By CQ Staff

June 29, 2006 -- The "typical American family of four" will pay an average of $13,382 for medical services in 2006, up 9.6 percent from 2005, according to a study by the consulting firm Milliman.

The study, part of the second annual Milliman Medical Index, examined average costs in five areas for a family covered by an employer-sponsored PPO. The five areas include inpatient services, outpatient services, physician care, pharmacy costs, and other services, such as ambulatory care, medical equipment, private nursing, and home health costs.

The study found that, over the last five years, increases in medical costs in each category varied each year. Outpatient care, for example, experienced a 12.6 percent increase over 2005 rates, yet trended downward in the previous years. Physician care remains the largest area of medical costs at $4,793, or 36 percent of total costs, according to the study. When combined with outpatient care, however, inpatient care costs make up 46 percent.

Cost sharing, or the amount patients pay at the point of service, also has increased along with medical costs, the study says. Of the $13,382 annual cost in medical services, a typical family will pay $2,210 in out-of-pocket costs. But increases in consumer cost-sharing have not matched increases in medical costs, the report notes. Out of the total costs, employers will pay $8,362, or 62 percent, while employees will pay $5,020, or 38 percent—$2,810 in payroll deductions and $2,210 in cost-sharing.

The study notes, however, that costs are dependent on many factors, such as age, geographic location, and health, as well as which services different health plans cover.

By Mary Agnes Carey, CQ HealthBeat Associate Editor

June 29, 2006 -- Starting in mid-July, the Centers for Medicare and Medicaid Services will make public Medicare beneficiaries' complaints about their Medicare prescription drug plan.

The complaints, which could include not responding to requests for appeals or drugs covered, would be reported on a percentage basis as related to a plan's total enrollment, said CMS spokesman Peter Ashkenaz.

In the past month, the agency said it has received approximately 2.2 complaints per 1,000 Medicare beneficiaries enrolled in prescription drug plans, with most complaints involving enrollment or disenrollment in a plan, difficulty in getting needed drugs and the cost of drugs or copayments, CMS said in a news release.

CMS also announced late Wednesday it has taken more than 1,000 compliance actions against drug plans this year. In 651 cases, CMS issued warning letters to plans for topics such as posting errors on Medicare's "Personal Plan Finder." CMS also issued 152 notices of non-compliance for problems such as failing to meet call center performance requirements, and the agency issued 318 requests for specific business plans on topics such as improving call center performance.

CMS did not release the names of the companies involved because "in the vast majority of cases, the problems were resolved quickly," Ashkenaz said.

When problems were not fixed fast, CMS took further enforcement actions. In 75 cases, CMS temporarily restricted plan marketing by removing information about the drug plan from the Medicare plan finder.

Some consumer advocates said CMS should release the names of sanctioned plans. "Public disclosure of identified problems makes sense if you're concerned about the informed consumer or the public interest," said Robert M. Hayes, president of the Medicare Rights Center. "If your main priority is propping up an industry and make it look better than it's performing, of course you don't want to disclose the culprits."

By Mary Agnes Carey, CQ HealthBeat Associate Editor

June 29, 2006 -- Senate GOP leaders objected Thursday to a unanimous consent request to pass legislation that would delay new Medicaid U.S. citizenship verification requirements set to begin July 1.

Sen. Daniel K. Akaka, D-Hawaii, sponsor of the measure (S 3590) that would delay the implementation of those requirements until Jan. 31, 2007, said he did not know which Republicans objected to his bill. "I don't know what their reasons are," Akaka said. A Senate GOP aide said Thursday the measure was blocked because members had not yet had a chance to review it or see a Congressional Budget Office score of its financial impact. The bill also had not undergone committee consideration, the aide said.

Akaka, other lawmakers and consumer and health groups say the new requirements, which will take effect Saturday, could cause three to five million Medicaid beneficiaries to lose their eligibility because they cannot produce the documents required, such as birth certificates or passports.

The American Hospital Association, the Federation of American Hospitals and other hospital groups Thursday wrote to Department of Health and Human Services Secretary Michael O. Leavitt to express concern that the new requirements "could mean that eligible U.S. citizens and nationals will lose Medicaid coverage."

Advocates for the poor Wednesday filed a class action suit to block the provisions, which were included in the budget savings bill (PL 109-171) President Bush signed into law in February. Centers for Medicare and Medicaid spokeswoman Mary Kahn declined comment Wednesday on the suit but said "states must afford applicants or current enrollees a reasonable opportunity to secure the required documents. If a beneficiary is having difficulty, we have instructed states to assist the beneficiary."

Speakers at a news conference Thursday said the new Medicaid requirements will be difficult for many people, including residents of nursing homes, individuals with mental and physical disabilities, or children in foster care, who may not have the required documentation. Children taken from troubled homes, for example, often come into foster care with little more than a few clothes and perhaps a favorite toy, said Linda Spears, vice president for communications at the Child Welfare League of America.

"Social workers, parents, no one is thinking, 'Where's the passport? Where's the birth certificate?'" Spears said.

Aware of the difficulties the new requirements will impose, some states, such as Maine, chose to delay enforcement of the new requirements, said Dan Hawkins, vice president for federal, state and public affairs for the National Association of Community Health Centers. Ohio officials also announced they will delay implementation of the new requirements until Oct. 1.

Implementing the new requirements will also be expensive for states. In January, the Hawai'i Primary Care Association estimated it would cost $640,000 yearly to put the new regulations into place.

A "technical corrections" bill has been drafted, but not yet introduced, to alter the Medicaid documentation changes, although opponents of the changes said the legislation does not go far enough. Action on that measure could come after the July Fourth recess.

By CQ Staff

June 28, 2006 -- Despite subsidies from the Medicare drug program, many employers are planning to curtail their health care coverage for current and future retirees, according to a survey released Wednesday by the management consulting firm Watson Wyatt Worldwide.

Only 5 percent of the 163 companies surveyed said they do not expect to place any additional restrictions on their medical benefits for future retirees over the next five years, and 7 percent do not expect to implement further restrictions for current retirees. Fourteen percent of employers plan to eliminate the benefit entirely for future retirees over age 65 and 6 percent plan to eliminate the benefit for current retirees over 65.

Nearly two-thirds of employers anticipate increasing financial contributions for future retirees and half of employers expect to change their plan design.

The Medicare drug benefit subsidizes employee and union plans with up to 28 percent of costs incurred greater than $250—up to $5,000—for retirees who are also Medicare beneficiaries. According to the survey, out of the 77 percent of employers who took the Medicare drug subsidy in 2006, 64 percent plan to take the federal subsidy in the future.

"Employers are biding time with the federal subsidy for now as they sort out their long-term retiree medical strategies," Cara Jareb, director of retiree medical consulting at Watson Wyatt, said in a news release. "But many of them will likely find that relying on the subsidy will not be the most effective solution to control costs going forward. At that point, employers will need to explore other ways to fund and deliver these benefits."

By CQ Staff

June 27, 2006 -- House Democrats Tuesday unveiled Medicare prescription drug legislation they said would be simpler, more affordable, and less complicated than current Medicare prescription drug benefits.

Among its provisions, the proposal would require the Medicare program to administer the benefit and negotiate prescription drug prices for all Medicare beneficiaries. The measure also would extend the enrollment deadline for the drug benefit from May 15 to Dec. 31 and close the "doughnut hole" of coverage that requires beneficiaries to cover their drug costs between $2,250 and $5,100, after which point the government picks up 95 percent of drug costs.

"Democrats stand united to provide common-sense improvements to the flawed Bush prescription drug bill," House Minority Leader Nancy Pelosi, D-Calif., said in a statement. "We will put seniors and people with disabilities first by bringing affordability, simplicity, and reliability to the benefit."

Administration officials have said the Medicare drug benefit has helped millions of seniors afford prescription drug coverage and the private sector can do a much better job of controlling the overall cost of the benefit.

By Mary Agnes Carey, CQ HealthBeat Associate Editor

June 28, 2006 -- The debate over the effectiveness of health savings accounts to improve health care coverage while reducing its cost raged on Wednesday at a Ways and Means hearing.

Employers and insurers told the panel that "HSAs" present many new options for affordable health care coverage for companies and their workers, and urged lawmakers to make several changes to current law to help increase HSA enrollment.

But the director of an urban health care center and a health care researcher concluded HSAs might actually discourage consumers from getting preventative medical care services, as patients are struggling to meet the policies' high deductibles and out-of-pocket costs.

HSAs permit individuals who sign up for high-deductible health plans to contribute and withdraw funds to cover health care costs tax-free. Created in the 2003 Medicare drug law (PL 108-173), proponents of such accounts say they will make consumers more aware of the cost of health care, which in turn will reduce health care expenditures. HSA opponents say the accounts are most attractive to healthier individuals who, if they enroll in HSAs, will leave the group market, driving up costs for less healthy individuals left behind.

A January survey by America's Health Insurance Plans, a trade group representing health care insurers, found at least 3 million Americans enrolled in high-deductible plans sold in connection with HSAs—a more than three-fold increase since March 2005.

"HSAs are helping a substantial number of previously uninsured consumers purchase coverage, accumulate savings for their future medical needs and access preventative care services," AHIP president and chief executive officer Karen Ignagni told the Ways and Means panel Wednesday.

A Government Accountability Office report released earlier this month, however, found as many as half of those who purchased a high-deductible insurance policy did not open or contribute money to a tax-free HSA to help meet those deductibles and other out-of-pocket medical expenses. And many who did open HSAs met the deductibles with their own money instead of using cash from the tax-free savings account.

Jeffrey Cava, executive vice president for human resources and administration at Wendy's International, told the Ways and Means panel the company's health care claims decreased by 14 percent during the first year that HSAs were offered to Wendy's employees. Of the company's worldwide workforce of 45,000, 10,200 employees are eligible for health care coverage and 7,000 have enrolled in HSAs, he said.
Cava said the HSA offered to Wendy's employees provides full coverage of preventative medical care, such as annual routine physicals, flu vaccines, and child immunizations. To each HSA, he said, Wendy's contributes approximately 60 percent of the deductible.

In the first year of HSA coverage, 75 percent of employees received annual physicals—up 25 percent from the year before, when HSAs were not offered. There was also a "significant increase" in the number of employees using online health care information to help manage their health plan. Cava said it was "exactly the type of result we hoped to achieve."

While HSAs helped Lutheran Social Services of Illinois to reduce its health care costs and free up funds to raise salaries, some employees have found the accounts "difficult to manage, difficult to understand, difficult to access, and have chosen to leave the plan for other alternatives," said Larry W. Lutey, the company's vice president of human resources.

Other witnesses noted numerous problems presented by HSAs, such as difficulties meeting high deductibles and co-payment—especially among lower-income Americans—which have produced greater demand for care from health care providers that serve the poor.

"The patients who seek care at our health center who are enrolled in high deductible plans and those that are uninsured are indistinguishable from one another in their inability to pay for needed services," said Jean Therrien, executive director of Neighborhood Family Practice, a community health care center located in Cleveland. "They do not have first dollar coverage for preventative care, office visits, lab testing, and prescription drugs."

Sara R. Collins, assistant vice president of The Commonwealth Fund, a non-partisan think tank, said research done so far on HSAs found few people enrolled in HSA-eligible high-deductible health plans and those who are enrolled are much less satisfied with many aspects of their health care than adults in more comprehensive plans. She also testified people enrolled in such plans are "far more likely to delay, avoid or skip health care because of cost."

Committee Democrats said they feared HSAs would hurt the current system of employer-provided health care. "The expansion of HSAs is yet another step toward the Republican goal of dismantling employer-provided health and pension benefits," said Rep. Charles B. Rangel, the panel's ranking Democrat.

Republicans said the accounts were helping millions of Americans find affordable health care coverage they could tailor to their particular needs. Rep. Eric Cantor, R-Va., said HSAs were simply "one more option in the buffet of health care options being chosen by employers."