By John Reichard, CQ HealthBeat Editor

May 6, 2008 -- The Senate Finance Committee launched on Tuesday the first of a series of at least eight hearings this year on overhauling the entire U.S. health care system, but former Health and Human Services Secretary Tommy Thompson testified that the panel should first focus more narrowly on revamping Medicare.

"Medicare is going broke," said Thompson, who together with former HHS Secretary Donna Shalala provided the sole testimony at the hearing. Although Shalala didn't endorse the Medicare-first strategy, she backed up Thompson in emphasizing the importance of the program. "It's very important to use Medicare as part of the wedge to transform the entire health care system," she said.

Thompson reminded the panel that Medicare's hospital trust fund will begin taking in less money than it pays out by 2013 and is headed for insolvency by 2019. That development "is going to be a huge, kind of dampening impact on health care," he said.

Reducing benefits, increasing the age of eligibility, and increasing revenue will all likely have to be part of the approach to transforming Medicare, he said. "How should we make these difficult decisions? I am calling for the creation of a bipartisan commission, similar to the base-closing commission. This commission should be charged by Congress and the next president to recommend solutions," Thompson urged, noting that "2017 is not that far away."

Shalala differed on the utility of a commission and objected strenuously to raising Medicare's age of eligibility, now 65 years of age for most beneficiaries. She said the commission approach is suited to dealing with more narrow issues and asserted that the "political system," specifically Congress, is going to have fix Medicare. "I think extending the age for Medicare is a very dangerous issue. As people get older they get sicker and that's the last thing we want to do in our society."

But when committee Chairman Max Baucus, D-Mont., seemed to suggest—as did other senators—that the focus ought to be on tackling health care costs both inside and outside of Medicare, Shalala made a vigorous argument that changes to streamline Medicare, notably through requiring the use of electronic health records, should "absolutely" be part of the strategy for implementing universal health coverage in the United States.

"You'd be surprised how much the private sector follows Medicare," she told Baucus. "It's very important as part of the strategy to use what you can control, and that is the Medicare system," she said. If use of electronic health records is driven through Medicare, "you will get a bump in the private sector."

Struggling with Medicare Writ Small . . .
Senate Finance Committee members meanwhile continue to struggle with putting together a much smaller package of Medicare changes that would put off, for 18 months, deep scheduled cuts in physician payments due to start July 1. Grassley said on his way out of the hearing that he and Baucus do not yet have a package to talk about, but the pair were planning to meet later on Tuesday. Baucus said after the hearing that he's still planning to bring to the Senate floor a Medicare package in "mid-May, end of May."

Grassley said "extras" in the bill beyond blocking doctor payment cuts could include rural provider payment provisions. Asked if a mandate for electronic prescribing in Medicare could be in the package, Grassley said it "might."

But even as relatively small issues set off intense lobbying that slows agreement on Medicare legislation, lawmakers are expressing confidence that the days of overhauling health care broadly will soon begin.

. . . But Boasting of Big Ambitions
"This committee must prepare for the challenge of building consensus" on a health overhaul, Baucus said in his opening statement. "I am confident that this time we will succeed."

"I see many shared principles," he said, including agreement to strive for universal coverage and slow the growth in health care costs. Payment incentives rewarding quality and efficiency, greater use of health information technology including electronic medical records, and wider research comparing the effectiveness of medical treatments "are just a few proposals that can transform our delivery system."

Grassley said it's important not to upend the system and observed that "people are used to their employers providing health benefits."

"I think we need to look into whether we can expand health care coverage by making the current unlimited income tax exclusion for employer-provided health insurance more equitable, while increasing the tax benefits for taxpayers purchasing non-group coverage," he said.

Shalala, who served as HHS secretary in the Clinton administration, seemed to determined to apply lessons learned from the spectacularly ambitious and spectacularly unsuccessful attempt to overhaul health in 1993–1994. It's important to have widespread agreement not just that there is a problem but also on the solution, she said, and that the elements be kept simple. "There ought to be limited elements—you ought to pick the ones that matter to do universal coverage.

"One of the things we learned in '93 is that complexity killed us," she said.

She also noted that a Congressional Budget Office estimate of the cost of the Clintons' proposed Health Security Act was "devastating. It changed the momentum of the discussion." Alluding to CBO's recent estimate that Democratic Oregon Sen. Ron Wyden's Healthy Americans Act would be budget neutral, Shalala said that if one starts the debate with a score of budget neutrality, "you take a giant step."

The Finance Committee plans to have two more health overhaul hearings before hosting a June 16 "summit" on health care to which it has invited the entire U.S. Congress.

By Mary Agnes Carey, CQ HealthBeat Associate Editor

May 7, 2008 -- New guidance from the Bush Administration concerning an Aug. 17 directive on coverage under the State Children's Health Insurance Program (SCHIP) has done little to calm critics' charges that the directive will hurt states' ability to expand health care coverage to uninsured children.

Among its provisions, the guidance CMS issued last August requires states seeking to expand SCHIP to first assure the government they have covered 95 percent of children in families earning less than 200 percent of the poverty level before covering children from families making 250 percent or more. The restrictions infuriated advocates of wider coverage of uninsured children, who said the rules set conditions that can't be met for covering children above 250 percent of the poverty level.

That standard is not too difficult to meet, CMS said Wednesday, adding that states could use data demonstrating Medicaid, SCHIP, or private coverage to show they had reached the 95 percent requirement. "This is an achievable goal and based on conversations with states, we are convinced that a number of states have already reached this goal," Herb B. Kuhn, CMS deputy administrator and acting director for the agency's Center for Medicaid and State Operations, wrote in a letter to state health officials.

The letter also told states that they can suggest other ways to prevent "crowd-out," or the substitution of public health care coverage for insurance offered in the private sector, and the letter also reiterates that the Aug. 17 directive does not apply to children currently enrolled in the program. States need not apply the 12-month waiting period or any cost-sharing requirements to children in families with incomes at less than 250 percent of the federal poverty level, nor should states apply crowd-out policies to unborn children eligible for SCHIP, according to CMS.

Lawmakers and child health advocates said the CMS letter stops far short of their goal of overturning the Aug. 17 directive. An aide to Senate Finance Committee Chairman Max Baucus, D-Mont., said late Wednesday that while committee staff has just begun to review the document, "it is immediately clear that this letter does not seek to reverse the August 17th directive, as requested by Chairman Baucus. The directive was issued in violation of the Congressional Review Act."

Sen. John D. Rockefeller IV, D-W.Va., who is sponsoring legislation (S 2049) that would nullify the Aug. 17 SCHIP directive, said CMS' action Wednesday "doesn't change the fact that the policy outlined in the August 17 CHIP directive is illegal." CMS officials have testified before Congress that they believe the agency had the power to issue the Aug. 17 SCHIP guidance.

Bruce Lesley, president of the child advocacy group First Focus, said the CMS letter "really doesn't do much" other than clarify the Aug. 17 guidance does not apply to children currently enrolled in the program and that the one-year waiting period for coverage does not apply to unborn children and other special circumstances.

But the directive issued last August, Lesley said, "is still illegal and it's bad for kids ... The policy has to go away."

By Reed Cooley, CQ staff

May 7, 2008 -- Experts agree that overcrowded emergency rooms are part of a mounting health care crisis in the United States, yet differ in their beliefs of what is causing the crisis and how to solve it.

A report, released Wednesday by the Center for Studying Health System Change (HSC), advocated the expansion of non-emergency health care providers, including community health centers and clinics, to deal with the problem.

According to the study, many low-income patients seek emergency room care for non-emergencies when faced with the prospect of months-long waits at more appropriate venues or the physicians' refusal to provide care to patients with inadequate insurance coverage.

"The growing reluctance of physicians and dentists to serve Medicaid and uninsured patients, along with shortages of primary care physicians and certain specialists . . . in some communities make obtaining clinic or physician appointments increasingly difficult," said an HSC press release.

The release said that turning to emergency rooms for non-urgent health issues is an inefficient use of the health care system.

"Emergency departments are very expensive settings and are not designed to treat ongoing, chronic needs," said Paul B. Ginsburg, president of HSC.

Sandra Schneider, secretary and treasurer of American College of Emergency Physicians (ACEP), agrees that extended emergency room stays should not be allotted to longer-term patients like those with pneumonia, but disagrees with HSC's position on non-urgent patients as a whole, many of whom she thinks can be treated quickly and efficiently in the emergency room.

"We are in a crisis situation in these emergency departments . . . However, the answer is not to take out the people we can turn around quickly; the answer is to take out the people who are waiting for an inpatient bed," she said.

Many patients seeking non-urgent care, for a sprained ankle for example, are referred to the emergency room by a primary care physician, and are in and out of the hospital in a matter of hours, according to Schneider.

"What's causing crowding . . . are inpatients being housed in emergency departments for days," she said.

She noted the downsizing of inpatient capacity in hospitals, due to nursing shortages and other issues, as a reason inpatients are waiting long hours or days in the emergency room before getting assigned to a bed, and advocated the re-expansion of this capacity as the only way to cut down on emergency room crowds.

Schneider cited a 2001 ACEP study that surveyed hospitals on a random night, and found that 22 percent of patients across the country had spent over two hours in the emergency department before being moved.

These are the patients that need to be redirected if emergency room crowding is to be stopped, she said.

By Mary Agnes Carey, CQ HealthBeat Associate Editor

May 9, 2008 -- The benefits of electronic prescribing, which include reducing costs and medication errors, should outweigh concerns about privacy or other hurdles that health care providers face in adopting "e-prescribing," experts said Friday.

A forum sponsored by the Brookings Institution's Engelberg Center for Health Care Reform highlighted the experiences of pharmacists, physicians, insurers, and others who have embraced e-prescribing as the way to improve health care. But panelists also acknowledged that many hurdles remain before the number of health care providers who issue prescriptions electronically will increase, including changing practice patterns, concerns that electronic data sharing systems could be become quickly outdated, and a Drug Enforcement Administration prohibition on prescribing controlled substances.

While widespread adoption of electronic health records is a priority for many lawmakers, health care analysts, and providers, proponents of e-prescribing say it is a simple first step that is already in place and proven to save lives. More than 7,000 people die each year as a result of medication errors, according to the Institute of Medicine.

Between 2 and 3 percent of all prescriptions are issued electronically, and less than 6 percent of physicians use electronic prescribing in their medical practices, panelists said.

But some privacy experts say e-prescribing gives insurers, pharmacies, marketers, and others the ability to aggregate and sell data without patients' knowledge or consent. "Congress thought they found a non-controversial piece of health IT they could pass and not bother anybody," Deborah Peel, founder and chairwoman of the group Patient Privacy Rights, said in an interview Friday. Peel said lawmakers should not permit e-prescribing unless there are strict prohibitions on "data mining."

Panelists at Friday's forum disagreed with that assessment. Steve Findlay, managing editor of Consumer Reports Best Buy Drugs, said e-prescribing is not the "right vehicle for the privacy concerns swirling around health IT" and that opportunity for the abuse of data is "relatively small."

E-prescribing advocates, which include a broad range of consumer, labor, insurers, and business groups, are pushing to get language included in Medicare legislation now being developed by the Senate Finance Committee that would require physicians participating in Medicare to issue prescriptions electronically, a practice that could save the program an estimated $3 billion over the next decade. Secretary of Health and Human Services Michael O. Leavitt has endorsed the idea of requiring e-prescribing in Medicare and earlier this month the Centers for Medicare and Medicaid Services released standards for electronic prescribing in the Medicare drug benefit. In addition, several Senate and House members have supported legislation (S 2408, HR 4296) to require electronic prescribing in Medicare, with payment incentives added to encourage adoption.

Michael Kim, owner of Grubbs Pharmacy on Capitol Hill, told the audience at Brookings that he implemented electronic prescribing last year once the District of Columbia allowed the practice. Since then, he said he has seen a steady, upward trend of about 20 to 30 doctors a week switching from issuing prescriptions on paper to sending them to his pharmacy electronically.

For some in the health care system, "it's probably like going from the typewriter to the computer" to adopt the new technology, but once they do they will not be disappointed, Kim said. "It's really, really a great system," he said, adding that his pharmacy technicians misread fewer prescription orders when they arrive electronically rather than being written by hand. The practice also prevents a patient from altering a prescription and allows physicians and insurers to track which prescriptions a patient filled or, more importantly, did not fill, Kim and other panelists said.

John Rother, group executive officer, policy and strategy for AARP, said consumers are ready to accept e-prescribing, noting an AARP survey that found 92 percent of people 65 and older wished their physician would issue prescriptions electronically. "It's much more convenient, it's safer" and allows both patients and their doctors to know immediately about lower-priced generics, possible drug interactions and what drugs are covered by the insurance company, Rother said.

Steve Stack, a member of the American Medical Association's board of trustees, said the AMA supports e-prescribing because it can improve patient care, increase collaboration between health care providers and reduce administrative costs.

"We want to do this. We are not interested in being a barrier," Stack said, but he added that a national, uniform set of e-prescribing standards, along with a transitional period, are key to speed physician adoption. Lifting a DEA prohibition on electronic prescribing of controlled substances would also encourage more physicians to do e-prescribing, since doctors do not want to have to issue some scripts via paper then do the others electronically.

Kim says he talks to many House and Senate members who come to his pharmacy, but "unfortunately, a lot of them don't understand the issues" around e-prescribing. "Frankly, what would push this thing along is if one of their prescriptions got screwed up," he said.

By Drew Armstrong, CQ Staff

May 9, 2008 -- Senate Republicans are pushing to remove Medicare and Medicaid provisions from a supplemental war spending bill, but so far they have been rebuffed by Democrats.

Charles E. Grassley of Iowa, ranking Republican on the Senate Finance Committee, sent a letter to Senate appropriators on Thursday asking for removal of two provisions in the Senate bill. One would block seven Bush administration Medicaid regulations that would shift some costs to the states, and the second would ban new physician-owned "specialty hospitals" from getting payments through Medicare.

Finance Chairman Max Baucus, D-Mont., who normally cooperates with Grassley, disagrees with his ranking Republican this time, noting Republicans have blocked efforts to address the Medicaid rules in separate legislation (HR 5613).

"Senator Baucus has said that in light of the fact that efforts to move legislation stopping these bad Medicaid [regulations] from being implemented have been blocked, the supplemental funding bill is a viable vehicle for moving them forward," said Baucus spokeswoman Carol Guthrie.

A spokesman for Appropriations Chair Committee Chairman Robert C. Byrd, D-W.Va., said the language has the support of Democratic leaders.

"The Medicare/Medicaid provision is expected to be in the House supplemental and was included in the Senate mark at the request of the Democratic leadership in the Senate with the support of the chair of the Senate Finance Committee," said Jesse Jacobs, Byrd's spokesman.

Grassley sent Baucus a copy of his letter to Byrd and the panel's ranking Republican, Thad Cochran of Mississippi. As of midday Friday, he had received no reply from Byrd, his office said.

"It is legislation on Medicare and Medicaid, and that is a basic part of the jurisdiction of the Finance Committee," Grassley wrote.

Cochran is backing Grassley's position. "Senator Cochran was certainly not consulted about this issue. We hope the chairman will carefully consider Sen. Grassley's concerns," said Cochran spokeswoman Margaret McPhillips.

"There are several pieces of the House and Senate drafts that don't belong on a supplemental appropriations bill, particularly if there is to be no opportunity for amendments on the House or Senate floor, and no conference committee," she said.

Grassley has previously supported the crackdown on specialty hospitals and said in his letter that he still does.

The spending bill would prohibit Medicare participation by new specialty hospitals, typically physician-owned facilities that specialize in one line of care, such as surgery, cardiac care, or orthopedics. These hospitals often focus on the most profitable specialties and have been accused of siphoning off paying patients from general hospitals.

There are an estimated 100 to 200 of the hospitals in operation. Those would be grandfathered in, but they would have to disclose their ownership interests to patients.

The provision would create $2.4 billion in savings over 10 years, according to a Senate GOP aide, mostly by slowing the growth in Medicare payments.

"While I am in support of the policy changes proposed by these provisions, they should only be considered by the Finance Committee," Grassley said in his letter.

Grassley has opposed the effort to stop implementation of the Medicaid regulations, working with other Senate Republicans to block or slow efforts to act on the Medicaid bill passed by the House last month by 349–62.

That measure, sponsored by House Energy and Commerce Chairman John D. Dingell, D-Mich., would postpone the regulations until April 2009, when a new president will be in office. The bid to include the provision in the supplemental represents an attempt by Democrats to work around the filibuster threat in the Senate.

The administration regulations are part of a long struggle between states and the federal government over who should pay more for Medicaid, the health care entitlement for the poor. The regulations would eliminate or curtail federal reimbursement for a number of services the administration thinks Medicaid shouldn't pay for, and they would change accounting procedures that the administration alleges states have used to draw more federal Medicaid dollars than they would otherwise be due.

Liriel Higa contributed to this report.

By Sara Lubbes, CQ Staff

May 9, 2008 -- The ever-rising costs of health care puts American businesses at a disadvantage when trying to compete with firms overseas, according to a new study released this week by the New America Foundation.

Foundation health policy director Len Nichols, who served as senior adviser for health policy during the Clinton health overhaul efforts of 1993–94, said the U.S. health care system—in which 60 percent of all residents are covered by employer-sponsored health insurance—puts the country at risk of losing "good jobs" to companies in other countries.

The study, co-authored by New America Foundation Program Associate Sarah Axeen, found that U.S. firms spent twice as much on health care in 2005 as their foreign competitors. For every American worker making $18 an hour, U.S. companies spent $2.38 per hour for that worker's health insurance. In contrast, firms in Canada, Japan, Germany, the United Kingdom, and France paid workers an average $20 per hour and spent 96 cents per hour on health care for each worker.

Meanwhile, American workers are also spending more on health care. Nichols says the average worker contribution for family health insurance has increased by 102 percent since 2000.

Nichols maintains that the wide cost difference between U.S. health costs and those overseas threatens the nation's ability to compete in the global marketplace.

But he also says it is impossible for companies to shift all of the burden of health insurance costs to workers. Union contracts get in the way, and employers cannot match salary increases or decreases to highly variable health care costs.

"Health care costs growth produces a series of 'shocks' of varying magnitude that cannot be fully shifted into wages in the short run," Nichols says. "Because the shocks persist, employers cannot get to the long-run equilibrium where health costs are fully shifted" to workers.

Instead, businesses end up having to bear a fair share of the costs, making it attractive to relocate operations overseas where firms do not contribute as much to their workers' insurance plans, Nichols says.

The solution, he suggests, is for the U.S. government and individual workers to pay more of their own health insurance costs.

Under that system, employers would be required to "cash out" health plans and convert health care contributions into raises for their workers. Workers would then use the money to purchase health insurance.

Nichols' suggestions fall in line with legislation by Ron Wyden, D-Ore., whose bill (S 334) would create a worker-based system.

Under Wyden's measure, state-based "Health Help Agencies" would offer workers information and guidance to buy the right insurance plan. The proposal would encourage plans with low-cost preventive care and chronic disease management—all with an eye toward reducing future health care costs.

Brian Baird, D-Wash., is sponsoring a companion bill in the House (HR 3163). Neither measure has seen committee action.