SEPTEMBER 19, 2005 -- Fearing its key lobbying goal for the year is now in even greater jeopardy, the American Medical Association (AMA) is hustling to keep Congress from fingering Medicare physician spending growth as the key culprit behind a big hike in beneficiary premiums announced Friday.

If Congress thinks rising Medicare physician spending is largely to blame for the 13 percent hike in monthly Part B premiums announced by Medicare, it may be more reluctant to pass legislation adding to that spending—namely, a measure sought by the AMA to prevent a scheduled 4.4 percent cut in Medicare payments to doctors next year.

Finding the billions of dollars needed to head off that cut will be a big enough challenge for Congress because of the huge amounts of money it plans to spend to assist efforts to recover from Hurricane Katrina. But if Congress thinks passing a new bill will drive Part B premiums far higher, the challenge becomes even more difficult for the AMA.

The Centers for Medicare and Medicaid Services said Sept. 16 that the Part B premium is rising 13 percent primarily because of a spending increase in Part B—the part of Medicare that covers various services other than inpatient hospital care.

But AMA Trustee James J. Rohack said late that day that "physician services account for less than one-fifth of [the] Part B increase." Other factors adding to higher Part B spending include clinical lab tests, payments to Medicare managed care plans, home care, ambulance services, and hospital outpatient services, he said.

Meanwhile, beneficiary complaints are growing about rising Part B premiums and other types of out-of-pocket costs Medicare patients must pay for treatment.

The giant senior lobby AARP is concerned about the cumulative effect of the Part B increase and other increases in cost-sharing, including a jump from $100 to $124 in the Part B deductible; a $40 increase in the deductible for beneficiaries who go to the hospital (to $952 in 2006), and the 40 percent that beneficiaries pay for hospital outpatient coinsurance, said Kirsten Sloan, the group's national health coordinator.

The Medicare Rights Center, an independent New York City–based group that counsels Medicare beneficiaries on their rights under the program, said the $10 increase in the Part B premium will "triple the cost of living increase people with Social Security can expect in 2006." Robert Hayes, the center's president, said that as a result, "more men and women will face harsh choices in meeting basic human needs of health, food, and housing."

Hayes faulted the administration for saying one in four beneficiaries can get help paying for Part B premiums. He said "bureaucratic hurdles" prevent many of those eligible for the assistance from actually receiving it. "The administration should not hide the hardship these increases will cause our parents and grandparents," Hayes said.

But the AMA is seeking to play down concerns about the impact of rising physician spending on the Part B premium not only by noting its limited impact, but also by noting that payment cuts will harm beneficiary access to physician care.

Rohack said access to care "will be in serious jeopardy" unless Congress and the Medicare program act to prevent scheduled cuts totaling 26 percent over the next six years.

"The cost of running a practice and caring for patients will go up 15 percent during that time, forcing many physicians to make the difficult decision to stop taking new Medicare patients into their practices," Rohack said.

SEPTEMBER 20, 2005 -- The Centers for Medicare and Medicaid Services (CMS) announced Monday the availability of a test version of an electronic health record system for use in doctors' offices.

The release of the test system is part of a Bush administration goal of fostering widespread adoption of such systems within 10 years.

"EHRs" are designed to provide a comprehensive list of all aspects of treatment a patient has received, as well as to issue reminders for preventive care and provide for electronic entry of drug prescriptions.

The test system was developed by the Department of Veterans Affairs, recognized as a pacesetter nationally in the adoption of electronic health records. Its name is "VistA-Office;" "VistA" stands for "Veterans Health Information Systems and Technology Architecture."

Rep. Pete Stark, D-Calif., said in a hearing in July that VistA is "basically the system that we could start with tomorrow" and added it would be available for free.

But Rep. Jim McCrery, R-La., also at the hearing, expressed concern about government intrusion on the private marketplace. He questioned if the release of the VistA system would in effect be a declaration that "that's going to be the platform forevermore."

The CMS press release Monday was written in language that seems unlikely to play up expectations for the software. The version being released will allow "an assessment of its effectiveness in private physician's offices," the agency said. The system is not "free" software, it added.

CMS said it also wants a chance to assess the system's potential for "interoperability"—that is, to work with other computer systems. Agency administrator Mark B. McClellan added that the test will help a public–private advisory committee created by HHS Secretary Michael O. Leavitt create a process for certifying electronic health records software.

Is VistA some sort of Trojan horse through which the Bush administration seeks to dramatically speed IT in spite of its philosophy against government involvement in the marketplace?

If so, National Health Information Technology Coordinator David Brailer certainly isn't letting on. Brailer emphatically denied at the July hearing by the House Ways and Means Health Subcommittee that VistA would become the de facto platform for electronic health records. He called it a "good solution" for "particular practice settings" but "not transformative" for health information technology adoption.

Michael Zamore, a policy adviser on health care information technology to one of the most liberal members of the House, Rep. Patrick J. Kennedy, D-R.I., agrees. "I think as a general rule the more physicians we can get using electronic medical records, the better off we're going to be."

But "this is a small step in that direction," he added. Only one-third of total adoption costs relate to software, he said; one-third is for hardware and the other third goes to training costs. VistA "doesn't obviate the need for a major move by the federal government to catalyze the movement of the health system into the information age."

SEPTEMBER 23, 2005 -- Medicare beneficiaries in 44 states will have access to private managed care plans that charge no premiums for drug coverage, Centers for Medicare and Medicaid Services administrator Mark McClellan said in a telephone press briefing Friday.

McClellan's announcement of the final approval of prescription drug plans to be offered in Medicare in 2006 also made clear that beneficiaries will have a very large number of other types of low-cost drug coverage plans from which to choose.

But the announcement also aroused concern that Medicare enrollees would be confused by having too many choices. And it fueled industry speculation that many plans would drop out in 2007 and that others would sharply raise premiums.

During the debate over the Medicare overhaul law, President Bush wanted to give an edge to private health plans by requiring beneficiaries to enroll in them if they wanted Medicare prescription drug coverage. That didn't fly politically, but now the president appears to have the next best thing: a marketplace created by the law in which Medicare HMOs and PPOs will be able to lure seniors with far more generous drug coverage than traditional Medicare.

"In 1971, Richard Nixon proposed Medicare HMOs," said Alec Vachon, a former GOP Senate Finance Committee staffer. "Thirty-four years later, George Bush and Mark McClellan may be living the dream."

Friday's announcement concerned both the prescription drug plans to be offered in 2006 in traditional Medicare—called "PDPs," or Prescription Drug Plans—and those in the managed care side of Medicare, called "Medicare Advantage."

While premiums charged to those who stay in traditional Medicare will be much lower than the $35 per month many analysts predicted—McClellan said all states except Alaska will have at least one PDP charging premiums lower than $20—that's still a lot more than zero, particularly for seniors on tight budgets.

Managed care enrollment in Medicare has never been big. Of the program's 43 million enrollees, only about 5 million are in Medicare Advantage plans.

Industry analysts shy away from forecasts, but the industry is buzzing about the potential enrollment impact of managed care plans charging zero premiums for drug coverage. "It could be big," says an industry executive. "People buy on the basis of premiums, brand name," and whether their doctor is in the network.

McClellan also announced that regional preferred provider organizations would be offered in 37 states. Drug coverage offered by those plans—the first such regional plans in Medicare—could lure rural residents into the managed care side of the program for the first time.

The approvals announced Friday indicate the marketplace created by the law has answered the complaints of rural lawmakers that their residents have no access to managed care plans.

In Iowa, for example, home state of Republican Senate Finance Committee Chairman Charles Grassley, at least five Medicare Advantage plans will be offered. And in Montana, home state of the committee's ranking member Max Baucus, at least four Medicare Advantage plans will be on the menu of choices.

Too Many Choices?
The statistics released Friday on approvals obscure the fact that beneficiaries in many states may have to sort through literally dozens of choices. McClellan said 11 to 20 organizations in each state will offer PDPs. But each organization may offer up to three different coverage options.

In addition, particularly with zero premiums, beneficiaries are likely to look hard at the Medicare Advantage plans offering drug coverage. In California, for example, a total of 37 Medicare Advantage or PDP organizations will offer drug options, and in a number of cases, each is likely to offer multiple options.

Administration officials stressed the advantage of the choices that will be available. "Thanks to the range of options ... everyone in Medicare will be able to choose a prescription drug plan that addresses their individual concerns about cost, coverage, and convenience," HHS Secretary Michael O. Leavitt said.

Leavitt and McClellan also said beneficiaries will have plenty of help picking a plan, noting the agency's Web-based tools, the 1-800-Medicare hotline, and 140 networks of counselors around the country, they said.

But at least some Democrats say that's not enough. Reps. Pete Stark of California and Jan Schakowsky of Illinois urged Friday that the enrollment deadline for the drug benefit be delayed from May 15 to Dec. 31 of 2006.

"Seniors citizens and people with disabilities will soon be inundated by marketers and have to sort through 40 to 50 plans without the support of independent counselors," said Schakowsky, urging adoption of a bill sponsored by the pair to slip the deadline.

Shakeout Ahead?
Veterans of the Medicare managed care market say they were floored by how many companies stepped forward to offer drug coverage and predicted a shakeout. "There are going to be a huge number of choices," said another industry source. "A lot of this is testing the waters." Given the mass pullout plans from the Medicare managed care market several years ago, beneficiaries may decide to stick with familiar names. AARP announced Friday it will offer a drug plan nationally that charges no deductibles. Blue Cross and Blue Shield plans also see themselves as having an edge because of their decades-long presence in the insurance market.

A total of 10 companies is offering drug coverage nationally, a number of them unfamiliar names.

Because premiums are priced low next year to grab market share and because there are a large number of plans, industry insiders predict price jumps for 2007 and fewer plans.

Reimbursement is a concern too. Blue Cross Blue Shield Association President Scott Serota expressed enthusiasm about the future of Medicare Advantage but also concern about possible Medicare cuts. A $10 billion "stabilization fund" to retain regional PPOs is "vulnerable," added Jane Galvin, Blues' director of regulatory affairs.

And if Congress yanks the $10 billion, it may make plans worry that it will later cut other types of payments too.

"It's not just the dollars, it's the signal Congress sends," Galvin said.

If news breaks of plan pullouts and rising premiums in late 2006, the Bush administration could have a senior backlash on its hands moving into the congressional elections. But if plans consolidate rather than pull out entirely, the hit may be diminished somewhat, because the enrollee wouldn't have to find an entirely new plan.

SEPTEMBER 22, 2005 -- The Social Security Administration announced Thursday that some 3 million people have submitted applications to qualify for the low-income prescription drug benefit provided under the Medicare overhaul law (PL 108-173).

Those who qualify will pay no or low premiums and deductibles, and generally will pay far lower co-payments per prescription than beneficiaries who receive standard Medicare prescription drug benefits.

On average, the added assistance available under the low-income benefit is $2,100 per year, according to the Social Security Administration (SSA).

The applications filed with SSA are used to determine whether the beneficiary meets asset test requirements. If assets exceed specified levels, applicants do not qualify for the low-income benefit even if they are eligible based on yearly income. If the asset test is met, beneficiaries enroll separately in low-income drug plans.

"This is an unprecedented initial response for a voluntary federal program for people with limited means," said Centers for Medicare and Medicaid Services (CMS) Administrator Mark B. McClellan. SSA didn't say how many of the 3 million applicants actually met the asset test, but McClellan said, "we expect that many of them will qualify."

McClellan also said CMS actuaries have projected that 4.6 million beneficiaries would enroll in the low-income benefit by 2006. "This is a good start in that direction," he said.

Commissioner of Social Security Jo Anne Barnhart said "work is far from over," and that her agency began work in May on mailing out more than 19 million applications to potential candidates for the low-income benefit. The agency is now in the process of making follow-up contacts with those who did not respond to the initial mailing.

SEPTEMBER 20, 2005 -- Many low-income and minority populations rely on Medicare Advantage plans because they are more affordable and include benefits not found in Medicare's traditional fee-for-service program, according to a new study released Tuesday.

The report, compiled on behalf of the BlueCross BlueShield Association, also found that Medicare Advantage plans reduce Medicaid costs when "dual eligibles," individuals who qualify for both Medicare and Medicaid, enroll in Medicare Advantage plans. Without Medicare Advantage, the study estimates that Medicaid costs would increase by $792 million annually and roughly $4 billion over five years.

Medicare Advantage plans are private health care plans offered to Medicare enrollees. As part of the new Medicare drug law (PL 108-173), many private insurers are expected to offer Medicare beneficiaries an array of health care services that go beyond traditional fee-for-service coverage, such as prescription drugs.

According to the study, 40 percent of African American and 53 percent of Hispanic beneficiaries without Medicaid or employer coverage rely on Medicare Advantage, as compared with 33 percent of non-Hispanic, white beneficiaries. The study also found that the plans had wide appeal to low-income beneficiaries, with 36 percent of Medicare eligible beneficiaries with incomes below $10,000 annually and 38 percent of those with incomes from $10,000 to $20,000 without Medicaid or employer coverage enrolling in Medicare Advantage plans.

In 2005, Medicare Advantage plans will provide Medicare beneficiaries with $3 billion in supplemental benefits at no additional cost to the beneficiary, or an annual average of $615 per Medicare Advantage enrollee net of premiums paid by beneficiaries.

Without Medicare Advantage in place, two million beneficiaries would lose supplemental coverage and would rely on Medicare alone for their health benefits, researchers found. As a result, the percentage of Americans without any supplemental coverage would increase by 32 percent. Ethnic minorities would be especially hard hit—the number of African-Americans without any supplemental coverage would rise to 59 percent, the study found.

"It is clear that low-income and minority populations rely heavily on the Medicare Advantage program," said Kenneth Thorpe, professor and chair of the Department of Health Policy & Management at Emory University, who conducted the study with colleague Adam Atherly. "Because these programs are often affordable and include benefits not found in traditional Medicare, many with lower incomes depend on it," Thorpe said in a news release.

Any attempt to scale back the Medicare Advantage program, as some Democrats and other opponents of the drug bill have urged, could hurt low-income Medicare beneficiaries and increase Medicaid costs, company officials said Wednesday.

"We're very concerned about the potential for cuts," said Alissa Fox, vice president of legislative and regulatory policy. The study released Tuesday should help Congress "see how much low-income beneficiaries benefit" from Medicare Advantage, she said.