MAY 3, 2005 -- In another sign that Medicare is moving toward a "pay for performance" system, Centers for Medicare and Medicaid Services Administrator Mark B. McClellan on Tuesday trumpeted the preliminary results of a pilot program showing that the lure of higher payments goaded hospitals into improving their quality of care. Separately, federal officials and medical society representatives announced the release of a "starter set" of measures of care given by doctors outside the hospital.

In tracking the performance of 270 hospitals on 34 measures of care for five medical conditions, the pilot found "improvements across the board, regardless of a hospital's initial performance on the quality measures," McClellan said.

The findings show that even relatively small increases in payment improve hospital quality, the CMS chief said in remarks to the annual Washington meeting of the American Hospital Association (AHA).

He added that gains in quality could mean lower costs. "For example, there should be fewer unnecessary hospital readmissions if there is better care in the initial patient stay," he said. "But most of all, the patients are going to benefit through better care and better health."

The results pertained only to the first year of the three-year pilot, known as the Premier Hospital Quality Incentive Demonstration. The analysis was performed by Premier Inc., the hospital consortium whose members are taking part in the study.

Of the 34 measures, 27 related to specific processes of care that hospitals should have used to deliver quality care. A perfect score meant the facility performed the process 100 percent of the time for the particular condition involved.

Overall, scores for process measures in the first year improved in the demo: 89.9 percent to 92.6 percent for acute myocardial infarction; 85.7 percent to 90 percent for coronary artery bypass surgery; 64.1 percent to 76.2 percent for heart failure; 84.9 percent to 90.5 percent for hip and knee surgery; and 70 percent to 90 percent for pneumonia treatment.

Hospitals in the top 10 percent of scores for a medical condition get a 2 percent increase in payment and those in the next highest 10 percent of performance get 1 percent. Other above-average hospitals get recognition but no bonus, CMS said. The payments will be made in September after the agency audits the Premier data.

Poor performers may see lower payments. "At the end of the first year, baselines will be set for the bottom 20 percent and bottom 10 percent," Premier said. "These baseline levels remain static, and CMS and Premier believe that all hospitals will be above the baselines by the final year of the demonstration. If any hospitals do remain below the preset 10 percent baseline in the third year of the demonstration, they will get a 2 percent reduction in Medicare payments for the clinical area involved, and those between the preset 20 and 10 percent baseline will get a 1 percent reduction."

GOP leaders in Congress, the Bush administration, the Medicare Payment Advisory Commission, and the hospital industry all favor a move toward performance-based payment of hospitals, but details of such a system remain to be worked out. "Hospitals support the concept of rewarding excellence in the quality of patient care and this demonstration shows that payment incentives can work," said Carmela Coyle, AHA's senior VP for policy. But Coyle said switching to quality-based payment will require legislation and working out such details as how to deal with facilities that perform very small numbers of procedures for a medical condition.

Hospitals are much farther along than physicians in gathering performance data. Almost all hospitals have reported data on 10 performance measures after Congress said in the Medicare overhaul law (PL 108-173) that it would pay them more if they collected such information and submitted it to CMS.

Doctors may be on the way to getting such a starter set of measures. The Ambulatory Quality Alliance (AQA) on Tuesday announced 26 "ambulatory care" measures that health plans and employers should begin using with physicians to measure and improve the quality of their care.

The set includes measures of preventive care including vaccinations, prenatal care, and screening for cancer; treatment of chronic conditions including coronary artery disease, heart failure, diabetes, asthma, and depression; and two measures addressing the efficiency of care.

The alliance includes the Agency for Healthcare Research and Quality, the American Academy of Family Physicians, the American College of Physicians, and America's Health Insurance Plans. CMS isn't part of the alliance, but the agency endorses the measures, an agency spokesman said.

The package "is a milestone for all those who wish to have a valid, reliable set of performance measures for physicians' offices, group practices, and other ambulatory care settings," McClellan said. "CMS supports the AQA's continued efforts to implement valid, reliable measures that benefit consumers and clinicians by enhancing the quality of the nation's health care."

MAY 4, 2005 -- House Democrats unveiled a series of initiatives Wednesday that they said could cut the number of the nation's uninsured Americans by half.

The lawmakers' ideas included allowing early retirees to buy into the federal Medicare program and permitting parents of children eligible for Medicaid and the State Children's Health Insurance Program to purchase health care coverage through those programs.

The Democrats would also create purchasing pools and provide tax credits to help small businesses purchase coverage. Additional legislation would give the secretary of the Department of Health and Human Services (HHS) the power to negotiate prescription drug prices for Medicare beneficiaries and permit seniors and others to import drugs from foreign countries where they often sell for less than in the United States. The Democrats also want to increase funding for the National Institutes of Health (NIH) by $1.5 billion over President Bush's fiscal 2006 request.

While the proposals would cost money to implement, in the long run they would save taxpayers' dollars because funding preventive care is always less expensive than waiting to treat a full-blown illness, the Democrats said.

"Care denied or care delayed always costs more when they turn 65," said California Rep. Pete Stark, one of several Democrats who introduced legislation Wednesday to permit the Medicare buy-in for early retirees.

Rep. Rahm Emanuel, D-Ill., said allowing consumers to import drugs from other countries would allow U.S. consumers to stop subsidizing drug prices of foreign countries. He added that permitting the HHS secretary to negotiate drug prices on behalf of Medicare's more than 40 million elderly and disabled beneficiaries would save taxpayers billions.

"Time and again we've proven the leverage of bulk buying," he said.

House Majority Leader Tom DeLay, R-Texas, said lawmakers should give the Medicare drug bill (PL 108-173) a chance to work before making any changes to it. The bill includes a provision prohibiting the HHS secretary from negotiating drug prices on behalf of Medicare beneficiaries.

"Let's see how the Medicare system is implemented and if there need to be adjustments at a later date then we'll entertain that," he told reporters.

Drug importation, DeLay said, would allow unsafe drugs to flood the country. "You can't convince me that the people that mail order drugs from other countries can guarantee their safety," he said. "Until you can guarantee that, I will never support reimportation."

The Pharmaceutical Care Management Association, a trade group representing pharmaceutical benefit managers (PBMs), said allowing the HHS secretary to negotiate prescription drug prices for beneficiaries could lead to fewer choices of covered drugs and higher drug costs for consumers in other parts of the system. PBMs negotiate drug discounts with pharmaceutical companies on behalf of insurers and employers offering health care coverage.

"Rather than dictating a one-size-fits-all approach, policymakers should be focusing on common-sense solutions that can provide consumers with access to a choice of plans providing coverage for clinically-proven, cost-effective brand-name and generic drugs," association president Mark Merritt said in a news release.

The House Democrats' news conference was one of several events during Cover the Uninsured Week (May 1–8) in Washington and around the country to draw attention to the nation's 45 million people who do not have health insurance.

Despite the Senate being in recess, Majority Leader Bill Frist, R-Tenn., and Minority Leader Harry Reid, D-Nev., have urged colleagues to participate in a Cover The Uninsured event, enter a statement into the Congressional Record, put out a press release about the uninsured, or write an op-ed in their home state's newspaper of record.

Dr. Risa Lavizzo-Mourey, president and chief executive officer of The Robert Wood Johnson Foundation, which has helped to coordinate activities throughout the country to draw attention to the nation's uninsured, praised Frist's and Reid's attentions to the matter.

"Our country desperately needs less partisan positioning and more cooperation on health care," Lavizzo-Mourey said in a statement. "We hope that more leaders will set aside their preconceived notions about expanding coverage and work together to seek common ground. Now is the time to rise above partisanship and embrace compromise as the first choice, not as the last resort."

MAY 4, 2005 -- Sales of high-deductible health plans sold in connection with health savings accounts (HSAs) have more than doubled in the past six months to the point where they are now covering a total of 1,031,000 people, America's Health Insurance Plans (AHIP) said Wednesday. "HSAs are steadily gaining momentum in the marketplace" and now are "a valuable part of the suite of products" offered by the nation's health insurers, said AHIP President Karen Ignagni.

Sales of HSAs, authorized under the Medicare overhaul law (PL 108-173), totaled 438,000 last September, after making their first appearance on the market in early 2004. President Bush has made the plans a key feature of his vision of an "ownership society" in which individuals have greater control over their health care and their retirement accounts.

HSA holders or their employers contribute pretax dollars to the accounts, which grow tax free, and which are used to pay health expenses not covered by the high-deductible health plans. Account owners pay no taxes on withdrawals, unless used after age 65 for non-health care purposes.

Conservatives are pitching them hard as a way to make individuals more responsible for their own health and health care expenses. Boosters say the accounts will make consumers more price sensitive, forcing the health care industry to deliver more efficient care. They also note that the premiums are relatively affordable, and claim that they will help cover the uninsured.

Liberals, however, say the accounts will draw young and healthy workers in companies away from traditional comprehensive employer coverage, making it unaffordable for older and sicker Americans.

But AHIP says the sales data "shatters the myth that these new products only attract young and healthy individuals." Nearly half of the people covered by the HSAs are over the age of 40, the insurer lobby said. According to HSA sellers tracking such data, 37 percent of buyers who purchased individual HSA policies were previously uninsured.

But it may be too early to draw any conclusions from the study about the impact of growing HSA sales on the mix of older-and-sicker versus younger-and-healthier workers in traditional employee plans.

"The question is, what other choices did enrollees have?" said insurance analyst Len Nichols of the New American Foundation, a centrist think tank. "Fear of selection is strongest where there are multiple options. If the whole company only has one plan, as most small employers do, enrollment growth is not related to selection issues at all. If the growth was in large firms with multiple choices, including more comprehensive insurance, then the myths would indeed be challenged."

Of the 1.03 million sold, 556,000 HSAs were sold to individuals, 162,000 to large groups, defined by AHIP as employers with more than 50 workers, and 147,000 to small groups, defined as having 50 or fewer employees. The total doesn't add up to 1.03 million because of incomplete data on the status of the remaining buyers.

Of buyers in the individual market, 48 percent were under the age of 40, and 52 percent were 40 or older. In the small group market, 56 percent were under the age of 40, and 44 percent were 40 or older. In the large group market, 55 percent were under age 40, and 45 percent 40 or older.

AHIP spokesman Larry Akey said the sales figures did not include data on the number of HSA buyers who had the option of other types of health coverage. But he said that based on anecdotal information, it appears that HSA in the large group market were generally offered as an option.

MAY 6, 2005 -- Medicare enjoys higher satisfaction ratings than private insurance plans—but also has disparities from state to state—and could achieve consistently higher performance ratings if quantitative national targets were set for the program, according to speakers at a forum Friday on Capitol Hill.

Such targets could include a 75 percent flu vaccination rate, said Sheila Leatherman, a former United HealthGroup executive who now teaches at the University of North Carolina. The co-author of an analysis of 400 studies on Medicare quality, Leatherman said the Medicare Payment Advisory Commission (MedPAC) should be charged with setting those targets.

She even suggested changing the "P" in MedPAC from "Payment" to "Performance."

"You wouldn't even have to change your brand," she told MedPAC Chairman Glenn Hackbarth, another speaker at the event.

The subject of quality in Medicare is fertile ground for policy makers, not only because of the political clout seniors have with Congress, but also because of the growing medical literature on the efficiency of treatment in the program, a growing set of quality performance measures, and Medicare's potential as a proving ground for widescale implementation of innovations that have bubbled up from the private sector and that, in turn, could be more widely applied in the commercial sector if they pan out broadly in Medicare.

The Medicare overhaul law (PL 108-173) launched a number of pilot projects testing those innovations, and aims to spread them both through the private plan "Medicare Advantage" and traditional fee-for-service sides of Medicare. Meanwhile, MedPAC is pursuing a strategy of writing a broad set of recommendations to make Medicare more efficient through gains in quality.

Looming over the effort is the advancing shadow of a baby boomer generation approaching Medicare eligibility, bringing with it a sharp upswing in costs.

The analysis prepared by Leatherman and Douglas McCarthy, president of Issues Research, Inc., consists of 60 charts showing Medicare's progress and deficiencies in quality of care. "Although the federal government's current Medicare quality efforts represent a promising start, they need to be intensified and accelerated to improve care not only for Medicare beneficiaries but for all Americans," Leatherman said.

"This chartbook makes the case for a concerted effort towards a national agenda for quality that sets out explicit targets to achieve and by when," said Karen Davis, president of The Commonwealth Fund, which paid for the study. "[Medicare] needs to be an innovative leader in improving the quality of American health care by making information on quality and efficiency more widely available and rewarding health care providers for high performance."

The review credits Medicare with providing enrollees greater access to care, giving more people a usual source of care, and increasing the use of preventive care, including a tripling of the rate of mammograms over the past decade for women over 65.

But flu vaccination rates vary widely by state—80 percent of Medicare enrollees in Minnesota received flu shots, but only 60 percent in Nevada did. "Among the states, rates of timely antibiotic administration [for pneumonia patients] varied by 31 percentage points from lowest to highest," the analysis said.

National rates for certain types of care were low in some cases, according to the analysis. Hospitals met guideline standards for treating pneumonia less than one-third of the time for Medicare fee-for-service patients.

In 1999–2000, only one-quarter of elderly adults with high blood pressure had it controlled. Other research showed that fewer than one-third of 1,801 older patients treated for depression at 18 clinics received recommended treatment. However, the results in this study were not necessarily nationally representative, the researchers said.

But "compared to privately insured nonelderly adults, elderly Medicare beneficiaries were more likely to rate their insurance highly and to be satisfied with their care, and were less likely to report problems with coverage and access to care," Leatherman and McCarthy said.

Another speaker at the event sponsored by the Alliance for Health Reform observed that few doctors are trained to oversee the complex health care needs of the elderly. The nation's supply of geriatricians—physicians specifically trained to effectively coordinate care for the multiple chronic conditions that afflict many seniors—is one-fifth what it should be, said Dr. Christine K. Cassel, president of the American Board of Internal Medicine. Noting the large role Medicare plays in funding the training of physicians generally, Cassel suggested that it help fund more training of geriatricians.

John Rother, senior policy analyst at AARP, said that while there is some good news in the study, "to me this is a wake-up call. Much of what is documented here is unacceptable for 21st century medicine. We are letting people die unnecessarily."

Hackbarth reacted by calling attention to the advice he says he frequently gives to his two teenaged children: that who they are is judged by what they actually do. By that standard, the U.S. health care system values highly freedom of choice of provider, "clinical autonomy," larger numbers of office visits, technology, and short waiting times for care.

But "what we don't seem to value is quality" as assessed against standard measures, Hackbarth said. While Medicare has delivered great value over the years, "we could do so much more," he said.

The MedPAC chairman emphasized data showing that states with high quality of care in Medicare have the lowest costs, while those with the lowest quality have the highest costs. "That's not good news," he said. Hackbarth also expressed concern over data showing that while rates of death within 30 days of hospital admission declined for eight medical conditions from 1995 to 2000, they increased for six of the conditions between 2000 and 2002. And in another study, rates of preventable hospitalization increased for five of 10 medical conditions from 1995 to 2002, he said.

Hackbarth called for a variety of improvements, including investments in developing performance measures, more data comparing the quality of providers, and linking payment to performance on quality measures. "The level of intensity of the effort needs to increase markedly," he said.

MAY 6, 2005 -- Making it tougher for individuals to transfer their assets in order to qualify for Medicaid coverage, increasing the use of "reverse mortgages" to fund long-term care, and raising co-payments for medical services are all elements of a National Governor's Association (NGA) draft proposal to overhaul the Medicaid program.

The 12-page document also includes a variety of ideas to help increase health care coverage for both current Medicaid beneficiaries and those that may become eligible for the program and to address factors that increase health care costs. They include providing both incentives and penalties to make individuals more responsible for their own health care, creating state purchasing pools to help small businesses buy health care coverage for workers, and moving to a package of benefits that resembles the State Children's Health Insurance Program (SCHIP) to help non-elderly, non-disabled Medicaid individuals have health care coverage.

As lawmakers worked to complete a fiscal 2006 budget resolution, ideas from the governors' draft proposal began to circulate through the media and congressional offices and even were quoted on the floor of the House, the NGA said in an April 28 statement.

NGA officials also stated the draft represents "a set of concepts" discussed by the association's 11-governor working group and the document "does not in any way represent current NGA policy" which requires a supermajority vote of the executive committee or all governors.

The group still maintains, however, that "Medicaid reform must be driven by good policy and not the federal budget process," the NGA stated.

Other ideas raised in the memo include:

• Streamline the federal Medicaid waiver process "or even change the federal statute to eliminate the need for waivers altogether."
• Create "a new national dialogue" on how to deal with the issues of aging population, including "potential sources of funding for end-of-life care."
• Using health care tax credits for individuals and employers as well as state purchasing pools to help slow the growth of low-income individuals becoming eligible for Medicaid.