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Minnesota scores big win with new Medicare language in health care bill

WASHINGTON, D.C. — In a huge win for Minnesota, the health care reform bill in the Senate Finance Committee now includes language that will fundamentally change how Medicare payments are made in order to reward states that provide high-quality, low-cost care.

The bill — unveiled last week by Sen. Max Baucus, who chairs the Finance Committee — originally did not include the Medicare payment reform language.

But, Baucus decided to add it late last night after an evening meeting with Minnesota Sen. Amy Klobuchar and other Finance Committee senators from such states as Washington and Oregon that also provide high-quality health care at relatively low costs.

“We are pretty excited about it,” said Klobuchar, who introduced a Medicare payment reform bill earlier this summer. “This is a big deal because it was our original work that I have been doing, and this was our bill from the beginning,”

Proposal represents biggest Medicare payment change ever
The proposal, which would be budget neutral, would establish a new payment structure for Medicare based on quality of care. If enacted, it would represent the most significant change to the Medicare payment model since the government-run program went into effect in 1966.

Medicare, which covers those age 65 and older, currently uses a fee-for-service model. The result is that states that provide fewer health care services — such as Minnesota, Wisconsin, North Dakota, Washington and Oregon — receive less money. At the same time, states that provide a greater volume of services — such as Florida, New York, California and Texas — receive reimbursements that can be more than double those paid to other states.

The problem with the current model is that more services do not equal better outcomes and quality of care, according to research conducted over the last 10 years by the Dartmouth Institute for Health Policy and Clinical Practice.

The issue, however, has been a nonstarter for years, in part because such politically powerful states as Florida, New York, California and Texas benefit from the current model.

But, last week, a bipartisan group of 28 senators, including Klobuchar and Minnesota Sen. Al Franken, who has also been working to have the measure included, wrote a letter to the president stressing the importance of robust Medicare payment reforms.

Sen. Amy Klobuchar
Sen. Amy Klobuchar

Today, Klobuchar said that senators on the Finance Committee from states that have lower quality care “seemed to be coming around.”

“They realize they need our support to get this done,” said Klobuchar.

Language would link payments
to quality, not volume

Thus, the new language in the Senate Finance bill would finally connect Medicare reimbursements to quality, as opposed to volume.

The measure gives the secretary of Health and Human Services, working with the Centers for Medicare and Medicaid Services, the power to develop quality measurements and a payment structure that would be based on quality of care relative to the cost of care. The secretary would have to account for variables that include geographic variations, demographic characteristics of a region, and the baseline health status of a given provider’s Medicare beneficiaries.

The secretary would also be required to account for special conditions of providers in rural and underserved communities.

Additionally, the quality assessments would be done on a group-practice level, as opposed to a statewide level. Thus, the amendment would reward physicians who deliver quality health care even if they are in a relatively low quality region.

The secretary of Health and Human Services would begin to implement the new payment structure in 2015. By 2017, all physician payments would need to be based on quality.

“The change included today will help control costs and get the most from our health care dollars. This will strengthen the strong safety net of Medicare by ensuring funds are there to pay for our seniors’ health care,” Klobuchar said in a statement.

The Mayo Clinic applauded the measure.

“It’s great,” said Bruce Kelly, director of government relations for the Mayo Clinic, adding: “It is starting to move Medicare in the direction of incorporating value into how they pay.”

Mayo also has supported the agreement that the House reached earlier this summer on Medicare payment reform.

Senate, House versions differ
Under the House agreement, the Institute of Medicine would have the responsibility of conducting two studies, one on geographic variations in payments and the other on how to reflect quality of care through reimbursements.

Based on the study results, the secretary of Health and Human Services would have to implement a new payment rate and submit the plan to Congress, which then would have the opportunity to veto the new payment model.

On Tuesday, Kelly said he did not favor one proposal over the other.

“At this point, I would say it is premature for us to pick sides,” said Kelly, adding, “The fact that both bills have this concept in there is a great success.”

In the Senate, however, proponents of payment reform have said that the language included in the Finance Committee bill is stronger than the House proposal.

“We would say no study, no delay,” Klobuchar said.

“It would not give veto power to Congress later on and it would be a straight rewarding of cost efficiency as opposed to putting in some money for the inefficient states.”

Though the measure made it over a major hurdle today when Baucus decided to include the language, there is still the likelihood that details will change.

The bill that is ultimately passed out of the Finance Committee will need to be merged with the bill that the Health Committee passed. Then, the resulting legislation will need to be passed by the Senate. Likewise, the health care bills on the House side also need to be merged and passed. At the end of all of that, the bills will go to conference committee to reach final agreement. And, at each stage, changes to the measure could be made.

Cynthia Dizikes covers Minnesota’s congressional delegation and reports on issues and developments in Washington, D.C. She can be reached at cdizikes[at]minnpost[dot]com.

Comments (22)

  1. Submitted by Rebecca Hoover on 09/22/2009 - 06:30 pm.

    The problem with Klobuchar is that she still is not paying attention to the needs of average Minnesotans. All of those without coverage because of senators like Klobuchar are not going to be all that interested in this “big win”. Klobuchar needs to start paying attention to what average Minnesotans need.

    Wherever I go I hear people expressing concern about Klobuchar’s handling of the health care issue. Just today I talked to a woman who had even helped raise money for Klobuchar and who had hosted a house party of Klobuchar, and she was furious at the way Klobuchar is not working to get coverage for all Minnesotans.

  2. Submitted by Paul Brandon on 09/23/2009 - 09:52 am.

    Note that the real reason that ALL Minnesotans do not have health care insurance is TPaw’s budget cuts.
    And of course the ‘average’ Minnesotan does have health care insurance; it’s a small but significant minority that doesn’t.

  3. Submitted by Paul Brandon on 09/23/2009 - 09:57 am.

    If the final bill actually measures health care quality (with proper control for the initial health of populations) rather than simply health care cost and treatment measures, the gain for states like Minnesota will be much less than anticipated.
    A large part of the treatment cost difference is that in states with large poor and uninsured populations, people have less preventive care and early diagnosis, leading to more expensive treatment when they show up in the emergency room.
    As far as I know, Klobuchar’s bill does not address this; only broadening health care coverage would.

  4. Submitted by Greg Kapphahn on 09/23/2009 - 10:01 am.

    If this change in medicare is included in the final bill, it will be not only a great victory in fairness for medically efficient states such as Minnesota, but also stands to reduce the overall cost of medicare nationwide as those physicians and hospitals who make a great deal of money performing a large number of futile procedures on frail, elderly people in the last few months of their lives find they will no longer be handsomely rewarded for doing so.

    As to the needs of regular Minnesotans, all these details have yet to be hammered out. There is no doubt that, at this point in time, no matter how much Senators Franken and Klobuchar might battle for exactly the bill we want, that’s not what we’re going to get.

    Because of the power of the “Blue Dog” Democrats, this bill can’t be anything but a first step in health care reform. It will be a major step, but will not be what we wish it would.

    As far as the fate of regular Minnesotans regarding health care, we need to be looking at Gov. Pawlenty and the way he’s consistently used vetoes and more recently, unallotment, to force the legislature’s compliance as he used a large proportion of the proceeds from the Healthcare access fund to balance the general fund budget, rather than support MN Comprehensive and MN Care.

    In this and so many other shady ways, Tim has consistently protected his wealthy friends from returning to the tax rates they paid when Minnesota had its most prosperous days (for the general population) and the entire state was the most prosperous in the upper midwest, and further impoverished those of lesser means in the process, which, as is typical, places enough drag on the state economy to take down the standard of living of most of the state’s population.

  5. Submitted by Alicia DeMatteo on 09/23/2009 - 12:14 pm.

    This model of giving more money for higher quality outcomes seems to be big in Washington lately.

    While I understand why it sounds good on paper, I wonder how anyone expects a lower-performing entity (be it a hospital or a school or what have you) to all of a sudden do better with less money.


  6. Submitted by Steve Titterud on 09/23/2009 - 04:34 pm.

    I don’t see the names of senators from NY, CA, or FL subscribing that letter. Representatives of the more populous states, beneficiaries of the current payment logic, are reacting to this idea as a loss to their state and constituents. They’re not against quality care – they just don’t want their states to foot the bill for a change in the payment system. I think their objections could be mitigated by a protracted phase-in.

    #5: Some of the changes which result in better quality health care outcomes are quite ordinary and based in common sense – like the procedural checklist now coming into wide use in surgery. This has reduced certain negative outcomes at little or no expense. You know, put a big “X” on the thing you’re going to remove, so you don’t cut off the wrong one, things like that.

    So a “lower-performing entity” can achieve a certain level of health care quality improvement AND an increase in revenue simply by a little of the right kind of effort, as in the example I’ve cited.

  7. Submitted by Rebecca Hoover on 09/23/2009 - 05:32 pm.

    This supposed “big win” is really small potatoes. The New England Journal of Medicine just published some articles about needed reforms and one pointed out the need for a ‘public option’ to help get a handle on costs. Compared to the cost savings a ‘public option’ would bring, this Mayo/quality stuff is small potatoes. As the article in the New England Journal of Medicine pointed out, some areas have only and couple of insurance companies and there is no real competition. A public option is needed to bring competition and to help bring down costs.

  8. Submitted by Bernice Vetsch on 09/23/2009 - 07:32 pm.

    Rebecca H. Amen. Without a good public option, we will have to subsidize for millions of people expensive private insurance premiums that, as far as I know, will continue to rise every year.

    Thom Hartmann suggests making Medicare THE public option by opening it to any American under 65 who enrolls and pays its modest premiums (this, year about $100 per month, plus deductibles).

    The payment reforms are a good move, but even more important is paying practitioners enough to cover their costs. Many clinics in small towns have said they can no longer afford to accept Medicare payments. Fairness to providers should be Step 2 in this reform.

  9. Submitted by Dave Eldred on 09/23/2009 - 08:48 pm.

    A public option will not stop — it probably won’t even slow — health care costs from growing. You can tax every penny of profit from insurance companies and you’ll still see health care costs skyrocketing as long as doctors and hospitals are incentivized to provide more treatment, not better treatment. Heck, the Blues are basically non-profit right now — are their plans cheaper than the for-profit companies?

    Kudos to Senator Klobuchar for seeing through the evil insurance company strawman and working for actual health care reform. Now, find a way to do the same to commercial insurance and we’re a long way to making health care affordable.

    Get that done and providing health care insurance to every American is suddenly affordable.

    That’s how they do it in the Netherlands — it can work here, too.

  10. Submitted by Rebecca Hoover on 09/23/2009 - 11:47 pm.

    Dave E., a monopoly is a monopoly is a monopoly. Some of these insurance companies have near monopolies, and you are sadly mistaken if you think they will give up their exorbitant premiums and profits unless forced by competition to do so.

    This is why we need a public option. Competition for these monopolies and near monopolies is needed to force lower prices. This competition is far more important that the small potatoes stuff Amy is doing.

  11. Submitted by Rebecca Hoover on 09/24/2009 - 12:29 am.

    Paul B., the problem is that the average Minnesotan can lose their coverage at any time. Our lack of a public option makes the insurance situation too risky for the average person.

    Dave E., I have to make one more point. I do not think one can compare the Netherlands to the USA. Sure, the Netherlands has lower costs than the USA but the people of the Netherlands are far more health conscious that the people of the USA. Only about 10% of the Dutch are obese compared to about 1/3 of adults in the USA. Also, the Dutch pride themselves on low-cost “natural” solutions–that is part of their culture. Those from the USA, in contrast, largely hold “natural” , low-cost solutions in low regard.

    Further, Netherlands has a system that is very controlled. Insurance companies must provide health insurance at a fixed price for all. The same premium is paid whether young or old, healthy or sick. Amy has not made any suggestion that we adopt something similar in the USA.

    Amy’s Mayo/quality stuff is not going to do one thing to bring us closer to what health care is like in the Netherlands. Now if Amy was proposing insurance that must be provided at a fixed price for all, that would be a different matter. As it is, Amy’s proposals aren’t going to have much of an impact. Amy doesn’t see the big picture and is barking up the wrong tree.

    And the average people of Minnesota who could lose their coverage at anytime may well find themselves suffering as a result. I know people who have lost their jobs in this recession and who never expected to experience the loss of insurance, etc., they are now experiencing. Believe me, these folks all want a public option.

  12. Submitted by Dave Eldred on 09/24/2009 - 09:16 am.

    Rebecca, every problem you raise can be solved without a public option.

    First of all, the insurance industry isn’t a monopoly — but I see what you’re getting at.

    In terms of insurance company profits, congress can eliminate them at will without a public option: simply tax the profits or require that X cents of every dollar received in premium be paid back to the insured.

    With respect to losing coverage, simply change the regs to require companies to continue providing coverage. In effect, amend COBRA so that losing coverage is no longer an issue.

    As far as the Dutch being more health concious than Americans — very true. So simply incent Americans to engage in healthy behaviors. Triple the tax on cigarettes. Provide deep discounts for those who can demonstrate they exercise regularly. Smoking in Manhatten has dropped by over 10% in the last three years because cigarette prices are nearly ten dollars a pack. You hit people in the pocketbook; they will respond.

    Frankly, all of that is beside the point: even if the public option will provide competition to lower insurance premiums (something I am highly skeptical will happen — as noted, non-profit insurance companies aren’t offering significantly cheaper policies today, what evidence exists to suggest that the government can run an insurance company more efficiently than the Blues?), you will do nothing to contain the explosive growth in health care costs.

    The simple fact is insurance company profits are not driving the massive growth in health care costs. Overtreatment and technology (medical device and drugs) are the problems. Until you stop incentivizing doctors on via a fee for service — as opposed to fee for quality — method, health care costs will continue to explode, public option or not.

    Senator Klobuchar’s bill is a start in the right direction. Until the true drivers of health care cost increases are reined in, no problem is solved. A public option will be a quagmire that solves nothing in the current system.

  13. Submitted by Rebecca Hoover on 09/24/2009 - 10:09 am.

    Unfortunately, like it or not, Amy’s bill does not address the key issues and that is why it is small potatoes and will not do much. First, when about 20% of health care costs involve the paperwork and need for insurance company profits created by the whole insurance system and unimaginable volumes of busy work and paperwork, it is apparent that steps that will streamline this are needed. The public option would help do that. Amy’s little proposal will not address this quagmire.

    Second, most experts believe that about 40% to 50% of our health care costs are the result of poor life style choices. Americans are driving up health care costs and digging their graves with their teeth by eating too much and eating unhealthy foods, exercising too little, and still smoking too much. Amy’s little proposal doesn’t do a thing to address these problems.

    In short, Amy’s little proposal misses the mark. Doctors ordering excessive tests and procedures are hardly a major portion of our problems. The big problems are insurance companies and life style choices.

  14. Submitted by Dave Eldred on 09/24/2009 - 10:53 am.

    “In short, Amy’s little proposal misses the mark. Doctors ordering excessive tests and procedures are hardly a major portion of our problems. The big problems are insurance companies and life style choices.”

    As I mentioned, Senator Klobuchar’s “little proposal” is only a first step. Additionally, to term it a “little proposal” is belittling and, frankly, is flat out incorrect.

    Our entire health care industry is set up on the premise that doctors and facilities are paid for the quanitty of services rendered. This sets up a system that rewards high use — not high quality. That is the most fundamental flaw with our health care system, and until it is addressed, you can expect to see spiraling health care costs. This amendment could potentially indicate a sea change in how health care is paid for in this country — how that is “little” makes no sense to me.

    In terms of the life style of Americans, I agree, that is an issue that drives health care costs — but how will a public option do anything to solve that problem? As I mentioned, the system needs to incent healthy behaviors, which it does not adequately do now. This is true whether there is a public option or not.

    As for this statement: “when about 20% of health care costs involve the paperwork and need for insurance company profits created by the whole insurance system and unimaginable volumes of busy work and paperwork” — is either misleading, inaccurate, or both.

    Could you pull private insurance company profits out of the equation? Ok, sure — is that 20% of health care spend? No — it is a few percent at most. Do you need a public option to do that? No — just regulate the private health insurance industry differently. If you don’t believe private companies shuold be allowed to profit, either require a certain percentage of premium fees to go back to the member or tax profits.

    So that leaves the paperwork and administrative costs to make up the rest of your 20% number. How exactly would a public option reduce those costs? Private health insurance companies have every incentive and reason in the world to keep those costs as low as possible — the more efficient they are, the higher the profits. Why do we believe the government could run an insurance company more efficiently? As I’ve noted repeatedly, the non-profit insurance companies can’t do it. What is special about the government?

    If health care reform is done right, we can cover everyone, have the money to pay for it, and control cost inceases down the line so we’re not debating this again 5-10 years down the line. Simply adding a public option won’t solve any problems long term.

  15. Submitted by Rebecca Hoover on 09/24/2009 - 11:12 am.

    Dave E.,

    It seems that you are a general counsel (an attorrney) for UnitedHealth Group. Is that correct? I think it would be helpful for others to know this so they can consider that you may just be advocating for the interests of big insurance.

    I personally find Amy’s little proposal to be small potatoes. I think your attempt and Amy’s to suggest that doctors are a big part of the problem is an attempt to divert attention from the problems caused by big insurance.


  16. Submitted by Dave Eldred on 09/24/2009 - 11:30 am.

    Rebecca, to be perfectly clear: I advocate on no one’s behalf but my own. Everything I have written is my personal opinion as a concerned citizen interested in health care reform.

    I see that you have chosen not to respond substantively to my arguments. In this health care debate, it is easy to throw empty arguments around from all sides: from the right, we’ve heard about mythical death panels; on the left, we’ve heard that the public option is a mystical panacea for all that is wrong with health care in America.

    Unfortunately, facts do not support either of these arugments.

    Let’s have an honest debate based on facts and reality. Health care is too important to be reduced to talking points that have no substance behind them.

    I’d be curious to see if you have any substance to support your arguments, as I haven’t seen it yet. If you do, please respond, I’d like to continue our discussion. This is a key moment for health care, let’s take advantage of it.

  17. Submitted by Rebecca Hoover on 09/24/2009 - 01:03 pm.


    I would respond to your emails more thoroughly if I thought you were truly speaking for yourself. It seems, however, that you are an attorney/exec for UnitedHealth Group and so I think responding is not a good use of my time.

    The bottom line is that I and many others support a public option because we believe that big insurance has not done a good job and many, many individuals have had very bad experiences with big insurance companies. Also, it is increasingly important that we all work for much needed lifestyle improvements because lifestyle choices are driving up healthy care costs.

    To be clear, this is the reason I am not posting to this thread anymore. I do not think continuing to exchange messages with you is a good use of my time.


  18. Submitted by Dave Eldred on 09/24/2009 - 01:29 pm.

    Rebecca, I’m sorry and disappointed you have chosen not to engage in a substantive conversation. Again, I do not speak for anyone other than myself. I am open minded and willing to listen to substantive arguments that differ from my own – I am sorry that you have chosen to hide your arguments for a public option.

    I have not yet heard a reasoned and cogent argument — from you or anyone — as to how the public option will solve any of the issues you raise. It is true that you do not have to continue this conversation with me, but someone, at some point, is going to have to explain to America how the public option will help solve the issues with our health care system.

  19. Submitted by Alice Johnson on 09/30/2009 - 12:59 pm.

    Rebecca, I am not and will never be a fan of the big health plans. I have worked in Health Care finance for over 20 years on the provider side. I have fought with health plans to properly reimburse for primary care services so that healthcare can be more cost effective. The problem is that all of the fee schedules for almost every healthplan is based on the inefficiencies and dislocations in the Medicare fee schedule. That is the root of our out of control costs pure and simple.
    The fact of the matter is that Dave is correct. The public option is no panacea. In fact in states like Minnesota it could end up hurting us if we begin to apply the Medicare or worse yet, Medicaid fee schedule to more people.
    Minnesota already has not for profit health plans who vigorously compete. We have no monopoly here.
    To her credit, Amy Klobuchar has figured this out and is moving to the root of the problem.
    The problems you raise can and must be solved through the insurance reforms that are part of every bill before congress and on which there is remarkable consensus.
    As much fun as it would be to put all the blame on United Health Group, they insure very few people in Minnesota, because they are for-profit and by law healthplans must be non-profit in Minnesota.
    To make the public option the only option is short sighted. It could be a useful tool or it could only make matters worse.
    We need to do cold eyed analysis of the problems and not fall back on ideological beliefs. That is what Senator Klobuchar appears to be doing.

    Alice Johnson

  20. Submitted by Rebecca Hoover on 10/01/2009 - 11:08 pm.

    No one is talking about making the public option the only option. Nor do I disagree with straightening out the Medicare reimbursement problem. What I do resent is that Amy has taken on only this one small part of the problem and seems to be completely ignoring the middle class. Those of us in the middle class have a strong stake in the public option because it offers an affordable way for those of us in the middle class to have some stability. We can be devastated by health problems or by economic downturns that cause us to lose insurance.

    This is why the public option is widely supported by the middle class and Amy is simply ignoring the needs of a large portion of the population that voted for her. She seems far more interested in protecting the interests of big insurance that would make a windfall from the totally unacceptable bill that is coming out of Baucus’s committee.

    I rarely talk to anyone who plans to ever vote for Amy again. What we see is not a cold eye of analysis from Amy but a cold heart and self-serving behavior.

  21. Submitted by Rebecca Hoover on 10/02/2009 - 12:10 am.

    I should also add that I find it amazing that when so many are without health insurance that Amy continues to ignore the devastating impact the lack of affordable health insurance is having on middle class families during this severe economic downturn.

    And these problems can only get worse with a public option. The average employer-sponsored premium for a family of four costs close to $13,000 a year and the Congressional Budget Office estimates these costs will rise to $25,000 per year by 2018. Premiums for individually purchased policies are even higher if indeed such policies are even available which they may not be when there are pre-existing conditions. Most middle class family cannot afford these premiums. Yet Amy has ignored the suffering of the middle class.

    Moreover, Amy’s approach is small-minded and far too narrow. If we want to control costs, we must do many things and Amy’s little Medicare reimbursement issue is only a small part of the picture.

    We must rein in the excessive executive salaries at places like UnitedHealth Group. The former CEO retired as a billionaire–money made by denying claims and cherry picking insureds. No one has suggested, however, that big insurance is the only problem and your suggestion that anyone has done so is out of line.

    As I and many, many others have pointed out we must also address widespread public health problems arising from unhealthy lifestyle choices leading to obesity and various other health problems. Approxiately 40 to 50% of our health care costs arise from poor life style choices.

    We must also increase competition because companies such as UnitedHealth Group have used consolidation to become near monopolies. Such competition is one purpose of a public option. Anti-trust lawsuit should also be used.

    If Amy were looking at the total picture, so many would not be so angry with her. Instead of doing this, however, she is listening to individuals only such as attorney, the General Counsel, from UnitedHealth Group and yourself (I noticed you are Director of Finance at a hospital). Instead of such limited listening, she needs to consider the grave harm the near monopolies in the health insurance industry are causing in our society, the needs of the middle class, etc. Amy has a lot of amends to make.

  22. Submitted by Rebecca Hoover on 10/02/2009 - 11:27 am.

    I wrote: “And these problems can only get worse with a public option. The average employer-sponsored premium for a family of four costs close to $13,000 a year and the Congressional Budget Office estimates these costs will rise to $25,000 per year by 2018.” I meant to write “these problems can only get worse WITHOUT a public option”. It is important to look at how little money the average middle class family in Minnesota has.

    Alice, I looked up information on the Courage Center where you work in an attempt to understand your point of view. I saw the Center provides only out-patient services not in-patient as I initially thought. I also saw that in the fiscal year 2006, the Center had annual revenues of $36,423,927. The 2006 IRS 990 tax report for the your organization is the most recent one readily available on the Internet. These revenues explain, of course, why you are interested in the reimbursement issue Amy addressed. Many in your industry have been discussing this issue for many, many years–for at least 10 and perhaps 15 or longer. It was not especially perceptive of Amy to notice this issue. Amy’s attention to this issue, however, is not the problem. Her lack of attention to the middle class and the little fellers is the problem as is her narrow view.

    Information on your salary is also public information, by law, and helps explain why you do not understand the urgency of the public option for the middle class. I found that in 2006, the Courage Center paid you $144,829 plus $8,677 in contributions to employee benefit and deferred compensation plans. In contrast, the median house income has dropped from its high about about $60,000 per year to about $57,000 and is probably even lower now. This is why the Baucus bill infuriates the middle class. The middle class cannot afford health insurance premiums for a family of four of about $13,000 per year. For you this may be a drop in the bucket, but for the average family those bills that do not include the public option are simply unacceptable to the average middle class family.

    The problem with the attorney and general counsel from UnitedHealth Group, Mr. Eldred and yourself, seems to be that your own far above average incomes have blinded you to the plight of the middle class.

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