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December 19, 2005

Washington Health Policy Week in Review Archive f62e5bbc-c55e-4d7f-a792-e3a67e866a90

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CEOs Cite Health Care as Greatest Cost Pressure

DECEMBER 15, 2005 -- For the third consecutive year, a survey of the nation's chief executive officers cites health care as the greatest cost pressure on businesses, while energy costs have supplanted litigation as the No. 2 concern.

The Business Roundtable's December 2005 CEO Economic Outlook Survey, released Wednesday, also shows that America's leading CEOs see broad strength in the economy moving into 2006, despite a recent series of economic challenges.

As a result, the CEO Economic Outlook Index has rebounded from its post-Hurricane Katrina level of 88.2 in September to reach 101.4, a high second only to the reading of 104.4 in the first quarter of 2005.

Business Roundtable is an association of chief executive officers of leading corporations with a combined workforce of more than 10 million employees and $4 trillion in annual revenues.

For the third year in a row, CEOs cited health care costs as Corporate America's No. 1 pressure across the economic spectrum, at 42 percent. Energy costs, at 27 percent, were cited as the third greatest pressure in 2004, but supplanted litigation costs in the No. 2 spot this year. Litigation costs dropped to 9 percent from 20 percent in 2004; materials and pension costs tied at 8 percent each as a cost pressure for companies, while labor was listed by 4 percent.

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First Finding of Landmark Program to Get Better Value for Medicare: Drugs as Good as Surgery for 'GERD'

DECEMBER 15, 2005 -- Drugs can be as effective as surgery for one of the most common health conditions affecting older Americans, gastroesophageal reflux disease (GERD), said a study released Wednesday under a landmark federal program aimed at comparing the effectiveness and price of medical treatments.

The study is the first of 10 that the federal Agency for Healthcare Research and Quality (AHRQ) will release in coming weeks. Subjects that will be examined in the upcoming reports include treatments for conditions that are common in the Medicare population—depression, the off-label use of certain anti-psychotic drugs, diabetes, and different types of breast imaging.

The studies were funded under the new "Effective Health Care Program," authorized under section 1013 of the Medicare overhaul law (PL 108-173). The law authorizes $50 million per year in spending on the program, but its fiscal 2005 funding totaled $15 million, the same level of funding expected for fiscal 2006. There are no indications that funding will be increased in fiscal 2007.

Studies in fiscal 2005 and fiscal 2006 are to focus on the Medicare population, but AHRQ will soon begin planning for a round of studies affecting enrollees in Medicaid and the State Children's Health Insurance Program.

AHRQ Administrator Carolyn M. Clancy emphasized at a Wednesday morning press briefing that AHRQ is making no treatment recommendations based on the findings. She also noted that Medicare cannot use findings of the program alone as the basis for coverage or non-coverage decisions.

Clancy noted that the GERD findings showed that 10 to 65 percent of surgery patients resumed use of medications. Asked whether the study shows that there is any reason to get surgery, Clancy said "that would depend on the severity of the symptoms," among other factors.

United Healthcare, Consumer Reports and other organizations have said they will disseminate the GERD findings to consumers, Clancy said. Aetna and the insurance lobby America's Health Insurance Plans also have expressed interest in disseminating the findings, Clancy said.

Treatment with "proton pump inhibitor" drugs appeared to be as effective as a $36,000 surgical procedure for lessening symptoms of GERD, Clancy said.

Known as "PPIs," the drugs, which include such products as Prilosec and Nexium, were more effective in treating GERD symptoms than "H2 receptor antagonist" drugs such as Pepcid, Zantac, and Tagamet, the study found. But PPIs have more side effects than the H2 drugs, Clancy noted.

GERD occurs when stomach acid enters the esophagus, causing heartburn and potential damage to the esophagus. The disease affects up to 7 percent of the U.S. adult population and its treatment costs about $10 billion a year, Clancy said.

The condition, also known as "acid regurgitation," disrupts sleep and causes belching.

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Hastert-Backed Bill Would Boost Allowable HSA Contributions

DECEMBER 16, 2005 -- Eric Cantor, the House GOP Chief Deputy Majority Whip, has offered a bill that would increase the amount of money companies could contribute to employee health savings accounts (HSAs)—a change backers say would encourage more Americans to sign up.

"Early studies show that while HSAs have enjoyed high adoption rates among the uninsured and small businesses, there seems to be a lag in adoption among employees of medium-to-large companies," said a press release issued by the Virginia Republican's office.

Authorized under the Medicare overhaul law (PL 108-173), HSAs are the centerpiece of GOP health reform efforts. The HSA approach aims to restrain health care spending by having consumers pay more of the costs of care and by giving them an incentive to shop more carefully for health care because the accounts build up more quickly if they do.

HSAs have two components: a high-deductible health insurance plan that shifts more of the costs to consumers, and the accounts themselves, funded by contributions from employers or individuals themselves. Money in the accounts grow on a tax deferred basis, and can be withdrawn tax-free to pay health care expenses not covered by the high-deductible insurance plan.

But many employees in mid-to-large companies are reluctant to sign up, believing they would get less money for health care with the accounts than they would with traditional benefits, Cantor said at a press briefing Wednesday.

Cantor said changing contribution limits would alter that perception and fuel a rapid increase in employees selecting HSA options.

Under current law, employers can contribute a maximum of $2,700 for an individual or $5,400 for families for HSAs. But if the deductible for the health insurance plan sold with the HSA is less than those amounts, employers can contribute no more than the deductible. Deductibles can be as low as $1,000 for individuals and $2,000 for employers.

Cantor's bill (HR 4511) would allow contributions of $2,700 for an individual or $5,400 for families regardless of the deductible amount. Those contributions are more in line with what employees get for traditional coverage in mid-to-large companies, Cantor said.

The bill also would permit flexible spending accounts to be used to pay for expenses not covered by the high-deductible plans opened in conjunction with HSAs.

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Health Care Provisions in Budget Package Appear to Largely Follow House Plan

DECEMBER 18, 2005 -- As House and Senate negotiators reached a compromise on the budget savings package early Monday morning, the final language on cuts to Medicare and Medicaid appeared to largely take its lead from the House version of the bill, a more conservative and market-driven proposal that would increase cost-sharing for Medicaid patients and maintain a fund designed to encourage the participation of managed care plans in Medicare.

The budget savings package would cut a net $6 billion from Medicare, the health program for the elderly, down from estimates of $8.3 billion on Sunday evening.

Last-minute changes were won early Monday morning by lawmakers and businesses who objected to a provision requiring Medicare beneficiaries to own rather than rent durable medical equipment after a certain time period. After much lobbying, the period of time was changed from 18 months to 36 months for oxygen equipment. That change meant $2 billion less in savings from Medicare in the overall spending cuts package.

The bill would save a net total of $4.8 billion from the low-income health care program Medicaid, according to a preliminary Congressional Budget Office (CBO) estimate obtained Sunday evening.

The legislation would mark a big victory for health insurers, whose intense lobbying efforts over the weekend pushed lawmakers to keep alive a fund included in the 2003 Medicare drug law (PL 108-173) designed to encourage preferred provider organizations to participate in Medicare. The Senate bill would have eliminated the fund, for a savings of $5.4 billion over five years. Moderates had argued that enough plans had signed up for Medicare already.

Another powerful lobby, the American Medical Association, failed to get the increase in doctor payment rates it had sought for treating Medicare patients, but physicians also would not be subject to a 4.4 percent drop that is scheduled to take effect Jan. 1. Instead, according to the CBO documents, the payment rate would be frozen at 2005 levels for the next year, at a cost of about $7.3 billion. The Senate budget bill provided a 1 percent increase in the rate, but the House bill did not address it.

Doctors will likely be unhappy with another provision of the bill that would reduce Medicare payments for some imaging services in 2006 and 2007. According to the Medicare Payment Advisory Commission, which advises Congress on Medicare payment issues, spending on medical imaging has grown faster than any other service in recent years.

According to the preliminary CBO budget estimates dated Sunday evening, lawmakers also found $6.5 billion in Medicare savings by implementing a Bush administration plan to give higher Medicare payments to insurers that cover sicker patients and lower payments to plans that enroll healthier patients.

Home health care providers would also take a hit, according to the CBO scores. Freezing payments for home health care services at 2005 rates would save $2 billion for Medicare, although agencies that serve rural areas would get a boost.

Savings to the Medicaid program in many ways appear likely to mirror the House budget savings package. The net savings of $4.8 billion is about half of what conservatives sought, but the bill maintains many of the elements they had pushed for, including giving states more flexibility in designing Medicaid benefits and allowing states to set co-payment levels for some services. The cost-sharing provisions would save about $1.9 billion over five years, a figure that jumps to $9.7 billion when projected 10 years out, according to the preliminary CBO estimates.

The cost-sharing provisions, which conservatives say will cause patients to be more involved in their care if they have a monetary stake in it, are among the parts of the bill that have rankled moderate GOP senators such as Gordon H. Smith of Oregon.

"The cost-sharing is one of the key pieces Sen. Smith fought to keep out of the Senate version. If it continues to look like the House package, Sen. Smith would be inclined to vote against the bill," said Smith spokesman Demetrios Karoutsos.

Six other moderates joined Smith in writing a letter to Senate Majority Leader Bill Frist, R-Tenn., last week asking him to avoid such changes to the program, though it is unclear whether they plan to vote for the bill.

House conservatives also prevailed over Senate negotiators and got provisions included in the final bill that tighten restrictions on seniors who transfer their assets and then qualify for Medicaid. The asset transfer rules would save about $2 billion over five years.

The asset transfer provisions angered the powerful seniors lobby AARP.

"AARP strongly opposes the current conference agreement. This is irresponsible policy and will harm millions of low-income Medicaid beneficiaries, millions of older persons who need long-term care and unfairly increases Part B premiums for all Medicare beneficiaries," said Kirsten Sloan, chief health lobbyist for AARP, Sunday night.

Also included in the Medicaid savings are changes to the way pharmacists are reimbursed under Medicaid. An expected savings of $3.6 billion, according to the preliminary estimates, would come from changing the reimbursement formula to more accurately reflect the actual costs pharmacists pay to acquire the drugs.

The conference agreement also funds a program to allow Medicaid coverage for disabled children whose families are not eligible for the program—a priority for Senate Finance Chairman Charles E. Grassley, R-Iowa—at $1.4 billion over five years.

Overall, according to the preliminary CBO numbers, the conferees found $6.9 billion in Medicaid savings, but $2.1 billion of that total was reallocated to states most affected by Hurricane Katrina, to help specifically with Medicaid costs.

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Illinois Governor Pitches 'All Kids' Plan for All States

DECEMBER 12, 2005 -- Illinois Gov. Rod R. Blagojevich (D) was in Washington to promote his state's new $180 million "All Kids" health insurance program that aims to provide comprehensive health care to all uninsured children there.
Blagojevich is helping Illinois Democrats Sen. Richard J. Durbin and Rep. Rahm Emanuel promote a national version of the legislation in Congress.

About 253,000 children in Illinois do not have health insurance. About half are not enrolled in public assistance programs for which they're eligible. The other half come from families who earn too much to qualify for government-sponsored health care programs but too little to afford private insurance. A child must be uninsured for a year before becoming eligible for the program.

Parents will pay monthly premiums and co-payments for doctor visits and prescription drugs, but not for preventive care visits such as check-ups and annual immunizations. The rates for "All Kids" coverage will be based on a family's income and will be significantly less expensive than typical private insurance premiums.

About 75 percent of the program will be financed by user premiums. The difference, estimated at $45 million, will be covered by the state with savings generated by implementing a primary care case management/disease management (PCCM/DM) model for Illinois residents who are in the state's Medicaid program. The PCCM/DM model focuses on preventive health care services and seeks to avoid expensive emergency room visits and hospitalizations. The savings are estimated at $57 million for the first year.

A study released by Families USA in October, "Good for Kids, Good for the Economy," estimated that the "All Kids" program could generate $87 million in business activities and nearly $31 million in new wages in its first year.

"I think that this is a program and an idea that can be adopted in other states," Blagojevich said.

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