JULY 29, 2005 -- It was not your typical Mark B. McClellan speech. The CMS administrator has been described as the consummate staffer, a person with an unmatched ability to sweat all the small stuff needed to make something big happen but one who never makes himself the story and whose speechifying accordingly is more detail and less driving vision.

But in a speech Thursday to the National Press Club, McClellan not only ventured into the personal, but also struck a bipartisan theme that allowed him to simultaneously doff a cap to the Democratic founders of Medicare and Medicaid and quietly convey that Republicans could run them better, while criticizing the programs in their current state as bloated with inefficiency.

The occasion was the 40th anniversary of the two programs, and McClellan's theme was setting loftier goals. He credited President Lyndon Johnson with achieving his goal of ensuring the dignity of elderly Americans with the creation in 1965 of Medicare. "But at 40 years old, Medicare needs to aim higher than that," McClellan said. "We can keep the promise of dignity, but we aim higher in helping you get much better health," he said.

'Swollen Feet . . .'
In that vein, McClellan recalled his frustration practicing internal medicine before joining the federal government. "I can remember one patient, really nice guy, breathing heavily with swollen feet, who showed up on one of my emergency room shifts with complications from heart failure.

"We got him stabilized, gave him a few free samples of drugs, and I remember looking at him as we were about to send him on his way. I just knew he wasn't going to fill the prescriptions I gave him—and he didn't have drug coverage.

"And I wasn't sure it would matter even if he did—he told me that before he came in, he hadn't taken his medicines because he wasn't sure what they were for, and he had forgotten what he was supposed to do if he started to gain a little weight or notice a little swelling. And he had just eaten some really salty pizza and had a smoke.

"I looked at him . . . and thought to myself, this doesn't have to happen. If only someone could explain to him, in terms that work for him, why his diet and exercise . . . matter so much with heart failure. If only someone could help him understand why he needed to take each of his medicines, and the early signs of his heart getting worse and what to do if that happened.

". . . All of this might be prevented, and that kind of support would have been much cheaper. But I had a patient with a bleeding ulcer in the next room, and I had to go."

Aiming high not only consists of new drug and screening benefits but also giving patients "effective support so . . . they can take the necessary steps to maintain and improve their health" using those benefits, McClellan said. As a step in that direction, he announced a pilot program called "Medicare Health Support," which would prevent complications such as the ones that brought his heart failure patient to the ER.

The project aims to educate heart failure and diabetes patients about how they can practice better preventive care, issue reminders and make home visits to keep them on track, and more efficiently manage their care through electronic medical records. "It's important to note that heart failure and diabetes account for most Medicare costs," McClellan said.

. . . Bloated Medicare
With modern medicine, "Medicare and Medicaid can help provide better, more innovative care for less. We are failing to do this now. When 50 percent of our beneficiaries do not get recommended preventive care, and over 45 percent do not get proven effective care for their illnesses, we are spending much more than we should on preventable complications."

McClellan cited other statistics illustrating inefficiencies in Medicare. For example, he said program spending is at least 30 percent more than it needs to be because doctors practice medicine differently around the country. Other research says that more than 30 percent of seniors get prescriptions that make them sicker. "We simply can't keep doing this and have a Medicare program that is up to date and sustainable," he said.

McClellan also announced a program, the Surgical Care Improvement Project, that aims to reduce preventable surgical complications by 25 percent by 2010.

"Among the 42 million operations performed in the U.S. each year, up to 40 percent have complications after the operation," he said. "If we . . . eliminate just 1 percent of inefficient care in overall Medicare spending over the next five years, we can improve patient access by increasing payment rates to physicians by 1.5 percent each year instead of cutting the rates."

A Poke at the Press Corps
Under considerable pressure from the moderator, a more personal side of McClellan—or rather of his family—emerged in other ways at the National Press Club event.

After sidestepping a request to compare Presidents Bush and Bill Clinton as bosses (McClellan advised the latter on Medicare drug coverage), he was asked to explain how he deals with criticism of his brother, Scott, the White House press secretary, and his mother, Carol Keeton Strayhorn, a Republican politician trying to unseat current GOP Texas Gov. Rick Perry.

"They do a very good job of not taking this sort of thing very personally," he replied. Less so his six-year-old twin daughters, he said, relating an anecdote about them watching the White House press corp grill their uncle during a recent briefing. "One of them walked up to the television and punched one of those reporters," McClellan said.

JULY 27, 2005 -- House Ways and Means Health Subcommittee Chairwoman Nancy Johnson said Wednesday her staff is drafting legislation that would take a "simple, streamlined" approach to increasing the use of health information technology (IT).

Witnesses at a hearing before her panel Wednesday supported the idea of broadening the use of health care information technology. But they differed over whether states should be forced to meet uniform privacy standards and whether a national information network could be established without uniform laws.

A House aide said Johnson's bill will stick to four main objectives, one of which would permit hospitals to give information technology to doctor's offices without running afoul of laws to prevent hospitals from inducing physicians to make unwarranted referrals. The bill also will seek to create common standards for protecting the privacy of medical data.

The legislation will make the existence of the office of the National Health Information Technology Coordinator a statutory requirement, the aide said. And it will take steps to further the use of a new generation of billing codes called ICD-10 codes. But unlike Senate proposals, it will not authorize federal grant programs to further IT.

Another health IT bill offered by Reps. Patrick J. Kennedy, D-Mass., and Tim Murphy, R-Pa., is the focus of efforts by Speaker J. Dennis Hastert, R-Ill., to develop a leadership bill on IT, former House Speaker Newt Gingrich said last week. But the House aide said Johnson also is working with GOP leadership on her bill. (The Kennedy-Murphy bill was to be considered during a hearing of the House Government Reform Committee on Wednesday.)

Privacy Brouhaha
Georgetown University researcher Joy L. Pritts warned against trying to achieve uniform privacy standards by preventing states from applying stricter requirements than those in the Health Insurance Portability and Accountability Act (HIPAA) of 1996. HIPAA does not provide adequate protection and state laws with stricter standards should remain in place, Pritts said.

But Mary Grealy of the Healthcare Leadership Council said in written testimony that it would be "potentially impossible" for industry to take part in a national health information network speeding the exchange of medical data if varying federal and state privacy standards remain in effect.

A national network subject to varying state requirements "will provide only a fraction of the speed and efficiency necessary to improve patient outcomes," Grealy said.

Johnson's bill will require a study of existing federal and state privacy laws, with a report back to Congress with recommendations on how to harmonize the standards, according to another House aide.

If Congress doesn't enact legislation based on the results of the study within three years, the HHS secretary can propose a single set of federal standards. In doing so, the secretary will have the ability to modify the existing HIPAA regulations based on the study. "It is not accurate to say that her bill just does a straight preemption of existing state law with existing federal standards," the aide said.

Mixed Reviews for Bush Administration
During the hearing, Johnson lauded the efforts of the Bush administration to further the use of IT. The administration has convened a public-private commission to spur the adoption of common standards that will allow various types of computer systems to function together effectively, among other initiatives.

Although the industry will not be required to comply with the standards, they will be mandatory for federal programs and those doing business with those programs.

But the panel's top Democrat, Pete Stark of California, said the administration is doing too much talking about IT. Stark laid into National Health Information Technology Coordinator David Brailer saying, "We are going to hear from our lead witness about more meetings and conferences than one would think possible."

Stark did praise a step the administration is reportedly going to take next week, making the "VISTA" electronic health records system developed by the Veterans Administration for small medical practices available free of charge.

The Veterans Health Information Systems and Technology Architecture system "offers a complete electronic record covering all aspects of patient care, including reminders for preventive health care, electronic entry of pharmaceutical orders, display of laboratory results, consultation requests, x-rays, and pathology slides," VA said in a July 2004 press release.

"It's basically the system that we could start with tomorrow," Stark said. "Why don't we get started? It's beyond me why we're having all these therapy sessions."

Stark also demanded that Brailer explain why the federal government sees fit to use its purchasing clout to enforce common standards in IT but not to negotiate lower drug prices for Medicare beneficiaries.

The difference, he suggested, is that Republicans are getting bigger campaign donations from drug companies than from IT vendors. When Johnson tried to object, Stark said, "You're interrupting," adding that "it's my time"—that Johnson was intruding on his time for questioning Brailer.

After questioning Brailer about the administration's drug negotiating policy, Stark also challenged him on his credentials to comment on marketplace economics and concluded by telling him "you're a useless witness."

Brailer got much gentler treatment from Rep. James McCrery, but the Louisiana Republican voiced his own concerns about government involvement in the marketplace. McCrery wondered if release of the VISTA system wouldn't in effect be a declaration that "that's going to be the platform forevermore." Brailer responded that VISTA would be just one of many choices of electronic health record systems for doctors.

Brailer emphatically denied VISTA would become the de facto platform, calling it "a good solution" for "particular practice settings" but "not transformative" for health information technology adoption.

JULY 27, 2005 -- In a bid to reduce deadly medical errors, the House on Wednesday sent President Bush legislation that would create a system for voluntary reporting and information-sharing about medical errors.

The House passed the measure (S 544) by 428-3, clearing the bill for the president's signature after years of intensive negotiations on Capitol Hill.

The Senate passed it by voice vote July 21.

The bill "will help create a culture of awareness ... instead of continuing the culture of blame," said Rep. Michael Bilirakis, R-Fla., sponsor of identical House legislation approved July 20 by the Energy and Commerce Committee.

Data reported to the "patient safety organizations" that would be created under the bill would be shielded from use in malpractice suits and other litigation. It also could not be used against a health care provider by an accrediting body or other regulator.

"Fear of litigation has kept many health care providers—doctors, nurses, even lab technicians in hospitals—from sharing information if a mistake is inadvertently made," Senate Majority Leader Bill Frist, R-Tenn., told the Senate on Wednesday. "People are afraid to share their internal data. It might expose them to a ruinous lawsuit. And that drives reporting of these medical errors underground. This bill will change all that, will lift this threat of litigation."

Frist, who is a heart transplant surgeon, noted that the civil aviation system has had a similar voluntary reporting system for 30 years, with pilots, mechanics, air traffic controllers, and others shielded from retribution when they voluntarily report mistakes.

"We shared information. Accidents went down, and safety went up. Everyone improved. Quality improved. Safety improved," he said of the aviation reports.

Institute of Medicine Report
Work on medical errors legislation began soon after the Institute of Medicine, the health sciences arm of the National Academy of Science, reported in 1999 that as many as 98,000 patients die each year as a result of mistakes by health care professionals. Many thousands more are injured, driving up health costs, the institute said.

Mistakes range from illegible prescriptions that lead to the dispensing of the wrong drug to amputations of the wrong limb or removal of the wrong organ during surgery.

The House and Senate passed different bills dealing with medical errors in the 108th Congress, but the House never appointed conferees and the differences were never resolved.

The bill now headed to the White House would establish procedures for voluntary confidential reporting of medical errors to independent patient safety organizations, which would submit the information to a national database for analysis and recommendations on ways to improve patient safety and reduce medical errors.

The bill would require the Health and Human Services Department to establish procedures to certify the patient safety organizations, with a review of that certification required every three years.

All information reported to the patient safety organizations would be kept confidential and would be in a form that precluded identification of any specific patient, health care provider, or person who reported the information. It could not be used in malpractice suits.

The definition of protected patient safety information does not include "a patient's medical record, billing and discharge information, or any other original patient or provider record."

Disclosure of the confidential patient safety information would be subject to a fine of $10,000 for each violation, although the data could be used in a criminal proceeding if a judge first determines that the data "contains evidence of a criminal act and that such patient safety work product is material to the proceeding and not reasonably available from any other source."

The bill would bar employers from taking any retaliatory action against an employee who reports patient safety information.

JULY 28, 2005 -- Rep. Nancy L. Johnson may have made a convincing case Thursday why Congress should permanently fix the flawed Medicare physician payment formula, but the Connecticut Republican shed little light on where the votes or the money will come from to get the job done.

At a press briefing to formally announce the introduction of her bill scrapping the existing Sustainable Growth Rate (SGR) formula and replacing it with a quality-based payment system, Johnson said the measure "will prevent a nationwide medical crisis and ensure doctors are paid fairly for the care they provide."

Without congressional intervention, the formula will generate yearly cuts of 5 percent for the next seven years, jeopardizing access to quality care for millions of seniors and disabled Americans, she said. Johnson added that the current payment system is "demeaning" to doctors and sends them "a message of disrespect."

Congress has intervened a number of times to prevent payment cuts under the formula, which reduces payments if the overall volume of Medicare spending on physician care exceeds a specified yearly growth target.

But Johnson called it "extremely important" that Congress not continue to "kick the can down the road" with yet another temporary fix. "Kick the can" proposals—by which she meant one- or two-year payment changes blocking SGR-generated cuts—cost $30 to $40 billion apiece, she said. That money would better be spent on a permanent fix, Johnson declared.

It's unclear, however, how much support Johnson, chairman of the House Ways and Means Health Subcommittee, will have for the bill, the "Medicare Value-Based Purchasing for Physician's Services Act."

Rep. Bill Thomas, R-Calif, chairman of the Ways and Means Committee, has yet to announce his support for the bill, although he recently joined in sending a letter to Medicare officials urging them to take administrative action that would sharply reduce the costs of a permanent legislative solution.

Johnson said Thursday that Thomas is "supportive" of her efforts but has been too busy with other legislation to turn to her bill. "Over the break he's going to go through it pretty seriously," she said.

The bill would base yearly payment increases on the growth in the Medical Economic Index (MEI), which tracks the costs of providing physician care. The Congressional Budget Office has estimated the 10-year cost of an MEI-based system at a whopping $155 billion.

The administrative change sought by Johnson and Thomas would reduce the 10-year cost by $114 billion, bringing it to about $41 billion. Under the change, Medicare would remove prescription drug spending from calculations of the physician payment formula, both retroactively and prospectively. Medicare officials say they may not have legal authority to make that change, however.

Where would Congress find $41 billion assuming Medicare did make the administrative change? Johnson said there are "constructive areas" she is looking at but did not elaborate. But a Johnson aide noted that the five-year cost of a bill replacing the SGR with an MEI-based system would be far lower. According to CBO, the cost would be $49.7 billion, but the administrative change would lower the cost by $46.5 billion, to a total of just $3.2 billion.

If Congress uses five-year numbers to price the legislation and Medicare makes the administrative change, a permanent fix might be within reach after all.

Johnson's briefing Thursday also filled in some of the missing details of the doctor payment proposal, which was first previewed July 13 in a meeting with lobbyists.

For example, the legislation to replace the SGR formula with a new quality-based payment system provides for a 1.5 percent increase in Medicare physician payments in 2006, scrubbing the 5 percent cut that would be made under the current payment formula. MEI-based payment increases in 2007 and 2008 would be reduced by 1 percent in each of those years if doctors failed to report data on the quality of care they provide.

Another notable change in the proposal is that it does not include "gainsharing" provisions allowing doctors and hospitals to share the savings if they develop ways to make treatment more efficient.

JULY 27, 2005 -- Senate Finance Chairman Charles E. Grassley on Wednesday pledged to move legislation by this fall that would address the desire to link Medicare provider payments to quality of care.

"Everyone around here knows I'm a stickler for getting the most out of every tax dollar spent," the Iowa Republican said during a hearing by his panel on the issue. "Right now, we're not doing that in Medicare."

He and other lawmakers and witnesses noted that hospitals, doctors, and other providers who order unnecessary tests or make mistakes may get more money from Medicare than those who delivery high-quality medical care.

"Right now, Medicare pays the same amount regardless of quality," Grassley said of the program, which spends more than $300 billion a year.

Tying Medicare payment to the quality of care delivered "represents a sea change in Medicare policy, a significant departure from business-as-usual," said the committee ranking Democrat, Max Baucus of Montana. And making such a change, Grassley and Baucus said, will influence private payers as well because Medicare is the largest purchaser of health care in the nation.

Baucus and Grassley are sponsoring legislation to link Medicare provider payments to quality.

Herb Kuhn, director of the Center for Medicare Management in the Centers for Medicare and Medicaid Services, told the panel there are "too many examples" of providers being rewarded with higher payments for poor quality care. He said the agency is conducting several demonstrations and pilot projects to test pay-for-performance principles and develop standardized quality measures for different health care settings.

Mark E. Miller, executive director of the Medicare Payment Advisory Commission (MedPAC) that advises Congress on Medicare payment policy, said there are enough quality measures in place right now that would allow Medicare to begin pay-for-performance programs for hospitals, physicians, home health agencies, Medicare Advantage plans, and dialysis facilities and physicians who treat dialysis patients.

"CMS already has quality information for most of these settings that could be used as a 'starter set' of measures," Miller said. "However, to ensure that measures capture a broader spectrum of quality for patients and types of providers, additional information would be needed, particularly for physicians," he said. Miller also said CMS may need legislative authority to change the way it pays providers.

Kuhn and Miller both said physicians are central players to making "pay-for-performance" work and that financial incentives may help toward that goal. MedPAC has urged taking about 1 percent to 2 percent of current payments for physicians and other providers, and redistributing it to caregivers who improve the quality of their care or meet quality benchmarks.

"It's small enough not to affect revenue streams but large enough to make a difference over time," Miller said.

Sen. Jon Kyl, R-Ariz., said that removing that amount of money from Medicare physician payments without increasing reimbursements to doctors would cause trouble.

"I think this will be perceived as an enormous problem," he said. Miller responded that MedPAC is also urging a physician payment update be done in tandem with the redistributed payments.

An American Medical Association official urged lawmakers to ensure that any value-based legislation replaces the current sustainable growth rate (SGR) physician payment formula with a "stable, reliable payment system that preserves patient access and reflects increases in physician practice costs."

"The flawed SGR formula cannot co-exist with a value-based purchasing program for physicians," Nancy H. Nielsen, speaker of the AMA House of Delegates, told the panel. "The flawed SGR and value-based purchasing are incompatible."

Separately, Ways and Means Health Subcommittee Chairwoman Nancy L. Johnson announced she plans to unveil legislation Thursday to overhaul the way Medicare pays physicians. If left unchanged, she said, Medicare physician reimbursements will be cut an average of 5 percent in each of the next seven years, a step she said could hurt senior's access to physician care.