Skip to main content

Advanced Search

Advanced Search

Current Filters

Filter your query

Publication Types



April 25 2005

Washington Health Policy Week in Review Archive bf341f99-3d3d-472e-8215-190fe5b93ad2

Newsletter Article


House Hearing Highlights Long-Term Care

APRIL 19, 2005 -- House Republicans and Democrats expressed hope that a hearing Tuesday on the growing burden of long-term care for seniors will lead to legislation. But as in previous years, the two parties' differences on the issue may be insurmountable.

Republicans favor offering tax incentives for people to buy private long-term care insurance policies, which now pay only about 3 percent of the estimated $200 billion spent annually on the services, according to the Congressional Budget Office (CBO). But Democrats say the insurance policies currently on the market aren't attractive to consumers and that long-term care should be covered by a government "social insurance" plan, much like Social Security.

"It should be a program, in my opinion, for which everyone pays a small amount, and from which everyone could benefit," Rep. Pete Stark, D-Calif., said at the House Ways and Means Health Subcommittee hearing.

The issue, like Social Security's financial condition, is gaining urgency as the baby boom generation prepares to retire. Most long-term care expenses, such as nursing homes or home nursing care, are now either donated, as with families who care for elderly relatives, or are paid by the government's Medicare and Medicaid programs. The two government medical programs pay a combined 38 percent of long-term care expenses, according to CBO.

Ways and Means Chairman Bill Thomas, R-Calif., has suggested combining an overhaul of Social Security with changes in the tax code and the way long-term care is provided, though he has not laid out specifics of such a plan. Other Republicans and the White House have said Congress should focus on Social Security alone.

It is unclear how the expenses of long-term care might increase in the future. The population is growing older; about 5 percent of Americans will be 85 or older by 2050, compared to 1.5 percent in 2000. But at the same time, they are growing healthier, with the incidence of impairment decreasing by about 6 percent per decade between 1910 and 1990.

"I do not believe we know how to provide long-term care services for the size population that's going to need them in 10 years," said subcommittee chairwoman Nancy L. Johnson, R-Conn. She said she has sponsored bills in the past and would do so again that would provide tax incentives for people to purchase private long-term care insurance policies.

Representatives of the long-term care industry say cuts proposed for Medicaid and Medicare are increasing the urgency for changes in the way the care is provided.

Publication Details

Newsletter Article


Many Hurdles Remain Before Budget Deal Is Sealed

APRIL 22, 2005 -- Despite indications that the administration is on the verge of a deal with Sen. Gordon H. Smith, R-Ore., on Medicaid cuts, budget negotiators still must resolve a series of tough issues if they hope to consider a conference report before the Senate departs for a one-week recess April 29. It appears that Smith has an agreement from the administration to appoint a commission to study implementing the Medicaid cuts that would be assumed as part of a budget conference report's reconciliation instructions to the Senate Finance Committee.

According to a Senate GOP source, the Medicaid savings number would be below the $12 billion sought by Senate Budget Chairman Judd Gregg, R-N.H.

Budget writers hope that a Medicaid deal will catalyze an overall agreement, but it remains unclear whether they can find enough savings in other programs to secure the $40 billion to $45 billion in mandatory savings they have been discussing.

With a tentative deal in place to move $70 billion in tax cuts through a fast-track reconciliation bill, the focus has largely been on mandatory spending cuts. The House budget (H Con Res 95) called for $68.6 billion in such cuts and the Senate approved $17 billion in cuts.

Yet before adopting its budget last month, the Senate voted to strike a $15 billion instruction to the Finance Committee to find savings, most of which would have come from Medicaid. Gregg and conservatives in the House have insisted that the budget must extract savings from among the three major entitlement programs: Medicare, Medicaid, and Social Security.

But the president's campaign to restructure Social Security appears to have taken savings from the retirement system off the table. "Medicaid savings [are] the cornerstone of this budget and Chairman Gregg has been fighting for every possible dollar," Budget Committee spokeswoman Gayle Osterberg said Friday.

Gregg was not present at two sets of Thursday discussions among Smith, Health and Human Services Secretary Michael O. Leavitt, and Senate Republican leaders. And reluctance among lawmakers and aides to discuss details of an emerging agreement appear to be based, at least in part, on the need to brief other players.

"Negotiations are ongoing, but there is no agreement in place," a Smith aide said Friday. The Senate has appointed budget conferees, but the House has not, preferring to wait until a budget deal is imminent to avoid contentious motions to instruct conferees on a variety of topics. Even if Medicaid cuts are restored in the conference report, Gregg and House Budget Committee Chairman Jim Nussle, R-Iowa, have yet to demonstrate how they would get to $40 billion in cuts from mandatory spending. Even if Gregg were to get $12 billion from Medicaid, which is looking increasingly unlikely, that would move his figure up to $29 billion.

Some of the remaining savings would almost certainly come from the chambers' tax-writing panels. The House budget instructed the Ways and Means Committee to find $18.7 billion in savings. But, after the Senate adopted Smith's floor amendment aimed at blocking Medicaid cuts, the Senate budget contained no savings instruction to the Senate Finance panel.

Ways and Means Chairman Bill Thomas, R-Calif., has given little indication of where he might look for savings, but others have said Medicare is a possible target. Through various programs, the universe of cuts available to Thomas is as much as $60 billion, according to Rep. Eric Cantor, R-Va., a member of the Ways and Means Committee and the GOP leadership.

Publication Details

Newsletter Article


MedPAC Votes to Urge Billions in Cuts to Private Plans in Medicare

APRIL 21, 2005 -- The Medicare Payment Advisory Commission, a strong proponent of private plan options in Medicare, surprised many observers Thursday by voting to recommend trimming billions of dollars private plans are supposed to receive under the Medicare overhaul law (PL 108-173). The influential panel agreed to the recommendations even though the private plan side of Medicare has only just begun to recover from several years of upheaval. Dozens of plans quit the program, leaving hundreds of thousands of beneficiaries to find new options.

While there's plenty of skepticism whether Congress will adopt the recommendations, the possibility that Congress would vote to make at least some of the cuts can't be ruled out. Lawmakers are under pressure to cut the deficit (see related story in this issue), fund legislation blocking a Medicare payment cut to doctors, and find alternatives to cutting Medicaid. Sen. Max Baucus, top Democrat on the Senate Finance Committee, said Thursday it is "wrong to be cutting [Medicaid] when the administration at the same time is increasing payments to managed care."

Even if lawmakers don't avail themselves this year of the political cover provided by the panel of outside experts, industry observers expressed uneasiness about how long improved payments under the Medicare overhaul law (PL 108-173) will last given the recommendations.

"Insurance companies are in the business of taking on risk. The more uncertainty there is, the less likely they are to expose themselves to risk they can't calculate or control," said a managed care industry executive.
With only one dissenting vote, the 17-member commission voted to adopt a draft recommendation that Congress eliminate the $10 billion stabilization fund for regional preferred provider organizations established by the Medicare overhaul law. The recommendation would generate no savings until 2007, when it is scheduled to begin making payments to attract and retain PPOs. Savings would total $1 to $5 billion over five years, MedPAC staff estimated.

The panel unanimously approved other draft recommendations that would lower spending on Medicare PPOs and HMOs compared to provisions in current law.
Medicare has been following a policy of holding plans harmless from possible reductions caused by "risk-adjusting" payments to plans based on the overall health status of their enrollees.

Commissioners agreed Thursday that "Congress should put in law the scheduled phase-out of the hold-harmless policy that offsets the impact of risk adjustment on aggregate payments through 2010." Agreeing to that advice would decrease spending by more than $1.5 billion over one year and by more than $10 billion over five years, staff estimated.

Another recommended change would remove "indirect medical education" payments from benchmark payments to managed care plans. "IME" payments are made to teaching hospitals and MedPAC said they ought to be taken out of the calculations used to set payments to managed care plans. The change would decrease spending by $200 to $600 million over one year, and by $1 to $5 billion over five years, MedPAC staff estimated.

Benchmark Payment Changes
The commission also agreed that Congress should set benchmark payments to the local HMOs and PPOs in Medicare—called "Medicare Advantage" plans—at 100 percent of the fee-for-service costs of traditional Medicare. The change would save $1.5 billion in one year and $10 billion in five years. Medicare's portion of the savings—the other portion would go to beneficiaries—should be redirected by Congress into a fund that pays plans more if they improve or score well on quality measures, the commission said.

MedPAC acknowledged that its recommended reductions could mean fewer plans take part in Medicare Advantage and that beneficiaries will have fewer choices as a result. But the commission staked out a strong philosophical position that managed care plans ought to compete on a level playing field with the traditional part of Medicare.

Close observers of the panel downplayed the notion that Thursday's recommendations were surprising, saying commissioners have consistently taken the position over the years that payment on the managed care and fee-for-service side of Medicare should be equitable.

They noted the timing of the recommendations was dictated by the Medicare law requiring the commission report back to Congress by June on a number of issues in Medicare Advantage payment.

But MedPAC Chairman Glenn Hackbarth acknowledged congressional acceptance of the recommendations "could not happen today without massive disruption to the system." However, the commission is obligated to give lawmakers its best advice on how to proceed in Medicare Advantage, he said, emphasizing that payment needs to be equitable between the managed care and the fee-for-service side of the program. MedPAC data, disputed by industry, shows that payment to managed care plans is 107 percent that of average per capita payments based on fee-for-service care.

Congress can then decide whether to implement the recommendations and when to do so, Hackbarth said. In assessing the cumulative impact of the recommendations on spending, Hackbarth cautioned that analysts couldn't simply add up the various savings estimates for individual recommendations because they "interact."

Hackbarth also justified the recommendations based on the commission's posture toward fee-for-service payments to hospitals, home health agencies, and skilled nursing facilities.
MedPAC has advised reductions compared to current law in those sectors to spur more efficient care, he suggested. It would be inconsistent to squeeze providers on the fee-for-service side and then pay private plans more than average fee-for-service costs on the managed care side of Medicare, he said.

Commissioners also agreed to other recommendations unrelated to spending levels. They agreed that quality measures should be applied to traditional fee-for-service Medicare that allow it to be compared to the managed care side of the program. They also favored an adjustment to make payments more equitable between regional and local plans.

MedPAC also agreed that the geographic areas used to set payment rates for local Medicare Advantage plans should be larger than the current county-based system of calculating payment levels. The aim is to even out variations.

But the managed care industry executive said these changes too would be disruptive to managed care plans. Counties in which Medicare HMO enrollees received relatively generous benefits would be combined with counties in which enrollees received lesser benefits. "That means that people who have been getting good drug benefits and who pay zero premiums aren't going to get them," he said.

MedPAC hasn't really assessed the real-world impact of the recommendations properly, the executive said. "When ideology and philosophy meets pragmatism, chaos is going to result if [the recommendations] are implemented."
Another industry source said the cumulative financial impact on the industry would be "significant" were Congress to adopt the recommendations, but that is "highly unlikely."

Mohit Ghose, public affairs VP at America's Health Insurance Plans, said it is "premature to revisit such a monumental piece of legislation at a time when it is being implemented to fulfill congressional intent, which is more plan choices and better benefits for beneficiaries. Even MedPAC's own impact analysis shows that the recommendations would reduce the number of beneficiary choices and the number of plans."

Plans have "signaled in good faith their intent to be part of a strong public–private partnership to modernize Medicare and it is critical that the new rules not be changed even before they go into effect."

Publication Details

Newsletter Article


The Pros, Cons of HSAs

APRIL 20, 2005 -- Seven out of 10 employers expect to offer "consumer-driven" health plans, such as health savings accounts (HSAs), by next year, but those plans will do little to reduce the ranks of the uninsured, according to studies released Wednesday.

A survey conducted by the Federation of American Hospitals and the American Hospital Association found that a "competitive marketplace" is evolving for plans such as HSAs. The study also concluded that 95 percent of enrollment in HSAs and health reimbursement arrangements, or HRAs, is in plans that build on the insurance company's existing provider network and negotiated rates, "showing that there is a level playing field for these plans."

But two other reports unveiled Wednesday predicted that HSAs would do little to lower the number of uninsured Americans. A report from researchers at Columbia University and Baruch College found that fewer than 1 million of the nation's 45 million uninsured are likely to get new health coverage as a result of HSAs because more than one-half of uninsured adults currently owe no income taxes, so tax incentives for high-deductible health plans would have little impact on coverage among the uninsured.

A separate report from The Commonwealth Fund concludes that HSAs will be unaffordable for the uninsured because the plans' out-of-pocket costs, including deductibles, would be too expensive for many uninsured families.

Funded either by employers or individuals themselves, HSAs, which were included in the Medicare drug bill (PL 108-173), give their owners big tax breaks for investing in the accounts and using them to pay their out-of-pocket health care expenses. The accounts are sold in tandem with high-deductible health plans, whose premiums are cheaper than those insurers charge for traditional employer health coverage.

Money from the accounts is used to pay expenses not covered by the health plans, but the owner gets to keep what is left over and can make it grow by shopping carefully for health care and taking responsibility to maintain personal health, enthusiasts say.

A Congressional Research Service (CRS) report on HSAs published earlier this month found a "burgeoning market" for the accounts, which are much touted by the White House and by many congressional Republicans as the answer to fast-rising health spending and to widening coverage of the uninsured.

The report found some evidence that HSAs reduce health care spending, but added that the data are not rigorous. CRS researchers also concluded that such accounts "are not likely to make a big difference in the number of uninsured."

The hospital groups' survey found that HSAs are gaining enrollment in the small group and individual markets, markets where hospital officials said consumers have traditionally had few options.

"These survey results should dispel the myth that consumers with HSA and HRA-type coverage will be treated differently by hospitals than those who are members of HMOs or who have traditional health insurance," Federation president Chip Kahn said in a news release.

The study by Sherry Glied of Columbia University and Dahlia Remler of Baruch College, City University of New York, says HSAs could lead to destabilization in the group health insurance market if small businesses begin to offer only high-deductible plans because their higher-wage employees prefer them. "Lower-wage workers in small firms are likely to be most at risk for dropping coverage if they are only offered a plan that provides little protection for out-of-pocket costs," Glied stated in a news release. That research was also funded by The Commonwealth Fund.

Publication Details

Newsletter Article


Which Drug Works Best? And How Do You Tell?

APRIL 22, 2005 -- Harnessing the power of evidence-based medicine to determine the effectiveness of prescription drugs is an emerging and imperfect art, but refining it could help health care purchasers determine the best drug for the best price, experts said Friday.

"That level of information is critical to a functional marketplace around pharmaceuticals," said Mark Gibson, deputy director of the Center for Evidence-Based policy at the Oregon Health and Science University. Without such data, "it is very difficult to foster competition in the [pharmaceutical] industry," Gibson said at a Capitol Hill forum sponsored by the Alliance for Health Reform and The Commonwealth Fund.

Dr. Mark L. Berger, vice president of outcomes research and management in the U.S. human health division of Merck & Co., Inc., said the art of determining the "comparative effectiveness" of drugs continues to evolve because practitioners as well as patients themselves are demanding more information about pharmaceuticals.

Experts now examine practice variations and performance measures to compare how physicians practice medicine in different regions of the country and consumers ask many more questions now than before about their health care.

"Patients are demanding better information as part of a shared decision-making process," Berger said.

And there is evidence that arming medical providers and patients with such information can impact expenditures. Dr. Peter Sawicki, director of the German Institute for Quality and Economic Efficacy in Health Care, said when his agency released information about the effectiveness of Lipitor, a cholesterol-lowering drug, the number of prescriptions issued for the drug dropped to 5 percent of statins prescribed from 40 percent.

Health care providers "want to know if the really expensive drug is better" than a cheaper alternative, Sawicki said. Gibson said when practitioners are presented with data on the effectiveness of drugs, they can shift the market share of a drug by as much as 30 percent.

As part of the Medicare prescription drug law (PL 108-173), the Agency for Healthcare Research and Quality was to receive $50 million to address the scientific information needs and priorities identified by the Medicare, Medicaid, and State Children's Health Insurance Programs. About $15 million of that is in the president's fiscal 2006 budget.

Reviewing a drug for its effectiveness is a lengthy and complicated process that determines how the drug will work for the majority of patients, panelists said. While such information can guide purchasing decisions, it should not preclude physicians from prescribing a different drug if that drug is better for a particular patient, the speakers said.

Berger cited numerous problems with such reviews, such as a limited supply of information to assess comparative effectiveness and that there is no consensus about what represents adequate information to assess comparative effectiveness.

Publication Details