By Mary Agnes Carey, CQ HealthBeat Associate Editor

FEBRUARY 5, 2009 -- Two key Senate Democrats told President Obama Thursday that they remain committed to passing health care overhaul legislation this year.

"We must act to contain the growth of health care costs to ensure our economic stability; to help American businesses deal with the health care challenge; and to make sure that we are getting our money's worth. Incremental efforts will no longer suffice and we cannot afford to wait any longer," Senate Finance Committee Chairman Max Baucus of Montana and Senate Health, Education, Labor and Pensions Committee (HELP) Chairman Edward M. Kennedy of Massachusetts wrote in their letter to Obama.

The lawmakers asked the president to "swiftly choose an exceptionally qualified and dedicated alternate nominee for secretary of Health and Human Services (HHS) to assist in our efforts."

On Tuesday, former Sen. Tom Daschle, who had been Obama's nominee to head HHS and a new White House Office of Health Reform, withdrew his name from consideration after it became public that he had paid nearly $140,000 in back taxes and interest on Jan. 2, on income from 2005, 2006 and 2007 and had collected more than $195,000 to give speeches to health care industry groups—the very sector President Obama has designated him to overhaul.

Both the Finance and HELP panels have been working on health care legislation. Last November, Baucus unveiled a wide-ranging plan to overhaul the nation's health care system which, among its provisions, would create a "health insurance exchange" where insurers could sell health coverage to the uninsured.
In their letter, Baucus and Kennedy said they had a "moral duty to ensure that every American can get quality health care."

"With your continued leadership and commitment, we remain certain that our goal of enacting comprehensive health care reform can be accomplished this year," they wrote.

By Drew Armstrong, CQ Staff

FEBRUARY 3, 2009 -- Tom Daschle has withdrawn from consideration to be secretary of Health and Human Services, the White House said Tuesday.

Daschle, a former Senate majority leader from South Dakota, was dragged down by questions about his disclosure that he failed to pay all the taxes he owed since leaving the Senate in 2005. His nomination had come under intense scrutiny in recent days.

"Sen. Daschle decided to remove his name from consideration," said White House spokesman Robert Gibbs. "We're at a critical juncture at our nation's history . . . and the president has a robust agenda to deal with many of those problems." Daschle did not want to be "a distraction to that agenda," Gibbs added.

Daschle, a Democrat, will not stay on as head of the White House's Office of Health Reform, either, both Gibbs and Daschle spokeswoman Jenny Backus said. President Obama had created that position for Daschle to strengthen his hand in helping overhaul the nation's health care system.

Senate Majority Leader Harry Reid, D-Nev., said Tuesday afternoon that the White House was "working as we speak to have a name brought forward for HHS," in place of Daschle. But Obama, he added, was "not going to rush into anything."

One name mentioned in the early speculation about a possible replacement was two-term Kansas Gov. Kathleen Sebelius, who last year was seen as a potential running mate for Obama. As governor, she has emphasized health issues in her state budgets and she earlier served as Kansas insurance commissioner.

However, just two months ago, Sebelius said she didn't want to be considered for Obama's Cabinet because of the pressing fiscal problems facing her state. "The possibility of joining President-elect Obama's team is exciting and compelling, but my service to the citizens who elected me is my top priority in these difficult times," she said in early December.

Daschle said that the questions swirling around his tax troubles were too distracting for him to be the best person to help Obama overhaul health care.

"Right now, I am not that leader, and will not be a distraction. The focus of Congress should be on the urgent business of moving the president's economic agenda forward, including affordable health care for every American," Daschle said in a joint statement with Obama.

"I accept his decision with sadness and regret," Obama said.

Senate Democrats stood united behind Daschle just 18 hours before, promising to support his nomination and see him through the Senate. At an hour-long meeting with Senate Finance Committee members, Daschle had answered questions and told lawmakers that his mistakes were honest ones.

Daschle paid nearly $140,000 in back taxes and interest on Jan. 2, on income from 2005, 2006 and 2007. He had been scheduled for a confirmation hearing Feb. 10 before the Finance panel.

Daschle was the second nominee for Obama's Cabinet to disclose tax problems. Treasury Secretary Timothy F. Geithner also was forced to acknowledge underpayment of his taxes, but last week he was confirmed by the Senate for the Treasury job. He drew 34 "no" votes, the most of any Obama nominee thus far.

Geithner may have used up whatever public and political tolerance there was for such disclosures, however.

Overshadowed by Daschle's withdrawal was a second announcement Tuesday—that Nancy Killefer, whom Obama had chosen as chief performance officer, also withdrew her nomination in the face of questions about delinquent tax payments.

"I think they both recognized that you can't set an example of responsibility but accept a different standard in who serves," Gibbs said of Daschle and Killefer on Tuesday. "They both decided and recognized that their nominations would distract from the important goals and the critical agenda that the president put forward."

Setback for Democrats

For democrats, Daschle's withdrawal is a blow to plans to overhaul health care later this year, a major campaign promise by the Obama administration. Daschle was seen as uniquely qualified because of his knowledge of health policy and his close friendships in the Senate

Sen. John Kerry, D-Mass., said, "Today is not a good day for the cause of health care reform."

Sen. Kent Conrad, D-N.D., a close friend of Daschle, called the situation a "tragedy."

"It's very hard to have the facts catch up with the headline," Conrad said. "I think if people would have had a chance to read the investigative report and listen to the investigator they would have come to a very different conclusion."

Sen. Barbara A. Mikulski, D-Md., who is deeply involved in the Health, Education, Labor and Pension Committee's efforts to overhaul health care, said, "It's a sad day for Tom Daschle, but it's really a sad day for our country. He had such knowledge and skill we could have really moved ahead in doing real health reform. We could have done it in a way that was sensible, affordable, and at the end of the day people would have had access."

Finance Chairman Max Baucus, D-Mont., said, "I'm surprised. It's tragic, regrettable. He's a very good man, exceptionally qualified for the job. . . . I think he would have been confirmed," Baucus said. "He's made his decision. It's time to move on."

Unlike Kerry, Baucus insisted that the loss of Daschle would not affect the timetable for moving a health care overhaul.

"The committee's moving full speed ahead—and the HELP Committee is—on health care reform. President Obama is totally committed to health care reform. It could be a little blip. I don't think it's much."

Baucus said he did not know of other names that have been recommended for HHS secretary.

Other members rued the loss of Daschle's experience with health care policy.

"I'm disappointed because he has a great deal of ability in this field," said Sen. Orrin G. Hatch, R-Utah, who served with Daschle for 18 years.

Alan K. Ota, Alex Wayne and Catharine Richert contributed to this story.

By John Reichard, CQ HealthBeat Editor

FEBRUARY 2, 2009 -- Whither the Obama health overhaul? Hundreds of health policy researchers were all ears Monday when senior Obama health adviser Jeanne Lambrew took the stage to speak at the National Health Policy Conference. She confined her remarks to explaining what the administration health team has done so far while offering only a murky description of the future&8212;Lambrew said she'd have a lot more to say in "a few short weeks."

What seemed clear however was that President Obama will be pushing hard for a public plan option in a reworked system. It also appears that his team may be having a challenging time of late carving out time for working on a long term overhaul of the health care system.

Lambrew, deputy director of the White House Office of Health Reform, suggested that Obama strongly supports giving creating a public program option in a system leading toward universal coverage. "If you really believe in competition why not give the public plan a chance," she asked. The issue is heating up as a potential source of gridlock in the health overhaul debate, with the White House and many House Democrats favoring it and many congressional Republicans likely to be firmly opposed. She said one potential model for a public option would be a state employees health benefits plan in which the government pays private health plans to provide coverage.

Lambrew also said that Obama's team got an "enormous" response to its pre-inaugural plea to citizens to organize local meetings on health changes and that it is preparing a report for Obama on what average Americans want changed. Lambrew said the call for meetings led to as many as 9,000 gatherings around the country and 4,500 reports on those meetings containing recommendations on changing the system.

But "a lot of our work got overwhelmed by the rapidity in the decline of the economy," she told the Washington, D.C. conference, an annual event sponsored by the policy journal Health Affairs and AcademyHealth, an association of health services researchers. That decline contributed to the addition of numerous health-related provisions in economic stimulus legislation.

In addition, the team also has been focusing on other "unfinished business" from the last session of Congress, specifically reauthorization of the State Children's Health Insurance Program. It wasn't easy to figure out a plan to extend the program after its March 31 expiration because the costs of doing so have risen and because of differences over whether to allow states to end the five-year waiting period for coverage of the children of legal immigrants. The Senate has passed a different version of the reauthorization than the House, and the White House is hoping the House will clear the Senate version and send it to Obama this week for his signature.

Might Lambrew have been trying to lower expectations for rapid action on a health overhaul? On the one hand, she described action on the issue as an undiminished priority for the president as it confronts a deepening recession. On the other hand, when asked about whether a health overhaul is on a 2009 timetable she said Health and Human Services Secretary nominee Tom Daschle would likely say that FDR and LBJ moved quickly to pass major legislation early in their administrations and that Obama considers a health overhaul a top priority. As for Daschle's nomination woes, Lambrew made it clear to reporters after her remarks that she wouldn't answer questions on the subject.

Lambrew devoted much of her speech to explaining the thinking behind economic stimulus provisions supported by the administration. She described as "protection provisions" elements of the stimulus that would provide states $87 billion over a two-year period in the form of a temporary federal increase in the share of Medicaid outlays borne by the U.S. government, plus language approved by the House allowing a Medicaid "buy-in" and paying 65 percent of the premium costs for 12 months for laid-off workers qualifying for coverage under "COBRA," the federal law that gives certain workers continued access to group rates for 18 months after they lose their jobs.

Lambrew noted findings by the Commonwealth Fund that 38 percent of low-income unemployed workers lack access to COBRA protections in explaining the rationale for the Medicaid buy-in, which would be available to laid-off workers without access to COBRA.

Other elements of the stimulus would pave the way for an overhaul in several ways, she said. Stimulus language includes job creation provisions that would help build up the primary care workforce in anticipation of sharply increased demand for that type of care in a system covering millions more uninsured. Health information technology provisions would boost adoption of the technology by an estimated 85 percent of doctors and 50 percent of hospitals by 2014, she said. Stimulus language would provide for "historical investments" in wellness and disease prevention programs, and comparative effectiveness funding of $1.1 billion would provide another tool to lay the foundation for lower cost growth, she indicated.

The final shape of stimulus legislation is unclear however, with the Senate taking up the legislation over the next several days.

By Drew Armstrong, CQ Staff

FEBRUARY 4, 2009 -- President Obama on Wednesday signed into law a major expansion of health insurance for children, delivering on a Democratic campaign promise and finishing what Democrats tried and failed to do in the last Congress.

Obama signed the legislation (HR 2) just hours after the House had cleared it, underscoring the difference in the political landscape wrought by the 2008 elections.

President Bush twice vetoed similar bills in the 110th Congress.

The House passed the measure by 290-135. No amendments were allowed under the rule that brought the bill to the floor.

Obama said that with enactment of the bill reauthorizing and expanding the State Children's Health Insurance Program (SCHIP), "we fulfill one of the highest responsibilities we have: to ensure the health and well-being of our nation's children.

"It is a responsibility that has only grown more urgent as our economic crisis has deepened, health care costs have exploded, and millions of working families are unable to afford health insurance," the president said.

The House first passed the legislation Jan. 14 by 289-139. The Senate amended it and passed it Jan. 29 by 66-32.

House Majority Leader Steny H. Hoyer, D-Md., described the expansion of the State Children's Health Insurance Program, or SCHIP, as a first step toward making sure all Americans have health insurance coverage.

He compared the problem of America's estimated 46 million uninsured—a figure climbing rapidly in the economic recession—to a leaking ship. "We can't patch every hole today, but if I could choose one leak to stop, it would be the hold where we keep our poor children," Hoyer said.

The bill would provide $32.8 billion extra over the next four and a half years for the program, an amount estimated to allow coverage of an additional 4.1 million children. The program covered about 7 million in 2008.

SCHIP, a joint federal-state program, was created in 1997 under a Democratic president and Republican Congress to provide health insurance to children in families that are low-income, but not poor enough to qualify for the larger Medicaid program. It was initially funded at $40 billion, to be spent over 10 years, and has been credited with reducing the number of children in the nation without health insurance.

"This is the same bill, by and large, that we passed in the House by an overwhelming bipartisan majority two weeks ago," said House Energy and Commerce Committee Chairman Henry A. Waxman, D-Calif.

There were a few differences between the original House bill and the final version, as amended by the Senate.

The Senate added a state option to provide dental insurance, boosting to 62 cents per pack the cigarette tax increase that will fund the SCHIP expansion. That will more than double the current excise tax to a total of $1.01 per pack. The original House version called for a 61-cent tax increase.

Republican Objections

This year's bill would allow legal immigrant children who have been in the United States for less than five years to enroll, a change from legislation passed and vetoed by President George W. Bush in 2007. That change, along with higher family income eligibility limits and less strict identity checks for enrollment, caused Republicans in both chambers to speak out against the bill.

Rep. Joe Barton of Texas, ranking Republican on the Energy and Commerce Committee, said the program should be targeted to children in families with incomes at or less than 200 percent of the poverty level. He also said stricter rules were needed to keep illegal immigrants out of the program.

"None of those things are met in this bill," Barton said.

The immigrant issue has become a major bone of contention. Democrats loosened identity check and enrollment requirements in order to get more kids into the program.

"You have to show your ID before you cash a check at the grocery store," argued Rep. Michael C. Burgess, R-Texas. "Why should we not require someone to show identification before they sign up for this benefit?"
Sens. Charles E. Grassley, R-Iowa, and Orrin G. Hatch, R-Utah, both voted against the bill in the Senate last week, and Burgess pointedly reminded Democrats of that change of heart. The two GOP senators were key supporters of the SCHIP bill in 2007.

"What does it say about a bipartisan bill when the two principal Republican sponsors in the other body withdrew their support for this bill as it came through the Senate?" asked Burgess.

By Mary Agnes Carey, CQ HealthBeat Associate Editor

FEBRUARY 5, 2009 -- Allowing Americans to get their health coverage from a public health insurance plan would provide better care that costs less while offering real competition to private health insurers, according to a report the left-leaning Institute for America's Future released Thursday.

Such a plan, which would be managed by the federal government, could generate enough savings to provide health care coverage to the 48 million Americans currently without health insurance because a public plan would have lower administrative costs and significant bargaining clout, the report concludes.

Analyzing information about Medicare's traditional fee-for-service program, Medicare Advantage, which is administered by private insurers, and the Federal Employees Health Benefits Program, which offers private health insurance to federal employees, the report finds that Medicare has controlled health care costs much better than private insurers over the last 25 years and that the private insurance market "is highly consolidated and needs competition from a public health insurance plan to lower skyrocketing premiums."

Public health insurance programs also have lower administrative costs and broader negotiating power, according to the report. "In a head-to-head competition, the public Medicare plan is much better at containing costs than private Medicare Advantage plans," the study concludes.

A public health plan option that would help provide coverage for the uninsured is an element in health insurance proposals advanced by President Obama and Senate Finance Committee Chairman Max Baucus, D-Mont. Among its provisions, the Baucus plan would create a government-run insurance option to compete with private insurance products and create a national health insurance marketplace where the uninsured could buy coverage.

Business and insurance groups doubted the report's conclusions and said that a federally-administered public health insurance plan could provide an even greater cost shift to private health plans than what currently exists.

Robert Zirkelbach, a spokesman for America's Health Insurance Plans, said the success or failure of such a plan "all depends on how it is structured and what rules it would abide by." There also is concern, he said, that a public health insurance plan "would be able to dictate prices for services."

Maria Ghazal, director of public policy for the Business Roundtable, said the concern is that such a plan would shift costs to the private sector, just as the Medicare and Medicaid programs currently do because their reimbursement rates are too low.

"The goal has to be that we improve access," she said. "The goal has to be to think big."

By Melissa Attias, CQ Staff

FEBRUARY 3, 2009 -- Two studies released Tuesday show that while the Medicare Part D drug benefit reduced out-of-pocket spending for seniors and increased their use of essential medicines during its first year in 2006, Part D patients increased their use of less beneficial medications and decreased medication usage when they entered the coverage gap known as the "doughnut hole."

The authors of both studies, published on the Health Affairs Web site, recommended redesigning the benefit to provide additional coverage in the doughnut hole to prevent adverse health effects in seniors. The coverage gap was originally implemented to keep the cost of the program within the amount specified by the congressional budget resolution.

While the Centers for Medicare and Medicaid Services did not comment directly on the studies, agency spokesman Peter Ashkenaz said CMS data shows that in 2007 and 2008, the average number of prescriptions filled showed little change as enrollees entered the coverage gap.

Specifically, among enrollees who reached the coverage gap, there were small decreases in the average number of prescriptions per beneficiary per month from before beneficiaries they reached the gap to after they reached the gap. For beneficiaries qualifying for Medicare's low-income subsidy, the decline was from 6.63 to 6.55 prescriptions. Among beneficiaries who do not qualify for the subsidy, for those who have gap coverage, the number of prescriptions declined from 5.26 to 4.87 prescriptions. For beneficiaries without gap coverage, the decline was from 4.77 to 4.39 prescriptions, Ashkenaz said.

In the first study, researchers tracked 114,766 continuous users of three pharmacy chains who lacked prescription drug benefits and found that 55 percent initiated drug insurance under Part D. Among seniors who selected the benefit, Part D increased their drug use three to 37 percent and reduced their out-of-pocket spending 37 to 58 percent.

In addition, the data showed that co-payments for one month's worth of selected medications were $15 to $80 lower under Part D, in comparison with the pre-Part D period.

The study also measured usage levels in four drug categories: statins (used to reduce cholesterol), clopidogrel (used to prevent blood clots that can lead to heart attacks and strokes), proton-pump inhibitors (PPIs, use to reduce gastric acid) and warfarin (also used to prevent clotting). According to the findings, use of clopidogrel under Part D increased 11 percent while use of statins increased by 22 percent. In contrast, warfarin, which is less expensive, did not significantly increase, while PPIs, a drug class that many health experts think is overused, increased by 37 percent.

Finally, the study found that patients who reached the coverage gap filled fewer prescriptions than they did during the previous months under Part D. Specifically, medication usage decreased by amounts ranging from 5.7 percentage points a month for warfarin to 6.3 percentage points a month for statins for seniors who reached the doughnut hole.

"The Part D program has expanded seniors' access to prescription drugs while keeping costs far below expectations. In 2008, every senior across the country had access to a prescription drug plan that provided at least some coverage in the gap, and those without coverage still received discounts negotiated by Part D plans," said Robert Zirkelbach, spokesman for America's Health Insurance Plans. "Moreover, plans have also taken steps to mitigate the impact of the coverage gap, including incentives for greater use of generic prescription drugs which reduce out-of-pocket costs for seniors and delay their entry into the gap. Most importantly, seniors continue to express very high satisfaction with their prescription drug coverage."

The Pharmaceutical Research and Manufacturers of America (PhRMA) did not immediately respond to a request for comment.

To ensure that seniors are using the benefit effectively, the study authors suggest redesigning Part D to require evidence of clinical appropriateness before authorizing medication use and instituting benefit designs to reduce the cost patients must pay for the most effective medications.

The authors also recommend providing additional coverage in the doughnut hole for essential medications to prevent seniors from damaging their health.

In the second study, researchers examined two groups of Medicare beneficiaries: a group covered through an employer-sponsored plan with no coverage gap and a group covered by individual Medicare Advantage Prescription Drug plans with either no coverage or some generic drug coverage in the doughnut hole.

The results also show that those who received no coverage in the doughnut hole reduced their use of prescription drugs by 14 percent, or about 0.7 prescriptions per month, when they entered the coverage gap. Patients with coverage for generic drugs but not brand name drugs, in contrast, only reduced their medication use by 3 percent, or 0.14 prescriptions per month.

To overcome this drop-off in drug usage, researchers suggest mandating generic coverage in the doughnut hole. Researchers say increasing the initial 25 percent co-pay for drug spending between $250 and $2,250 by 5.6 percentage points to 30.6 percentage points will enable patients to have generic coverage in the doughnut hole with a $10 co-pay for each monthly prescription. Increasing the initial co-pay to 34.1 percent would provide generic coverage and eliminate the need for the $10 co-pays.