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February 21, 2006

Washington Health Policy Week in Review Archive c98aa1cb-478c-4fde-926e-56473074d863

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Bush Hints at Legislation on Price Transparency

FEBRUARY 15, 2006 -- Legislation may be needed to ensure that hospitals, physicians, and other health care providers give consumers more detailed information about the cost of health care services, President Bush said Wednesday during an appearance in Dublin, Ohio.

"I know members of Congress are working on a bill. It would be better this be done with people saying, 'oh, we understand it's important to be transparent,'" Bush said. "There's always a bill out there in case the volunteerism is not quite as strong as it should be."

Bush added that on Thursday, "I'm going to have a little visit with people in the insurance industry and the health care industry and the business industry to encourage transparency." On Tuesday, hospital industry and administration officials met to discuss price transparency issues.

Helping consumers understand how much health care costs—and getting them to make purchasing decisions based on that knowledge—is a critical part of the administration's plan to expand health savings accounts (HSAs), which were created in the 2003 Medicare drug law (PL 108-173).

The accounts, which Bush discussed at length in his remarks Wednesday, allow people who sign up for high-deductible health plans to contribute and withdraw funds to cover health care costs tax-free. The idea is that once patients are forced to pay more costs out-of-pocket, they will begin to comparison shop and request quality data, eventually driving down the costs of health care.

Some health care providers say the information consumers need is how much their out-of-pocket costs will be for a particular service and not how much, for example, a hospital charges for a particular service. The quality of care provided is also an important fact consumers should consider before making a choice, providers say.

"How do you make it meaningful for consumers? Is it really worthwhile to show the consumer a master list of thousands of prices?" said Carmella Coyle, senior vice president at the American Hospital Association.

Allan Hubbard, director of the president's National Economic Council, met with hospital executives Tuesday at the White House to discuss price transparency issues. According to a memo written by one of the meeting's participants, Hubbard told the executives that Bush would ask Department of Health and Human Services Secretary Michael O. Leavitt to develop a voluntary program for hospitals to report their prices.

"He did not give any details on this program or what form this transparency would take," Federation of American Hospitals President Chip Kahn wrote in a memo to his group's board of directors and staff, a copy of which was obtained by CQ HealthBeat. "It was obvious that [Hubbard] is approaching the issue from 30,000 feet and had not gotten into the details," Kahn wrote.

In his memo, Kahn said he stressed during the meeting that "it is the insurers who can best inform patients about their alternatives regarding the potential out of pocket expenses of using one hospital versus another, and that hospital charges were only relevant to a very narrow band of patients."

While the administration wanted a voluntary solution, Hubbard "contended that if hospitals do not take it upon themselves to solve this problem, the Congress might choose to," Kahn wrote.

In his remarks Wednesday—delivered at Wendy's International Inc., whose 9,000 full-time employees and families are covered by HSAs—Bush said the accounts would allow consumers to "shop around until you get the best treatment at the best price . . . When you inject this type of thinking in the system, price starts to matter," he said. "You begin to say, well, maybe there's a better way to do this, and a more cost-effective way."

Critics contend that HSAs would cause a net increase in the number of uninsured Americans. In an analysis released by the Center on Budget and Policy Priorities on Wednesday, Massachusetts Institute of Technology professor Jonathan Gruber projects that while 3.8 million previously uninsured people would gain health coverage through HSAs as a result of the president's fiscal 2007 budget proposals, 4.4 million people would become uninsured because their employers would drop coverage and the workers would not be able to secure coverage on their own. The net effect, Gruber concludes, would be to increase the number of uninsured Americans by 600,000.

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Democrats to Intensify Push to Fix Drug Benefit

FEBRUARY 15, 2006 -- Democrats on Wednesday intensified their criticism of the way the Medicare drug benefit started, announcing plans to highlight the problems and potential solutions in "hundreds" of meetings with senior citizens and the disabled.

Democrats also outlined legislative changes they said should be made in the benefit, telling reporters in a Capitol Hill press conference that their proposals would assure that the most vulnerable Medicare beneficiaries will have uninterrupted access to medicines.

Sen. Richard J. Durbin, D-Ill., said seniors in his state "wanted a Medicare benefit that would lower their prices. What they have today is a confusing benefit, a law that prohibits Medicare from negotiating with pharmaceutical companies, and a plan that guarantees drug companies billions of dollars in profits."

Durbin, along with Michigan Democrats Sen. Debbie Stabenow and Rep. John D. Dingell, hammered away at themes likely to be repeated over and over during this fall's election campaigns. They said the benefit provides drug and insurance companies with billions of dollars in profits while bogging seniors down in needless complexity and confusion.

But at a House Energy and Commerce Committee hearing, Republicans countered that Democrats are exaggerating the problems for political gain.

"Some sense political advantage in condemning the program and can't bring themselves to admit that free markets actually work," said Committee Chairman Joe L. Barton, R-Texas, referring to lower-than-projected premiums charged by Medicare drug plans.

Provisions outlined by Democrats would require all drug plans to provide a 60-day prescription when a drug is not covered by a plan or when a pharmacist is unable to confirm plan enrollment. A standardized appeals process would be required with medications provided during the appeal.

Plans could not drop covered drugs during the year, raise the cost to the beneficiary, or otherwise set up new barriers to access to medications under the Democratic proposal. A beneficiary whose drug is not covered by a plan would be permitted to switch plans.

In addition, Medicare would be required to reimburse family members, charities, or states that picked up prescription drug costs for a beneficiary denied coverage because of administrative failures at CMS. Pharmacies could bill Medicare directly for prescription costs during a transition period if a beneficiary's private plan coverage could not be confirmed because of administrative glitches.

But Health and Human Services Secretary Michael O. Leavitt told the committee that problems marring the start of the drug benefit can be fixed through administrative action. Barton said while there are glitches, "critics have tried to make patients believe that they are not smart enough to understand the new Medicare drug benefit, that it provides inadequate coverage, and that signing up isn't worth their time because it cannot save them any money. The critics are simply wrong."

Barton emphasized that he will work to get rid of the glitches. "We will have the first of what will likely be several hearings on this topic on March 1," he told Leavitt.

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HSAs No Panacea, Former Bush Cabinet Member Says

FEBRUARY 15, 2006 -- In a week in which President Bush is going all-out to pitch health savings accounts as the key to overhauling U.S. health care, one of his former cabinet members isn't exactly singing from the same hymnal—not that he ever was entirely in tune with the administration.

HSAs didn't loom large in a plan for fixing health care laid out Tuesday by former Health and Human Services Secretary Tommy G. Thompson. Thompson called for a system of mandated coverage in which states would place the uninsured in pools and insurance companies would be invited to submit bids on how much they'd charge to cover them, among other changes.

Asked after his speech to the AARP board of directors whether HSAs would reduce the pool of uninsured, Thompson said they are no panacea and only are good for some people.

"I think health savings accounts are very good," he said. "I like health savings accounts. But it's only one thing. It's not the totality that I'm talking about."

Thompson did say the accounts "are good for certain people," but that "it's not the panacea for everybody. Health savings accounts are a good step. But what I'm talking about is a program that is going to actually give people coverage."

Thompson said the leadership needed to cover the uninsured does not exist but he predicted that the 2008 election would be about health care. And rather than hurt the economy, coverage would help it, he asserted. "I can show you that if you followed my ideas on the uninsured that it would actually be a net positive to the economy," he said.

"Why? You would have companies coming back in and offering health insurance. You would have individuals coming in and be required to have health insurance and be able to go in to a doctor instead of an emergency room. And there would be much more affordability and accessibility. And if everybody's covered by health insurance, that stimulates the health care sector by a great deal."

Thompson caused controversy when he left office by saying the U.S. food supply is too vulnerable to a terrorist attack and that the HHS secretary should have authority to negotiate the prices Medicare will pay for individual drugs covered by the program's new drug benefit. The drug industry and the Bush administration are staunchly opposed to giving government that power, saying it would undermine innovation and that competition among drug plans is a more effective way to control costs.

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No Free Health Care, Says Bush Economic Advisor

FEBRUARY 14, 2006 -- Allan Hubbard, director of the president's National Economic Council, said Tuesday that the biggest factor driving health costs is the "perception that health care is free."

Because the nation's health care is primarily a third-party-payer system in which insurance—not the doctor or the patient—pays the direct bills, Hubbard argued that Americans use health services as though they were free.

Speaking at a breakfast with reporters Tuesday morning, Hubbard made the administration's argument that the nation's health care costs could be reduced if Americans paid more out of pocket, and therefore would more carefully consider some of their choices.

The administration hopes to achieve a health system that gives consumers a bigger stake in their health care decisions mainly through the expansion of health savings accounts (HSAs), which were created in the 2003 Medicare drug law (PL 108-173). The accounts allow people who sign up for high-deductible health plans to contribute and withdraw funds to cover health care costs tax-free. The idea is that once patients are forced to pay more costs out-of-pocket, they will begin to comparison shop and request quality data, eventually driving down the costs of health care.

Bush's budget request seeks to expand HSAs by raising the ceiling on contribution amounts and allowing premiums to be paid from the accounts. The president also has proposed giving businesses the option to offer portable HSA plans that would allow workers to use them even if they switch jobs.

To the argument that the high deductibles required under the law means only wealthier people will sign up, Hubbard said, "Critics forget the high deductible plans are cheaper. . . . It's unfair to compare HSAs to low-deductible plans."

Hubbard could not offer an estimate of the savings that could be achieved from Bush's plan—which would cost $29 billion over five years—but said, "We'll know it's working when growth starts to slow."

About 3 million people have enrolled in HSAs and Hubbard—who participates in one himself—said the changes proposed by Bush would bring enrollment up to 21 million by 2010.

Though, he added, "I actually think it would expand faster than that." But Hubbard noted that the need for more data on the cost and quality of health care is imperative for the system to work.

HSAs and the issue of price transparency were part of Bush's remarks Wednesday when he traveled to Dublin, Ohio, to discuss his health care agenda.

"The president wants to make sure that consumers are informed, because that will help make health care more affordable and accessible," White House spokesman Scott McClellan told reporters Tuesday. "He wants patients to have information on prices and quality of care. And he has called on health care and insurance industries to make that information available to consumers."

Hospital industry executives met with administration officials Tuesday at the White House to discuss price transparency issues, according to several health care sources. A White House spokesman did not return a call placed for comment.

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Study Finds Beneficiaries Face Wide Variations in Medicare Drug Plans

FEBRUARY 14, 2006 -- Medicare drug plans tend to require higher cost-sharing of beneficiaries than do other commercial offerings. Medicare plans are also more likely to use cost controls such as step therapy, prior authorization, and quantity limits.

These findings and others are part of a new analysis of the 2006 Medicare Part D marketplace by the health care consulting firm Avalere Health LLC.

The report, which examined the nearly 3,000 Medicare drug plans, found wide variation in plan design across the Medicare program. For example, prescription drug plan (PDP) monthly premiums range from $1.87 to $104.89 and there are varying degrees of coverage, ranging from 598 to as many as 3,891 drugs covered, the report found. Some 834 plans offer a zero deductible option.

Plans are competing heavily to cover the dual eligibles—beneficiaries who qualify for both Medicare and Medicaid, but who now receive their drug coverage under Medicare as part of the drug law—with dual eligibles having at least six plan choices in every state.

"Consumers will have a broad range of plans to choose from in 2006," Avalere Medicare expert Valerie Barton said in a news release. "Plans entered this untested marketplace with a variety of strategies and will likely alter their benefit designs and business strategies moving forward. We expect to see marked changes in benefit offerings, including market consolidation, as plans course-correct based on experience and legislative and regulatory changes."

Other highlights of the report include:

  • 51 percent of stand-alone PDPs and 63 percent of Medicare Advantage plans have four or more cost-sharing tiers. By contrast, the report concludes, standard commercial plans average three tiers. Commercial plans also typically cover more drugs than the average Part D plans.
  • Monthly premiums for Medicare Advantage plans are, on average, almost $18 lower than for PDP plans and zero premiums are available in 496 plans across the country.
  • Zero or reduced deductibles are being offered by 66 percent of PDPs and 75 percent of the managed care plans, but few plans offer coverage for the "donut hole," a provision in the drug law (PL 108-173) that requires beneficiaries to pay their own drug expenses between $2,250 and $5,100, after which point catastrophic drug coverage begins.
  • The average PDP formulary covers 1,526 drugs; the average Medicare Advantage plan formulary covers 1,456 drugs.

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Where Hillary Is Heading on Health Care

FEBRUARY 15, 2006 -- Sen. Hillary Rodham Clinton, D-N.Y., is talking up health care again. She used a luncheon address Tuesday to urge AARP to join her in efforts to fix the new Medicare drug benefit and to prod the House to clear a Senate-passed bill promoting health information technology.

Her larger goal, however, is to make the health care system more efficient using information technology, preventive care, and research pinpointing the most effective forms of treatment. She would then use the resulting savings to fund coverage of the uninsured.

The Veterans Health Administration's efforts at using IT to make care more efficient and safe point the way for the nation, she added.

"I'm absolutely convinced the issue is back on the national agenda," she told a Washington meeting of AARP's board of directors. Clinton said that at the current rate of spending, one-third of the nation's income will go for health care by 2040. "It's an issue that in many ways encompasses everything," she said.

It's impossible to deal effectively with the budget deficit, retirement security, economic competitiveness, and even military preparedness without addressing health care and its rising costs, she said, pointing out that deployments to Iraq by uninsured reservists were delayed because of their medical status. "We are approaching a real turning point for the nation when it comes to this issue," she said.

But Clinton outlined a more piecemeal approach to overhauling health care than the giant plan Congress rejected in her husband's first term as president.

House passage of legislation she developed with Senate Majority Leader Bill Frist, R-Tenn., would be one step toward a more efficient system, she said. And she noted her support of comparative effectiveness research studies in the Medicare overhaul law (PL 108-173), saying a broader research effort in this area coupled with adoption by providers of best treatment practices would yield large savings.

Clinton also said smarter payment, including more coverage of preventive care, would also save money, asserting that, for example, the American health care system will pay tens of thousands of dollars for diabetes-related amputations, but not for lower-cost podiatry visits that could prevent those amputations.

Clinton noted that VA hospitals historically haven't enjoyed the best reputation but that the VA system now receives the highest ratings for quality of care and patient satisfaction. A significant part of the system's quality gains stem from the use of health information technology that provides "quality care in an electronic paperless environment."

Those systems allow the right medication in the right dose to be delivered to the right patient at the right time, she said. And unlike Medicare, the VA can negotiate drug prices with pharmaceutical manufacturers, she said.

Although she voted against the overhaul law and its creation of the new Medicare Part D benefit, Clinton said, "AARP and I share the goal of making the program work."

Clinton also said she is developing legislation with fellow Democratic Sens. Ron Wyden of Oregon and Max Baucus of Montana to "rationalize" the Medicare drug coverage program. "These plans, many of us believe, will be here today and gone tomorrow," she said.

The senator also said the proposal aims to create a regulatory framework "to weed out those plans that are not living up to their responsibilities," and that she doesn't see how plans can make a profit delivering the drug benefit to the poorest Medicare beneficiaries eligible for both Medicaid and Medicare, suggesting that consideration should be given to "nonprofit alternatives" for delivering the drug benefit to the dually eligible.

Clinton also said the asset test for the low-income drug benefit should be ended and the government should have authority to negotiate for lower drug prices in Medicare. In addition, pharmacists should be reimbursed for their out-of-pocket costs of filling prescriptions for Medicare beneficiaries when government computers did not show they were eligible, she said.

Clinton also said Medicare's Feb. 15 deadline for reimbursing states for resuming Medicaid coverage to cope with drug snafus, should be extended.

Despite all the problems in health care, Clinton expressed optimism that they could be solved. "It will require people checking their ideological baggage at the door," she said.

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