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July 11, 2005

Washington Health Policy Week in Review Archive f18c00bc-7c18-48e5-8aa2-14a3893b14d4

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Guess What—Dems Don't Like Medicaid Commission Picks

JULY 8, 2005 -- With just 55 days to go to complete recommendations on trimming Medicaid by $10 billion over five years, HHS announced Friday the names of members who will serve on its advisory commission on overhauling Medicaid—a list criticized by most Democrats.

While Democrats for the most part slammed the selections for missing the mark on bipartisanship, one former Democratic Hill aide praised the lineup as basically "moderate, pragmatic and thoughtful."

Named to chair the commission was former Tennessee Governor Donald Sundquist, a Republican who defended the aggressive Medicaid expansion program TennCare against cuts in the late 1990s. Sundquist pushed for passage of a tax increase and saw his political fortunes nosedive after that.

"You could say he lost the governorship defending TennCare," said one state official.

"He tried to finance it, and he got creamed for it," added a Hill aide who otherwise called the commission "stacked" in the administration's favor.

Named as co-chair was Angus King, who served as governor of Maine as an independent and also has a reputation as a moderate on Medicaid issues.

Named as voting members were Nancy Atkins, commissioner for the West Virginia for Medical Services; Melanie Bella, vice president for policy at the Center for Health Care Strategies; Gail Christopher, vice president for health at the Joint Center for Political and Economic Studies; and Gwen Gillenwater, director for advocacy at the National Council on Independent Living, an activist group representing people with disabilities who do not want to live in nursing homes.

Also named as voting members were Robert Helms, director of health policy studies at the American Enterprise Institute; Kay James, former director of the U.S. Office of Personnel Management; Troy Justesen, deputy assistant secretary for the office of special education and rehabilitative services at the U.S. Department of Education; Mike O'Grady, assistant secretary for planning and evaluation at HHS; Bill Shiebler, former president of Deutsche Bank; Grace-Marie Turner, president of the Galen Institute; and Tony McCann, secretary of mental and health hygiene for the state of Maryland and a former Department of Health and Human Services budget official in the administration of former President George Bush

Ron Pollack, executive director of the liberal advocacy group Families USA called the new commission "a sham that deserves—and will receive—no credibility."

The announcement "reinforces our judgment that this Commission is designed to promote pre-determined and very destructive Medicaid changes dictated by the Bush Administration," Pollack said.

A spokesman for House Energy and Commerce Committee ranking Democrat John D. Dingell of Michigan said her boss had no plans to release a new statement reacting to the appointees, pointing to an earlier statement in which Dingell said the panel "falls short of the unbiased, independent advisory panel" proposed by Sens. Gordon H. Smith, R-Ore. and Jeff Bingaman, D-N.M.

Bingaman said he was disappointed with the makeup of the panel. "This is a long way from the bipartisan panel I had envisioned," he said. "Any report they produce is likely to be lopsided, and therefore not a useful tool for Congress."

Rep. Henry A. Waxman, D-Calif., author of various laws expanding Medicaid, said "today's announcement confirms that the purpose of the commission is to rubber-stamp the administration's failed Medicaid policies."

Sen. Max Baucus of Montana top Democrat on the Senate Finance Committee, said "six weeks is not enough time for a commission to develop the thoughtful approach that was intended."

HHS Secretary Michael O. Leavitt also named 15 non-voting members. They are James Anderson of the National Association of Children's Hospitals; Julianne Beckett of Family Voices, an organization that has fought for legislation allowing families of severely disabled children to buy into the Medicaid program; Carol Berkowitz, president of the American Academy of Pediatrics; Maggie Brooks, county executive for Monroe County in New York; and Valerie Davidson, executive vice president for the Yukon-Kuskokwim Health Corporation.

Also named were Mark de Bruin, chairman of the policy council for the National Association of Chain Drug Stores, which has defended current Medicaid drug payment policies; John Kemp, CEO of the Disability Service Providers of America; Joseph Marshall, CEO of the Temple University Health System; John Monohan, president of state-sponsored programs for the insurer Wellpoint; and Dr. John Nelson, who recently stepped down as president of the American Medical Association.

The other non-voting members are Joseph J. Piccione, an executive with OSF Healthcare System; Douglas Struyk, CEO of the Christian Health Care Center; Dr. Howard Weitz, a cardiologist with Thomas Jefferson University; and Joy Johnson Wilson, director of health policy at the National Conference of State Legislatures (NCSL).

Not all Democrats slammed the lineup. "My overall reaction is congratulations," said a former Hill aide. "I bet I'm the only Democrat in town saying that."

The source praised the selection of representatives of the American Academy of Pediatrics, the National Association of Children's Hospitals, and NCSL. But the former aide said what the commission will bring to congressional action on Medicaid in September is "minimal," noting that Hill aides are already putting together an overhaul plan. "They're not sitting around sucking their thumbs waiting for a commission to tell them what to do."

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Optional Spending Big but Elusive Target in Medicaid

JULY 5, 2005 -- Optional spending by state Medicaid programs is the target of administration and congressional budget cutters—and a very big target it is, at least in one sense. Optional spending totals 60 percent of Medicaid outlays, seemingly making the job of controlling Medicaid spending straightforward—just trim some of the frilly extras.

To some, "those who are optional probably have other alternatives and don't really need Medicaid's help," Senate Aging Committee Chairman Gordon H. Smith, R-Ore., observed at a hearing last week. But Smith and others at the hearing argued otherwise.

"In fact, if we allow optional beneficiaries to lose Medicaid coverage, they will simply join the ranks of the millions of uninsured Americans and end up costing taxpayers far more in the long run," he said.

Smith's views are influential in the Medicaid debate. As one of a handful of Senate Republicans wary of Medicaid cuts, Smith was instrumental in negotiating an agreement with the Bush administration to create a commission to study carefully how some $10 billion in cuts over five years should be made.

"We must proceed with caution and extreme sensitivity," he emphasized at a June 28 Aging Committee hearing questioning how optional the optional side of Medicaid really is.

The commission Smith seeks has yet to be announced, but a representative of an existing Medicaid commission testified that cuts in optional spending would inflict added pain on some of the most vulnerable Americans.

"Some of the sickest and poorest Medicaid beneficiaries are considered 'optional' and many of the 'optional' benefits provided under Medicaid, such as prescription drugs and rehabilitation services, often are integral to appropriate care and functioning of the population Medicaid services," said Diane Rowland, executive director of the Kaiser Commission on Medicaid and the Uninsured.

Added Pamela S. Hyde, who heads New Mexico's Medicaid program, "We do not want to be in the situation where we have to reduce services or eligibility that will hurt the most vulnerable individuals with mental illness because the federal government wants to preserve services to 'mandatory populations' and reduce its own spending on so-called 'optional' ones."

HHS Secretary Michael O. Leavitt has emphasized the distinction between mandatory and optional Medicaid in making the case for overhauling the program. States should have more control to shape the optional side of Medicare, reducing benefits for some beneficiaries to open up Medicaid to more people, he says. But critics see in such flexibility a weapon to chop spending, not extend care to more people.

In what sense is Medicaid spending optional? Medicaid consists of mandatory populations and optional populations and mandatory benefits and optional benefits.

States that decide to take part in Medicaid "are required to cover all children under the poverty level, pregnant women and children under six with incomes at or below 133 percent of the federal poverty level, and most elderly and disabled recipients of cash assistance under the Supplemental Security Income cash assistance program," Rowland testified. All states have chosen to participate in Medicaid, and on average pay 43 percent of Medicaid costs while the federal government pays 57 percent.

In addition to these mandatory populations, "states have the option to extend coverage to children at higher incomes, their parents, and other low-income elderly and persons with disabilities in the community and in nursing homes and still receive federal matching funds for the cost of their coverage," said Rowland.

"If a state decides to extend Medicaid coverage to an optional population, it must generally offer the same benefits package that it makes available to its mandatory populations," according to a Kaiser Medicaid Commission fact sheet. "In every state, this benefits package includes both mandatory and optional services."

Mandatory benefits for both mandatory and optional populations include hospital, physician, and lab service. "Many of the 'optional' benefits, such as prescription drug coverage and intermediate care facilities for the mentally retarded are integral to Medicaid coverage and offered in all states," Rowland testified. The facilities provide diagnostic, treatment, and rehabilitation services for the mentally disabled in a residential setting.

Most children in Medicaid—79 percent—qualify on the basis of mandatory population coverage while 48 percent of the elderly qualify for optional eligibility groups, Rowland said.

The term "mandatory population" dates back to Medicaid's roots in 1965 as the medical coverage program for people on welfare.

"The populations historically eligible for cash assistance are 'mandatory' under Medicaid law, while most populations not eligible for cash assistance were made eligible for Medicaid through new laws enacted over the program's 40-year history," said Rowland.

As eligibility opened up to new groups, it did so on an optional basis. Optional status does not "imply a lesser standard of need or worthiness than coverage for mandatory groups and services," said Rowland.

"Given the range of disabilities covered by Medicaid, many of the 'optional benefits are essential to appropriate care and management of people with disabilities on Medicaid," she said. "For the aged and disabled who rely on Medicaid to fill Medicare's gaps, 'optional' benefits like prescription drugs, dental and vision care, and home and community-based services are the most important gaps Medicaid fills."

Individuals covered at the state's option account for 60 percent of Medicaid outlays, and of those outlays, 86 percent is for services to the elderly and disabled, said Rowland.

State flexibility to alter benefits to optional populations, without added federal resources, "will not achieve significant savings for states or facilitate Medicaid's ability to meet the health needs of the low-income population and adequately pay their providers nor will they help address the increasing long-term care needs of an aging population." And "given the extremely limited incomes of most Medicaid beneficiaries, nominal co-payments and cost-sharing are likely to lead to reduced access to early care and potentially more costly hospitalizations for untreated conditions," Rowland said.

But leaving Medicaid spending untouched is untenable, says the National Center for Policy Analysis. "Left unreformed, Medicaid will bankrupt every state is as little as 20 years, possibly absorbing 80 to 100 percent of all state revenues," a NCPA position paper states. "Delay is not an option. States and the federal government must act now to avoid a real human and fiscal disaster."

"In virtually every state, Medicaid pays for inputs rather than outputs. This means that the more physicians and facilities do, the more they earn—even if patients would have been better off if less were done." NCPA urges that Medicaid be converted from a defined benefit to a defined contribution program "under which the state determines how much it is willing to spend and patients (along with their doctors) choose how to spend it."

Private sector plans should be able to compete for these dollars, leading to coverage that would respond to changing medical science and changing consumer preferences, NCPA said.

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Report Finds Malpractice Premiums Rising Faster than Claims

JULY 7, 2005 -- A study released Thursday by several liberal groups shed doubt on claims by insurance companies that malpractice litigation claims are behind rising premiums. The report concludes that the major companies are charging higher premiums than justified by current or projected payouts.

The report, commissioned by the Center for Justice and Democracy, suggests that over the last five years, malpractice claims payouts have remained constant as premiums have doubled. Some insurers, according to the study, increased premiums while projections of future claims payments increased, accumulating "record amounts of surplus over the last three years."

The study was blasted by the insurance industry. Lawrence Smarr, president of the Physicians Insurers Association of America, said the study contained "several critical flaws."

"Falling Claims and Rising Premiums in the Medical Malpractice Insurance Industry" analyzed the 2000–04 performances of the 15 largest medical malpractice insurers in the United States based on data from the companies' 2004 annual statements to state insurance departments.

The study, written by Jay Angoff, an attorney and former insurance commissioner of Missouri, found that carriers increased their net premiums by 120.2 percent while net claims payments rose by 5.7 percent. In some cases, the study said, claims payments decreased as premiums shot up.

Smarr said it is "inappropriate" to compare premium and claims changes over a calendar year because claims are paid "many years" after a premium is collected. Further, Smarr said, the figures in the study only address the indemnity, or money paid to a patient, and not legal fees, which could double the figure.

"Not only is [Angoff] comparing apples and oranges, he's only got half an apple," Smarr said.

The study does address the "incurred loss" ratio, or projected payout on future premiums, and found that they declined by 25 percent between 2000 and 2004. The carriers increased premiums by 9.3 percent in 2004 even though incurred losses declined by 21.1 percent, according to the study.

Smarr said these numbers also leave out legal costs, and that paid claims are rising by 6 percent per year. He said he was looking into having an actuary replicate the study with figures the industry feels are more appropriate.

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State Officials Say Revenue Picture Sunnier but Medicaid Revisions Remain 'Critical'

JULY 7, 2005 -- A survey released Thursday by state officials says state revenues "improved dramatically" in fiscal 2005, with a "remarkable" 42 states collecting more revenues during the year than they expected to take in. Nevertheless, states will be forced to trim outlays for higher education in coming years because Medicaid spending will keep growing at a yearly rate of 9 percent to 10 percent per year, said Raymond Sheppach, one of the officials of the National Governors Association (NGA).

Scott Pattison, executive director of the National Association of State Budget Officers (NASBO), told reporters at a midday briefing to announce the survey results that "revenue is coming in strong." State spending growth bounced to 6.6 percent in fiscal 2005, slightly above the 6.5 percent average figure for the past 27 years, and notable after several fairly flat years. Sales, income, and corporate tax collections were up, reflecting economic growth.

The spending increase—up from an average yearly increase of 3.9 percent during the past five years—reflects not only rising revenues but also "pent-up demand," Pattison said. Costs of Medicaid, other state-funded health care programs, and kindergarten-through-12th grade education have been rising fast, he said.

"The economy is strong," said Sheppach, NGA's executive director. The joint NGA-NASBO "Fiscal Survey of States" projects that fiscal 2006 revenues will come in at a figure 5.2 percent higher than that for fiscal 2005. But there are trouble signs, too, the officials cautioned.

"Rainy day funds," reserves of revenue maintained by states to draw on during economic downturns, have become depleted. In fiscal 2005 they totaled 4.5 percent of expenditures, down from 10.4 percent in fiscal 2000. The survey said the funds will drop to 3.8 percent of expenditures in fiscal 2006.

Also, 10 states expect to have budgets in fiscal 2006 that are smaller than those in fiscal 2005, Pattison added. "That's quite a concern."

Sheppach stressed that states are struggling to keep up with growing Medicaid costs even as revenues rise. According to the survey, 24 states reported Medicaid shortfalls in fiscal 2005, up from 20 states in fiscal 2004. Enrollment increases averaged 8 percent over the past five years, playing a major role in increased Medicaid spending. While families and children accounted for the greater part of the enrollment increases, the elderly and disabled accounted for the greater share of rising costs.

Although the state spending picture is improving, Sheppach predicted Medicaid will keep gobbling up a growing share of state budgets, saying states are limited in their ability to increase spending by a system that keeps them from taxing services and Internet sales.

Another issue is the politics of tax increases. The survey noted that 17 states have proposed tax and fee increases for fiscal 2006 that would raise a total of $2.4 billion, $983 million from increased tobacco taxes.

Sheppach called it "critical" for Congress to adopt revisions in Medicaid urged by the NGA, including added co-payments, asset transfer restrictions, pharmaceutical reimbursement changes, and added flexibility for states to alter benefits. He said he is hopeful Congress will make those changes in September as part of the budget reconciliation process. "If it doesn't happen then, then I think it's going to be unlikely for the next couple of years," he said.

Medicaid's "tipping point . . . is at the next economic downturn," he said. "We've got a strong economy now, but at some point it is going to slow." Without changes to Medicaid, cuts in coverage and benefits will go much deeper than they do now, because states won't be able to fill revenue gaps, he said.

Sheppach acknowledged that while it is important to chart a new course in Medicaid, flexibility won't cure states' budget blues. Medicaid's spending growth rate would only be "marginally lower" than 9 percent yearly if states could adopt benefit packages such as those in the State Children's Health Insurance Program, he said.

Sheppach further predicted that governors will pursue health care changes beyond those in Medicaid, aiming to restrain costs and improve quality. He noted that Maine's Dirigo program, for example, is made up of three parts—increasing quality, widening access, and improving quality. Other states will focus on providing consumers with more data on the cost and quality of health care so they can get better value for their health care dollar, he predicted.

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Survey: Cost Concerns Cause Women to Forgo Medical Care

More than a quarter of women ages 64 and under delayed or chose not to seek medical care in 2004 because they couldn't afford it, according to a national study released Thursday.

For uninsured women, that figure soared to 67 percent, according to the Kaiser Family Foundation, which sponsored the study. The comprehensive findings—touching on myriad topics such as health insurance coverage and access, use of prescription drugs and concerns about quality of care—are detailed in the report.

Based on phone interviews with 2,766 women ages 18 and older, the study also found that 17 percent of women with private health insurance postponed or decided not to get medical treatment they thought they needed in the past year because of cost concerns.

In addition, the study found 20 percent of all women reported they did not fill prescription drugs in the past year because of the expense. One in seven women also reported skipping or taking smaller doses of prescription drugs in the past year to make their supplies last longer.

As a followup to a similar study conducted in 2001, the report identified a lack of communication between women and doctors on topics such as smoking, alcohol use and calcium intake, with individual percentages hovering at 33, 20, and 43, respectively.

While 28 percent of women ages 18 to 44 said they had talked to their doctor about sexually transmitted diseases, 31 percent in that age group said they had broached the topic of HIV/AIDS.

Despite the lack of doctor-patient counseling about health risks and lifestyle issues, 53 percent of women said they turned to health care providers first when they needed information on a particular health issue.

Carolyn Clancy, director of the Agency for Healthcare Research and Quality and part of a panel discussing the survey's findings, said women needed to be more proactive about speaking with their doctors and should get into the habit of putting together a checklist before their appointments.

"You need to prepare in the same way as if you were going to the car mechanic," Clancy said.

Alina Salganicoff, vice president and director of Women's Health Policy at the Kaiser Family Foundation who was also on the panel, agreed. "Women need to realize they are partners in their health," she said.

The study also revealed that mammography rates reported by women ages 40 to 64 fell slightly, from 73 percent in 2001 to 69 percent in 2004.

"This is an issue we thought we'd be beyond," said another panelist, Paula Johnson, chief of the Division of Women's Health at Brigham and Women's Hospital in Boston. With fewer and fewer radiologists wanting to do mammograms, she added, the entire field is in crisis.

Screening rates for pap smears and blood pressure for women ages 18 to 64 have also fallen slightly since 2001, the study indicated. While 81 percent of women in that age group in 2001 reported having pap smears in the past two years, only 76 percent did so in 2004.

The study also found that a mere 38 percent of women ages 50 and older said they had a colon cancer screening test in the past two years; 37 percent of women ages 45 and older, meanwhile, reported they had an osteoporosis test in the past two years. Screening tests are an essential tool for early detection and prevention of many diseases, according to the Kaiser Family Foundation.

The report also highlighted the prevalence of anxiety or depression among women, with 23 percent of the respondents reporting they have been diagnosed with depression or anxiety by a physician in the past five years.

"This really has to be seen as an epidemic in our society right now," said panelist Susan Starr Sered, senior research associate at Suffolk University's Center for Women's Health and Human Rights.

Johnson, who is also director of the Connors Center for Women's Health and Biology, added that depression was projected to become the second leading cause of death and disability by 2020.

Starr Sered, author of numerous books on women's issues, drew a link between mental health and another finding of the survey—that certain chronic conditions such as obesity and diabetes rose in the non-elderly population between 2001 and 2004.

"If you live in chronic pain, your mental health suffers," she said.

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