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Health Care Reform: Who's Paying to Shape It?

The $849 billion health care reform bill making its way through Congress promises to redefine the health care landscape. That's why health care companies are now spending hundreds of millions of dollars to shape the topography.


Health care groups — insurance companies, drugmakers, doctors — spent a record $486 million on lobbying in 2008, according to the Center for Responsive Politics, a nonpartisan watchdog focused on the influence of private money in government. This year, health organizations are on track to shatter that number, says Dave Levinthal, communications director for the Center for Responsive Politics: Health care groups spent $396.2 million on lobbying in the first 10 months of the year, and are expected to have amped up spending in November and December.

“Corporate and special interests have played an incredibly large role in the shaping of this legislation,” says Levinthal.

The big push will come in the next few weeks as the reform legislation makes its way through the Senate and then — if it passes — into conference, where Congress will reconcile the House’s version with the Senate’s own bill.

Here’s who the big players are, what they want, and what — so far — their influence has bought them.

Big Pharma

Pharmaceutical and health products companies have already spent more than $199 million to influence the legislation. Pfizer alone has spent more than $16 million this year making its case to the government.

What they want: The drugmakers have two big priorities:

  • Expanded prescription drug coverage for more Americans
  • Strong patent protections for so-called biologics — the new wave of drugs made from living cells rather than from chemical compounds

Pfizer spokesman Ray Kerins and other pharmaceutical executives claim they need at least 12 years of exclusivity to generate the profits needed to fuel the discovery of new drugs. (We’re taking that claim with a grain of salt: In 2008 Pfizer spent just 16.5 percent of its $48 billion in revenue on R&D; many of the new drugs in Pfizer’s pipeline have actually come from acquisitions.) The only pharmaceutical player to spend more than Pfizer on lobbying is the Pharmaceutical Research and Manufacturers of America ($19 million), an industry group representing most major pharmaceutical and biotechnology companies that is arguing for similar patent protections.

The payoff: So far, the industry efforts seem to have swayed lawmakers. The House and Senate bills both call for a 12-year exclusivity window on biologics that would keep generic competitors at bay. That’s seven years longer than under the current rules, which give drug manufacturers a five-year exclusivity window during which generic competitors cannot submit applications for FDA approval of a similar medication. (The longer biologics window would, however, allow FDA submissions before the exclusivity period ends.)

An expansion of Medicare in an amendment proposed by Senate majority leader Harry Reid last week would have dramatically expanded prescription drug coverage, but Senate Democrats dropped the expansion on Monday — a move that benefits health care providers but could hurt drugmakers.

Incidentally, Reid is among the top Senate recipients of campaign contributions from the pharmaceutical industry, having generated nearly $194,000 for his 2010 race from industry lobbying groups and individuals in the field, according to the CRP.

To be fair, though, the industry has made some concessions. In June, PhRMA promised to cut drug costs by $80 billion over the next 10 years, in part by selling select Medicare-covered drugs at half-price.


Insurers

Perhaps no one stands to lose (or gain) as much from health care reform as the insurance industry. Health services and HMOs spent $53 million in the first 10 months of the year on lobbying, according to the CRP. One of the biggest individual spenders was Blue Cross and Blue Shield, which has shelled out more than $3.5 million.

What they want: Insurers want the government to require all Americans to have insurance and to impose significant fines on those who refuse. They also want to kill the public plan — making private options the only game in town — and they want to offer nationwide plans subject to one set of rules, rather than plans that must meet individual state benefit standards.

A Blue Cross and Blue Shield spokeswoman argues that private insurers will gladly cover everyone, even those with pre-existing conditions, if the government requires that young people buy insurance — in effect subsidizing the cost of the very ill or elderly. The company maintains that a public plan would crowd out private insurers by underpaying physicians, making it cheaper for consumers but ultimately leading to shortages.

The payoff: The insurers have made headway on most of the items on their wish list.

  • Coverage mandates: To get younger Americans to sign up, individuals who do not buy insurance and are not covered by Medicare or Medicaid will be subject to a 2.5 percent tax on every dollar earned above $9,350, until they’ve paid the cost of the average plan, according to the terms of the House bill. The Senate bill includes similar fines.
  • Public option: The amendment introduced by Reid on Dec. 8 all but killed the public option. Although the full extent of Reid’s amendment will not be revealed until it passes through the Congressional Budget Office, details reported so far suggest it’s likely to allay insurers’ concerns: Instead of having the government offer a competing insurance plan, Reid’s amendment reportedly creates an exchange in which private insurers can offer low-frills high-deductible nonprofit plans.
  • National standards: Both the House and Senate bills say that an insurer will be able to sell plans nationwide that meet the requirements of a single state — a measure that some reform advocates say will lead to state-shopping for low coverage requirements. The Senate measure will effectively create a national standard that insurers need to meet — by choosing a yet-to-be-determined state as a yardstick - but will then bar states from refusing plans that don’t meet higher state standards.

“You are going to have a spiraling race to the bottom,” says Igor Volsky, a researcher and blogger at the Center for American Progress Action Fund, a progressive think tank. He says the change in rules will have insurers behaving like credit card companies, most of which incorporate in Delaware to take advantage of the state’s generous tax laws. “Insurers will have some floor standards that they will have to meet but, ultimately, you are going to have insurers move into states where there aren’t many regulations.”

Health Professionals and Hospitals

One of the other big Beltway lobbies is the American Medical Association, which represents American physicians; the group has spent $12 million this year trying to get its message out. Meanwhile, the Federation of American Hospitals and the National Association of Children’s Hospitals have spent more than $2.9 million and $1.7 million respectively on lobbying.

What they want: Among the many changes the health care providers want is a new Medicare and Medicaid reimbursement formula that would pay doctors and hospitals more money.

“[The current] financial model is not sustainable,” says Jim Kaufman, vice president of public policy at the National Association of Children’s Hospitals. “Where I used to work in Maryland, the reimbursement didn’t cover the cost of liability insurance and rent.”

The payoff: As far as the hospital and doctors are concerned, the health insurance requirements in both bills are a vast improvement over the status quo. Private physicians and public and private hospitals currently cover about 46.2 percent — about $46.4 billion worth — of the uninsured’s medical bills in the form of unreimbursed care, according to the FAH. If a reform law pushes 30 million of the roughly 48 million uninsured Americans to get some sort of coverage, as promised by lawmakers, hospitals could see their costs drop tremendously.

Children’s hospitals have won another victory: an extension of the government-funded Children’s Health Insurance Program, which provides coverage to kids at or below 250 percent of the poverty level. The program pays hospitals more than would Medicaid, the government’s other option for poor children. Sen. Bob Casey (D-PA) added the amendment early in December.

Meanwhile, Monday’s rollback of the proposed Medicare expansion also benefits health professionals, who argue that the system often doesn’t adequately compensate them for their costs.

In all, lobbyists may not have gotten everything they wanted. But their money hasn’t been wasted, says Center for Responsive Politics’ Levinthal. “At the end of the day money isn’t the full story — but when you are spending hundreds of millions of dollars to impact the way that a bill is written, oftentimes you will have more success than a group that is not,” he says.

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