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October 23, 2006

Washington Health Policy Week in Review Archive 1c88d0e5-512f-46f3-99f2-31ea61374add

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Decline in Employer Health Coverage Behind Rising Uninsured Rate, Studies Find

By Cheyenne Hopkins, CQ Staff

October 19, 2006 -- The continued decline in employer-sponsored insurance has led to an increasing number of uninsured, according to reports released on Thursday at a Capitol Hill forum.

The reports, prepared by the Urban Institute for the Kaiser Commission on Medicaid and the Uninsured, found that employer-sponsored coverage fell from 81 percent in 2001 to 77 percent in 2005. Also, unlike previous years, there was no increase in Medicaid and State Children's Health Insurance Program (SCHIP) coverage in 2005 to offset the employer-sponsored decline, said John Holahan, director of the Health Policy Research Center at the Urban Institute.

The findings were presented at a forum sponsored by the Kaiser Commission on Medicaid and the Uninsured and the Alliance for Health Reform.

The reports follow Census Bureau figures released in August that found the percent of uninsured rose from 15.6 percent to 15.9 percent, or 46.6 million people, in 2005. Adults accounted for 1 million of the increase while the number of children under age 18 without access to health coverage grew in 2005 for the first time in seven years. Last year, 11.2 percent of children in that age group had no coverage, compared with 10.8 percent the previous year, according to the Census figures.

Bowen Garrett, a senior research associate in the Health Policy Center at the Urban Institute, said the reasons for the decline in employer-sponsored coverage included a decrease in employers not offering the plans and workers going to new jobs where plans were not offered.

The largest plan declines were among employees of firms with fewer than 25 workers and among adults ages 19 to 34, one report found.

Garrett also pointed to changes in the workforce. From 2001 to 2005, more people became unemployed; more employees became self-employed, temporary workers, or small business workers; and more workers had incomes below the poverty level.

One audience member argued that policy needs to reflect this new workforce more. However, this trend is likely to not end soon.

"Job-based coverage is likely to continue to fall because of rising health insurance premiums and greater employee contributions to premiums," Garrett said.

Chip Kahn, president of the Federation of American Hospitals, said consumers cannot look to employers to solve the problem, but public policy action is required.

While about 85 percent of Americans have health insurance, Kahn argued there should be public policy targeted at the 15 percent not insured and another policy to sustain those with coverage.

Kahn also highlighted the cost implications of the uninsured. In a survey of hospitals, his organization found that hospitals' uncompensated cost rose from $5.1 million in 2004 to $7 million in 2005.

The panelists discussed various proposals for solving the issue, such as universal health care, expanding entitlement programs, and using tax credits to expand coverage. Kahn said whatever the solution, it should be a comprehensive one for lasting effect.

Jeanne Lambrew, a senior fellow at the Center for American Progress and a former Clinton administration health policy official, saw good news in the findings. It shows people are not declining health insurance if they are offered it, Lambrew said.

However, she said there is a jarring disconnect between these findings and the solutions supported by the White House and Congress. For example, she said the administration has argued for fiscal responsibility but there is a disconnect between being willing to pay for drugs for seniors without offsets, such as through the drug benefit law, and not being willing to pay for low-income children through the children's health insurance program. Lambrew argued for increased funding for public health programs to target populations, including the poor, children and small businesses.

SCHIP, which was created in 1997, is up for reauthorization next year. Lambrew said maintaining the program will cost from $30 to $40 billion over 10 years.

Lambrew said solving the uninsured problem is "no longer the political pariah it once was."

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Grassley to Seek Extension in Lame Duck of Mechanism to Boost Hospital Payments

By John Reichard, CQ HealthBeat Editor

October 20, 2006 -- Senate Finance Committee Chairman Charles E. Grassley traveled to Pennsylvania on Friday to say he'll seek an extension of statutory language to ensure that Medicare payments to hospitals accurately reflect local wage rates.

"Medicare hospital payments need to adequately account for differences in wages so that hospitals are able to obtain staffing in a competitive workforce environment," Grassley said in a press release Friday.

Grassley made the trip to give a boost to the struggling Senate reelection campaign of Pennsylvania Republican Rick Santorum, a fellow member of the Senate Finance Committee.

Santorum highlighted his position on the powerful committee in a press release, saying he was "able to secure a temporary extension of funding" for hospitals in northeastern Pennsylvania "financially disadvantaged" by the current wage mechanism.

The extension remains to be enacted, however. Grassley said he would seek its enactment as part of a package of Medicare legislation that "may" be considered during the lame-duck session of Congress scheduled to start Nov. 13. A Grassley aide said that negotiations have begun between House and Senate staff on assembling the Medicare package.

At issue is Section 508 of the Medicare overhaul law (PL 108-173), which allows certain hospitals to be "reclassified" into different geographic regions for purposes of applying a Medicare wage index. Hospitals near high-cost areas complain that the index doesn't accurately reflect the cost of wages they must pay to compete for labor in such areas.

The 508 provision is due to expire in March 2007. The language Grassley is seeking would extend it through September 2007. Grassley said the extension would give him time to work on a long-term solution to problems with the index.

A hospital lobbyist estimated that hospitals have benefited under the Medicare law's reclassification mechanism to the tune of a billion dollars. Grassley spokeswoman Jill Kozeny couldn't confirm the estimate but said the cost of the six-month extension would be under $100 million. She noted that 21 senators wrote to Grassley and Finance Committee ranking member Max Baucus, D-Mont., in June urging an extension of the 508 provision. Bills are pending, such as S 3500, that would require a longer extension than Grassley has proposed, she said. In developing his long-term fix, Grassley would consider recommendations on wage index changes by the independent federal Medicare Payment Advisory Commission, she said.

Santorum said that without Section 508 funding, hospitals in northeastern Pennsylvania stand to lose $34 million a year.

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Health Care Remains Low Priority for Americans, but High Costs and Access Still a Concern, Study Says

By Libby George, CQ Staff

October 17, 2006 -- The Medicare drug benefit may win the lion's share of media attention, but it's not at the top of the list for most Americans, a new survey shows.

While health is considered a "second-tier issue" for Americans—coming in behind Iraq, the economy, and gas prices—the survey, published online Tuesday in the journal Health Affairs, found that 43 percent of Americans surveyed named high costs as one of the two most important health care issues for government to address, while 34 percent flagged the lack of insurance and access.

For the survey, the report's authors looked at two Harvard and Robert Wood Johnson–sponsored polls taken between March and April of 2006 as well as an analysis of the results of 19 national opinion surveys conducted between 1940 and 2006. Released less than a month before the midterm elections, the authors believe the report's results "are likely to create a climate that is supportive of increased health spending and substantial policy changes."

The survey also found that, as a fourth-place issue, health issues are a lower priority for Americans than they were in the early 1990s. But author Robert Blendon said that does not downplay the survey's overall significance.

"Health care has consistently ranked in the top few issues for government to address, and politicians ignore it at their peril," said Blendon, a professor of health policy and political analysis at the Harvard School of Public Health.

The survey found that issues related to Medicare and the drug benefit finished a distant third—named by only 15 percent of respondents as one of the two most important health care issues. Low-quality care came in at 11 percent.

Importantly, the survey also found that people are generally satisfied with their own care providers, while dissatisfied with the nation's health care on the whole. This result, Blendon and his co-authors suggest, could stem from "broader public concerns about the insecurity of health insurance coverage, high prices, bureaucracy, waste, and disparities in access to care."

Interestingly, when asked to identify the two most important diseases for government to address, the public again diverged from recent media coverage and ranked obesity number five, tying with diabetes. The respondents ranked cancer, AIDS, avian flu, and heart disease as the top issues, in order.

But Blendon said that is something that could change over time "as obesity receives more attention from the media and health professionals."

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More Drugs, More Use Limits Seen in 2007 Medicare Drug Formularies

By CQ Staff

October 20, 2006 -- The Centers for Medicare and Medicaid Services released an analysis Friday comparing Medicare drug plan formularies for 2007 and 2006, concluding that more drugs will be covered next year but that limits on their use will be somewhat greater.

For the drug-only private plans offered to beneficiaries in the traditional fee-for-service program, formularies for 2007 show a 13 percent increase in the number of drug "items" covered. They also show a "slight increase" in the number of drugs requiring "step therapy" before they can be used. These requirements "encourage people to try proven, cost-effective drugs first," the CMS analysis says.

However, the formularies for 2007 also show a "slight decrease" in the percentage of covered drugs with "quantity limit restrictions." CMS said the limits are applied "to some drugs with safety concerns" to make sure they are used in recommended doses, such as drugs for mental health conditions or to treat severe pain.

Next year's formularies for Medicare managed care plans offering prescription drug coverage show "a greater than 10 percent increase on average" in the number of covered drugs and "a slight increase in the rate of step therapy."

Scrutiny of the drugs used most by seniors shows an 8 percent increase in these products covered by the drug-only plans and a 6 percent increase in the most popular Medicare managed care plans. For the drugs in these managed care plans, "there are slight increases in step therapy, prior authorization, and quantity limit requirements," CMS said.

Each prescription for a prior authorization drug must be approved by the drug plan in order for it to be covered.

CMS notes that if a person with Medicare is taking a Part D drug that is not on the plan's formulary, "a required transition period allows the person to get a temporary supply of the drug while they arrange for an alternate prescription or ask for an exception."

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More States Get Wal-Mart $4 Generic Drug Program

By Michael Teitelbaum, CQ Staff

October 19, 2006 -- Wal-Mart Stores Inc., announced that as of Thursday it's expanding its $4 generic prescription drug program to 14 more states in addition to Florida.

The program makes up to 30-day supplies of 314 generic prescription medicines available to its customers and employees for $4, whether they are insured or not. The program initially was launched in the Tampa area on Sept. 21 and expanded to the entire state of Florida on Oct. 6. Originally, the national rollout was to begin in 2007.

The 14 new states receiving the program are Alaska, Arizona, Arkansas, Delaware, Illinois, Indiana, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Texas, and Vermont.

Bill Simon, Wal-Mart's executive vice president of the Professional Services Division, noted that 88,235 new prescriptions had been filled in the 10 days after the statewide Florida rollout and that customer demand led them to accelerate the launch.

Currently, initial $4 prescriptions are not available by mail order or online, but refills can be ordered online or by telephone only for in-person pickup in Florida and the other states. Simon said "the company will continue to push for expansion to other states as expeditiously as we can."

Charlie Sewell, senior vice president of government affairs at the National Community Pharmacists Association, however, called the program "a classic bait and switch," adding that "if you look at the $4 list of drugs that about 99 out of 100 drugs are not covered." He said, "They are trying to hoodwink patients into believing they can get cheap drugs at Wal-Mart. But when they take their prescriptions in, they will be seriously disappointed."

Opponents of Wal-Mart's idea also have noted in the past that the corporate giant was losing money on the medicines but making up the loss on other purchases shoppers made while buying prescriptions.

Simon disputed that claim, saying that Wal-Mart is not filling medicines below cost and they're making a profit on each one.

Ken Johnson, senior vice president of the Pharmaceutical Research and Manufacturers of America, the drug industry's chief trade association, said that "we believe Wal-Mart's new initiative, which provides mostly older, generic drugs at low cost, is one way to improve access to some medicines for some people."

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Stark: Job One for House Democrats Is Protecting Medicare Entitlement

By John Reichard, CQ HealthBeat Editor

October 17, 2006 -- To an industry audience that has largely tuned out the liberal spectrum of the congressional airwaves the past dozen years, tuning into Pete Stark on Tuesday afternoon and his plans for the House Ways and Means Health Subcommittee under Democratic control might have seemed like a tympanic explosion. Attendees at the speech, which was sponsored by the National Medicare Congress, didn't necessarily sit bolt upright in their chairs at the remarks by the Subcommittee's top Democrat, but seemed at a loss to know how to react to the starkly different tone they may be paying close attention to if the House flips in the midterms.

When they finally did begin to pose questions to Stark during the Q & A session after his remarks, one audience member asked him to assess the legacy of House Ways and Means Committee Chairman Bill Thomas, R-Calif., with respect to Medicare. "He was a failure," Stark replied tersely. "He was unable to dismantle it."

But if Stark's remarks grated on the ears of the GOP-friendly members of the audience, they were couched in terms that in some respects could be perceived as industry friendly.

The main job of a House controlled by Democrats would be to protect entitlement programs such as Medicare, he said, asserting that doing so would benefit the bottom lines of companies doing business with the program. Government also should boost Medicare payments to help providers pay for health information technology, Stark declared.

He appeared to say that doctors should not be penalized with lower payments if they don't rate highly on performance measures, unless their care can truly be tied to improved treatment outcomes. And industry would benefit from sorely needed congressional oversight of the program, according to Stark, who said that improved functioning of Medicare would deliver faster answers to industry requests for coverage of products and services.

But his main message of the day was that Republicans are intent on ending the Medicare and Social Security entitlements enjoyed by Americans for many years and that the top job of House Democratic leaders will be to protect those entitlements. For his part, Stark shied away from predicting Democratic control, saying "the bananas of victory are too green for me to order new stationary."

"There is no question that for the most part the Republican Party and certainly . . . the White House would like to see Medicare end as an entitlement," Stark emphasized. Instead, it would be replaced with a voucher system in which seniors are given a fixed sum of money to shop for a private plan, he suggested.

A second consecutive year of the so-called "Medicare trigger," in which Social Security Trustees declare that general revenues will make up more than 45 percent of total Medicare spending within seven years, will be the "nail in the coffin" of the entitlement, he said. It would lead to Republican proposals that if enacted would end the program's current guarantee that beneficiaries receive a defined package of benefits regardless of the yearly Medicare spending total.

Trustees issued the first trigger warning earlier this year.

Stark said that if Democrats gain control of the House they will hold a series of oversight hearings, including on long-term financing of the program. Asked after his speech where he would go to finance Medicare for the baby boomers, Stark said that depends on the dimensions of the financing problem and even whether one exists in the short term. That needs to be studied, he said. The jury is out on that question and on whether economic productivity won't be sufficient to prevent shortfalls, a Stark aide added. Trustee projections are based on relatively pessimistic growth estimates, the aide said. She added that according to one analysis, reliance on historical rates of productivity growth would "evaporate the crisis."

Stark rejected suggestions Monday by former Centers for Medicare and Medicaid Services Administrator Mark B. McClellan that Medicare's viability can be sustained in the long term by charging wealthy beneficiaries more for Medicare benefits. McClellan said that Medicare is such a good deal on health care that wealthy people won't drop out of the program in large numbers if charges to them are increased and that if they do, they will come back into the program even with the penalties involved when their health care needs increase.

But Stark said of Medicare that "in fact it already is highly progressive." Its funding already is based on a "very linear" relationship between income and taxes, with an "absolutely flat universal benefit." He added that "for just that reason, everybody participates, and they participate on a fair basis." Since its inception, Medicare "has not been able to be branded as a welfare program," he said. But increasing premiums paid by the affluent even further would cost it vital political support, he suggested.

Stark told industry executives that it is in their self-interest to support the Medicare entitlement. "I just want all of you here to think about your revenues," he said. Health care companies are going to lose revenues if the Medicare entitlement is ended, and that lost revenue will be hard to replace. It "ain't going to come from the health care fairy," he said. "My pitch to the private sector, the Wall Street gang, is you can't afford to lose Medicare, and lose it you will if it loses its status as an entitlement."

Stark said Congress should minimize or prevent cuts in Medicare payments to physicians for a year while working out a plan with the Government Accountability Office and the Medicare Payment Advisory Commission for overhauling the current physician payment formula. Despite all the talk about cuts, however, he said that doctors' gross incomes, with the exception of family physicians, are on the rise.

Stark expressed skepticism about tying higher payments to pay-for-performance measures, suggesting that if doctors and pharmacists are licensed, it ought to be presumed they are delivering quality care. Once data systems are able to identify differences in treatment outcomes, payments could be made on a differential basis.

Stark also said it's time to adopt a standard program for health IT. "Somebody has to say, 'here gang, this is the program.' Period. And you know what? Whoever does it, it'll be wrong." Many providers will have to reprogram, retrain, buy new software, but "that's going to happen whatever plan is picked."

"So let's pick one now, and let everybody swallow their gripes, and get about improving it so that perhaps five years from now we have a system that everybody grudgingly is going along with and we would have a medical information technology system that would save us money, help with diagnostic work, and be a real boon to medical care in this country. But somebody is going to have to bell the cat. This idea that you are going to have 15 different proprietary plans out there all sharing information is bunk."

Down the road, Medicare will have to tell providers they won't get paid if they don't have electronic record systems, he said. Until then, the government is going to have to help providers pay for it. Providers might receive add-on payments for five years to purchase IT, he said—such as getting 10 percent add-ons to their payments the first year, 8 percent the second year, 6 percent the third year, 4 percent the fourth year, and 2 percent the fifth year.

Stark dismissed the idea that health IT donations by hospitals wouldn't be used to steer referrals. "If you believe hospitals are going to give out free software without having a big string attached, guess again," he said.

The notion of Stark's message as industry friendly only goes so far, of course. "Overpayments" to managed care plans in Medicare are unaffordable and must stop, he said. Managed care plans are paid much more than fee-for-service providers, but Medicare could save $60 billion over 10 years if payments were equal, he said.

Stark repeated the familiar Democratic charge that the Medicare drug benefit was designed to pump up drug company profits and said his party would seek to add a government-run plan to the mix of private prescription drug plans offered by Medicare. The government would be able to negotiate prices for the plan it sponsors, he said.

But with Democrats only in charge of the House "I don't think you're going to see major legislation for the next two years," he said. But Stark said there are more subjects for oversight hearings of Medicare than there are House hearing rooms. The functioning of Part D would be a prime but not an exclusive focus—not for "gotcha" hearings but to assure the smooth functioning of the program after years of no oversight, he said.

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