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April 10, 2006

Washington Health Policy Week in Review Archive 684c17c1-4b48-472f-b3d2-491ea3deef1a

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CMS 'Call Letters' Aim to Simplify Medicare Plan Menu

APRIL 4, 2006 -- The Centers for Medicare and Medicaid Services issued bidding instructions Tuesday urging private plans in Medicare to simplify their offerings for 2007. However, the CMS "call letters" instructing prescription drug and managed care plans on preparing their bids for next year do not formally standardize those offerings, a step urged by some congressional Democrats.

CMS said it wants "clearly understandable" options and that plans should compete by making it easier for beneficiaries to make comparisons. The agency said "distinct preferences" are emerging among beneficiaries for certain design features in the Medicare prescription drug benefit and that plans should focus their competitive energies on offering alternatives in those areas.

CMS wants alternatives such as deductibles versus no deductibles for drug coverage and the use of fixed-dollar co-payments for prescriptions versus "co-insurance," in which out-of-pocket costs are a percentage of the cost of the prescription. Other alternatives should include coverage versus non-coverage in the "doughnut hole," the portion of the standard drug benefit in which beneficiaries must pay 100 percent of prescription costs; a range of premium charges; and tighter versus broader formularies of covered drugs.

Bidders should make sure that differences in plans offered "can be reasonably understood," said the CMS call letter for "PDPs," the prescription-drug-only plans offered in traditional Medicare.

Two Is Enough, Mostly
Consistent with the proposed version of the call letter, CMS said that in general it wants a PDP sponsor to offer no more than two types of drug plans.

"In general, we expect that more than two bids from a sponsoring organization would not provide meaningful variation, unless one of the bids is an enhanced alternative plan that provides coverage in the coverage gap," the letter said.

The document also addresses a number of problems that fouled the start of the drug benefit for some beneficiaries and pharmacists, such as long telephone wait times for assistance and delayed updates of enrollment data.

"CMS expects sponsors to develop and maintain information systems that accurately process updated enrollment information at least weekly," the letter says. Call centers operated by drug plans to handle questions by current and prospective enrollees must answer 80 percent of calls within 30 seconds. "Abandoned" calls in which beneficiaries on hold hang up must not exceed 5 percent of all beneficiary calls.

Those new timeliness standards also apply to toll-free call centers that plans must operate to answer inquiries from pharmacists and doctors or nurses about a beneficiary's coverage. The call center must be open when the pharmacies participating in a plan are open, even if that's 24 hours a day. CMS is going to be releasing weekly reports on call center performance, the agency said.

The call letter also advises plans that they must have a "one-stop" area on their Web sites providing information on how beneficiaries can appeal decisions not to cover drugs.

A separate CMS call letter to managed care plans on the Medicare Advantage side of Medicare also aims to clear up beneficiary confusion. In some cases, "beneficiaries are unable to make meaningful distinctions between the various plans offered by a sponsor," the letter said. Sponsors must eliminate plans "that are substantially duplicative in terms of cost sharing, provider networks and benefit design," including drug coverage offered by the plans, the letter said.

CMS also said that, in general, it will no longer be possible to market a managed care plan as having a "zero premium" for Medicare Part B, which covers physician services and certain other forms of care outside the hospital. The agency noted that in 2007 higher-income beneficiaries will pay higher premiums for Part B than other beneficiaries. Since an MA plan must offer uniform benefits, the zero premium claim could not be made in marketing, but plans can tout premium rebates, the letter explains.

Consumers Union has expressed strong support for limiting the number of drug benefit designs. "The current proliferation of plans, many with minor differences, has simply led to confusion and predictable paralysis of choice among many beneficiaries and their families," the publisher of Consumer Reports said in a March 1 comment on a draft version of the call letter.

It expressed support for legislation offered by Rep. Marion Berry, D-Ark. (HR 752), and Sen. Richard J. Durbin, D-Ill. (S 345), that would create a drug plan administered directly by Medicare and that would compete with private prescription drug plans in the program. The Medicare-run plan would have authority to negotiate prescription drug pricing.

Pending such legislation, "we support the concept of reducing the number of plans and, to the extent possible, grouping them according to a few broad characteristics," Consumers Union said. But "we doubt that any grouping will be enough to help consumers," the group added.

Issues such as formularies of covered drugs, tiers of varying co-payments within plans, utilization controls, and differences in grievance and appeal procedures "are simply too complex to be made understandable to the layperson."

In the Senate, Democrats Max Baucus, Mont. and Ron Wyden, Ore., have expressed interest in introducing legislation simplifying drug plan comparisons by standardizing the plans that could be offered.

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Despite Bay State Breakthrough, Money Still the Big Obstacle to Covering the Uninsured

APRIL 6, 2006 -- Health policy analysts praised the political accomplishment of Massachusetts lawmakers Tuesday in enacting a plan that covers almost all of the state's half a million uninsured residents, but they said money is a big obstacle to replicating that model nationwide.

The plan makes Massachusetts the first state in the nation to require residents without health insurance to obtain coverage, just as drivers are required to buy automobile insurance. Uninsured residents with low incomes will receive state subsidies to buy health coverage.

Not only does Massachusetts have a relatively small uninsured population, it also has a relatively large "free care pool" whose funding will be shifted to providing subsidies for the purchase of insurance, analysts noted Wednesday. That's not the case in big states like California and Texas where many of the nation's uninsured reside, they note.

But the Massachusetts plan may have shifted the debate over how to cover the uninsured to a new focus on "the individual mandate" even as President Bush tried Wednesday to play up health savings accounts, or HSAs, as the solution to what ails health care.

Enactment of the plan advanced by Mitt Romney, the Republican governor of Massachusetts and a potential presidential candidate, "raises the bar" for candidates offering plans to cover the uninsured, said Chris Jennings, a health policy adviser during the Clinton administration. "I'm sure they are looking at this very, very carefully," Jennings said of potential Democratic presidential candidates, including Sen. Hillary Rodham Clinton of New York.

'Giant Leap Forward' Politically
That Massachusetts lawmakers were able to reach agreement on a plan sharply increasing coverage of the uninsured in today's budgetary climate impressed veterans of the perennially gridlocked inside-the-Beltway debate over coverage of the uninsured.

"It's a giant leap forward," said Chip Kahn, who as a senior health insurance industry official successfully opposed President Bill Clinton's plan to cover the uninsured. The movement to ensure coverage for all "is worthy of attention and deserves commendation," said Jennings, Kahn's opponent in that battle.

By relying on private plans to cover many of the uninsured and holding individuals responsible for obtaining coverage, the plan would, at least in theory, appeal to conservatives. And by covering virtually all of the uninsured, at least in theory, it would be attractive to liberals.

But that in practice the plan attracted the support of virtually every member of the Massachusetts Legislature was unexpected. "I was surprised by the vote," said John Holohan, an insurance analyst with the Washington-based Urban Institute. Holohan attributed the result to a greater willingness to compromise in an atmosphere of growing anxiety about health costs. "People are worried about losing coverage," he said.

Uncertainty Over Subsidies
But Holohan noted that Massachusetts has a low percentage of uninsured residents—about 7 percent—while other states where many of the nation's uninsured reside have much higher rates. Texas, for example, has a 27 percent uninsured rate, he noted.

"At the national level, it would require some significant new taxes" to fund subsidies, he said.

Massachusetts is funding its subsidy program by switching a pool to compensate hospitals for treating uninsured residents to a fund that helps those without coverage buy health insurance. The plan also raises funds by deciding not to use a recent budget surplus to lower taxes. And the plan reportedly calls for charging employers with more than 10 workers up to $295 a year for each employee they do not cover.

Fierce employer resistance, particularly by small businesses, helped doom the Clinton plan, which mandated employer coverage of workers. But the $295 charge is far less expensive than any health insurance benefit that businesses can provide today, said Jennings. Most employers want to be able to provide health coverage to attract and retain workers, he said. Holohan similarly suggested that the penalty wouldn't necessarily stir strong employer resistance nationwide, noting that it did not do so in Massachusetts.

But Kahn, while praising the political achievement in Massachusetts, portrayed employer resistance as a major potential obstacle to widespread national adoption of the Massachusetts plan.

"Because the employers are required to do things ... I think at the national level it would be awfully difficult to pass something like that within the current configuration of politics," said Kahn, who is now president of the Federation of American Hospitals. Kahn agreed that $295 is a relatively low amount for employers to have to pay. But from an employer's point of view, "small mandates today can get to be big mandates tomorrow," he said.

Jennings said the $295 charge may be problematic from another point of view—whether it's enough to allow the Massachusetts subsidy program to be viable. "That's the question," he said. "Ask 10 different people and you'll get 10 different answers in Massachusetts," he added.

Holohan indicated that Massachusetts ultimately may have to increase taxes to fund the subsidy program, but not necessarily by much. "They put some new money in this, but I think they're going to need more at the end of the day," he said.

Despite likely bumps in the road, "I think it's a good model," Holohan said. "We've gone the route of trying to get employers to pay for this and it didn't work. It's just a battle that's unwinnable."

Insurer opposition to federal rate controls and regulation in the Clinton plan also played a big role in its demise, but Kahn held off on any prediction that insurers would try to shoot down a Massachusetts-type plan at the national level. "I hate to use the quote, but the devil is in the details," Kahn said. It would be premature to predict how insurers will react "until you see the whites of the eyes of the plan," Kahn quipped.

For now, at least, the nation's largest health insurance lobby is saying nice things. Karen Ignagni, president of America's Health Insurance Plans, praised the legislation as a "path-breaking attempt to apportion responsibility for expanding access among all stakeholders." She added that "policy makers left many of the details of implementing the new law to the regulatory process. We will be working with our members to help create the environment necessary for this legislation to succeed."

But Sen. John Ensign, R-Nev., predicted that Republicans will not embrace the individual mandate approach in the Massachusetts plan as a national solution. "As Republicans, we're not usually in the business of mandating things. We're mostly trying to free up and let market forces work better," he said in a press briefing Wednesday.

"Certainly the polarization at the federal level is a big barrier" to national adoption of a Massachusetts-type plan, said Paul Ginsburg, president of the Washington, D.C. Center for Studying Health System Change.

But at the state level, states in the Northeast and upper Midwest could be interested in following the lead of Massachusetts, he added. The political and business culture of those states is more hospitable to a Massachusetts approach, he said.

Despite questions about Massachusetts as a model for the nation, the state is clearly now a laboratory that will be closely watched nationally by those hoping for a compromise on the issue of the uninsured. "I believe you have to mix and match a variety of approaches," said Ron Pollack, executive director of the liberal advocacy group Families USA.

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From the CQ Newsroom: House GOP Leaders Vow to Try Again on Budget Resolution

APRIL 7, 20006 -- A day after party infighting forced House Republican leaders to send members home for recess without passing a budget, GOP leaders pledged they would resume negotiations when they return from the two-week Easter break.

"I don't think we should be throwing in the towel," House Republican Conference Chairwoman Deborah Pryce, R-Ohio, said at a Friday morning news conference.

House Majority Whip Roy Blunt, R-Mo., said he believes the GOP can eventually pass a budget resolution (H Con Res 376) despite the intense disagreement among appropriators, conservatives, and moderates that sank the effort this week.

Problems arose, Blunt said, because the basic budget resolution became the vehicle for proposed new procedural hurdles to emergency spending, which is funding that falls outside the annual caps on discretionary spending. Other procedural proposals, including curbs on member earmarks, also became entangled in the negotiations.

"We really haven't had the budget discussion yet," Blunt said. "Earmark reform and emergency funds and things of that nature are very much process-oriented. In light of that, I do think we have a real opportunity to get back and get this budget done, but we really have to move past these process-oriented issues."

Blunt's remarks appeared to signal that GOP leaders might try to break off the "process-oriented" emergency spending provision, which provoked a full-scale revolt by House Republican appropriators, led by Chairman Jerry Lewis of California.

That provision would require the Budget Committee to sign off on any proposed emergency spending for natural disasters or other domestic purposes that exceeds $4.3 billion. Lewis urged all 36 of his fellow Appropriations Republicans to vote against the budget and rule for its consideration unless that proposal is stripped.

Conservative activists in the Republican Study Committee pressed for the curbs on emergency spending, along with several other proposals that are not a part of the budget resolution. Those would restrict member earmarks and create a "sunset commission" to recommend programs for termination.

House Majority Leader John A. Boehner, R-Ohio, earlier expressed doubt that the House would keep attempting to pass a budget beyond this week.

"If we don't do it this week, why do it?" Boehner said on April 4.

Blunt said he did not necessarily agree. "I think that would have been the conventional wisdom this week, a couple of weeks ago," Blunt said. "I'm not sure where I would have been on that."

Boehner did not participate in the Friday press conference, which was conducted by telephone with the intent of promoting new Department of Labor statistics showing job growth in March.

But Boehner said Thursday night after the budget talks collapsed that he would continue the negotiations after the recess.

"We'll keep working on the budget process reforms—that's the biggest issue standing in the way," he said.

Members of the Republican Study Committee claimed Thursday night to have struck a deal with leaders regarding new earmark rules. But appropriators have refused to agree to those terms, which would require that earmarks be identified by sponsor and be subject to challenges on the floor, including in conference reports.

Ron Bonjean, spokesman for Speaker J. Dennis Hastert, R-Ill., said Friday morning that a budget agreement was still a "moving target."

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Medicare Advantage Rates to Rise Modestly in 2007

APRIL 3, 2006 -- The Centers for Medicare and Medicaid Services said Monday that payment rates for Medicare managed care plans will rise only modestly in 2007. While payment rates are set to rise an average of 4 percent next year, those rates will be subject to a technical adjustment for the way physicians code patients for billing purposes. That technical adjustment on average would leave plans with a payment rate increase of 1.1 percent assuming the overall health status of their Medicare enrollees stayed about the same between 2006 and 2007.

Small increases in the past have caused an erosion in benefits offered by the Medicare-managed care plans, now known as Medicare Advantage plans.

"No member of Congress will be able to conclude that plans are overpaid next year," said Karen Ignagni, president of American's Health Insurance Plans, the largest health insurance lobby.

Ignagni declined further comment on the impact on plans of the announced rates pending further analysis of the technical adjustments involved.

Medicare Advantage plans have been able to offer more generous benefits than in traditional Medicare, fueled by higher payment increases under the Medicare overhaul law (PL 108-0173) plus separate payments from the government for providing drug coverage.

CMS Administrator Mark B. McClellan emphasized that attractive coverage in a press release announcing the rate changes. He noted that enrollment in Medicare Advantage plans has grown by one million since the start of the year.

A big draw for the plans has been "zero premiums," meaning the plans do not charge a monthly premium for drug coverage. Receiving relatively large increases for other forms of care has made it easier for the plans to charge no premiums for drug coverage.

According to CMS, more than half of beneficiaries choosing a Medicare Advantage plan have enrolled in such zero premium coverage. And almost three-quarters of beneficiaries enrolling in Medicare Advantage plans with drug coverage have lower deductibles or at least some coverage in the "doughnut hole" gap in the Medicare drug benefit, where drug plan coverage stops after a beneficiary spends $2,250 and picks up again after $5,100.

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Studies Find Disparities in Health Care Between U.S., Other Nations

APRIL 4, 2006 -- Despite the perception that the U.S. health care system is the best in the world, studies released Tuesday conclude that Americans are not getting their money's worth.

The first of two reports from the Commonwealth Fund found that the U.S. health care system performed poorly compared with other countries in terms of providing care equitably, safely, efficiently, or in a patient-centered manner. The second study concluded that U.S. adults with below-average incomes fare worse than their counterparts in four other countries.

While the U.S. system scored well on effectiveness of care—in particular preventive care—there are wide disparities based on income, according to patient surveys.

"The U.S. is far from being the best performing system in the world," Donald Berwick of the Harvard School of Public Health said in analyzing the studies' findings.

Commonwealth Fund President Karen Davis said America's "fragmented health care system and a lack of a strong primary care foundation show up in performance gaps" throughout the studies, with particularly negative results for patients vulnerable due to poor health or lower incomes.

Contrasting the experiences of patients in the U.S. with those in other countries "provides evidence that it is possible to provide care that is more efficient, effective, safe, patient-centered, and equitable," Davis said.

Robert B. Helms, resident scholar and director of Health Policy Studies at the American Enterprise Institute, said that while "there are lots of things that are inefficient about the U.S. health care system, whether they're more or less inefficient than in other countries is a difficult thing (to judge). . . . This is more of an opinion survey versus hard evidence on medical outcomes."

The Commonwealth studies found that when ranked against adults' health care experiences in Australia, Canada, Germany, New Zealand, and the United Kingdom, sicker adults in the United States have the highest rate of receiving wrong medications or doses of medicine or experiencing a medical mistake in the previous two years.

German and U.S. patients with health problems said they had the least difficulty waiting to see a specialist or have elective or non-emergency surgery, but both Americans and Canadians reported they were more likely to wait six days or more for an appointment with a doctor or had trouble getting care on nights and weekends.

Sicker adults in the United States more often reported that they visited the emergency room for a condition that could have been treated by a regular doctor had one been available, and that their medical records or test results failed to reach their doctor's office in time for appointments.

The U.S. also ranked last among the six countries in terms of equity in the health care system, while the United Kingdom ranked first with no or negligible differences in terms of patients' access to care by income, researchers found.

American adults with below-average incomes had the worst experiences on measures of primary care access, coordination, and doctor–patient relationships, according to the studies.

"These surveys reflect that no one in the U.S. is benefiting . . . from the health care system as a whole," said Andrew Bindman of the University of California at San Francisco.

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Support for Small Business Health Coverage Solutions Fragmented

APRIL 6, 2006 -- The lack of consensus over how to make health coverage affordable for small businesses was as clear at a Senate hearing Thursday as the growing pressure members of Congress feel to deliver on the issue.

Senators made passionate pitches for different solutions. Business officials testifying at the hearing by the Senate Finance Committee were similarly out of sync. Insurance market researchers voiced strong criticisms of the small business coverage bill (S 1955) that has progressed farthest in the Senate.

And the senator who chaired the hearing, Iowa Republican Charles E. Grassley, was noncommittal about what should be done for small businesses, saying he will continue to hold hearings on rising health costs and coverage of the uninsured.

So if forces are starting to coalesce to push S 1955 across the finish line in Senate floor action expected in early May, it wasn't apparent from the Finance panel's review of the issue.

Sen. Olympia J. Snowe, R-Maine, an early champion of legislation allowing small businesses to join "Association Health Plans" (AHPs) to buy coverage, declared that "the time for talking has long since passed. No more excuses, no more laments, no more complaining, no more describing a problem and doing nothing about it."

"Even when study after study confirms beyond a doubt that fewer and fewer small businesses are able to offer health insurance to their employees, little has been done to alleviate the problem," Snowe said. "Quite simply, that's outrageous."

But Snowe did not say that she would support S 1955, a modification of AHP legislation she had introduced. Sponsored by Sen. Michael B. Enzi, R-Wyo., and approved by the Senate Health, Education, Labor and Pensions Committee, S 1955 would allow small employers to band together in "Small Business Health Plans" to buy less-regulated coverage.

Snowe called the bill "a good step forward" but voiced several criticisms, including its failure to allow small businesses to join together to self insure, a step that would exempt them from state regulation.

Reading from prepared remarks, Sen. Blanche Lincoln, D-Ark., appeared to connect with witnesses and the hearing room audience with an emotional statement advocating a bill (S 2510) creating a nationwide purchasing pool for small businesses.

"The small business health care crisis is undoubtedly the number one issue I hear about when I am traveling in Arkansas, and I have been working hard on a solution," she said. "Small businesses are the number one source for jobs in Arkansas, yet only 26 percent of businesses with fewer than 50 employees offer health insurance coverage."

The approach in S 1955 would preempt mandates that protect consumers in Arkansas and provide them with meaningful coverage, she asserted. "Mandates like coverage for maternity care and newborn coverage, diabetes supplies, children's preventative health care and mental health disorders would all be pre-empted," she said.

Also sponsored by Sen. Richard J. Durbin, D-Ill., the Lincoln bill would create a Small Employers Health Benefits Program along the lines of the Federal Employees Health Benefits Program. The large pool would allow the costs of more sickly workers to be offset by premium contributions of healthier ones, making coverage more affordable for those with chronic and other diseases, backers say.

In addition, the bill would provide $50 billion in tax credits over 10 years to help small businesses pay the costs of coverage. Spending $50 billion over 10 years to cover 20 million uninsured people "seems somewhat reasonable," Lincoln said pleadingly.

But Joseph E. Rossmann of the Associated Builders and Contractors, Inc., said S 1955 "is the most viable proposal currently before the U.S. Senate," adding that it would be run by the private sector (the SEHBP would be overseen by the federal Office of Personnel Management) and would reduce premium costs by 12 percent for members of Small Business Health Plans.

"Adverse selection that currently exists in state markets will be greatly reduced when younger, healthier workers employed in small businesses who are now uninsured are able to obtain coverage that is affordable," he said in written testimony.

And Sen. Jim DeMint, R-S.C., also urged against involving government, saying that if one is honest about many of the problems society is having today, "it comes back to government." Tax breaks to ease the costs of purchasing health savings accounts would "turn patients into shoppers," increasing access to coverage by making it more affordable, he said.

But Sen. Max Baucus, D-Mont., said, "I'm not sure the individualist ethic can be cleanly extended to health insurance. The nature of health insurance is shared risk. We all pay into the pool. And we benefit from the pool when we need help."

Similarly, the importance of having a large pool mixing sick and healthy people and of having "a fair sharing of health care costs" drew support from the National Small Business Association, which says it represents some 150,000 small businesses.

Business Support for a Mandate
"Broad reform" is necessary, said Todd McCracken, NSBA president. He said his association backs an individual mandate requiring everyone to have health coverage. Subsidies should be created to help everyone afford it, he added. That's the approach Massachusetts is taking in legislation approved Tuesday by state legislators.

Len Nichols, a health policy analyst with the New America Foundation—a self-described non-partisan group that says it advocates new thinking to address complex policy challenges—said S 1955 "is manifestly about helping some at the expense of others." The health plans it would create would bring down costs for healthier small business employees while driving them up for sicker employees, he said.

Linda Gibbs, deputy mayor of New York for Health and Human Services, voiced similar concern that S 1955 would fragment the insurance pool. Gibbs said in a letter to Grassley distributed at the hearing that under the bill "New York City's small businesses could see their already significant costs for health insurance increase to the point where very few small businesses would be able to afford it."

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