempt to spark greater competition among health plans. The Speaker did indicate, however, that passage of these bills would not be a substitute for overall reform and that comprehensive reform is still a priority of the Democratic Congress this year. Nonetheless, considering the lost momentum of the past few weeks, it is unclear how the votes can be achieved to pass comprehensive reform.

If a healthcare-reform bill is not passed, the savings that the legislation was offering in the form of cuts to Medicare spending, as well as health-delivery method changes, could be adopted by a debt-reduction commission or through the reconciliation process and applied to reductions in the deficit. This result would be two-fold: (1) Congress would lose a large chunk of the savings it needs to pay for healthcare-coverage expansions in the future, and (2) Medicare providers would face similar cuts and delivery-reform changes that would have emerged from healthcare reform but without the advantage of expanded coverage and a larger pool of patients with health insurance.

Impact of Healthcare Reform Policies on the O&P Field

Major questions remain on significant issues as Congressional leaders attempt to reconcile the House and Senate versions of the bill as soon as possible. Some of the most significant points of disagreement are the financing mechanisms to pay for the expansion in coverage. Since some of the mechanisms impact the O&P field, the O&P national associations are actively involved in the process to ensure that a final bill does not negatively impact O&P providers and the patients they serve.

Including Orthotics and Prosthetics in the Essential Benefits Package
A large number of O&P organizations and disability groups worked throughout the past year to have orthotics and prosthetics specifically recognized as being covered in the essential benefits package that all private health insurance plans must cover if they operate under proposed health insurance "exchanges." These exchanges would be either state-based or national in scope. They would be web-based marketplaces where consumers could make apples to apples comparisons of private health plans available in a particular state.

The original House bill did not include O&P or durable medical equipment specifically in the essential benefits package. However, the bill did include phrases such as "rehabilitation services" and "equipment and supplies incident to a physician's services" to imply coverage of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS). The final bill passed by the House does, in fact, include coverage in the essential benefits package of "durable medical equipment, prosthetics, orthotics, and related supplies," a major step forward in protecting coverage of these services in private insurance. If health reform is eventually signed into law and includes this same language, this will be a major victory for the field.

The Senate bill reported out of the Health, Education, Labor, and Pensions (HELP) Committee had originally omitted "rehabilitative and habilitative services and devices" until the O&P groups and broader rehabilitation and disability communities advocated for the inclusion of this term in their bill. The Senate included this language in its legislation during the merger between the Senate Finance and HELP Committee bills, and it was passed on the Senate floor on December 24, 2009.

Both the House and Senate bills include categories of benefits in the standard benefit package that are of particular importance to persons who need orthotic and prosthetic services and devices, but the House language explicitly lists orthotics and prosthetics as an essential benefit. This language more accurately reflects the services provided by orthotic and prosthetic professionals and will ensure that beneficiaries are guaranteed access to critical benefits. It is also critical to the O&P field that the essential benefits package is set as a floor for plans, and that private plans are allowed to offer more than these services and devices.

For these reasons, O&P groups strongly recommend that if Congress creates a final healthcare-reform bill, the essential benefits package includes rehabilitation devices and DMEPOS. O&P groups also support a provision in the Senate bill that would allow plans to provide benefits in excess of the essential benefits package, thus ensuring that the package is a floor and not a ceiling on O&P care provided.

The Medicare O&P Fee Schedule
The differences between the House and Senate bill have very real consequences for the O&P field. Lawmakers are searching for ways to cut the cost of the final bill and to create savings under Medicare. Along those lines, the Senate bill would apply a newly devised "productivity adjustment" to the Medicare O&P fee schedule. Because the adjustment would ultimately result in lower fees for O&P providers over the next ten-year period and into the future, it could compromise the ability of O&P practitioners to provide highly customized and specialized care to amputees and beneficiaries with orthopedic impairments in need of orthotic bracing and prosthetic limbs. Therefore, many in the O&P field have strongly opposed this section of the Senate health-reform bill with respect to its application of the productivity adjustment to orthotics and prosthetics.

The House bill does not apply the productivity adjustment to the relatively small, highly specialized O&P field nor does the bill reduce the annual CPI updates to the O&P fee schedule for the next ten-year period. This is very good news indeed. Considering the fact that almost every provider group, except physicians, is slated to have its updates reduced in the House health-reform legislation, including durable medical equipment, the O&P field fared well in the House legislative process. The O&P community has been advocating for the House language over the Senate language throughout the conference process where both bills are reconciled. However, if the Massachusetts election has the effect of halting negotiations and the House leadership decides to pass the Senate-passed bill without changes, the O&P fee schedule will be at risk for reductions in annual updates into the future.

Definition of DME in Relation to Orthotics and Prosthetics
The Senate bill requires the Department of Health and Human Services (HHS) to develop, through regulation, a standard definition of durable medical equipment (DME) so that this benefit can be easily compared between plans. The O&P field has been advocating to make it clear to Congressional leaders that orthotics and prosthetics are not a subset of durable medical equipment and should not be defined as such by the Secretary when developing standard definitions of healthcare terms.

The O&P organizations have argued that the vast majority of DME items are largely product or commodity-based, while most orthotics and prosthetics entail a high level of clinical service by educated and trained practitioners who design, fabricate, and fit custom orthoses and prostheses. Categorizing O&P care under the definition as DME applies a spectrum of rules intended for DME to a field that is very different in critical respects and causes major problems for patients when trying to access artificial limbs and orthopedic braces.

In addition, many benefit exclusions, caps on benefits, and eligibility rules to obtain DME are completely misapplied to O&P care. The "in-the-home" restriction under the DME benefit, for example, does not apply to O&P under Medicare and should not apply with private coverage either. Application of the in-the-home restriction to O&P services would restrict coverage to only those O&P devices and technologies that are medically necessary in the patient's home, which is an absurd standard. The O&P field, therefore, has been advocating that the final health-reform bill separately define orthotics and prosthetics from DME for purposes of comparing covered benefits across private health plans.

Health Insurance Compacts
A section of the Senate health bill relates to the development of interstate health insurance "compacts," which are intended to provide lower-cost insurance across state lines. HHS and the National Association of Insurance Commissioners (NAIC) would develop model guidelines for the creation of compacts between states to allow for the interstate sale of insurance. Insurers would be able to organize under the laws of one state (state A) and, if permitted by another state (state B), operate in state B without being subject to the mandated benefits laws of state B. This could wipe out many states' prosthetics and orthotics parity laws, dealing a blow to O&P patients who have fought long and hard to preserve access to O&P care in many states throughout the country. The O&P organizations are working hard to ensure that federal health-reform efforts do not obliterate state laws that have taken years to enact and implement.


At the time of this writing, the fate of healthcare-reform legislation is largely unknown. It is apparent that many advocates, lawmakers, and staff who have been working throughout 2009 and into 2010 on reform legislation are motivated to finish the process. It is also apparent that opponents of health reform have succeeded in derailing the momentum of the bill's enactment. There are many factors that could lead to the final demise of this process, not the least of which is unified Republican opposition to what they believe is a government takeover of healthcare.

With the state of the economy, the high unemployment rate, and strong political headwinds before them, proponents of reform will be hard-pressed to achieve the grandiose reforms they thought possible in the early days of 2010. With every day that passes, the momentum to present the President with a bill to sign lessens. All eyes will be on Congress throughout the next few weeks and months to see if healthcare reform suffers the same fate as the 1994 effort or if a bill is ultimately enacted.

Peter W. Thomas, JD, serves as general counsel for the National Association for the Advancement of Orthotics and Prosthetics (NAAOP). Theresa Morgan is a legislative assistant at Powers Pyles Sutter & Verville, PC, Washington DC.