By John Reichard and Emily Ethridge, CQ Staff

December 8, 2011 -- Included in the legislative package House GOP lawmakers discussed early Thursday is a two-year Medicare physician payment patch that would be offset in part with cuts to spending on the health care overhaul and to Medicare premium increases, sources say.

Rep. Phil Gingrey, R-Ga., said the patch would block a 27 percent cut in payments to doctors scheduled for Jan. 1 and replace it with a 1 percent increase in reimbursements in 2012 and 2013.

“That was a pleasant surprise,” Gingrey said. “We had no reason to expect that but we’re pleased with that. I’m going to whip the doctors caucus and ask each one of them to vote for this next Tuesday. I told the whip team that I certainly will vote yes.”

However, Senate Majority Leader Harry Reid, D-Nev. made clear later Thursday that the House GOP legislative package, which would continue the expiring Social Security payroll tax cut for employees and address unemployment insurance, wasn’t going anywhere in the Senate.

Even with the larger package in doubt, a number of the various pay-for provisions in play may yet end up in a final deal.

Gingrey said that cuts to the health care law (PL 111-148, PL 111-152) would include reduced spending for the overhaul’s preventive care fund. And the package would raise the cost of Medicare premiums for individuals earning more than $1 million.

Republicans have not released a formal list of all the payment offsets they are considering.

According to a congressional source, the health care law cuts would reduce subsidies to buy health insurance and trim funding for the Centers for Medicare and Medicaid Innovation, in addition to draining the prevention fund.

Provisions of the pay-for package appeared to be in flux throughout the day Thursday. Estimates on the size of the health law cuts ranged from $20 billion to $42.9 billion over 10 years.

GOP lawmakers are considering two other possible Medicare cuts to providers but have not decided one way or the other as to whether to include them. One would shrink payments to providers to reduce “bad debt”—to offset their losses from patients not paying out-of-pocket charges. Medicare spending also might be reduced by adjusting outpatient “E/M” billing codes for “evaluating and managing” patients. GOP lawmakers considered but rejected cuts to Medicare funds for medical imaging and home care, the source said.

On Wednesday, the American Hospital Association (AHA) shifted into high gear to try to head off the E/M changes, sending an alert to member facilities and urging them to contact lawmakers to express their opposition. The E/M change would trim $10 billion over 10 years from outpatient hospital department payments, the AHA alert said.

In his statement Thursday on the House GOP plan, Reid said that “House Republican leaders had to entice their members into supporting their proposal by weighing it down with a laundry list of policies whose sole purpose are scoring points against President Obama. House Republicans’ bill is a partisan joke that has no chance of passing the Senate,” Reid said. “Instead of playing political games, Congress should work to find common ground,” he added.

Dena Bunis contributed to this story

John Reichard can be reached at [email protected].  

By John Reichard, CQ HealthBeat Editor

December 8, 2011 -- The Department of Health and Human Services issued a final rule Thursday to establish at least one health insurance cooperative in every state by providing loans from a $3.8 billion federal fund created by the health care law to provide start-up money and fund capital reserves.

“Only a handful of insurance choices are available that are sponsored and managed by entities primarily focused on meeting the health insurance needs and preferences of consumers, as determined directly by consumers or their elected representatives,” the rule says.

The combined membership of co-ops is 2.1 million nationwide. They operate in only four states—Minnesota, Washington, Idaho and Wisconsin—according to the rule. Altogether, they make up a little more than 1 percent of the private insurance market.

The program begins amid considerable skepticism that such new plans will be able to compete against big insurers, whether profit or nonprofit. But the “Consumer Operated and Oriented Plans,” as they are known under the health care law (PL 111-148, PL 111-152), will have visibility in the marketplace created under that measure because they will be offered in new state-based exchanges.

Skeptics question whether the co-ops will be financially viable. But the rule says that “most of those who have expressed interest in the program are provider organizations and small business organizations that are likely to be viable because of their private support, health care experience and business expertise.”

The rule allows multiple co-ops per state “provided that there is sufficient funding to capitalize at least one co-op in each state.”

It adds that “all co-op loans must be repaid with interest, and loans will only be made to private, nonprofit entities that demonstrate a high probability of becoming financially viable.” The final rule establishes eligibility standards and sets terms for loans for the co-ops.

The health law originally provided $6 billion for the co-op program but some of that funding was removed. The proposed version of the rule estimated that 57 entities could be funded with the $3.8 billion. John Morrison, head of the National Alliance of State Health Co-ops, said earlier this year that people in 15 states are working on forming co-ops.

By Jane Norman, CQ HealthBeat Associate Editor

December 9, 2011 -- Community health center advocates say they’re facing a tough financial outlook for the coming year, with a 15 percent drop in state funding expected in 2012.

A report by the National Association of Community Health Centers says it’s a continuation of a trend, that centers have already felt the impact of funding cuts. There have been clinic closures in California and Colorado due to reductions in state funds this year, the report says.

In other states, clinics are open fewer hours, preventive care programs have been cut back and hiring or salary freezes, reductions in benefits and layoffs instituted.

The report says that centers will receive $335 million from states in 2012, which is $60 million less in state funds than in 2011.

Centers are funded by the federal and state governments, though states are not required to take part and 15 don’t provide any financial assistance. The centers are regarded as a pivotal part of the health care law (PL 111-148, PL 111-152) and received increased federal funding through the law. But advocates say most cannot survive without state money as well.

The centers are mandated to serve any person who seeks care, which makes them a draw for people lacking health insurance or with inadequate coverage. Funding cuts at the state level “greatly reduce health centers’ capacity to serve the increasing numbers of uninsured patients walking through their doors,” the report says.

In some states, the cuts are dramatic. In Washington, state funding was wiped out entirely following major cuts to public health programs due to the economic crunch.

In New Hampshire, the state appropriation will drop from $4.3 million to $2.3 million. In New York, it will decline from $53 million to $39.7 million. And in Alaska, there’s an 80 percent decrease projected, from $7 million to $1.4 million.

Among the 35 states that allocate state money to centers, 19 will cut funding in 2012 compared with 2011 and centers in six states will experience declines of 30 percent or more. However, six states will increase funding and Wyoming will direct money to community health centers for the first time, the report says. In the other states, funding will stay the same. State lawmakers in Texas are still negotiating funding levels.

Report on Community Health Centers (pdf)

Jane Norman can be reached at [email protected].  

By Jane Norman, CQ HealthBeat Associate Editor

December 7, 2011 -- A state-by-state breakdown of estimated health care spending found that the gap is broadening between the highest-spending and lowest-spending states, an economist with the Centers for Medicare and Medicaid Services (CMS) said Wednesday.

Between 2005 and 2009, states with the highest level of personal health care spending per capita saw those levels grow faster than the national average, while states with the lowest levels grew more slowly, said Gigi Cuckler, an economist with the office of the actuary at CMS, in a webcast produced by the Kaiser Family Foundation.

While there was no overall reason cited as to why the gap broadened or recommendations on what to do about it, the report did note that spending grew fastest for hospital care per capita in New England, which includes some of the highest-spending states. There was also faster growth there for physician and clinical services per capita.

The researchers did find a clear economic trend. “The recent economic downturn slowed spending growth across all regions more severely than the 2001 recession,” the report noted. The Great Lakes, New England and far West—plagued by higher unemployment than other parts of the country—saw the greatest slowdowns in spending on health care.

In 2009, the states with the highest personal health care spending ranged from 113 percent to 136 percent of the U.S. average. They also tended to have older populations and higher incomes overall, the report said.

States with lower spending had lower per capita incomes, younger populations and more people without insurance — making them likely candidates for the Medicaid expansion or exchange subsidies under the health care law (PL 111-148, PL 111-152).

The highest-spending states in 2009 were Massachusetts, Alaska, Connecticut, Maine, Delaware, New York, Rhode Island, New Hampshire, North Dakota, and Pennsylvania. The lowest spenders were Utah, Arizona, Georgia, Idaho, Nevada, Texas, Colorado, Arkansas, California, and Alabama.

For some states, the reason for high costs is clear. Alaska and Maine both have some of the highest Medicaid spending per enrollee in the nation, the report said. Costs are high and health markets far-flung in Alaska, while Maine has a high share of people as a proportion of its population enrolled in the program for the needy and they consumed more health care than the national average.

Regional trends were also uncovered. “In 2009, the New England and Mideast regions had the highest levels of total personal health care spending per capita,” the report said. “In contrast, the Rocky Mountain and Southwest regions had the lowest levels of total personal health care spending per capita with average spending roughly 15 percent lower than the national average.”

Personal health spending as defined for the study included total medical expenses for private insurance, Medicare and Medicaid, but excluded administrative expenses.

Jane Norman can be reached at [email protected].

By Dena Bunis, CQ HealthBeat Managing Editor

December 6, 2011 -- The nation’s health status did not improve in 2011, and it’s because increases in obesity, diabetes, and the number of children in poverty offset improvements in smoking cessation, preventable hospitalizations and cardiovascular deaths, according to the United Health Foundation’s 2011 America’s Health Rankings.

Over the past decade the rankings report a slight—.5 percent—uptick in the nation’s health, already down from the 1.6 percent average annual rate of improvement in the 1990s.

The annual rankings are based on 23 health measures. There were some positive trends: 178.3 percent of the population smoked in 2011, down from 17.9 percent in 2010; there were 68.2 preventable hospitalization per 1,000 Medicare enrollees, down from 70.6 the year before, and in 2011 cardiovascular deaths numbered 270.4 per 100,000 people in the U.S., down from 278.2 the year before.

But those positive measures were offset, the study authors said, by some troubling increases. In 2011, 27.5 percent of the adult population was obese, up from 26.9 percent in 2010; the rate of diabetes went from 8.3 percent in 2010 to 8.7 percent in 2011, and the percentage of children in poverty went from 20.7 percent in 2010 to 21.5 percent in 2011.

At a time when the nation, states and individual families are grappling with tightening budgets and growing health care expenses, this year's Rankings sends a loud wake up all that the burden of preventable chronic disease will continue to get worse unless we take urgent action," Reed Tuckson, executive vice president and chief of medical affairs for UnitedHealth Group, said in a statement.

The rankings provide a state-by-state look at the nation’s health. For the fifth year in a row, Vermont is the nation’s healthiest state. Mississippi is the nation’s unhealthiest. States that showed the most substantial improvement include New York and New Jersey, both of which moved up largely as a result of aggressive smoking cessation programs. Idaho and Alaska showed the most downward movements. Idaho dropped 10 spots to 19 in the rankings, and Alaska dropped five places.

• Health Rankings

By Rebecca Adams, CQ HealthBeat Associate Editor

December 9, 2011 -- Employers and health insurance plans that cover expensive, lifesaving, specialized medicines are worried that a $29 billion deal to combine two big firms that distribute the drugs could lead to higher costs and more restrictions on how patients get their medications.

Express Scripts Inc. has filed an application with the Federal Trade Commission to acquire Medco Health Solutions. The two companies are pharmaceutical benefit managers (PBMs), which act as middlemen that health plans pay to negotiate with drugmakers for the lowest possible prices, passing those savings on to the plans and others. The drug benefit managers also run their own mail-order and specialty pharmacies.

Executives for other specialty pharmacies and consumer groups are concerned that a unified Express Scripts and Medco would dominate the specialty drug pharmacy market.

Such specialty medications are typically costly therapies that require special handling, such as being shipped in dry ice or being refrigerated. Some are biologics derived from living organisms. They include chemotherapy for cancer patients and drugs to treat complex or rare diseases such as hemophilia, multiple sclerosis, Hepatitis C, rheumatoid arthritis, and cystic fibrosis.

These medicines are used to treat many of the nation’s sickest and most vulnerable patients, at a high cost to Medicare, the federal program for senior citizens and the disabled, and Medicaid, the federal–state health care program for the poor.

Specialty medications are the fastest growing sector of the drug industry. By 2014, they are expected to account for 40 percent of all drug spending in the United States, according to a June report by CuraScript Pharmacy, Express Scripts’ specialty drug division. “For specialty medications, many years of unsustainable cost increases appear to lie ahead,” the report said.

Patients who need specialty drugs have fewer options than those who take more commonplace pharmaceuticals. Far fewer drugmakers produce specialty medicines and pharmacies that dispense them are more scarce.

Concerns over the leverage such a large company could yield in the specialty drug market is undoubtedly a top concern of the Federal Trade Commission and could be a major reason behind a move to block the merger. If the agency is concerned about possible antitrust violations, could block the deal or require the two companies to divest some of their operations in the specialty drug market.

Congress does not have power to intercede formally in the decision, but lawmakers can ratchet up pressure on the FTC to stop it, and lawmakers have begun to raise questions.

In a letter to the FTC, Republican Sens. Saxby Chambliss and Johnny Isakson of Georgia and Jerry Moran of Kansas warned of the influence a combined company would have on the specialty and mail order drug markets. “With that type of market concentration, it is important that your agency works to see that access to health care is not limited,” they wrote.

At a Dec. 6 hearing by the Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, Sen. Herb Kohl, D-Wis., said “no large employer who privately expressed concerns to us wished to testify at today’s hearings, often telling us that they feared retaliation from the large PBMs with whom they must do business.”

Opponents Reach Out to FTC
A Nov. 30 letter from the American Antitrust Institute to the FTC urged the agency to challenge the deal, citing in part the impact on the specialty drug market. The merger “increases the ability and incentive for Express Scripts-Medco to engage in anti-competitive conduct and threatens to increase specialty drug prices and limit patient access to critical medications,” the letter read.

There is dispute about how much market share a combined Express Scripts and Medco would control.

Adam Fein, president of Philadelphia-based Pembroke Consulting Inc., said in a report last year the two firms control about 52 percent of the market—a figure Democratic senators cite.

After the report released, Medco hired Fein as a consultant. This year, he said he erred and revised his estimates to say that the two firms would control only about 31 percent of the market, a figure the two companies point to.

Express Scripts officials say the specialty market is competitive, with more than 100 specialty pharmacies, including some run by big insurers such as UnitedHealth Group. Attorneys concerned about the power of a combined company say either estimate—potential control of a third or a half of market share—is too much.

One risk, they say, is that a unified Express Scripts-Medco could strike a deal with a drug company to become the sole distributor of a drug, giving private and federal health plans no options. The opponents cite the example of a gel used to treat a rare form of epilepsy.

The price of the drug shot up from $1,600 a vial to $23,000 in 2007, after Express Scripts won an exclusive right to distribute it. Express Scripts spokesman Brian Henry said the manufacturer, Questcor Pharmaceuticals, set the price. Questcor executives told The New York Times at the time that market research prompted it to raise the price.