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November 3, 2008

Washington Health Policy Week in Review Archive b960ee0b-9b2c-47c6-b46b-890cf978476f

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E-Prescribing, Quality Reporting Could Boost Docs Medicare Pay

By Mary Agnes Carey, CQ HealthBeat Associate Editor

October 31, 2008 -- Physicians can increase their Medicare reimbursements by an additional 4 percent next year if they prescribe drugs electronically and participate in a quality reporting initiative.

The Centers for Medicare and Medicaid Services said late Thursday that physicians who adopt and use qualified "e-prescribing" systems to electronically transmit prescriptions to pharmacies may earn an extra 2 percent in Medicare payments. Physicians who report on quality measures as part of the Physician Quality Reporting Initiative (PQRI) will receive an additional 2 percent, CMS said. All Medicare physicians are scheduled to receive a 1.1 percent payment increase next year, so doctors who participate in both the e-prescribing and PQRI programs could receive up to a 5.1 percent payment increase in 2009.

Proponents of electronic prescribing and measuring the quality of health care services say those steps are critical to improving patient care and lowering its cost. "The Institute of Medicine says more than 1.5 million Americans are injured every year by drug errors. E-prescribing lets providers know—up front—their patients' medication history and the risk of dangerous infections," acting CMS administrator Kerry Weems said in a news release.

In a statement, American Medical Association President-Elect J. James Rohack said the Medicare physician payment rule "confirms that physicians caring for seniors would have faced a harsh payment cut of 15.1 percent next year if Congress had not stepped in to replace the looming cut with a payment increase." Legislation (PL 110-275) to stop that payment cut became law in July.

Rohack also said the group is "reviewing the 1,500-page rule now to determine how it addresses AMA concerns with proposals that would exacerbate already significant administrative hassles that take physicians away from patient care."

Separately Thursday CMS issued a final rule implementing several new payment changes to the Medicare program that were also included in the Medicare legislation.

In addition to the physician payment update, the rule expands the type of services included in the initial physical Medicare beneficiaries receive when they join the program and it increases ground ambulance service payments. Changes to the way Medicare pays for oxygen services drew the ire of the American Association for Homecare, which called the new regulations "alarming and wholly inadequate."

The rule implements provisions of the Medicare bill that require an oxygen supplier that furnishes oxygen equipment during the 36-month rental period to continue to furnish the equipment after the rental period ends for "any period of medical need for the remainder of the 'reasonable useful lifetime' of the equipment," according to CMS. The American Association for Homecare expressed concern that there is no payment for oxygen supplies required to keep the patient healthy and keep the equipment working properly once that 36-month cap becomes effective. The group also said that the rule includes "no recognition of costs associated with visiting patients who require episodes of unscheduled emergency services."

The CMS rule also implements language in the Medicare bill that requires accreditation of imaging providers in order to qualify for certain Medicare payments. The measure also requires a two-year program testing the use of physician-developed criteria to determine whether imaging services for various conditions are medically appropriate.

"These provisions...are important steps toward ensuring proper utilization of medical imaging services while preserving access to diagnostic and therapeutic imaging technologies," Maureen Zilly, director for government relations for the Medical Imaging & Technology Alliance, said in a statement.

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Economists Back Stimulus Bill of up to $450 Billion

By John Reichard, CQ HealthBeat Editor

October 30, 2008 -- If a larger economic stimulus package bodes well for a temporary increase in federal Medicaid spending, boosters of such an increase could take heart from the testimony of two of the three economists who testified at a Joint Economic Committee hearing Thursday.

Congressional leaders haven't fixed the size of a new economic stimulus package they may take up this year after the Nov. 4 elections. However, leaders in both chambers have said they are interested in a package in the $150 billion range, which is expected to include relief for the states including a temporary hike in federal Medicaid funding.

That's not big enough, two economists told the hearing, while a third said it would be better to hold off on any added stimulus until after other government measures have been given a chance to work.

New York University economics professor Nouriel Roubini told lawmakers at the hearing that a fiscal stimulus of at least $300 billion and possibly as high as $400 billion should become law—quickly.

"This is the worst financial crisis that the U.S. and other advanced economies have experienced since the Great Depression," Roubini testified. Noting a slump in private sector spending, Roubini said private demand "is in free fall."

Given a projected sharp contraction in demand—of about $450 billion in 2009 compared with 2008—fiscal stimulus of at least $300 billion and possibly as large as $400 billion is needed as compensation, Roubini said.

He added that "a stimulus package legislated only in February or March of next year when the new Congress comes back will be too late as the contraction of private aggregate demand will be extremely sharp in the next few months."

But Rep. Kevin Brady, R-Texas, questioned the potential effectiveness of a new stimulus package.

"The question now is not how many more financial pills we can stuff down the market's throat, but how effectively they are administered and given time to work," he said. Brady added that there is already "ample evidence" that a new stimulus package "will become a Christmas Tree of pet congressional projects, from Amtrak to Medicaid, adorned with financial handouts to local and state governments whose spending has outpaced even that of Congress...."

The economists testifying at the hearing basically agreed that a recession has begun and the economic conditions will deteriorate further. In the third quarter of 2008, the inflation-adjusted Gross Domestic Product "decreased 0.3 percent at an annual rate," testified J. Steven Landefeld, director of the Bureau of Economic Analysis at the U.S. Department of Commerce. By comparison, inflation-adjusted GDP grew by 2.8 percent in the second quarter of this year, Landefeld said. The third quarter figures were based on "advanced estimates" of GDP.

Consumer spending dropped 3.1 percent in the third quarter, the largest such decrease since the second quarter of 1980.

Simon Johnson, professor of entrepreneurship at the Massachusetts Institute of Technology, told the joint House-Senate committee that a total fiscal stimulus of around $450 billion would be appropriate, "with about half front-loaded in the first three quarters of 2009, when there will likely be recession, and the rest following over the next 8–12 quarters, during which otherwise growth will be slow."

Johnson said in his written testimony that "I think we should think about a world in which the U.S. recession will last 4–5 quarters, with a trough at negative 2–3 percent GDP growth (annual rate), followed by 8–12 quarters of slow growth."

Johnson said near-term spending should include direct aid to state and local governments, in part because it would replace money cut from existing programs, which "can have a very rapid effect, without the need to design new programs."

Roubini similarly urged "a massive direct government fiscal stimulus that includes public works, infrastructure spending, unemployment benefits, tax rebates to lower-income households, and provision of grants to cash-strapped local governments."

But economist Richard Vedder, a fellow at the American Enterprise Institute, counseled against moving too quickly, saying that a stimulus package of $300 to $450 billion would lead to a decline in confidence and "soaring inflationary expectations."

"I would urge you not to panic," Vedder told lawmakers, noting the series of aggressive measures already taken by the federal government to intervene in the economy. He counseled waiting a month or two to allow "the healing effects of the market" to occur.

Vincent DeMarco, president of the Maryland Citizens' Health Initiative, urged Congress to temporarily increase federal Medicaid payments to preserve what he said was a badly needed expansion of Medicaid coverage to low-income uninsured state residents. Because of the expansion, "in just three months, over 16,000 uninsured Marylanders have signed up for coverage, demonstrating the great need for this expansion," DeMarco said.

"We know that many of the people who would be hurt if Maryland's new Medicaid expansion is curtailed are in particular need of health care coverage now because of the economic downturn," DeMarco said. Also in jeopardy is Maryland state funding to ensure that children in Medicaid get dental care, he added. The funding "will prevent the kind of tragedy that occurred a couple of years ago when a young boy in Prince George's County died because he did not get proper dental care," DeMarco said.

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McCain, Obama Back Prescription Drug Importation But Acknowledge Safety Concerns, Advisers Say

By Meghan McCarthy, CQ Staff

October 27, 2008 -- Presidential candidates Barack Obama, D-Ill., and John McCain, R-Ariz., have reaffirmed their support for allowing Americans to import cheaper prescription drugs from abroad, but both campaigns note that concerns over international drug safety will take precedence in determining this policy, commonly known as drug reimportation.

At a generic pharmaceuticals conference in September, senior advisers to the Obama and McCain campaigns acknowledged that recent incidents with tainted heparin, a blood thinner, and infant formula that were imported into the United States from China illustrate the policy challenges to ensuring drug safety abroad.

"We have not changed our position on this issue, but obviously there have been concerns in countries like China," Obama campaign adviser Neera Tanden said in an interview. "Our plan does not envision importing drugs from China . . . but from countries with strong records of safety, like Canada and Europe."

The McCain campaign also confirmed continued support for drug reimportation. Campaign spokesman Brian Rogers said in an e-mail McCain understands the need to have a "properly documented" drug supply chain, and he would insist that all imported drugs "meet state and federal standards for safety." Rogers also noted that additional Food and Drug Administration funding would be needed to secure imported drugs.

But Rep. Jack Kingston, R-Ga., an outspoken proponent of drug reimportation measures on Capitol Hill, said talk of unsafe drugs is nothing more than a stall tactic.

"Safety is the politically acceptable red herring here . . . most people will tell you that the safety issue has been a convenient way to fight [reimportation]," Kingston said.

He said large increases in FDA funds for foreign inspection are not necessary.

"As the ranking member on the Appropriations Agriculture subcommittee which has jurisdiction over the FDA, they don't know what they are talking about–they just want to grow," Kingston said, referring to FDA Center for Drug Evaluation and Research Director Woodcock's statement that inspection of foreign drugs would require an additional $225 million increase.

"The reality is that 10 years ago they wanted $25 million to do this . . . maybe they need $250 million if they want to make sure they can reimport drugs from Nairobi," Kingston said.

Kingston would prefer to focus on importing cheaper drugs from Canada first.

"This is no strange, third world country, it's our number one trade partner . . . really and truly, if we could get Canada, it would be a good day's work," Kingston said.

Sen. Byron L. Dorgan, D-N.D., another champion of drug reimportation efforts, sponsored legislation that he said includes stringent safety measures that will protect Americans from tainted drugs (S 242).

"Our legislation has a greater measure of safety than current law, it requires much greater resources and tracking devices that don't exist currently," Dorgan explained. "Our legislation does not include China, only countries that have similar chains of custody and regulations of the type that exist in the U.S."

Dorgan's legislation explicitly allows for reimportation from Australia, Canada, the European Union, Japan, New Zealand, and Switzerland.

Dorgan also noted that importing drugs across country borders is a common and safe practice in Europe.

"The EU has been doing something called parallel trading . . . for two decades, with no safety issues at all, allowing prescription drugs to go from Spain, to Italy, to France. If they can do it for two decades, it seems our country can do this as well," Dorgan said.

Despite bipartisan support for drug reimportation, serious challenges to the practice exist. Rep. John D. Dingell, D-Mich., the powerful chairman of Energy and Commerce committee, remains a staunch opponent of drug reimportation efforts, advocating instead for domestic health care reform to address the high cost of prescription drugs.

"GAO reported last week that FDA inspections of foreign drug facilities are alarmingly low–once every 13 years, despite the fact that serious violations are often found in foreign plants," Dingell said.

"That report, and the heparin crisis, call into serious question claims that reimportation is the answer to high drug prices. An unsafe, cheap drug is still an unsafe drug. A national health care program would guarantee every American the safe and effective drugs they need."

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Part D Nerds Celebrate Good Times

By John Reichard, CQ HealthBeat Editor

October 31, 2008 -- One of the databases that makes the Medicare research community drool consists of claims filed under the Medicare Part D prescription drug program. Researchers have been itching to know what secrets those claims reveal about the types of drugs seniors are being prescribed and potential flaws in the design of the Medicare drug benefit.

On Thursday, researchers were treated to some of the first findings gleaned from the data treasure trove, which Medicare officials hailed as an "unprecedented tool" for the evaluation of the drug benefit "and the entire Medicare program."

The biggest outlays under the drug benefit in 2006 were for the cholesterol reducer Lipitor, followed by the blood thinner Plavix and the anti-psychotic drug Zyprexa. Zyprexa is approved for treatment of schizophrenia and some cases of depression relating to bipolar disorder; one of its controversial off-label uses in the past has been for dementia but FDA warns that it is not approved for that use and that elderly patients taking the drug for that condition are at higher risk of death.

In the number four, five, and six positions respectively were Nexium, used for gastroesophogeal reflux disease; Seroquel, a treatment for bipolar disorder; and Risperdal, which is used to treat bipolar disorder and schizophrenia. Rounding out the top 10 of drugs that cost Medicare the most were in the number seven position, Prevacid, another acid reflux treatment; number eight, Norvasc, a drug for high blood pressure; number nine Aricept, a treatment for Alzheimer's disease, and number 10, Advair Diskus, used to prevent asthma and treat symptoms of chronic obstructive pulmonary disorder.

In terms of drug classes, cardiovascular drugs accounted for 22.7 percent of Part D spending on the top 100 drugs, followed by psychotherapeutic drugs at 17 percent and gastrointestinal drugs at 8.7 percent.

In 2006, which was the first year of the drug benefit, 90 percent of enrollees filled at least one prescription, the Centers for Medicare and Medicaid Services said. The rate at which generic drugs were dispensed climbed from 60 percent in 2006 to 64 percent in 2007. By the first quarter of 2008, that rate had climbed to 67.8 percent, according to data filed by plans offering Part D coverage.

In 2006, the average monthly Part D cost per beneficiary, including costs both to Part D plans and the beneficiary, was $203. Those costs were considerably higher under drug-only coverage plans compared to Medicare Advantage plans offering drug coverage.

The average number of prescriptions per enrolled beneficiary per month was 3.2 in 2006.

About 10 percent of Part D enrollees reached the level of prescription drug outlays in which they no longer received any Medicare coverage for prescription costs, a gap known as the "doughnut hole." On average it took beneficiaries reaching the gap about six months to get there in both 2006 and 2007, with those with drug-only coverage getting there faster than those with Medicare Advantage drug coverage. The average number of prescriptions filled showed little change after enrollees entered the gap, according to CMS.

Only 8.8 percent of all Part D enrollees had prescription drug expenditures high enough to qualify for catastrophic coverage provisions in which Medicare picks up 95 percent of drug costs. In almost all cases these enrollees were part of the low-income drug benefit that provides more comprehensive drug coverage.

Relatively few beneficiaries used medications in "specialty tiers," a category of high-cost drugs involving high out-of-pocket costs. Overall, 4.4 percent of enrollees used specialty tier drugs in 2007, which accounted for 10 percent of total drug costs.

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Studies Analyze Impact of Massachusetts Health Care Law

By Greg Vadala, CQ Staff

October 30, 2008 -- The landmark 2006 Massachusetts law to bring near-universal health coverage to the state has not caused employers to cut back coverage for their employees, new studies have found. But other research suggests the law could diminish employer's motivation to offer coverage in the long run.

Three studies published this week on the Web site of the health policy journal Health Affairs reported, respectively, that the percentage of companies in Massachusetts offering health coverage to their employees has increased, employers have not tightened coverage eligibility, and that public support for the overhaul remains high.

But according to a study released Thursday by the Center for Studying Health System Change (HSC), high costs could "potentially weaken employers' motivation and ability to provide coverage." The study also found that employer frustration seems to be on the rise as the state requires them to take on greater responsibilities.

Since the Massachusetts overhaul was enacted, 439,000 people have enrolled in health insurance, according to the Massachusetts Division of Health Care Finance and Policy. Under the law, uninsured Massachusetts residents over age 18 are required to obtain health insurance if affordable coverage is available and pay penalties if they do not. Likewise, employers with 11 or more workers must contribute toward the cost of health coverage or pay a penalty of $295 annually per uncovered employee if they do not.

One of the three studies published on the Health Affairs Web site reported that the percentage of companies in Massachusetts with three or more workers offering coverage increased to 79 percent in 2008, from 73 percent in 2007. The study, led by Jon R. Gabel of the National Opinion Research Center, which is affiliated with the University of Chicago, found that 52 percent of employers agreed that the overhaul "has been good" for the state. This year, 29 percent of companies considered the overhaul a financial burden, down from 36 percent in 2007.

Gabel's study also found that the percentage of companies with 11–50 workers offering coverage increased to 92 percent in 2008, from 88 percent in 2007. Nationwide, the percentage of companies offering coverage was statistically unchanged from 2007 to 2008, at 60 percent and 63 percent, respectively.

Gabel and his coauthors expressed concern that nearly 90 percent of employers who were unaware of the requirement to offer a plan to enable employees to pay for their health insurance on a pre-tax basis, known as a Section 125 plan, did not do so. The authors also were worried that 60 percent of companies with 11–50 workers not offering coverage said they did not pay their annual "fair share" contribution of $295 per employee.

In a second article, Sharon K. Long and Paul B. Masi of the Urban Institute asked employees for their views of the law's impact on their benefits. The findings were based on surveys conducted in the fall of 2006, just before many of the overhaul's critical elements were implemented, and the fall of 2007, about a year after they were enacted.

Employees reported that little had changed over the course of the year. Overall, 90 percent of employees were covered in businesses of all sizes. Long and Masi "found no evidence that employers made major changes in the scope of benefits, network of providers, or quality of available care under their health plans as reported by their employees. Nor is there evidence that employers have shifted a greater share of the cost of health care onto their workers in response to reform."

The third study, led by Robert Blendon, a professor at the Harvard School of Public Health, found that 69 percent of Massachusetts residents currently support the overhaul, up from 61 percent in September 2006.

Blendon's team also found that support for the law's "individual mandate" provision, which requires the state's residents to purchase health insurance if "affordable" coverage is available, increased to 58 percent in 2008 from 52 percent in 2006.

Grace-Marie Turner, president of the Galen Institute, said she was not surprised that Blendon's study found that those who were uninsured at some point during the previous year were less likely to support the law and the mandate.

"They're the ones who are really feeling the pinch of the program," Turner said.

According to the study, this year 45 percent of uninsured people said the law is beneficial, down from 72 percent in 2007. Also this year, 33 percent of the same group said the law is having a negative impact, up from 17 percent in 2007.

In assessing the three articles in Health Affairs overall, Joseph Antos of the conservative American Enterprise Institute said, "This is a good example of how eager some foundations and analysts are to show that [the program] is a success."

Antos contended that the studies do not hold much weight because not enough time has lapsed since the overhaul's enactment.

"We have to give employers a chance to really accommodate to this," he said. "When you try to answer the questions too soon, you don't get a clear answer. We don't have a clear answer."

For her part, Turner said she is troubled that the studies did not address the impacts of the program's cost on individual taxpayers and employers.

"The program is going to succeed or fail around the issue of cost, and none of the three papers addresses that," she said.

The issues of cost and employer involvement are at the core of the HSC study. It found that 160,000 newly insured residents, or 36 percent of the total, complied with the law by getting coverage through their employer, and that the estimated annual cost to employers adds up to about $540 million.

The HSC study was conducted between May and August of this year and is based on interviews with 28 stakeholders, including representatives of employer groups, benefits consultants, providers, and others.

According to the study, employer costs likely would increase as more residents are expected to take up employer coverage to steer clear of the tax penalty, which is "significantly higher in 2008 at half the annual premium of the lowest cost health plan available." That penalty is about $900 for an adult making approximately $31,000 a year, the study said.

The study also found that employers are frustrated that they will be required to take on more responsibility. For example, beginning on Jan 1, 2009, the state will require employers with more than 50 full-time employees to cover 25 percent of their employees and make a 33 percent premium contribution. Currently, employers are required to meet only one of those two thresholds to avoid the penalty of $295 annually per uncovered worker.

Debra A. Draper, a coauthor of the study and an HSC senior fellow, said in a statement, "Many respondents were concerned that unless the state seriously addresses the underlying factors driving costs that the current trajectory of the reform is financially unsustainable."

HSC is a nonpartisan health policy research organization funded in part by the Robert Wood Johnson Foundation, which funded the survey and the study.

The Robert Wood Johnson Foundation and the Blue Cross Blue Shield of Massachusetts Foundation funded the survey led by Gabel. Those two organizations and The Commonwealth Fund supported the study by Long and Masi. The Kaiser Family Foundation and the Blue Cross Blue Shield of Massachusetts Foundation funded the research by Blendon's team.

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Study: Overpayments Still a Factor in Medicare Private Fee-for-Service Plans

By Ben Weyl, CQ Staff

October 27, 2008 -- Private fee-for-service (PFFS) plans—the fastest growing part of Medicare Advantage—will continue to be an outsized financial drag on the public sector, despite recent passage of legislation designed to trim the program's costs, according to a new Commonwealth Fund report.

Payments to PFFS plans were, on average, 16.6 percent greater per enrollee than what traditional Medicare fee-for-services would have cost, according to the report, amounting to nearly $2.5 billion of extra spending in 2008.

PFFS payments make up a sizeable portion of the overpayments amassed by Medicare Advantage. A recent analysis of the program found it cost 12.4 percent more per enrollee than what it would have cost traditional Medicare, totaling $8.5 billion in 2008. Payment to PFFS plans, therefore, made up nearly 30 percent of Medicare Advantage's overpayment.

PFFS plans currently operate differently from other Medicare Advantage programs in several ways, according to the report. The plans are exempt from the quality reporting and disclosure requirements other plans are subjected to; they are not subject to bid review or negotiation with Medicare; and providers can charge patients coinsurance of up to 15 percent more than the plan payment amount. Most importantly, PFFS plans are not required to have contracts or network arrangements with physicians, hospitals, or other providers; through a practice known as "deeming," the PFFS plans can pay providers without such agreements.

Some advocates of PFFS plans have cited their importance in bringing private plans and subsequent benefits to rural areas. The report quotes Secretary of Health and Human Services Michael O. Leavitt arguing in a May 2008 letter that without deeming, "PFFS plans would have difficulty establishing provider networks, especially in rural areas. Weakening these plans will hurt beneficiaries in rural areas."

The majority of PFFS enrollment and overpayment has occurred, however, in urban areas, according to the report. In 2008, 60 percent of enrollees were in urban areas and 66 percent of PFFS extra payments were in urban areas, the report found.

America's Health Insurance Plans (AHIP), the trade group for insurance providers, discounted the importance of the urban-rural divide. "I think it's very clear that Medicare Advantage plans provide an important coverage option for seniors in all areas across the country," said AHIP spokesman Robert Zirkelbach.

Enrollment in PFFS plans has grown rapidly, from 220,000 in December 2005 to nearly 2 million in February 2008, according to the report. In part to limit the growth of PFFS plans—and their accompanying costs—Congress passed the Medicare Improvements for Patients and Providers Act of 2008 (PL 110-275), which mandated quality reporting requirements beginning in 2010, and removed the "deeming" authority of PFFS plans and required plans in certain areas to offer provider networks beginning in 2011.

The Congressional Budget Office projects these measures will significantly reduce PFFS growth, but estimates that there will still be about 40 percent more enrollees in the plan in 2013 than there were in 2008, according to the report.

"The legislation passed this year does not adequately address the overpayment problem in private fee-for-service Medicare Advantage plans," said Commonwealth Fund President Karen Davis in a statement.

For AHIP, which opposed the legislation, overpayments are not an issue. "The important thing to keep in mind is these plans are providing these additional benefits and lower out-of-pocket costs," Zirkelbach said.

A spokesman for the Centers for Medicare and Medicaid Services expressed similar sentiments. "Medicare Advantage plans, including private-fee-for-service offerings, are part of the overall Congressional mandate to give beneficiaries broader access to choices," said CMS spokesman Jeff Nelligan in a statement. "These plans are especially important to rural, low-income, and minority beneficiaries and allow enrollees to receive benefits beyond the Medicare benefit package."

The report's lead author, however, warned that the status quo was untenable, especially in light of the looming fiscal challenges. "The intention of the Medicare Advantage program was to save the program money through the use of private plans. Instead, these plans are costing Medicare billions in overpayments," said Brian Biles, of George Washington University's School of Public Health and Health Services, in a statement. "If new Medicare legislation fails to address these issues, we will continue to see PFFS plan enrollment centered on high extra payment urban areas and Medicare spending billions of dollars that unnecessarily deplete federal resources."

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