June 22, 2006 -- The congressional debate over changing the nation's troubled medical malpractice system widened Thursday with a Senate hearing on alternatives to caps on damage awards, a proposed solution that has repeatedly been rejected by the Senate. While specialized "health courts" attracted much attention at the hearing, witnesses were divided on their merits and no consensus emerged in support of any one alternative approach.

Sen. Michael B. Enzi, R-Wyo., who chaired the Senate Health, Education, Labor and Pensions Committee hearing, aims to parlay that lack of unanimity on how to proceed into support for a bill he has introduced with Sen. Max Baucus, D-Mont., to test various approaches to addressing the problems of soaring malpractice premiums, slow or no compensation of injured patients, and the ordering of unnecessary tests and procedures to protect against lawsuits.

"While we continue to debate in Washington, we ought to lend a hand to states and encourage them to create alternatives that would be more fair and predictable for both patients and health care providers," Enzi, who also is committee chairman, said in his opening statement at the hearing.

The Enzi/Baucus bill (S 1337) would authorize grants to the states to carry out pilot programs testing three approaches: health courts, awards by state administrative boards, or "early disclosure and compensation" programs in which providers are given immunity from lawsuits in return for speedy compensation of an injured patient.

Although pilot programs testing health courts have attracted growing support—including from a number of prestigious figures and organizations in health care—they also are strongly opposed by the American Trial Lawyer Association, a major source of funding for Democratic Party candidates, as well as by some consumer organizations and the American Bar Association.

Both ATLA and the ABA oppose health courts on grounds that they would deny injured patients access to a jury trial. That right is important, Sen. Edward M. Kennedy, D-Mass., emphasized at the hearing because it ensures that those injured get a fair hearing when they are up against wealthy and powerful corporations. Without the possibility of a jury trial, there would be no settlement offers in many cases, Kennedy said.

Kennedy added that patients must have a "genuine choice" between getting their day in traditional court and alternative forms of hearing disputes, a statement that raised the question whether he might be open to health courts that were optional rather than mandatory.

Sen. John Cornyn, R-Texas, appearing as a witness at the hearing, expressed strong support for the pilot tests of health courts, saying he hopes to soon introduce legislation to fund those experiments. Cornyn indicated that the test would preserve the patient's option of going to regular court—an approach that at least suggested the possibility of attracting the support of a few Democrats.

Harvard School of Public Health professor David Studdert said there are many unknowns with health courts but asserted that they have "tremendous promise." The courts would have full-time judges dedicated solely to addressing health care cases. Judges would be able to choose from a neutral panel of experts in each area of medicine, avoiding the dueling "hired gun" experts that confuse and prolong disputes today, according to Common Good, a New York City–based organization that advocates health courts.

Most cases would be resolved within months, and legal fees would be capped at 20 percent of awards except in exceptional cases. Recovery of awards by injured patients would be automatic once a mistake was verified, without the need to prove precisely how an error occurred.

Patients would be reimbursed for all of their medical costs and lost income, plus a fixed sum that would be set according to a schedule addressing specific types of injuries. A panel of experts would decide and update payment amounts in the schedule.

Philip Howard, the founder of Common Good, told the hearing that the schedule of payment amounts, an approach followed in other countries, "dramatically turns down the heat in the process," easing mistrust between physicians and patients, speeding compensation, and making it available to a larger number of injured patients.

Howard said he understands the reluctance to change from the current jury system people are used to but that the new system wouldn't get rid of the right to sue, rather it would change it.

Among the organizations willing to participate in a pilot program testing health courts are the Duke University medical system, the Johns Hopkins University medical system and the Yale-New Haven Hospital and medical group. Kenneth Kizer, former president of the National Quality Forum, and Margaret O'Kane, president of the National Committee for Quality Assurance, also support health courts, as does the Progressive Policy Institute, a source of policy ideas in the 1990s for the centrist New Democrats.

The American Medical Association said health courts and other alternative models would have to be thoroughly tested but said they could reduce meritless claims and lower costs associated with litigation.

But Cheryl Niro, speaking on behalf of the American Bar Association, said "injured patients would be forced to give up their right to a jury trial" if health courts are adopted. "The schedule of awards is a de facto cap on non-economic damages and, for that reason, could well be found unconstitutional," she said.

Niro added that the ability of judges to fashion awards based on the unique circumstances of each case would be lost. Neil Vidmar, professor at the Duke University School of Law, also likened the schedule of payments to caps, which he said discriminate against the most severely injured patients, as well as women, children, and the elderly. He too emphasized that the jury system provides individualized justice under the law.

Richard Boothman, chief risk officer at the University of Michigan Health System, suggested a different approach than health courts. "I don't believe that the system needs radical change," he said. "I do believe it needs some changing."

The problems with the current system are stubborn ones because the medical profession concentrates so heavily on the legal profession, he said. Providers do not pay attention to their own complicity in current problems, he added. By openly admitting to patients that they've been harmed by medical errors, and promptly compensating them for those errors, many suits can be avoided, he said. The University of Michigan health system has seen a dramatic reduction in claims pay outs by following such a system, he said. Sens. Hillary Rodham Clinton, D-N.Y., and Barack Obama, D-Ill., have offered legislation (S 1784) to promote wider use of the University of Michigan approach.

June 20, 2006 -- Over the last five months virtually all Medicare drug plans have raised prices for the top drugs prescribed to seniors to treat conditions such as high cholesterol, osteoporosis, and high blood pressure, according to a new study from Families USA.

A separate study released Tuesday from the seniors group AARP found that prices for drugs commonly used among Americans age 50 and older had soared to their highest levels in the first quarter of the year, the biggest increase since the group began tracking prescription drug prices six years ago.

A Centers for Medicare and Medicaid Services (CMS) analysis released Tuesday said the Medicare drug program "is providing significant discounts on prescription drugs, with available savings remaining extremely stable over time." The analysis also concluded that prices for drugs used by beneficiaries with chronic conditions rose 3.6 percent from December 2005 through June 2006, while average wholesale prices for the drugs increased 4.1 percent.

The Pharmaceutical Research and Manufacturers of America (PhRMA) said both reports were aimed at scaring seniors. PhRMA Senior Vice President Ken Johnson called the AARP report "a flawed and deceptive study" and said drug prices have been in line with medical inflation. He said the Families USA findings were "discredited information" designed to discourage seniors from enrolling in the new drug benefit.

Mohit Ghose, a spokesman for America's Health Insurance Plans, a trade group representing insurers, said "we know from first-hand experience across the board that private sector competition and tools are working for Medicare beneficiaries." Competition in Medicare Part D will save the program $30 billion and the average plan premium is about $24 rather than the $37 originally forecast by the Congressional Budget Office, Ghose said.

Rising Prices
The Families USA report, which the group said was based on pricing data that Medicare drug plans submitted to CMS, examined Medicare plan price changes from mid-November 2005, when the drug benefit began, to mid-April 2006. The report evaluated the Part D plan prices for the top 20 drugs prescribed for seniors. Among its findings, the study concluded that all Part D plans raised their prices for the cholesterol-lowering drug Zocor while almost 99 percent raised prices for Fosamax, a drug used to treat osteoporosis. More than 97 percent of plans raised their prices for Lipitor, another cholesterol-lowering drug, while more than 92 percent of plans raised their prices for Aricept and 89 percent raised prices for Plavix, drugs used for Alzheimer's and stroke, respectively. Overall, Part D drug prices increased by 3.7 percent.

"At the same time that the Bush administration and Congressional leaders are touting the effectiveness of the Medicare drug plans, those plans are quietly raising the prices that they charge," Families USA Executive Director Ron Pollack said in a statement. "As a result, seniors will pay more and more—as will America's taxpayers."

In its statement, CMS noted that Medicare drug plan beneficiaries who enroll in the lowest-cost plan available in their area could save an average of 60 percent on the cost of their drugs, with potential savings as much as 72 percent.

Johnson of PhRMA said "there is no doubt that seniors enrolled in the new Medicare program are in a better position since the prescription drug coverage began just a few months ago."

The AARP analysis, conducted by AARP's Public Policy Institute, found manufacturer prices for nearly 200 of the most commonly used brand name medications rose at a rate of 3.9 percent during the first quarter of 2006, triple the rate of general inflation. Prices rose on average by 6.2 percent for the 12 months ending with the first quarter of 2006, more than one-and-one-half times the 3.5 percent rate of general inflation for the same time period, the study found.

Increases noted in the AARP report include a 13.3 percent increase for the sleep drug Ambien—the drug also rose 20 percent in 2005—and 12 percent increases for inhalers Combivent and Atrovent.

"State, federal, and family health care budgets are being stretched to the max and, sadly, sometimes beyond. It is simply unsustainable for American consumers to continue footing the bill for large increases in drug prices," AARP Chief Executive Officer Bill Novelli said in a statement.

PhRMA's Johnson said the AARP report lacked credibility because U.S. government consumer price data "show that inflation of prescription drug prices has clearly been in line with overall medical care cost inflation for the past several years."

June 22, 2006 -- Nearly 30 health care organizations representing physicians, patients, researchers, and other health care interests have formed the Alliance for Cardiac Care Excellence.

Coalition members said Wednesday that they aim to help bridge the gap between clinical procedures and treatments proven to be the most effective for cardiac patients with the level of care that most adult cardiac patients receive.

"In the U.S., close to two million people annually receive treatment in the hospital for either heart attacks or heart failure, and we want to ensure that those patients receive the best care possible," Centers for Medicare and Medicaid Services (CMS) Administrator Mark B. McClellan said in a news release. CMS is a member of the alliance.

Those quality measures include ensuring that all patients arriving at the hospital with symptoms of a heart attack receive aspirin, beta blockers, and other recommended treatments at the right time. Only about 85 percent of eligible adult cardiac patients treated in U.S. acute care hospitals receive such care, according to the alliance.

By Dec. 31, 2006, the alliance wants 95 percent of eligible adult patients hospitalized for heart attack and heart failure in acute care hospitals to receive care that meets all of the seven basic nationally accepted quality care standards. By Dec. 31, 2007, the alliance aims to have 95 percent of eligible adult patients hospitalized for heart attack and heart failure in acute care hospitals to receive the full 12 quality measures that apply to the patient.

JUNE 23, 2006 -- A study by the Kaiser Family Foundation urges a delay in the July 1 start of new requirements specifying how states document the citizenship of Medicaid enrollees. The study said states face an "enormous job" carrying out the requirements, which critics say could cause many thousands of the nation's 55 million Medicaid beneficiaries to lose their coverage.

Even New York, pointed to by the federal Medicaid program in a June 9 letter as an example of the feasibility of documenting citizenship "without undue hardship to either applicants or the state," would face much difficulty complying if the requirements aren't modified, the study reported.

But a spokeswoman for the Centers for Medicare and Medicaid Services (CMS) said Friday that the Deficit Reduction Act (PL 109-171), which mandates the new documentation requirements, "was signed on Feb. 8 and was virtually self-implementing." States "have had several months to prepare," said spokeswoman Mary Kahn. "The statute is very straightforward about what documents are required."

A CMS "interim guidance document," released three weeks before the requirements go into effect explains how applicants must document both citizenship and identity. A final version of the document may be released by July 1.

The requirements will also apply to current Medicaid beneficiaries when they renew their coverage, which they must do at least once a year. Citizenship only needs to be established once, however.

Medicaid officials in both California and Ohio have said they won't be ready to enforce the rules July 1, according to published reports. But Kahn said Friday that "if they don't comply, the states are at risk of losing federal financial participation"—Medicaid's term for federal payments to the states to match their own Medicaid outlays.

Medicaid has long required states to establish that applicants are U.S. citizens, but only New York, Georgia, Montana, and New Hampshire require more than self-declaration of citizenship under penalty of perjury. The CMS guidance spells out the types of documents that must be presented to establish citizenship and identity, ruling out sworn statements as proof of citizenship except in rare cases.

The Kaiser study examines the experience of New York, which has required documentation of citizenship since the 1970s, to assess the feasibility of complying with the guidelines without causing major loss of coverage.

New York offers applicants assistance in meeting its documentation requirements that may not exist in other states, the study notes. Because of that assistance and a flexible approach toward obtaining compliance, most applicants are able to meet the documentation requirements, it adds. But documentation can be a particular barrier to entry into Medicaid for the elderly, the institutionalized, the homeless, the mentally ill, and people with "transient or unstable housing," the report says.

Based on New York's experience, CMS should change its requirements so U.S. citizens who receive Medicare and income assistance from the federal Supplemental Security Income (SSI) program are exempt from documenting citizenship in Medicaid, the study says.

A "hierarchy" of acceptable documentation laid out by the CMS guidelines is too hard to administer, said the study, which is based on interviews with state and local Medicaid officials in New York and with individuals who provide enrollment assistance in the state.

Tracking whether an applicant first attempted to supply a more preferable document is too burdensome, the study says. New York "does not assign a hierarchy of reliability . . . to citizenship documents." Also, the CMS guidelines require types of proof of identity that New York doesn't, it said. "For example, while a birth certificate documents both citizenship and identity in New York, this practice would not be acceptable" without modifying the CMS guidelines.

Another difference is that New York accepts copies of citizenship documents and does not require originals or certified copies. "The prospect of now requiring beneficiaries to mail original documents to New York's local social services offices, to be mailed back at a later date, is unrealistic and encourages people to surrender valuable and important documents best kept in their own possession," the study said.

"The alternative prospect of abandoning a successful mail-in renewal system to require in-person encounters for the purposes of presenting original documents is equally untenable."

The report also asserts that the cost and complexity of obtaining or replacing original or certified copies of citizenship documents would be a significant barrier to Medicaid coverage. Those costs range from $10 to $220, it said. To the extent New York State picks up those costs, it faces significant new administrative expenses, the report added.

"The practical implications of requiring original citizenship documents are potentially enormous. . . . many of the state's 4 million Medicaid beneficiaries may have to present original documents in order to retain their Medicaid benefits," the report said.

The June 9 CMS letter noted that the agency will monitor the quality of documentation relied on by states to establish citizenship and identity. CMS "will require corrective action to ensure the most reliable evidence is routinely being obtained," the letter said.

The letter specified that existing beneficiaries be given a "reasonable opportunity" to document citizenship before loss of coverage. If an applicant or current beneficiary makes a "good faith" effort to document citizenship but is unable to do so, the state should provide assistance, the CMS letter said.

But the Kaiser study said states should be "obligated" to provide help, not just told they "should" do so.

Leading the charge for the new requirements were two House Republicans from Georgia, Nathan Deal and Charlie Norwood, who say they are needed to keep illegal immigrants from taking health care resources away from U.S. citizens.

Norwood spokesman John Stone said there is enough flexibility in the requirements to permit enforcement to begin July 1. "It's not like everybody's going to have to be verified by July 1," he said. Existing beneficiaries come up for renewal at different times in the coming months, he said. "It's next year some time for a lot of folks." Stone added that as long as a good faith effort is under way to find documents, coverage will continue. "They're not kicked off while the social worker is looking for documentation," he said.

June 20, 2006 -- Instituting a series of basic and widely accepted care measures for 75,000 patients undergoing care for pneumonia and heart bypass surgery would have reduced hospital costs for those patients by as much as $1 billion, according to a study released Tuesday.

The results of the "pay-for-performance" demonstration conducted by Premier Inc. and the Centers for Medicare and Medicaid Services (CMS) also concluded that providing that level of care would have resulted in 3,000 fewer deaths, 6,000 fewer medical complications, 6,000 fewer hospital readmissions, and 500,000 fewer days in the hospital. Premier is a nationwide alliance of not-for-profit hospital facilities and health care systems, and the study's findings were presented at a Webcast from a Premier conference in Orlando, Fla.

"This is compelling proof that improving the process of care can reduce costs while improving outcomes," said Premier President and Chief Executive Officer Richard A. Norling. "These findings benefit patients, hospitals, and those who pay the bills."

For pneumonia, the quality measures included checking the oxygen level in patients' blood to determine if they are breathing properly and making sure blood cultures were taken before antibiotics were administered. For heart attack bypass patients, measures evaluated included whether aspirin was prescribed at discharge and what antibiotics were selected for surgical patients and when they were administered.

The CMS-Premier partnership, launched in October 2003, is the first national pay-for-performance demonstration to test the idea that monetary incentives and market recognition can improve the quality of care. The demonstration encompassed 260 hospitals in 38 states, and in November Medicare paid $8.9 million to 123 hospitals that showed measurable improvements during the first year of the demonstration.

Pay-for-performance or "P4P" pays a hospital or other health provider more for higher scores on specific measures of performance, such as the percentage of heart attack patients who have been prescribed lifesaving beta-blocker drug therapy when they leave the hospital. Federal officials and policy wonks are touting pay-for-performance as a way to improve medical care for Medicare beneficiaries and spend federal health care dollars more efficiently.

Improvement in evidence-based quality measures is expected to save Medicare money over time because of the demonstrated relationship to improved patient health, fewer complications, and fewer hospital readmissions.

The results discussed Tuesday found that 2004 hospital costs for pneumonia patients were $10,298 for patients who received a low number of the care measures and $8,412 for those who received a high amount. Hospital costs for heart bypass surgery patients also varied widely, with those receiving a low number of measures costing $41,539 while those who had the highest amount cost $30,061.

In a statement, Arnold Milstein, medical director at Pacific Business Group on Health and U.S. health care thought leader at Mercer Human Resource Consulting, said the study is "important early evidence regarding a question that is central to the sustainability of both public and private health benefits plans, whether efforts to improve quality actually improve or worsen the affordability of care. The predominant answer emerging from these results could not be more encouraging—better care can indeed improve affordability."

CMS officials are evaluating the results to determine how they might be implemented for the entire Medicare program, said Mark Wynn, director of the division of payment policy demonstrations in CMS' Office of Research, Development and Information. As part of the budget savings bill (PL 109-171) President Bush signed into law in February, CMS must develop a plan for hospital value based purchasing beginning in fiscal 2009.

June 22, 2006 -- An annual event that typically gives Washingtonians blinkered by spin and ideology a bracing dose of business perspective on health care lived up to its reputation Wednesday.

Among the blunt assessments offered by Wall Street analysts at the event: the commercial insurance industry has given up trying to control health costs; much of the enrollment growth in the private plan side of Medicare is in plans that do little if anything to actually try to manage care; Medicare drug plans are going to set premiums for 2007 with basically no clue about whether they are running profits or losses in 2006; and starting in 2008, those plans are likely to cover a much more limited range of drugs.

Much of the focus of this year's "Wall Street Comes to Washington Conference" was on the first year of the Medicare drug benefit, a reflection perhaps of the much greater impact that private sector behavior has on Medicare since the passage of the Medicare overhaul law (PL 108-173) in 2003.

Wall Street types noted the drug benefit has commanded center stage in the health care investment community, even though it has about as much impact on the overall earnings of the companies that offer those benefits as the price of paper clips, said Douglas Simpson, an analyst at Merrill Lynch.

But Wall Street's growing focus on Washington seems less surprising due to the larger trend suggested by the Medicare drug benefit—the growing use by Republicans of private or public–private approaches to health care ills that policy makers more traditionally have targeted with government solutions.

Insurance industry analyst Robert Laszewski noted there are now three "important experiments" testing those approaches—the Medicare drug benefit, health savings accounts, and the new Massachusetts law requiring individuals without insurance to buy private coverage, in some cases with the help of government subsidies.

The result of those experiments tilting toward the private sector may be known within a few years, when the health care cost crisis may be reaching the boiling point nationally, Laszewski suggested, hinting at the possibility of dramatic government intervention in health care if those experiments don't work out well.

'Training Wheels' on Rx Benefit
Laszewski said Medicare drug plans won't have enough data on claims this year to make their premium bids for next year anything other than guesswork. He said one plan told him that premium bids for 2007 would be nothing more than "a crapshoot."

But Christine Arnold, a managed care analyst with Morgan Stanley, noted that the drug benefit comes with "training wheels" for drug plans. She was referring to reinsurance provisions and "risk corridors" that cushion plans against losses, particularly in 2007.

But those wheels start to come off in 2008, with plans absorbing a larger share of any losses they occur that year, Arnold said. The result is that plans will have more restrictive formularies that year to rein in costs, she predicted. Plans also may be in a much tighter cost control mode because they tried to get a larger market share at the start of the benefit by charging low premiums, analysts suggested.

Because enrollment surpassed their projections, the analysts suggested that "adverse selection" would not be a big problem in the first year of the benefit. Adverse selection is when so many people with high health costs sign up for coverage that it forces the plan to charge sharply higher premiums the following year. This causes enrollees with relatively low costs to seek a better deal and creates a continuing spiral of rising premiums that makes the plan unaffordable.

Analysts suggested that enough healthy people are enrolling to keep that from happening, but they expressed some caution. "I think it's way too early to know anything," said Laszewski, referring to a lack of data on claim costs.

"It doesn't look like adverse selection was an issue per se," said Matthew Borsch, an insurance analyst with Goldman Sachs. But Borsch said he'll be interested to see how high premiums are next year in drug plans with more comprehensive coverage that are more attractive to seniors who expect to fully utilize the drug benefit as compared with low premium plans offered by Humana that were expected to attract relatively healthy seniors.

'Policy Mess' in '08?
Laszewski suggested that the drug benefit's future may not be serene. "What happens when the federal government makes up for all the underpricing" by drug plans in early premium-setting? he asked.

If risk corridors entail much added federal spending to bail out plans with losses, and if plans also have to boost premiums 25 to 30 percent [in 2008] "to make up for all of this, you've got a policy mess on your hands," he said. "I think there's a real issue in terms of long-term policy sustainability of the program."

Arnold agreed with Laszewski that managed care plans in Medicare, called Medicare Advantage plans, will have to trim benefits because strong reimbursement by the federal government since passage of the Medicare overhaul law won't continue.

Medicare Advantage enrollment is up by about a million since then, but Laszewski expressed surprise that growth hasn't been greater because of the extra benefits and lower-cost sharing offered by those plans. The plans are a "fantastic deal" for seniors but "the leap was just too much" out of traditional Medicare for many seniors, he said.

Much of the enrollment growth in Medicare Advantage has been in "private fee-for-service" plans, which allow enrollees to see the providers of their choice without financial penalty while also getting good coverage of costs not covered by traditional Medicare, analysts said. But there is little management of care in the plans. It's unclear how sustainable the plans will be, said Borsch, apparently referring to their cost to taxpayers.

'Boring' Consolidation
Simpson said consolidation in the insurance industry has been "huge" and will continue over the next several years. Other analysts agreed, saying the trend is troubling. "I don't like it—I just get bored," Arnold said, complaining that she has just five big companies to follow and they have stopped innovating.

"When has anything interesting ever come out of a huge company trying to integrate 30 others," she said.

Insurers are so big that they cope with Wall Street pressure for near-term earnings growth not through innovations in cost control but by acquiring other companies, Laszewski said. "It's never been so boring—or profitable. The industry has given up on managing care and controlling costs," he said. "We have a lot of people making themselves really rich and selling their industry down the river," he said of insurance company executives. "I think my industry is on a long walk off a short pier."