By Mary Agnes Carey, CQ HealthBeat Associate Editor

March 7, 2008 -- Improvements in health care quality are not keeping pace with the higher prices Americans have to pay for medical care, according to new data from the Agency for Healthcare Research and Quality (AHRQ).

Between 1994 and 2005—the years analyzed in two reports the agency released earlier this week—the quality of health care improved by an average 2.3 percent a year. That rate of growth was smaller than the 3.1 percent annual average improvement rate AHRQ noted last year when it measured trends between 1994 and 2004 in the areas of health care quality and health care disparities.

The quality improvement rates are lower than increases in health care spending. Over the same time period, the Centers for Medicare and Medicaid Services estimate that health care expenditures rose an average annual rate of 6.7 percent.

"Health care quality is improving only modestly, at best," AHRQ Director Carolyn M. Clancy said in a statement. "Given that health care spending is rising much faster, these findings about quality underscore the urgency to improve the value Americans are getting for their health care dollars."

AHRQ said the 2007 reports show some notable gains, such as improvements in the care of heart disease patients. When measuring what portion of heart attack patients received recommended tests, medications, or counseling to quit smoking, the reports found an average 5.6 percent annual improvement rate from 2002 to 2005.

On another front, measures of patient safety showed an annual improvement of just 1 percent, reflecting such measures as what portion of elderly patients had been given potentially harmful prescription drugs and how many patients developed post-surgery complications.

While the reports showed some reductions in disparities of care according to race, ethnicity and income, many of the largest disparities remain. Black children under 18 are 3.8 times more likely than white children to be hospitalized for asthma. New AIDS cases are 3.5 times more likely among Hispanics than whites. Among pregnant women, American Indians or Alaska natives are 2.1 times less likely to receive first trimester prenatal care.

Other highlights of the reports include:

• More than 93 percent of heart attack patients received the recommended hospital care in 2005, up from about 77 percent in 2000/2001. The percent of heart attack patients who were counseled to quit smoking increased from about 43 percent over that two year period to about 91 percent in 2005.
• Among people who needed treatment for illicit drug use in 2005, only 18 percent of adults between the ages of 18 and 44 actually received treatment. Only 11 percent of children between 12 and 17 got treatment. These rates have remained about the same since 2002, according to AHRQ.

By Christine Grimaldi, CQ Staff

March 6, 2008 -- Medicare "trigger" legislation that would place spending limits on the program to curb support from the general tax revenues does not look at the whole picture, health care experts said.

Yet an administration official added that the percentage of the general revenues used to fund Medicare will decrease on its own if the president's fiscal year 2009 budget is approved.

"The package that we submitted sort of complements the budget," said Julie Goon, special assistant to the president for economic policy in the National Economic Council, at the Kaiser Family Foundation on Thursday.

Its passage would see Medicare use 38 percent of the general revenues in 2013, and 39 percent in 2018, Goon said.

The Bush administration was required to send legislation to Congress by what is commonly known as the Medicare funding "trigger," a warning system put in place as part of the 2003 Medicare overhaul law (PL 108-173).

The law says that if, for two years in a row, Medicare is projected to draw 45 percent of its funding from general tax revenues in any of the next seven years, the president must propose legislation to solve the problem. The 45 percent threshold will be crossed in 2013, according to a warning issued by Medicare trustees in April.

Current Congressional Budget Office projections place Medicare's percentage of the general revenue at 45.1 percent in 2013 and 51 percent in 2018, said Director Peter Orszag. Projections for 2007 and 2008 are both at 41 percent.

The Congressional Budget Office is expected to score the legislation in the context of the trigger soon, Orszag said.

"This was a proposal that was really intended to signal that general revenues, which are a part of the funding of Medicare and have been from the very beginning, should have a limit in much the same way that the payroll tax is limited by law," said Marilyn Moon, vice president and director of the American Institutes for Research's Health Program. "But the irony of that is that I think that people got very much the opposite of what they wanted in many cases."

For instance, Moon said increased revenues in other parts of Medicare could cut down on overall spending, but both conservatives and liberals would likely balk at this idea.

"I think in many ways everyone should agree and do away with this trigger, but I'm not sure that that's what's going to happen," she said.

Moon turned to the reasons for the greater general revenue share: increased spending in the health care system, a shift from inpatient to outpatient care that fed Medicare's related Part B program, and measures within the "trigger" legislation itself to supplant the Part D drug benefit program from the general revenues.

AARP's John Rother identified the underlying problem of cost containment in health care and called for a system-wide examination of both private and public programs.

A trigger would be useful as a way to broadly examine Medicare—but not this trigger, said Rother, who is director of policy and strategy at AARP.

"If we were going to really look at Medicare's performance, we'd look at cost growth relative to private sector cost growth, we'd look at measures of quality and patient satisfaction, we'd look at burden on providers and participation in the program . . . not the balance between dedicated and non-dedicated financing sources," he said.

He noted that the trigger "is the product of one person's imagination"—that of former Rep. Bill Thomas, R-Calif., who as chairman of the House Ways and Means Committee advocated in 2006 for a 40 percent hard trigger. Subsequent negotiations over the Medicare bill led to the 45 percent soft trigger, "as a more or less figure pulled out of thin air," Rother said.

"Are these numbers somewhat arbitrary? More than likely," Goon said. "But they do sort of give an indication of how much money is coming out of the general revenue basket and being spent on Medicare and other health care programs to the detriment of spending in other parts of the government."

Goon said she agreed with almost all concerns raised, including that the trigger legislation is not an all-inclusive representation of Medicare. "Where I disagree is I don't think that we should make the perfect the enemy of the good," she said.

Democrats declared the measure dead on arrival. Edward M. Kennedy, D-Mass, chairman of the Senate Health, Education, Labor and Pensions Committee, said the administration had "trumped up a phony crisis in Medicare to justify proposing deep cuts in quality health care for seniors while giving massive subsidies to HMOs and other insurance companies."

Rep. John D. Dingell, D-Mich., chairman of the House Committee on Energy and Commerce, termed the Medicare trigger "little more than a scare tactic to promote cuts to the most successful program of our time."

By John Reichard, CQ HealthBeat Editor

March 7, 2008 -- The Medicare Payment Advisory Commission (MedPAC) is considering several draft recommendations to Congress and the Medicare program regarding skilled nursing facility payments, the performance of prescription drug plans, and primary care.

MedPAC staff presented the draft recommendations to commissioners at the March 5–6 meeting of the panel. Chairman Glenn Hackbarth cautioned observers that the recommendations may be changed and that they may or may not come up for a vote next month on including them in MedPAC's June report to policy makers.

One of the draft recommendations calls for revisions to the prospective payment system Medicare uses to pay skilled nursing facilities. Right now, the payments consist of a nursing component, a therapy component, and an "other" component that includes room and board. The revisions would add a "separate non-therapy ancillary component," a term that includes items such as prescription drugs and intravenous therapy. They also would revise the therapy component to base payments "on predicted patient care needs," and adopt a provision for "outlier payments" covering unusual financial losses on patients.

A second draft recommendation calls on the secretary of the Health and Human Services Department, which oversees the Centers for Medicare and Medicaid Services, to require the facilities to report diagnosis information and dates of service on their claims. In addition, the facilities would be required to report "services they furnish separately" on their assessments of patients, and to disclose nursing costs separately from routine costs on Medicare cost reports.

Facilities that have the largest profits on prospective payments would take the largest cuts under the revisions while those that are losing money on the payments would see the biggest increases, according to a MedPAC staff analysis. The recommendation for better data would "enhance the design" of prospective payments, the analysis said.

The American Association of Homes and Services for the Aging issued a statement Thursday saying that the research presented at the meeting shows that if the new payment system is adopted "Medicare payments would shift and—among other things—recognize the higher costs not-for-profit nursing homes face." The association's president, Larry Minnix, said "we hope that Congress will give due attention to this thoughtful work on MedPAC's part."

MedPAC also is weighing a draft recommendation aimed at improving the performance of prescription drug plans offered under Part D of the Medicare program. One draft recommendation calls for the HHS secretary to develop a measure of access "that calculates whether beneficiaries get a prescribed drug or its alternative without undue delay."

A second draft recommendation would address the fact that some plans do not provide pharmacies with the information they need to improve access to prescription drugs, according to a MedPAC staff analysis. The HHS secretary "should require plans to transmit information to pharmacies when they reject a prescription stating why the drug is not covered and if the plan covers a clinical alternative," the draft language states.

MedPAC also is wrestling with worries that the nation faces a shortage of primary care physicians, who health care analysts see playing a key role in coordinating health care services and improving its efficiency. Under current payment systems in traditional Medicare, "primary care services are at risk of being undervalued" and "underprovided," a MedPAC staff analysis said. The number of U.S. medical school graduates "selecting family practice and primary care residencies has declined steadily," the analysis added.

The panel is looking at three draft recommendations in this area. One states that Congress should establish a payment adjustment that would "increase the payment for a primary care service if a practitioner designated by the [HHS] secretary as a primary care practitioner furnishes the service." The adjust would be "budget-neutral," meaning other types of physician payment would have to be nicked to pay for the higher primary care payments. Congress should require HHS to identify the physician specialties that can receive the adjustment, a second draft recommendation says. "The secretary should use rule-making to determine the criteria to identify qualifying primary care practitioners," it adds.

The third draft recommendation deals with promoting the establishment of "medical homes" for chronically ill beneficiaries. The concept would involve modest per-beneficiary monthly payments to doctors who provide such a home. "Congress should initiate a medical home pilot project in Medicare," the draft language states. The homes would have to meet "stringent criteria," including furnishing primary care; using health information technology; conducting case management services to coordinate services; maintaining "24-hour patient communication and access;" keeping up-to-date records of advance directives by patients about their wishes if they become medically incapacitated; and being accredited or certified by an external accrediting body.

By John Reichard, CQ HealthBeat Editor

March 5, 2008 -- At a standing room only session Wednesday morning, the Medicare Payment Advisory Commission kicked around the idea of issuing single payments for episodes of treatment that would be shared by both the hospital and the doctors involved in delivering the treatment. While acknowledging that such a scheme could be complex to administer and could backfire, commissioners said such "bundled payment" has potential to root out inefficiencies in care and deliver major savings.

MedPAC Chairman Glenn Hackbarth emphasized at the start of the meeting that the commission may or may not move forward on adopting a final recommendation at its April meeting urging Congress to enact legislation bundling payment in Medicare. But commissioners, who are under heavy pressure to find ways to make spending more efficient in Medicare, were clearly drawn to the idea and repeatedly praised the staff work that went into preparing a draft recommendation on the subject.

"I think in the end this is one of the more important things we're going to do this year," commented commissioner Francis J. Crosson, an executive with Oakland, Calif.-based Kaiser Permanente. Commissioners also reviewed options for how policy makers might structure an entity to oversee an extensive ongoing program of research into how various drugs, surgical treatments, and medical devices compare in treating the same medical condition. "I'm a big advocate for moving in this direction," Vice Chairman Robert Reischauer said of the comparative effectiveness approach to getting better value for Medicare spending.

Longtime MedPAC observers expressed surprise at the long line to get in to Wednesday's session that seemed more appropriate for a smash movie or a hot band than a midweek gathering of policy analysts. But what might have been missing in glamour as an attraction was made up for in money. Issuing a single check for treating a heart attack, for example, throws into doubt how much doctors and hospitals who are now paid separately for their services would receive, how that compares to current reimbursement, and how they would divvy up their respective shares.

If, as MedPAC hopes, it leads to more efficient care as hospitals and doctors work together to figure out new processes of care that are less costly—thereby leaving them more money to share from their bundled payment once treatment is completed—it also creates uncertainty about how long-held routines for delivering treatment might have to change. The prospect of having to team up with a local hospital also means having to overcome tensions that often occur between doctors and local hospitals and between doctors and other doctors over how to deliver care.

After staffer Anne Mutti laid out a potential "glide path" to bundled payment, commissioner Nicholas Wolter, a physician with the Billings Clinic in Billings Montana, said "I love the phrase 'glide path' for something that's going to be like landing on the eastern slope of the Rockies during a Chinook."

But commissioners warmly praised the staff work that went into preparing draft recommendations on the subject, which would first try to educate doctors about how efficiently they provide treatment relative to their peers as a goad to avoid wasteful tests and other procedures.

One draft recommendation states that "Congress should require CMS [the Centers for Medicare and Medicaid Services] to confidentially report resource use around hospitalizations. After two years, Congress should implement 'virtual bundling,' which reduces payments to hospitals and inpatient physicians with relatively high resource use across episodes of care for select conditions. The payment penalty can be used to finance additional payments to high quality fee-for-service providers with relatively low average resource use."

A second draft recommendation states that "Congress should require CMS to create a voluntary pilot program to explore issues related to actual bundled payments for services around a hospitalization."

The distinction between virtual and actual bundled payment is that in the case of the latter, providers would get a flat fixed payment whatever the level of services they provided. Virtual bundling would retain the current fee for service system, in which doctors and hospitals get paid per service they perform and in general can make more money by ordering more services. The virtual approach would begin weaning providers away from inefficient ordering of tests and procedures, however, by penalizing them for above average resource use.

Commissioners expressed concern about the resource drain on CMS of administering such a system but described it as promising if hospitals and doctors truly team up to make care more efficient. "I think there is a huge possibility for process improvements," said commissioner Nancy M. Kane of the Harvard School of Public Health. "I think we're headed very much in the right direction here," added Reischauer.

Staffers also laid out options for fleshing out MedPAC's recommendation in its June 2007 report to Congress that it charge an independent entity to sponsor and disseminate research on comparative effectiveness. Commissioners weighed in on such issues as the makeup of an independent board to oversee the research and how the program would be funded, but did not consider any draft recommendations on the subject.

Staffers Nancy Ray and Hannah Neprash noted that a federal role in this area need not result in a large expansion of the government but could entail having a public-private entity with an advisory board that oversees existing research in the private sector and at such entities as the Agency for Healthcare Research and Quality and the National Institutes of Health.

The commissioners who spoke up about the issue supported the idea of having full-time board members to lessen conflict-of-interest problems and of having mandatory contributions to fund the research by both the private and public sectors. But they expressed concern about Congress having too large a role in funding, saying it could lead to sharp funding reductions if an industry interest offended by some research finding applied heavy pressure on lawmakers.

They reiterated their strong support for a comparative research program. The potential savings involved "swamp everything discussed today," said commissioner John M. Bertko, a visiting scholar at the Brookings Institution who recently retired from his position as chief actuary for the insurer Humana.

By Alex Wayne, CQ Staff

March 3, 2008 -- New rules for Medicaid would reduce federal payments to states by nearly $50 billion over five years—more than three times earlier government estimates, according to a report released Monday by a House committee.

The Bush administration plans to roll out at least seven new Medicaid regulations this year that together comprise a plan to curtail expenses in the program the administration considers unnecessary or inappropriate. The Centers for Medicare and Medicaid Services had estimated that the new rules would reduce the federal share of Medicaid's costs by about $15 billion over the next five years.

Medicaid is a joint federal–state health entitlement program for the poor in which the federal government pays about 57 percent of the costs. The federal share is estimated to total about $204 billion in fiscal 2008.

States and the federal government have been locked in a years-long struggle over which should bear more of the costs of Medicaid, which, like other health programs, is growing more rapidly than inflation. The government and the Government Accountability Office have accused states of using improper schemes to draw higher federal Medicaid payments than they qualify for.

But states have complained since last year that the planned new regulations would shift too much of the program's costs to them. Medicaid is the most expensive line item in many states' budgets, so any increased costs can cause governors and state legislators a fiscal headache. The first regulation, which limits federal reimbursement for ancillary services states provide Medicaid patients, such as help finding housing and jobs, took effect Monday.

The Oversight and Government Reform Committee's Democrats asked all states to provide an estimate of what the new Medicaid regulations would cost them. The panel received responses from 43 states and the District of Columbia, its Democratic staff said in the report, comprising 95 percent of total Medicaid spending.

The costs range from $7.4 million over five years in Ohio to $10.8 billion over the same period in California.

"As the economy tips into recession, the last thing we should be doing is taking federal funds from states, especially funds that are supposed to help people with their health and medical expenses," the committee's chairman, Henry A. Waxman, D-Calif., said in a statement.

The panel's report said the centers did not respond to requests to provide its own estimates of the state-by-state fiscal impact of the regulations.

A CMS spokesman did not immediately provide a response to the report.

Congress acted last year to postpone three Medicaid regulations. But those moratoria have started to expire, and Republicans have said they want an in-depth examination of the regulations through congressional hearings before they will consent to further postponements.

The Senate adopted an amendment to an American Indian health care bill (S 1200) it passed last week that would postpone the regulation that took effect Monday. However, the House has not acted on the Indian health legislation.

By Mary Agnes Carey, CQ HealthBeat Associate Editor

March 3, 2008 -- More than three-quarters of voters want the next president and Congress to take quick action to help the more than 47 million Americans without health care coverage get it, according to polling data released Monday.

Compiled for the Federation of American Hospitals, the American Viewpoint survey found that 83 percent of voters feel immediate action on the issue is required, with 55 percent of voters saying it was "very important" and 28 percent listing it as "somewhat important."

About a quarter of voters also said they fear not being able to pay for health care benefits (15 percent) or losing their coverage (11 percent). Other health-related concerns grabbing the electorate's attention include overhauling the current medical malpractice system, requiring Medicare to negotiate prescription drug prices and changes to entitlement programs.

Last year, the Federation released its own proposal to provide universal coverage within the context of the current system by expanding eligibility for Medicaid and the State Children's Health Insurance Program (SCHIP). Health Coverage Passports, or HCPs, would be issued to Americans below 400 percent of the federal poverty level who are not eligible for Medicaid or SCHIP.

All Americans would be required to have coverage, and the passports would be subsidies that pay a percentage of premiums on a sliding scale based on income. People who can obtain coverage at work but are uninsured would be required to use the subsidies to enroll in their employer's plan. Other uninsured people would use the subsidy to buy coverage in the individual market. Uninsured people who make too much money to qualify for the subsidies would have to buy their own insurance, but their premiums would be tax-deductible.

Voters' continued concern about the number of Americans without health care coverage plus estimates that the figure will increase makes the case for quick action by the next president and Congress, said the federation's president, Chip Kahn. "The longer we wait, the worse it will get," Kahn said at a news conference. The American Viewpoint poll also found that voters, no matter what their political affiliation or health care coverage status, had a favorable view of the Federation's plan to cover the uninsured.

A separate analysis released at the news conference found that the Federation's coverage proposal would cost nearly $133 billion if implemented in 2010. When the Federation unveiled its plan last year, the cost estimate was $115 billion if the proposal was implemented in 2007.

Prepared by The Lewin Group, the analysis also found that the Federation's plan would cost the federal government $131.3 billion and cost private employers $4.7 billion in 2010, while saving states nearly $18 billion and households about $35 billion.

The Federation's plan also is expected to result in an increase of individuals covered by employer-sponsored coverage, from 56 percent now to 57 percent, or about 3.5 million people, in 2010. That finding rebuts fears that if subsidies were provided for non-group coverage, fewer employers would offer coverage to their employees.