I. MCare Abatement is helping Pennsylvania and its healthcare systems to address physician shortages by providing affordable and competitive liability insurance rates when compared to other states. Many parts of Pennsylvania, including Lancaster County, are already experiencing a growing shortage of physicians. MCare has helped to slow this deficit but not eliminate it. Given this critical role, any changes in Pennsylvania’s MCare Abatement Program must include careful examination of its three primary elements:

1. Abatement and how it influences the state and local ability to attract and retain the most qualified physicians.
2. MCare Fund and how it is designed and funded to ensure full coverage of all MCare costs (past, present, and future).
3. MCare Premiums and the continued affordability of these costs for physicians.

• Lancaster General updated its Medical Staff Planning Report in 2007 to assess community needs and the current number of primary care, medical specialty and surgical specialty physicians.
• Based on national standards, this study identified a current deficit of 72 physicians in Lancaster County.
• By 2012, this study projected a deficit of 162 physicians based on anticipated retirements and continued moderate growth in Lancaster County and a few additional zip code areas. This deficit includes:
  • 68 primary care physicians – essential as the ports of entry and primary providers of patient care.
  • 45 medical specialists (e.g. cardiology, endocrinology, neurology, infectious diseases, gastroenterology)
  • 49 surgical specialists (e.g. general and vascular surgery, neurosurgery, orthopedics, OB/GYN, urology, cardiovascular/thoracic surgery).

II. Any final agreement must ensure that all (current and future) unfunded liabilities will be fully and equitably covered. While the intent of tort reform has been to reduce or slow the accrual of actual liabilities, it does not eliminate the continuing accrual of these costs and the need to plan and budget for their payment. Any agreement to decrease or redirect a portion of the MCare Fund for other purposes must be restricted to only those funds available in excess of an appropriate allocation that is annually projected for these costs.

III. There should be a financial reconciliation if it is determined that hospitals and physicians have disproportionately shared in covering MCare costs. With no tobacco funds transferred to the fund since 2005, it appears that physicians and hospitals payments may be covering more than their expected share for these costs. There should be commitment to conduct this analysis and settle any imbalance as soon as all data are available.

STATE UPDATE

Fall 2007 has been a challenging period at both the state and federal levels. Pennsylvania’s Fall Legislative session started with a packed agenda of key bills including Mcare, Hazardous Waste, Energy, and Open Records. Most of these bills failed to achieve final approval from both Houses and now await action in the Spring session.

For physicians, hospitals and the healthcare industry, the greatest disappointment was the failure to achieve extension of the Mcare Abatement through 2008. The Senate approved Mcare bills twice but the House of Representatives adjourned for the year without voting on a Mcare bill. As session days ran out in December, a number of new developments contributed to this lack of action and three different positions on how to use Mcare funds emerged. Early in December, the Rendell administration identified a surplus of Mcare Funds and proposed using a portion of those monies to support expanded access to healthcare coverage under the Governor’s Cover all Pennsylvanians Plan (CAP). The Senate opposes linking CAP to the Mcare Fund and approved a bill to direct 50% of the funds to support continued abatement and unfunded liability costs, 50% for patient safety and IT initiatives. The House Republicans have proposed using the surplus to support a tax credit approach to expanding healthcare coverage and use.

The Governor has indicated he may delay physician payments that would normally come due in January to April 1, 2008. He said he would make a final decision between Christmas and New Year’s Day and lawmakers are expected to work on developing a compromise solution over the same period.

Physicians and hospitals must act now to contact Governor Ed Rendell and their state legislators urging the Governor to defer these payments and asking all parties to work together during the first quarter of 2008 to develop a compromise plan that protects Mcare Abatement without disruption.

FEDERAL UPDATE

On the federal level, the House and the Senate have been working for the past few weeks to develop a final budget bill that the President will sign. Several attempts to increase discretionary spending (e.g. State Children's Health Insurance Program [SCHIP]) have failed. The Senate passed a very restricted federal budget bill yesterday which goes to the House today for approval and then onto the President for final review and approval.

This proposed budget bill includes:

• Preventing the 10.1 percent cut to physician payment that would have occurred as of January 1, 2008, and instead gives a six month 0.5 percent update for physicians through June 30, 2008.
• Continue to provide additional payment incentives for physicians and other health care practitioners who report quality measures in the Physician Quality Reporting System.
• Revise the Physician Assistance and Quality Initiative Fund, which is intended to help stabilize physician payments and promote physician quality initiatives.
• Extend Medicare private plan cost contracts through 2009, which are due to expire at the end of 2008.
• Will ensure beneficiary access to long-term care hospitals. These facilities will receive regulatory relief for three years. Also, there will be a limited moratorium on the development of new long-term care facilities and a freeze to the annual long-term care hospital payment update for one quarter in rate year 2008.
• Ensure beneficiary access to inpatient rehabilitation facility services by addressing the 75 percent rule. This legislation would permanently freeze the compliance threshold at 60 percent and allow co-morbid conditions to count permanently toward this threshold.
• Extend the SCHIP through March 31, 2009. This provision makes additional funding available so that states do not have to scale back SCHIP. This SCHIP extension will ensure that no state has to cut back their program due to insufficient federal funding.