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January 17, 2006

Washington Health Policy Week in Review Archive 64fc1c41-76a4-48c3-bcef-e5ef9491cf28

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Baucus Wants Quick Action on Changes to Drug Benefit Implementation

JANUARY 12, 2006 -- One of the two Democrats who helped write the Medicare prescription drug law has criticized its implementation and urged federal officials to quickly fix what he sees as an array of problems with the benefit that began Jan. 1.

Sen. Max Baucus of Montana, the ranking Democrat on the Senate Finance Committee, said on Thursday that he was "disappointed and extremely concerned" with the transition of dual-eligibles—Medicare beneficiaries who also qualify for Medicaid—from Medicaid to Medicare drug coverage, by the Centers for Medicare and Medicaid Services (CMS).

"CMS has failed to adequately protect these beneficiaries," Baucus wrote in a letter to Health and Human Services Secretary Michael O. Leavitt. Baucus cited a series of problems from both his home state and around the country as well. They include low-income Medicare beneficiaries being charged copayments that are far higher than those established by Congress and low-income seniors being required to pay the full Medicare drug plan deductible of $250 although the drug law (PL 108-173) does not require them to do so.

Baucus' complaints add to the growing chorus of criticisms from lawmakers and some consumer watchdog groups over how the government and private health care plans have handled the first weeks of the new Medicare drug benefit. Sen. Hillary Rodham Clinton, D-N.Y., said on Thursday that her office had been "deluged with complaints from frustrated and confused beneficiaries, pharmacists, and other providers struggling in this transition." On Tuesday, Rep. Benjamin L. Cardin, D-Md., urged Leavitt to add additional staff to the 1-800-Medicare line to help pharmacists verify beneficiaries' eligibility for the benefit. On Dec. 30, two days before the drug program began, Sen. Olympia J. Snowe, R-Maine, said that CMS's computerized database contained inaccurate information on roughly half of the state's dual-eligibles.

On Thursday, the Center for Budget and Policy Priorities, a liberal-leaning think tank, heavily criticized the startup of the Medicare drug benefit.

In an interview taped for C-SPAN that airs this weekend, CMS Administrator Mark B. McClellan said on Thursday that there were problems with coverage for some dual eligibles. But he added that difficulties were often limited to duals who switched their plan coverage late in December, which complicated efforts to have their data correctly entered into CMS computers in time for the start of the drug benefit.

"We're handling the cases where it comes up," McClellan said. "We will continue to watch this very carefully." He added that most beneficiaries who enrolled in the drug benefit were receiving their prescriptions. "Many pharmacies are having no problems at all. Many states are having no problem at all," McClellan said.

According to Baucus, about 10 states have responded to problems with the drug benefit by restarting Medicaid prescription coverage, even though the states are ineligible for matching federal Medicaid payments. In the C-SPAN interview, McClellan said that CMS did not have the authority to reimburse states for such payments.

In his letter, Baucus wrote that many problems with the drug benefit rollout "appear to stem from CMS' over-reliance on the efforts of community pharmacists" to move the approximately 6 million dual-eligibles from Medicaid to Medicare for their drug coverage. CMS computer systems designed to help pharmacists accomplish that goal "have repeatedly failed," Baucus wrote, adding that pharmacists report errors and shutdowns in CMS-contracted software and busy signals and long waits on the 1-800-Medicare line. "In some cases, pharmacists are simply giving prescriptions away when they do not know how to correctly bill," Baucus wrote.

"In short, Part D has experienced major setbacks in its first week," Baucus concluded. CMS, he said, must improve its information technology systems to speed beneficiary enrollment in the drug benefit and electronic verification of that enrollment for pharmacists.

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Disparities in Medical Treatment Remain Despite Improvements, Reports Find

JANUARY 9, 2006 -- While health care has improved for many Americans, gaps have widened in both the quality of care and access to care for Hispanics, according to two reports released on Monday by the Department of Health and Human Service's Agency for Healthcare Research and Quality (AHRQ).

Significant disparities between minorities and whites continue to exist with some signs of improvement, according to the 2005 National Healthcare Disparities Report. Overall, racial disparities in most of both the quality measurements and the access measurements were narrowing. But for Hispanics, the disparities in a majority of both the quality measurements and the access measurements were growing, researchers found. For example, the quality of diabetes care declined from 2000 to 2002 among Hispanic adults while it improved among white adults.

The report found that disparities related to race, ethnicity, and socioeconomic status still pervade the American health system, while they vary in magnitude by condition and population. The disparities exist in several areas, including:

  • Quality of health care, such as effectiveness, patient safety, timeliness, and patient centeredness.
  • Access to preventative care, treatment of acute conditions, and management of chronic disease.
  • Clinical conditions, including cancer, diabetes, end stage renal disease, and heart disease.
  • Across health care settings, such as primary care, dental care, home health care, and emergency departments.

The National Healthcare Disparities Report and its companion document, the National Healthcare Quality Report, were issued Monday at the National Leadership Summit on Eliminating Racial and Ethnic Disparities in Health, which was sponsored by the HHS Office of Minority Health. The reports, issued annually, measure quality and disparities in four key areas of health care: effectiveness, patient safety, timeliness, and patient centeredness.

The reports conclude that while the overall quality of care for all Americans improved at a rate of 2.8 percent—the same rate of increase as in last year's report—there has been much more rapid improvement in some measures, in particular where there have been efforts to improve care. The report, for example, finds a 10.2 percent annual improvement in five core measures of public safety, according to an AHRQ news release.

Yet significant disparities between minorities and whites continue. The National Healthcare Disparities Report found that together, blacks, American Indians, and Alaska Natives received lower quality care than whites for about 40 percent of core report measures, while Hispanics received worse care than non-Hispanic whites for over half of the core report measures and better care for 16 percent of the measures.

Minorities and the poor also have worse access to care, researchers found. For example, blacks and American Indians and Alaska Natives experienced worse access to care than whites for half of core report measures and better access to care for no measures. Hispanics had worse access to care than non-Hispanic Whites for 88 percent of care measures, the report on health care disparities found.


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Lower Drug Copayments Keep Patients Healthier, RAND Study Finds

JANUARY 13, 2006 -- Reducing copayments for patients on cholesterol-lowering medication can keep them healthier and cut U.S. medical costs by more than $1 billion annually, according to a RAND Corporation study.

The report found that when cholesterol-lowering drugs cost less, patients were more likely to take their medication, leading to fewer health problems and hospitalizations.

Researchers based their findings on estimates of about 6.3 million American adults with private insurance or Medicare coverage who take cholesterol-lowering medication. Reducing copayments for the sickest patients would avert nearly 80,000 hospitalizations and more than 31,000 emergency room visits each year, which account for the $1 billion savings estimate.

"There are obstacles to these policies, but our research suggests they should receive wider consideration," the study's lead author, Dana Goldman, said in a news release. Goldman is also director of health economics at RAND Health.

The RAND findings come as Congress is considering new flexibility for states to charge higher copayments to Medicaid beneficiaries as part of budget reconciliation legislation (S 1932) the House is scheduled to consider early next month.

Groups opposed to the legislation say that increasing copayments for Medicaid beneficiaries may discourage them from receiving medical care that can help avoid costly medical complications later. But Bush administration officials have said higher Medicaid copayments will not be a disincentive to seeking care.

The RAND study, published in the January edition of the American Journal of Managed Care, found that patients who had $10 per month copayments for their cholesterol-lowering medication were 6 percent to 10 percent more likely to fully comply with doctors' orders to take the drug than patients who had $20 per month copayments. High-risk patients were less likely to be influenced by higher costs, researchers found.

Researchers also analyzed the link between patients' drug compliance and their use of medical services for up to four years after starting cholesterol-lowering therapy. Researchers found that patients who took their medication regularly had lower hospitalization rates and emergency room visits, particularly for patients with a higher risk profile.

The analysts cautioned, however, that there are some potential problems their study did not address. Health plans with lower drug copayments for high-risk and medium-risk patients may attract higher numbers of sick patients, while discouraging healthier patients who may perceive that they are penalized by being charged higher copayments, researchers concluded.

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MedPAC Agrees on Final Payment Recommendations

JANUARY 10, 2006 -- A key advisory panel voted Tuesday to adopt a final recommendation that Congress increase Medicare hospital inpatient payments in fiscal 2007 by 0.45 percent less than the "market basket" increase in the projected costs of such care. Because the increase for fiscal 2007 is projected to be 4 percent, the recommendation by the Medicare Payment Advisory Commission (MedPAC) would amount to a 3.55 percent increase in inpatient payments next year under the Medicare prospective payment system.

The percentage point figure of 0.45 represents half of an adjustment the commission makes to account for productivity growth when it considers how much of a payment increase to recommend for hospital inpatient and outpatient payments.

MedPAC also adopted a final recommendation that Congress increase Medicare hospital outpatient payments by the same amount as for inpatient payments, market basket minus 0.45 percent. Although hospitals are running negative margins on Medicare patients, relatively generous private insurance payments more than offset those losses, commission staffers say.

MedPAC said that for the short term it is postponing any recommendation that addresses the relatively poor performance of rural hospitals under the outpatient prospective payment system.

The American Hospital Association said it was "dismayed" with MedPAC's vote to reduce the Medicare payment increases provided under current law.

"This poor decision ignores data detailing the pressures facing hospitals and fails to take into consideration the very serious impact any reduction in payment would have on hospitals and the patients we serve," Rick Pollack, the group's executive vice president, said in a statement.

Pollack also said that since 1997, hospitals' total Medicare margins have fallen steadily. And in 2004, 68 percent of hospitals lost money serving Medicare patients.

"With this evidence at hand, MedPAC's recommendation for less than a full market basket update is very troubling, and threatens hospitals' ability to continue to provide vital health care services," he said.

The panel, which files its payment recommendations with Congress on March 1, agreed that Medicare composite rate payments to outpatient dialysis facilities should be increased by the market basket increase for the sector, or 3.1 percent, minus 0.45 percent to adjust for productivity gains. Another recommendation adopted by the panel urges Congress to direct the HHS secretary to eliminate differences in payments to hospital-based and freestanding facilities for services under the dialysis composite rate. This recommendation also says the secretary should combine the composite rate and the add-on adjustment for dialysis drugs into a single bundled payment.

Commissioners agreed to a final recommendation that Medicare payments to doctors in 2007 be increased by the projected change in "input prices" for physician care minus an adjustment for productivity gains. In effect, the increase would be 2.8 percent. The one-year cost of such an increase would be more than $1.5 billion and $5 billion to $10 billion over five years.

Panel members also agreed to language advising the HHS Secretary to adopt a new procedure for reviewing the payment codes that designate the thousands of tests and services for which doctors can bill Medicare. The aim of the recommendation is to identity services that are "overvalued" for purposes of setting Medicare payment amounts. Now, the "Resource Utilization Committee" (RUC) that advises Medicare on payment codes focuses on updating payments for services for which doctors are paid too little and not enough on correcting those for which they are paid too much, commissioners said.

The recommendation calls for a new standing panel of experts to review recommendations by the RUC. Members should include not only doctors but also people "with expertise in health economics." HHS, in consultation with the panel, should identify new services likely to "experience reductions in value"—in other words, services for which doctors can be paid less because of declining costs of that particular type of care. "The services should be referred to the RUC and reviewed in a timely manner," MedPAC advises.

The reviews could have major implications. Whole industries rise and fall based on changes in payment codes, noted a financial analyst at the meeting.

The commission adopted a recommendation for no payment increase to home health agencies in 2007 after its staff released data in December projecting Medicare margins will reach 14.7 percent in 2006.

The panel approved a final recommendation to keep payments in fiscal 2007 to inpatient rehabilitation facilities the same as in fiscal 2006. And it also decided that Medicare payments to long-term care hospitals in 2007 should not be increased. MedPAC projects that profit margins on Medicare patients in those facilities will average 7.8 percent in 2006.

Commissioners also said Congress should not provide a Medicare payment increase to skilled nursing facilities (SNFs) in fiscal 2007. Profits on Medicare patients in such facilities will average 9.4 percent in fiscal 2006, according to commission data.

"We are disappointed that MedPAC recommended no inflation adjustment for SNFs in 2007, especially since the Commission reported last month that profit margins at non-profit SNFs are nearly zero," said Larry Minnix, president of the American Association of Homes and Services for the Aging. "MedPAC's mission does not allow it to analyze Medicaid payment rates," he added. "This recommendation only amplifies the need for our country to take a comprehensive look at how to overhaul long-term care financing to meet the needs of our aging population."

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More Nurses Can Mean Better Care at Same Cost, Study Says

JANUARY 10, 2006 -- Increasing hours of nursing care could save lives, shorten hospital visits, and prevent medical complications, according to a new study that appears in the January/February issue of Health Affairs.

The article examines the health outcomes and costs that could result from raising the proportion of registered nurses (RNs) and hours of nursing care per patient. The study concluded that increasing the proportion of RNs improves care without raising costs and that increasing the number of nurses improves care at a price.

The study examined three possible approaches to improving nursing care:

  • Increasing the proportion registered nurses without changing the number of nursing care hours per patient.
  • Increasing the number of nursing care hours per patient without changing the proportion of registered nurses/licensed practical nurses.
  • Raising both the proportion of RNs and the number of nursing care hours.

The study concluded that the first option would improve care and could also save money by reducing deaths, shortening hospital stays, and preventing hospital-related complications such as pneumonia and urinary tract infections. An estimated 37,000 RNs would have to be hired to replace the licensed practical nurses at a cost of about $811 million, but long-term savings are estimated at $1.8 billion.

The other two options would not pay for themselves, but the authors believe the changes are worth the price.

"We would have to spend more money, but the value to patients makes it look like it is worth doing," said author Jack Needleman, associate professor at he University of California at Los Angeles.

The costs associated with the second and third options are significant, $5.8 billion and $5.7 billion, respectively, equivalent to approximately 1.5 percent of annual hospital expenditures. Annual hospital inflation is approximately 5 percent to 6 percent.

Licensed practical nurses (LPNs), also known as licensed vocational nurses, have about two years of training. Registered nurses have more training and are able to evaluate patients and provide care at a more sophisticated level. They are generally paid a third more money than LPNs.

"If the wages rose and working conditions improved," the first option could be implemented, said study coauthor Peter Buerhaus, professor and senior associate dean for research at Vanderbilt University School of Nursing.

But the second and third options would require well over 100,000 nurses, more nurses than are currently available.

Buerhaus attributes the dearth of nurses to shortages in nursing faculty, space in nursing schools, and space in clinical programs. Despite the need for nurses, nursing schools were turning prospective students away last year, he said.

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Report: Health Spending Now 16 Percent of GDP

JANUARY 10, 2006 -- Health care spending growth slowed in 2004 to 7.9 percent, the lowest level of increase in four years, mostly due to a slowdown in the growth of drug spending, federal officials said Tuesday.

For the first time in a decade, drug spending growth slowed to single digits, rising 8.2 percent, or less than half the rate measured just five years earlier, according to the report published Tuesday in the journal Health Affairs.

In 2004, health care spending was $1.9 trillion, or $6,280 per person. The study also shows that U.S. spending on health care now accounts for 16 percent of the gross domestic product, up from 13.8 percent in 1993 and 9.1 percent in 1980.

"The implication is that more of every dollar of output by our country is going to health care," said Cynthia Smith, an economist at the Centers for Medicare and Medicaid Services and lead author of the report.

James A. Klein, president of the American Benefits Council, said the report "underscores the importance for both public and private health care purchasers to step up their efforts to rein in health costs while improving health quality."

Karen Ignagni, president of chief executive officer of America's Health Insurance Plans, said the findings demonstrate "the need for further work in improving the affordability of health care" such as making evidence-based medicine "the gold standard of health care."

Mark Merritt, president of the Pharmaceutical Care Management Association, which represents pharmaceutical benefit managers, or PBMs, said the findings are proof of PBMs' successful efforts over the past decade "to change the way consumers, clinicians, and purchasers think about prescription drugs."

The findings, issued annually by the Centers for Medicare and Medicaid Services' Office of the Actuary, includes data through 2004, the most recent year for which actual numbers are available.

Highlights of the report include:

  • Medicare spending rose 8.9 percent to $309 billion in 2004, up from the 6.6 percent registered in 2003. The growth, the report notes, was fueled by increases in home health and physician spending, as well as by the 2003 Medicare prescription drug law (PL 108-173) that increased payments to rural providers and managed care plans and provided drug spending subsidies for low-income Medicare beneficiaries. The Medicare spending numbers do not include the new Medicare drug benefit which went into effect Jan. 1.
  • Medicaid spending growth slowed to 7.9 percent to $293 billion in 2004, a drop from 8.9 percent and the second straight year of deceleration. The authors attribute the slower growth to states efforts to contain prescription drug spending, including using generics and negotiating higher rebates.
  • Private payers spending growth decelerated to 7.6 percent in 2004, a percentage point slower than 2003 and also slower than public sector growth (8.2 percent) and overall spending growth (7.9 percent).
  • Hospital spending reached $571 billion in 2004, up 8.6 percent from $525 billion the previous year and higher than the average rate of 8.2 percent since 2000. Hospital spending growth now accounts for one-third of all health spending growth, and hospitals account for 30 percent of total health spending.
  • Growth in retail drug sales continued to decelerate in 2004, slowing to 8.2 percent compared with 10.2 percent in 2003 and 14 percent in 2002. Prescription drug spending rose to $188 billion in 2004. The report's authors said this was the first year of single-digit growth in the retail market in 10 years. Rapid growth in the use of lower-priced generic drugs, more use of over-the-counter medications, and a shift toward greater mail-order dispensing all contributed to the trend, the researchers concluded.
  • Payments for physician services rose 9 percent in 2004 to roughly $400 billion, a slight acceleration from the 8.6 percent increase in 2003. Medicare spending for physician services grew 9.9 percent and Medicare spending for physician services grew 11.1 percent in 2004, up from 8.8 percent in 2003, because of increasing volume and intensity of services provided.
  • Home health care spending grew faster in 2004 than any other service category. Public spending rose 17.6 percent for home health services, accounting for 74 percent of such spending.
  • Medicare spending for skilled nursing facilities rose 4.3 percent in 2004. Medicaid is the largest public source of funding for nursing homes and accounts for nearly 40 percent of such spending.

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Wanna Know How the Doc Did? Ask the Patient

JANUARY 13, 2006 -- Patients provide consistent and reliable information about the quality of medical care physicians give and how their offices operate, a new study has found.

In the statewide demonstration study of physicians in Massachusetts' five leading commercial health plans and Medicaid, researchers at Tufts–New England Medical Center and Massachusetts Health Quality Partners found reports by 45 patients of individual physicians are "highly consistent and reliable sources of data." Meanwhile, individual physicians vary substantially from one another on measures such as communication quality, accessibility, and coordination of care,

The report—described as the first large-scale study to examine the validity of patients' reports on the quality of their doctors' care—comes as lawmakers, patients, and health analysts are placing greater emphasis on the measuring and reporting of providers as a way to determine what constitutes quality medical care and how much to pay for it.

"These findings reveal that among a modest-size sample of a physician's patients, it is possible to obtain a snapshot of what it is like to be a patient of that physician that appears to hold true from patient to patient," the study's lead author, Dana Gelb Safran, said in a news release. "The study points to patients' reports as an effective tool that can be used more widely to improve quality of care."

The patient surveys were completed by phone and mail between May and August 2002, using a statewide sample of nearly 13,000 adult patients of 215 generalist physicians at 67 practices, with an average of 58 completed questionnaires per physician.

Patients critiqued their health care experiences on 11 measures reflecting both quality of interactions—such as how often the doctor explained things in a way that was easy to understand, or treated the patient with respect—as well as organizational features of care such as coordinating care with specialists.

The study, supported by The Commonwealth Fund and the Robert Wood Johnson Foundation, was published in the January issue of the Journal of General Internal Medicine.

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