The bill, H.R. 3962, is a revised version of separate reform bills approved by three House committees of jurisdiction: Ways and Means, Energy and Commerce, and Education and Labor. It will expand health care coverage to 96 percent of people legally residing in the United States at a cost of slightly more than $1 trillion, the Congressional Budget Office estimates.

The tab would be paid by controversial higher taxes on wealthy Americans and new levies on business and industry, including a 2.5 percent excise tax on the sale of medical devices sold for use in the United States, raising $20 billion over seven years, according to the Joint Committee on Taxation. It would not apply to exported devices or to retail sales of devices.

Key Features of H.R. 3962 The bill includes an individual and employer mandate, penalties for those who do not obtain or provide health insurance coverage, expanded eligibility for Medicaid and the State Children’s Health Insurance Program, a public insurance plan option to compete with private insurers, a health insurance exchange where individuals and small businesses can comparison shop among private and public insurers, including new health insurance co-ops, and premium subsidies to help people buy affordable coverage.

The public plan option, which has drawn fire from Republicans and the health insurance industry, would be subject to the same market reforms and consumer protections as private plans in the exchange and would be financed by premiums. Startup funds would be provided, but would have to be amortized from future premiums.

The Health and Human Services secretary would administer the public plan and negotiate rates for providers participating in the plan. Providers would be presumed to be participating unless they opt out.

A new advisory committee, to be chaired by the Surgeon General, is established to help define the essential benefits package under the public plan to be offered in the exchange. Over time, it is to become the minimum quality standard for employer plans.

The basic package is to include preventive services with no cost sharing, mental health services, oral health and vision care for children, and caps on the amount of money a person or family spends on covered services in a year (a maximum of $5,000 for an individual and $10,000 for a family, with lower levels for lower income and middle income families.

There will be four plan levels: basic, standard, premium, and premium plus. All will cover the essential benefits package, but have varied levels of cost sharing. The premium plus plans will offer additional benefits such as adult dental or vision care, gym memberships, and private hospital rooms.

In a separate provision to inject competition into the health insurance marketplace, the bill would eliminate the antitrust exemption for health insurers and medical malpracticer insurers. According to a House Democratic leadership statement, this will “remove their shield that has allowed them to price fix, divide up territory, and effectively create monopolies in particular markets.

Medicare Plan, Provider Cuts The House reform bill would cut $170 billion from payments to Medicare Advantage (MA) plans and $229 billion from annual payment updates to Medicare fee-for-service providers, including clinical laboratories paid under Part B.

MA plans would see their payments reduced over three years to fee-for-service levels, beginning in 2013. Currently, plans get approximately 14 percent more in payments than traditional fee-for-service for comparable services. “Massive MA cuts would cause millions of seniors to lose their MA coverage altogether, while millions more would face benefit cuts and higher out-of-pocket costs,” America's Health Insurance Plans said in a statement.

Fee-for-service providers would see their payment updates hit with a productivity adjustment (PA). This is a reduction in payment to encourage providers to be more efficient in the delivery of care. Clinical labs are among those to get a PA for the first time. The House bill would replace the current Part B lab fee schedule update formula (the Consumer Price Index for All Urban Consumers minus 0.5 percent) with a new formula in 2010: the full CPI-U minus the PA (estimated at minus 1.3 percent). The lab fee update for 2010, announced in the final physician fee schedule rule, is a negative 1.9 percent. Under the House formula, lab fees would be cut 1.4 percent under the CPI-U plus a further 1.3 percent PA reduction, for a total reduction of 2.7 percent.

New Medicare Payment Models The House reform measure includes provisions to promote prevention and wellness services and to improve the quality of care while lowering costs. It would eliminate deductibles and copayments for all preventive services covered by Medicare and would establish new incentives to encourage providers to coordinate care.

One new model is the accountable care organization (ACO) that allows providers to share in Medicare savings they help create through care coordination and quality improvement initiatives. This alternative within fee-for-service Medicare would reward physician-led organizations that take responsibility for the costs and quality of care, according to a summary of the bill. ACOs could include groups of physicians organized around a common delivery system (including a hospital), an independent practice association, a group practice, or other common practice organizations, the summary said.

Another payment model in the bill is a medical home pilot program to reward providers who agree to provide services necessary to make their practice a medical home by ensuring full access to patients and providing coordinated and comprehensive care.

Further, a new Center for Medicare and Medicaid Payment Innovation is to be created by 2011 within the Centers for Medicare and Medicaid Services to test and expand new payment models that encourage higher quality and lower cost.

Other Delivery System Reforms The measure provides financial incentives to reduce preventable hospital admissions, expanding this policy over time to take account of the important role that physicians and post-acute care providers play in avoiding readmissions.

It also calls for demonstrations of bundled payments that encourage providers to coordinate care across the entire spectrum: from the physician’s office to the hospital, through a rehabilitative or nursing facility stay, and back to home. The HHS secretary is to submit to Congress no later than three years after enactment a detailed plan on how to implement post-acute bundled payments.

Physician Ownership of Hospitals H.R. 3972 closes a loophole in the Stark self-referral rules that allows physicians to refer Medicare and Medicaid patients to hospitals in which they have a direct financial interest. It would prohibit physician ownership in hospitals that are new as of Jan. 1, 2009, and grandfather those operating prior to that date.