By Mary Agnes Carey, CQ HealthBeat Associate Editor

June 8, 2007 -- Much of the spending growth in Medicare physician services is due to an increase in the volume and intensity of physicians' services rather than the result of changes in Medicare's payment rates, a Congressional Budget Office (CBO) analysis concludes.

The background paper, released Friday, found that while updates to Medicare's payment rates have fluctuated since the sustainable growth rate payment system for physicians was established in 1997 and implemented in 1998, spending for physicians' services under the fee scheduled has increased steadily, rising by 79.2 percent between 1997 and 2005.

Even after adjusting for changes in the cost of providing physicians' services—as measured by the Medicare economic index—and for growth in the number of beneficiaries enrolled in the program, spending on physicians' services has increased by 34.5 percent, the CBO found.

Unless Congress acts to stop it, Medicare payments to physicians will be reduced by about 10 percent in 2008 and by about 5 percent annually over the following several years. The American Medical Association (AMA) is fighting hard to stop the scheduled cuts, saying they could hurt seniors' access to physician care. The AMA is urging lawmakers to reduce payments to Medicare Advantage, Medicare's private insurance plans, as a way to finance a Medicare physician payment increase

"We are pleased that the report points out that more than half of the increase in Medicare spending on physician services between 1997 and 2005 stems from coverage expansions and changes in the beneficiary population and that nearly all of the remainder is due to factors such as prevalence of disease and medical innovation. The report illustrates the complex factors that drive demand for physician services, and shows that blunt instruments like the SGR will only exacerbate the problem," said Cecil B. Wilson, AMA board chair.

The CBO paper states that of the 39.4 percent increase in the quantity of physicians' services observed between 1997 and 2005, most of the increase "is attributable to the underlying trend in the quantity of services rather than the result of behavioral responses to changes in payment rates." Specifically, behavioral responses of physicians or beneficiaries to changes in Medicare payment rates account for only 1.4 percentage points of the 39.4 percent increase over those years. The underlying trend increase, which captures continuing changes in medical practice over time, accounts for 38.8 percentage points of the quantity increase, according to the CBO.

By John Reichard, CQ HealthBeat Editor

June 4, 2007 -- John K. Iglehart is stepping down September 4 as the editor of Health Affairs, the journal he founded 25 years ago to bring the work of academia to the attention of the healthy policy community broadly and to Congress in particular.

Succeeding the 67-year-old Iglehart as editor of Health Affairs is James C. Robinson, a contributing editor and a professor of health economics at the University of California at Berkeley's School of Public Health.

"I look forward to sustaining the journal's longstanding interests in topics such as health insurance and delivery of care, and also to continuing to increase the journal's presence in areas like global health and biomedical innovation and technology," Robinson said in a press release issued by Project Hope, the publisher of Health Affairs. Robinson said he plans to supplement the journal's bimonthly print edition with more Web-based publications, blogs, and online interviews.

Iglehart is much admired in the health policy community for a sharp intellect, a journalist's to-the-point manner of expression, and a friendly down-to-earth manner that allowed him to move easily between the worlds of academia, journalism, and Capitol Hill.

Among the lesser-known aspects of Iglehart's career, which prior to Health Affairs included a 10-year stint at the National Journal and writing assignments for the New England Journal of Medicine, is that he served as a lobbyist between 1979 and 1981 for the large national HMO operator, Kaiser Permanente.

But Iglehart's career is best known for bringing the views of academia, not business, to the attention of members of Congress and their aides. "He built the journal into the dominant place where health policy makers look for research and analysis that is relevant to the issues they are dealing with," said Paul Ginsburg, president of the Center for Studying Health System Change.

"John's publishing it is what got it in front of people on Capitol Hill," said W. David Helms, president of AcademyHealth, an organization of health services researchers.

Iglehart said he saw the need for a journal such as Health Affairs because health policy academics all too often were writing for themselves. "I was struck by the fact that there were so many smart people writing about health policy issues that weren't really reaching important audiences like the broad health policy community and the media," Iglehart said in a telephone interview. "They were really writing for their peers."

Contributors to Health Affairs frequently appear as witnesses at congressional hearings and policy proposals and analysis published in the journal often shape legislation.

Iglehart said the "challenge of publishing a journal like this—because we accept no advertising—is that the economics don't work out." Subscription revenues cover only one-third of its expenses and the rest comes from foundations, he said.

Iglehart said the journal hasn't accepted advertising not because he was philosophically opposed but because advertisers primarily would have been publishers of academic books. That wouldn't have provided large revenues, he said, adding that foundations would have pulled the plug on their funding, figuring Health Affairs had gone commercial.

Although he is giving up management of the journal, Iglehart will remain as editor emeritus and said he really isn't looking to cut back his schedule, "other than a long weekend here and there." He said he'll continue to write for the New England Journal of Medicine and to chair the Health Reporters' Breakfast, a periodic roundtable in which the press grills key members of Congress and administration officials.

By CQ Staff

June 6, 2007 -- Two key creators of the State Children's Health Insurance Program (SCHIP) Wednesday released their goals for reauthorization of the program, which expires Sept. 30.

Sens. Edward M. Kennedy, D-Mass., and Orrin G. Hatch, R-Utah, said in a statement that they support an increase in the federal tobacco tax as a funding source for SCHIP, and say that children must be its primary focus. They also propose greater funding for outreach activities to enroll six million of the nine million American children who are currently uninsured but eligible for health care coverage either through SCHIP or the Medicaid program.

Kennedy and Hatch urged that the SCHIP enrollment and renewal process be simplified, and that the program adopt national standards to measure the quality of care that children receive through the program, with pending legislation (S 1226) serving as "a good starting point."

Other principles Hatch and Kennedy have agreed to include providing "incentive grants" to help reduce childhood obesity, allowing SCHIP funds to help pay for premiums for children in families with qualifying incomes that have access to employer-sponsored coverage, and giving each state the flexibility to determine the federal poverty level of children who would be covered under SCHIP.

The lawmakers also propose examining the current five-year exclusion of lawful immigrant children and giving the states the option to cover those children under SCHIP. Better targeting of funds also is needed, the senators said in a news release.

"No state should be allowed to retain federal [SCHIP] dollars while doing little to actually cover eligible children. In addition, no state should be faced with closing enrollment or dropping children from the program because of a shortfall of available federal funds."

By Michael Teitelbaum, CQ Staff

June 8, 2007 -- A bipartisan group of House members has introduced legislation to expand a prescription drug discount program that benefits low-income individuals.

The measure (HR 2606) would expand Medicaid's "340B" drug program to allow more hospitals and community health centers to purchase drugs at discounted rates. Health care providers who qualify for the program pay 40 to 50 percent less for prescription drugs than average wholesale price, the bill's sponsors said.

Introduced by Rep. Bobby L. Rush, D-Ill., and cosponsored by Reps. Jo Ann Emerson, R-Mo., and Bart Stupak, D-Mich., the proposal would expand the program to inpatient services for hospitals currently covered under the program. It also would help critical access hospitals, sole community hospitals, rural referral centers, Medicare-dependent hospitals, and other providers.

The program was created as part of a 1992 veterans' health care law (PL 102-585) and was designed to limit the cost of outpatient pharmaceutical drugs paid by safety net hospitals, community health centers, and other providers who serve the most vulnerable patient populations. The law requires pharmaceutical manufacturers participating in the Medicaid program to provide discounts on covered outpatient drugs purchased by participating entitles.

At a news conference Thursday, Rush and Stupak said hospitals in their districts could potentially save millions of dollars if the bill became law. For example, Mt. Sinai Hospital in Chicago would save approximately $2.5 million per year.

Rick Pollack, executive vice president of the American Hospital Association, said the measure would help hospitals now struggling to survive. "With resources already stretched to the limit, discounts on drugs will serve as welcome relief to spiraling pharmaceutical costs," Pollack said. He also said the Medicaid program would "see lower costs for achieving much-needed prescription drug savings."

Rush said he was confident that the Energy and Commerce Committee—the panel on which he and Stupak serve—would pass the bill and it would get to the House floor by the end of the year.

Ken Johnson, senior vice president of the Pharmaceutical Research and Manufacturers of America (PhRMA), said the group was reviewing the legislation, but noted that it would expand the Medicaid drug discount program "substantially."

"Adding new categories of covered entities to the 340B program and allowing each covered entity to use multiple contract pharmacies without any safeguards are imprudent given recent evidence that the program's safeguards against drug diversion may not be working effectively," Johnson said in a statement.

In addition, he said, the measure would expand "pharmaceutical product price controls, which various studies . . . have shown can discourage innovation."

By John Reichard, CQ HealthBeat Editor

June 5, 1007 -- Based on the budget recommendations of the nation's governors, Medicaid spending will grow by 5.8 percent in fiscal 2008, down from an expected growth rate of 6.6 percent in fiscal 2007, according to a new survey.

Medicaid spending growth is moderating as states mount more aggressive cost-control efforts, said the survey by the National Governors Association and the National Association of State Budget Officers (NASBO). Over the past five years, every state has adopted cost controls, "with the majority centered on freezing or reducing provider payments and managing prescription drug costs," the survey said.

But Medicaid remains the dominant force in state spending—it accounts for 22 percent of state outlays—and "continues to constrict state budgets as it has for many years," the survey noted. And pressure to increase Medicaid spending is likely to grow as more governors offer proposals to widen coverage of the uninsured.

Thirty-four governors introduced plans to reduce the number of uninsured residents in fiscal 2008, according to the analysis. Proposals rely on expansions of the State Children's Health Insurance Program (SCHIP), traditional Medicaid, and revisions to traditional Medicaid permitted under the budget savings law signed last year by President Bush (PL 109-171).

"Proposed fiscal 2008 funding for these programs totals nearly $18.4 billion," the study said. About half of that would come from state and federal Medicaid and SCHIP funding, it estimated.

Overall, the survey concluded that "fiscal conditions have been strong and stable" in the states. "Only three states were forced to reduce their enacted budgets by an aggregate $170 million in fiscal 2007," it said.

"This report demonstrates that most states are still in good financial shape, but some are expecting their revenue and spending growth to decline somewhat over the next year or two," said NASBO Executive Director Scott D. Pattison. "We expect a handful of states to begin experiencing more difficult fiscal times."

The analysis also noted other projections that show yearly Medicaid spending growth rates creeping back up.

"Even with the more moderate growth rates in health care spending from the height of the most recent fiscal downturn, projections over the next decade remain at an average annual rate of about 8 percent from fiscal 2008 through fiscal 2017, according to the most recent estimates by the Congressional Budget Office."

By Mary Agnes Carey, CQ HealthBeat Associate Editor

June 5, 2007 -- The Senate Finance Committee may mark up legislation the week of June 11 to reauthorize the State Children's Health Insurance Program (SCHIP), but full Senate action is not expected before the July Fourth recess, senators said Tuesday.

Finance Chairman Max Baucus, D-Mont., said he hoped his panel would mark up SCHIP legislation next week, and that a 90-minute bipartisan committee meeting Tuesday was a good start toward that goal. Other senators who were in the meeting also described it as "constructive" and "fluid," with members freely expressing their views about the program, which expires Sept. 30 and is up for reauthorization this year.

Policy issues discussed in the session included income levels at which children would qualify for coverage and which adults should be covered, such as pregnant women or childless adults. There was some discussion about how to finance the bill, with options including a possible increase in the federal tobacco tax or reductions in Medicare payments to Medicare Advantage plans, but no decisions were reached, participants said.

"There was very little talk about the payfors this morning," said Finance member Kent Conrad, D-N.D.

The amount of funding needed to pay for the SCHIP reauthorization "will be determined by the policy" in the legislation, Baucus said. He also said that he had been discussing possible offsets with House Ways and Means Committee Chairman Charles B. Rangel, D-N.Y., and House Energy and Commerce Committee Chairman John D. Dingell, D-Mich., but offered no specifics.

Senate Majority Leader Harry Reid, D-Nev., noting the Senate's crowded calendar, which includes immigration and energy legislation, indicated that SCHIP would wait until July.

Once the Senate returns from the July Fourth break, "we've got to do appropriation bills. We have SCHIP we have to do. We have to do a farm bill," Reid told reporters.

Baucus has made SCHIP reauthorization the Finance panel's top policy priority, and has said that he supports spending an additional $50 billion on the program. The fiscal 2008 budget resolution (S Con Res 21) includes a "deficit neutral" reserve fund that allows for up to $50 billion in new spending for SCHIP as long as the spending is fully offset.

Conrad said the panel should move cautiously when debating whether or not to expand the program to cover more adults. "If you want to cover adults, you've got to call [the program] something else," he said. "We can't be misleading people."

He also said that allowing children whose families have income of up to 300 percent of the federal poverty level or $60,000 in yearly income for a family of four—a provision in some of the pending SCHIP proposals—was overly generous. "That's not poverty in North Dakota," Conrad said. "Sixty thousand dollars a year in New York is very different."

Sen. Olympia J. Snowe, R-Maine, said it was important to build bipartisan support for the SCHIP reauthorization, since the program was created in 1997 with bipartisan support. She cautioned against looking to payment reductions to Medicare providers, such as hospitals or home health agencies, as a way to finance SCHIP. Reducing provider payments would "roll back some of the services provided to the elderly," she said. "I think that's much more difficult."