Product & Healthcare Industry News

Health Care and the American Recovery and Reinvestment Act

On February 17, 2009, four weeks after his inauguration, President Barack Obama signed into law a $787 billion economic stimulus package.^1,2 The economic impact of the American Recovery and Reinvestment Act of 2009, as the measure is officially known, will not be apparent for months. Nonetheless, the bill's approval — even before any new senior officials of the Department of Health and Human Services (DHHS) were in place — has jump-started the Obama administration's plans for health care.

By launching broad federal initiatives for biomedical and comparative effectiveness research, the adoption of health information technology, and the protection of the privacy and security of medical records, the stimulus law should have major and immediate effects. It directs to health care about $150 billion in new funds (see table), most of which will be spent within 2 years. The spending includes $87 billion for Medicaid, $24.7 billion to subsidize private health insurance for people who lose or have lost their jobs, $19.2 billion for health information technology, and $10 billion for the National Institutes of Health (NIH). The new NIH funding, equivalent to a third of the institutes' $29.5 billion annual budget, was added at the insistence of Senator Arlen Specter (R-PA), a strong supporter of the agency. Specter, who has survived a brain tumor and two episodes of Hodgkin's disease, was one of the three Republicans in Congress who voted for the legislation.

Health Care Spending Provisions of the American Recovery and Reinvestment Act of 2009
Program or Investment Area	Amount and Purpose of Funding
Comparative effectiveness research	$1.1 billion, of which $300 million will be administered by the agency for healthcare research and quality, $400 million by the NIH, and $400 million by the secretary of health and human services.
Continuation of health insurance coverage for unemployed workers	$24.7 billion to provide a 65% federal subsidy for up to 9 months of premiums under the Consolidated Omnibus Budget Reconciliation Act. The subsidy will help workers who lose their jobs to continue coverage for themselves and their families.
Department of Defense and Veterans Affairs	More than $1.4 billion for the construction and renovation of health care facilities.
Health Information Technology	$19.2 billion, including $17.2 billion for financial incentives to physicians and hospitals through Medicare and Medicaid to promote the use of electronic health records and other health information technology and $2 billion for affiliated grants and loans to be administered by the office of the National Coordinator for Health Information Technology. Physicians may be eligible for grants of $40,000 to $65,000 over multiple years, and hospitals for up to $11 million.
Health Resources and Services Administration	$2.5 billion, including $1.5 billion for construction, equipment, and health information technology at community health centers; $500 million for services at these centers; $30 million for the NHSC; and $200 million for other health professionals training programs.
Medicare	$338 million for payments to teaching hospitals, hospice programs, and long-term care hospitals.
Medicaid and other state health programs	$87 billion for additional federal matching payments for state Medicaid programs for a 27-month period that began October 1, 2008, and $3.2 billion for additional state fiscal relief related to Medicaid and other health programs.
National Institutes of Health	$10 billion, including $8.2 billion for new grants and related activities and $1.8 billion for construction and renovation of NIH buildings and facilities, extramural research facilities, and research equipment.
Prevention and wellness	$1 billion, including $650 million for clinical and community-based prevention activities that will address rates of chronic diseases, as determined by the secretary of health and human services; $300 million to the Centers for Disease Control and Prevention for immunizations for low-income children and adults; and $50 million to states to reduce the health care-associated infections.
Public Health and Social Services Emergency Fund	$50 million to the DHHS to improve the security of information technology.

The act also provides $650 million to support prevention and wellness activities targeting obesity, smoking, and other risk factors for chronic diseases and $500 million for health professions training programs, including $300 million to revitalize the National Health Service Corps (NHSC). The NHSC provides loan repayment, salary support, and scholarships for physicians and other providers who practice in underserved areas. Under the Bush administration, its budget decreased to about $125 million per year, and it could award only 84 scholarships in fiscal 2008, less than 1 per medical school. The package increases by 50% the overall support for the NHSC and other workforce programs run by the Health Resources and Services Administration.

On the medical research front, comparative effectiveness studies that directly compare the risks and benefits of different treatments for a particular condition are essential for improving practice and slowing cost escalation. Such studies, however, have been controversial; the pharmaceutical and medical device industries may not fund them, and some are concerned that the government or insurers may use the results to mandate specific approaches to treatment or to deny coverage.

The federal government has already funded many important comparative studies, including one ongoing study, sponsored by the National Eye Institute, comparing two medications for age-related macular degeneration that are both made by Genentech and another ongoing trial, sponsored by the National Heart, Lung, and Blood Institute, comparing percutaneous intervention involving drug-eluting stents with bypass surgery for patients with diabetes and multivessel coronary artery disease. With the money allocated in the stimulus bill, the government will be able to fund many more such trials, as well as clinical registries, clinical data networks, and systematic reviews. Indeed, the $1.1 billion in new funding for comparative effectiveness research dwarfs the current $334 million annual budget of the Agency for Healthcare Research and Quality, which will administer $300 million of the funds; the NIH and the DHHS will administer the rest.

In addition, the act includes funds for a contract under which the Institute of Medicine will make recommendations (by June 30, 2009) for "national priorities for comparative effectiveness research." It establishes a Federal Coordinating Council for Comparative Effectiveness Research, which will be composed of up to 15 federal officials (at least half of whom are physicians or others with clinical expertise) and chaired by the secretary of health and human services. The council will be tasked with recommending and coordinating research but will not be able to establish clinical guidelines or to "mandate coverage, reimbursement, or other policies for any public or private payer."¹ The legislation also points to the importance of including women and minorities in this research, since different groups may have different responses to treatments.

Although the federal government has long spent billions on health care, there is no precedent for the act's massive investment in accelerating the adoption of health information technology — or for the expanded leadership role that government will assume in this arena. At present, perhaps only 17% of U.S. physicians and 8 to 10% of U.S. hospitals have at least a basic electronic health record system. Far fewer have — and routinely use — the types of comprehensive systems that would allow them to fully realize the potential of the technology.³ However, such technology will lead to improvements in the quality of care and savings on other health care costs only if the implementation is done right.

In 2004, the Bush administration, by executive order, created the Office of the National Coordinator for Health Information Technology as part of the DHHS. But Congress had never established the office in law, and its funding has been only about $60 million a year. The stimulus legislation codifies the national coordinator position and office, provides $2 billion for discretionary spending, primarily for grants and loans, and sets a goal of "utilization of a certified electronic health record for each person in the United States by 2014." It establishes two federal advisory committees on health information technology — one on policy and one on standards — through which the government will work with the private sector and consumer groups to develop the specifics of a nationwide health information network. These include the design of "interoperable" electronic health records that permit the seamless exchange of data among physicians, hospitals, laboratories, pharmacies, and other health care organizations, as well as methods for ensuring the privacy and security of patient data. Standards are to be developed in 2009 and tested and certified in 2010; the DHHS will certify specific products.

Beginning in 2011, Medicare and Medicaid will provide financial incentives over multiple years of up to $40,000 to $65,000 per eligible physician and up to $11 million per hospital for "meaningful" use of health information technology, such as the electronic exchange of data and reporting of clinical quality measures. Starting in 2015, physicians and hospitals that do not use certified products in a meaningful way will be penalized. The Congressional Budget Office projects that the incentives will boost the proportions of physicians and hospitals adopting comprehensive electronic health records by 2019 to 90% and 70%, respectively, from the 65% and 45% that would be expected to do so anyway.⁴

Improved safeguards for the privacy and security of individually identifiable health information and the prevention of commercial exploitation are critical to the success of a nationwide network. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) was enacted before many of the online entities and communications that have become a routine part of health care had even been contemplated. Under HIPAA, every person has had "a right of access to inspect and obtain a copy of protected health information," with certain exceptions, such as psychotherapy notes. However, electronic medical records have typically been printed out and given to patients in paper form. Now, patients will have the right to obtain an electronic copy of their electronic medical records and to have it transmitted directly to a physician, a hospital, or another entity that they designate.

The stimulus act also incorporates other rule changes that privacy advocates and some lawmakers had been seeking for years. For example, it allows patients to request an "audit trail" showing all electronic disclosures of their health information and mandates that they be notified about any unauthorized disclosure or use. It extends protections to personally controlled electronic health data (such as those stored by Google Health, Microsoft HealthVault, and other online data repositories), as well as to companies that do work on behalf of health care providers, health plans, and health care clearinghouses (the entities covered under HIPAA). When individually identifiable health information is transmitted or physically transported, such as on a laptop computer, outside a health care entity, it must be encrypted or otherwise rendered indecipherable to unauthorized individuals. The act also includes limits on the sale of an individual patient's health information or its unauthorized use in marketing or fund-raising, increases penalties for violations, and strengthens enforcement and oversight.

After he was named the White House chief of staff in November, Rahm Emanuel remarked, "You never want a serious crisis to go to waste." Clearly, the economic crisis has allowed the Obama administration to undertake far-reaching health care initiatives that it could not otherwise have launched quickly, if at all. The government will now have to determine how to spend the money promptly — and wisely.

References:

1. The American Recovery and Reinvestment Act of 2009. H.R.1. (Accessed February 17, 2009, at http://thomas.loc.gov/cgi-bin/bdquery/z?d111:h.r.00001:.)
2. Conference Report on H.R.1, American Recovery and Reinvestment Act of 2009. 111th Congress, First Session, Congressional Record — House, February 12, 2009, 155: H1307-1516. (Accessed February 17, 2009, at http://www.conferencereport.gpoaccess.gov/.)
3. Blumenthal D. The federal role in promoting health information technology. New York: The Commonwealth Fund Perspectives on Health Reform, January 2009. (Accessed February 17, 2009, at http://www.commonwealthfund.org/Content/Publications/Perspectives-on-Health-Reform-Briefs/2009/Jan/The-Federal-Role-in-Promoting-Health-Information-Technology.htm.)
4. Sunshine RA. Letter to Honorable Charles B. Rangel, Chairman, Committee on Ways and Means, U.S. House of Representatives. Washington, DC: Congressional Budget Office, January 21, 2009. (Accessed February 17, 2009, at http://www.cbo.gov/.)