By Mary Agnes Carey, CQ HealthBeat Associate Editor

October 10, 2007 – The American Medical Association and AARP are continuing their campaign to convince Congress to cut Medicare Advantage payments, holding a briefing Wednesday highlighting problems with Medicare private fee-for-service plans in rural America.

Among the criticisms the panelists levied at the plans were that they often reimburse rural providers at rates far lower than that of the traditional Medicare program, and that the policies are so complex, beneficiaries do not understand them, in particular the higher cost-sharing that may be required for some services, such as cancer treatment or home health care.

Brock Slabach, board member of the National Rural Health Association, said that many Medicare private fee-for-service plans do not comply with cost-based reimbursement requirements for critical access hospitals that Congress established in 1997. He said other problems with the plans, for example, are that they impose burdensome pre-certification requirements for care and delay payment or pay the incorrect amount for services, problems that, if not corrected, will weaken rural health care providers' ability to provide services.

Of the approximately 8.9 million Medicare beneficiaries enrolled in Medicare Advantage plans, 1.7 million are in private fee-for-service, with much of the growth of those plans in rural areas, panelists said at the briefing, which was held in the Senate Finance Committee hearing room. The committee is drafting legislation that is widely expected to prevent a scheduled 10 percent in Medicare physician payments, financed in part by a reduction in Medicare Advantage reimbursements.

Lawmakers and health care analysts who say Medicare Advantage plans are overpaid have leveled their strongest criticisms at private fee-for-service plans because they say the care they provide is loosely managed and the plans are reimbursed at much higher rates. On average, Medicare Advantage plans are paid 112 percent of the rates paid in traditional Medicare, while private fee-for-service plans are paid 119 percent of those rates, according to the Medicare Payment Advisory Commission (MedPAC).

Backers of such plans say they offer additional benefits, such as eye and hearing exams, limits on out-of-pocket spending, reduced Part B premiums, and lower cost-sharing on preventative exams for cervical cancer, prostate cancer, and breast cancer. Mohit Ghose, a spokesman for America's Health Insurance Plans (AHIP), a trade group representing insurers, said seniors enrolled in Medicare Advantage are saving on average $86 per month, or a total of $1,032 a year.

On Monday, AMA and AARP announced a new television ad campaign to encourage Congress to cut $54 billion from Medicare Advantage plans. The groups argue that while one of five seniors is enrolled in Medicare Advantage, "these excess payments to insurers are coming out of everybody's pockets." The extra funds, the groups said, could be used to prevent the scheduled cut in Medicare physician payments. Eliminating that cut could force beneficiaries' Medicare Part B premiums to rise to $100 monthly.

In conjunction with UnitedHealth, AARP is a major player in the Medicare prescription drug plan market. Starting next year, AARP plans to sponsor a Medicare Advantage plan as well, said Brian McGuire, AARP associate regional director.

By CQ Staff

October 9, 2007 – The Centers for Medicare and Medicaid Services (CMS) anticipates that the agency will collect $4 billion from Medicare Part D drug plan sponsors due to lower-than-expected drug costs in 2006, the first year of the Medicare drug program.

In a news release, CMS said that for the 2006 contracting year, Medicare will collect the funds from plans because their actual drug costs for almost all Part D plans were below expected levels in their 2006 bids. A number of factors, including that it was the plans' first year of bidding and the use of generic drugs was higher than anticipated, led to the lower spending.

As part of the Medicare drug law (PL 108-173), CMS is required to pay the plan sponsors prospectively based on their bids and can only complete a final reconciliation of accounts after the end of the calendar year. The law also limits the unanticipated losses or unexpected gains by Part D plans. For the first two years of the drug program, if a plan's drug spending is 2.5 percent or higher than projected, Medicare makes additional payments to cover a portion of the unanticipated costs. If drug spending in 2.5 percent or more below the levels projected in a Part D plan's bid, Medicare recoups a portion of the unanticipated cost savings.

CMS said it expects that as plans gain more experience with the Part D program, their future bid submissions will more accurately reflect their actual costs of providing prescription drug coverage. In the release, issued Oct. 5, CMS added that the 2007 bid submissions were significantly lower than those submitted in 2006, a reflection of 2006 experience with the drug program. With that in mind, CMS expects that amounts collected from or paid to plans in future years as a result of the final reconciliation and risk sharing process will be significantly lower than the reconciliation for the 2006 plan year.

By CQ Staff

October 11 2007 – Medicare Advantage plans slapped with "corrective action plans" because of rules violations have had difficulty meeting requirements for marketing, appeals, and grievance procedures and for giving proper notice that they are terminating hospital and other provider services, according to an analysis by the Gorman Health Group consulting firm.

On Oct 1, the Centers for Medicare and Medicaid Services (CMS) released 91 corrective action plans based on audits completed from January 2006 through Sept. 30, 2007. The Gorman Group analysis found that 94 percent of the affected plans had difficulty meeting CMS appeals and grievance requirements, while 61 percent failed to provide proper termination notices of hospital, skilled nursing facility, or home health agency services. Sixty-two percent were cited for improper marketing activities, including those that "mislead, confuse or misrepresent" beneficiaries.

By Sasha Bartolf, CQ Staff

October 9, 2007 – Team training, the use of trigger tools, and effective accountability systems are keys to attaining flawless patient care—and more people are recognizing this, according to Lucian Leape, one of the nation's leading figures in patient safety and an adjunct professor of health policy at the Harvard School of Public Health.

Now "we can use perfection as a benchmark," Leape said during an interview released Tuesday by the journal Health Affairs. In the discussion, Leape addressed ways to improve patient care and safety, as well as the new methods doctors and hospitals are implementing to eliminate medical errors and injuries.

A landmark 1999 Institute of Medicine study stated that medical errors kill up to 99,000 U.S. hospital patients per year, prompting calls throughout the medical community and on Capitol Hill to find ways to prevent errors and improve patient care.

Among his recommendations, Leape said he advocates intensive team training and simulation training programs as being critical to reducing patient errors. While he acknowledged that simulation training is expensive, "everyone likes the idea of doctors, nurses, and anesthetists experiencing their first crisis on a plastic patient" rather than on a real one, he said.

Leape also said he believed that greater integration between nurses, doctors, and pharmacists is essential. "At a minimum, in the first year of medical school, all nurses, doctors, and pharmacists should learn the basics of error theory" and have experience working together in "clinical problem-solving exercises" while in school.

Leape pointed to "convincing demonstrations" at such places as The John Hopkins Hospital's intensive care unit as well as 68 hospitals in Michigan where central-line infections and ventilator-assisted pneumonia were abated. "If 68 hospitals in Michigan can receive these results, then so can all 5,000 hospitals in the United States," he said. In both cases, the medical teams had specific protocols that were rigidly enforced to ensure things were done right, Leape said.

In addition, a "trigger tool"—a list of 50 "elements" that help alert a doctor to whether or not a test result or a patient's experiences with a drug are abnormal, also is an effective way to reduce adverse events for patients, Leape said. "This is a list . . . that can be found in the patient record, many of them laboratory tests or simple clinical observations," he said. "You identify abnormal findings and investigate whether a patient has suffered an adverse event." The Institute for Healthcare Improvement (IHI), which developed the trigger tool, estimates there are 15 million preventable injuries per year, which translates into roughly 40 percent of all patients experiencing some sort of injury while receiving medical care.

Acknowledging mistakes in patient safety and providing full disclosure and compensation to patients is another concept Leape said he supported. He said fear of litigation is most often why patients do not learn the truth behind their accidental injuries but that studies conducted by the University of Michigan and liability insurers are proving that full disclosure and apologies to patients have led to substantial reductions in the number of suits filed.

In terms of the barriers to better patient care, Leape faults hospital administrators and CEOs for their lack of interest in investing in better care for patients. The "single most disappointing aspect of the safety movement" has been "the difficulty in getting CEOs of hospitals and health care systems to make safety a priority," Leape said.

He also criticized federal and state governments for not doing enough to reduce the number of deaths and infections as a result of being admitted into a hospital. "The federal government has not done much to provide incentives, financial or other, to improve safety." While some states have established reporting systems, just collecting information is not a very powerful factor for change, he said.

Leape did applaud efforts by a number of states to require hospitals to publicly report data about the care they offer, including the number of medical errors and injuries that occur each year. By making this data public, the media can report what is being done, both good and bad, in the patient safety arena.

By John Reichard, CQ HealthBeat Editor

October 10, 2007 – Enrollment in the Medicaid program dropped 0.5 percent in fiscal 2007, mainly because of an improving economy and new requirements to document citizenship, according to a survey of 50 state Medicaid programs released Wednesday. The authors of the study said they could not tell which of the two factors had the greater impact on enrollment, but said the new documentation rules were most often cited by state Medicaid directors as the reason for the decline—the first in nearly a decade.

The study by the Kaiser Commission on Medicaid and the Uninsured also reported that Medicaid spending grew only 2.9 percent in fiscal 2007, after rising just 1.3 percent in fiscal 2006. "We have just come through a period of historic low growth in Medicaid spending," said Vernon Smith of the consulting firm Health Management Associates, which conducted the survey along with Kaiser Commission researchers. In addition, the study found that state officials used growing revenues from their improving economies to increase Medicaid payment rates to providers, improve benefits, and expand eligibility. "Faced with an improving economy, 42 states expect to expand coverage to the uninsured in the next year," the commission said in a news release.

Study authors and state officials offered a mixed prognosis for Medicaid in a press briefing Wednesday. On the one hand, Medicaid's financial vital signs are getting stronger as state revenues grow and spending comes under better control. That, in turn, is fueling state ambitions to cover more of the nation's growing uninsured population. One the other hand, state officials expressed concern that tens of thousands of eligible American citizens, many of them children, won't be enrolled in Medicaid because of the time and expense involved in documenting their citizenship. And officials warned that regulatory changes pushed by the Bush administration could slice $20 billion from Medicaid spending over the next five years.

About three-fourths of the states mentioned specifically that the documentation rules had an impact on the number of people enrolled in the program, Smith said. Kansas Medicaid Director Andrew Allison told reporters that when the rules took effect in July 2006 with little advance guidance from federal Medicaid officials, his staffers were "immediately inundated with paper, with phone calls, with confusion, and our process simply wasn't scaled to meet that administrative burden." Allison added, "not every consumer was equally able to meet those requirements either. We have people applying who have children born in other states," who have to arrange to buy birth certificates to prove citizenship, for example.

After a few months, Allison said his staff found that "the primary impact of these new requirements was on eligible citizens, and in particular on African-American citizens whose citizenship in the country I'm not sure has ever been questioned to the same extent." The biggest part of the application backlog that developed consisted of African-American children, he added. "I regret having to recount the last year in Kansas," Allison said. "We lost ... about 20,000 in case load," primarily children. "I am hoping we are not seeing a permanent impact, which would simply dissuade eligible American families from applying for coverage."

Asked whether it was possible that part of the enrollment decline was because fewer illegal immigrants are getting into Medicaid, Smith downplayed that as a significant factor. Most state Medicaid officials "spoke very confidently that the issue was not affecting persons who would be illegal," he said. The requirement that an enrollee be a citizen was not new, "it's how it's documented that's new," Smith said. "Medicaid director after Medicaid director said the persons who are affected by this are American citizens, primarily children."

Forty-two states, mindful of the growing uninsured population in the United States—46.5 million in 2006, up from 44.4 million in 2005—have developed or are moving ahead with plans to expand coverage. Almost all of them would rely extensively on Medicaid or the State Children's Health Insurance Program to do so, the survey found. The failure of Congress to reauthorize SCHIP by the Sept. 30 deadline lawmakers set for doing so does not bode well for support from Washington for state efforts to broaden coverage of the uninsured, said David Parrella, director of the Connecticut Medicaid program.

Even with support from Washington, state efforts are only part of the answer to the uninsured problem, officials cautioned. "It would be a misconception to view states as now having both the initiative and the ability to address the needs of the uninsured," Allison said. "That initiative and ability vary quite dramatically across states."

Sounder finances led more states to improve their Medicaid programs than in any of the past seven years of the annual survey. "Most notably, every state implemented some type of provider rate increase in 2007 and 49 states planned to increase rates for at least one provider group in 2008," the survey found. "In the past two years we've been in a period where states have been catching up" by restoring payment levels they were forced to cut a few years earlier, Smith said. Connecticut, in particular, made "really historic investments in provider rates" in 2007, Parrella said.

But Medicaid payment rates to doctors are very low, giving Medicaid enrollees difficulties finding a physician. Even the big improvements in Connecticut went only so far. "The last time we did a comprehensive fee schedule increase was 19 years ago," Parrella said. During the past year "we actually did a secret shopper survey" in which people posed as new Medicaid enrollees trying to get their first doctor's appointment. The results "were really dismal," he said. "They were shameful for the department ... we took a real beating public relations-wise." Legislators responded with increases that raised rates paid to doctors from their previous level of about 45 percent of Medicare rates to about 80 percent of those rates. But even with better reimbursement, Medicaid patients "won't get into every practice," Parrella said. "That's just a reality."

The study found that Medicaid spending grew only 2.9 percent in fiscal 2007, largely because of the decline in enrollment and the shift, from Medicaid to Medicare, of a chunk of prescription drug costs for "dual eligibles"—Medicare enrollees who also qualify for Medicaid. But state Medicaid officials are planning for higher spending. "Moving into fiscal year 2008, state legislatures authorized total Medicaid spending growth that averaged 6.3 percent," the study found.

By John Reichard, CQ HealthBeat Editor

October 9, 2007 – The announcement last week by Medicare that 2008 monthly premiums for doctor and other Part B services would rise by their smallest amount since 2001 overlooked the likelihood of physician payment revisions later this year that could bring the premiums up to about $100.

Congressional Democrats may try to pay for the cost of the doctor payment fix in a way that doesn't drive the premiums that high. But various health industry lobbies will likely spring into action to try to block the types of payment revisions that would be needed to keep Part B premiums from reaching the century mark.

CMS boasted in an Oct. 1 "fact sheet" that monthly Part B premiums will rise in 2008 by the smallest percentage increase since 2001. Now at $93.50, the premiums will rise 3.1 percent, to $96.40 in 2008, the agency statement said. But that estimate is based on current law, which calls for a projected cut of 10 percent in Medicare payments to doctors in 2008. Since Congress is widely expected to pass legislation later this year to erase that cut, the premium increase may be around 7 percent, bringing the monthly premium to about $100.

Part B of the Medicare program covers physician services, outpatient hospital services, certain home health services, durable medical equipment, and other items. Premiums pay a fixed percentage of Part B outlays, which means that premiums rise as Part B spending rises. Since eliminating the cut would add somewhere in the neighborhood of $20 billion to Part B spending over five years, premiums would go up considerably more than the $96.40 CMS is currently projecting.

"If we had assumed a freeze on physician payment rates for 2008, rather than the approximately 10 percent reduction that would be required under current law, then the Part B premium could have been as much as $100," said Richard S. Foster, the chief actuary for the Centers for Medicare and Medicaid Services. CMS also said in the fact sheet that it is able to offset some of the increase in the part B premiums in 2008 because of a previous accounting error that overstated the level of Part B spending. Had there been no adjustment for the accounting error and a physician payment freeze were assumed, the monthly premium would have been as much as $103, Foster said.

The $100 mark is significant because so many seniors live on modest, fixed incomes, said William Vaughan, senior policy analyst for Consumers Union. Of retirees getting Social Security checks, 21 percent of married couples and 41 percent of single people live almost entirely on that income, said Vaughan, citing Social Security Administration figures. The average monthly Social Security check is $1,050, he added. Assuming an average cost of living increase in Social Security payments in 2008 of about $30 a month, about one-fifth of that would go to rising Part B premiums. In some cases, up to one-third or more of the cost-of-living hike would go to a combination of rising Part B and Part D premiums, he said. Part D premiums pay for Medicare prescription drug coverage. That wouldn't leave much, Vaughan added, for rising food, housing, transportation, or other costs.

A couple of things could still happen that would keep monthly Part B premiums from reaching $100 next year. One is that if Congress doesn't pass legislation until late in the year to erase the 10 percent cut, the legislation's impact on Part B premiums wouldn't be felt for up to one year later, because CMS would already have announced the final premium amount, policy analysts said. "What they've done in the past is keep the premium the same for a number months and then recapture the lost amount by charging a higher amount later," Vaughan said. But "it does get recaptured," he added.

Another possibility is that the cost of the legislation erasing the cut is paid for by trimming other spending in Part B. House-passed Medicare revisions earlier this year erasing the doctor payment cut would have kept Part B premium increases down by trimming payments to Medicare Advantage plans as well for anemia drugs and home oxygen, among other services. The lobbies for those sectors of health care are likely to fiercely resist those Part B "pay fors." But some of those payment changes will stick, said a policy analyst who is an expert on physician payment issues. "I think a lot of the cuts will come out of Part A" of Medicare, which pertains to hospital and other inpatient costs, he said. "But there will be Part B cuts."