Health Care Industry Pledges to Slow Cost Growth

May 18, 2009

Health insurers, pharmaceutical manufacturers, and other major players in the US health care industry have promised that they will help stem the rate at which costs are rising by looking for ways to slice outlays by $2 trillion during the next decade. At a May 11 meeting with industry leaders, President Obama called the pledge “a watershed event.”

Health insurers, pharmaceutical manufacturers, and other major players in the US health care industry have promised that they will help stem the rate at which costs are rising by looking for ways to slice outlays by $2 trillion during the next decade. At a May 11 meeting with industry leaders, President Obama called the pledge “a watershed event.”

The groups that agreed to hold down costs-the Pharmaceutical Research and Manufacturers of America (PhRMA), AMA, Advanced Medical Technology Association, American Hospital Association, Service Employees International Union, and America’s Health Insurance Plans-gave broad outlines of their approaches, which include expanded use of information technology (IT), better treatment of persons with chronic diseases, and increased administrative efficiencies. The groups promised to provide more details in coming weeks. “We are committed to taking action in private-public partnership to create a more stable and sustainable health care system,” the groups wrote in a letter delivered to the White House the day before the face-to-face meeting.

The letter addresses “[the Obama] administration’s goal of decreasing by 1.5 percentage points the annual health care spending growth rate.” But the importance of the industry move is not so much in the specifics as in the tone. Unlike the early years of the Clinton administration, during which fierce industry opposition scuttled health care reform efforts championed by former First Lady Hillary Clinton, insurers and providers now look at changing the system as “much more of a collaborative process,” said Ronald A. Williams, Aetna chairman and CEO, after the meeting with President Obama. As health care changes are being drafted, private sector representatives will now be among those seated at the table. President Obama acknowledged that change, calling the letter “a recognition that the fictional television couple, Harry and Louise, who became the iconic faces of those who opposed health care reform in the ’90s, desperately need health care reform in 2009.”

Prediction: 75% of Physicians Will Be ePrescribing in 5 Years
When Congress included incentives for health care providers to adopt electronic prescribing (eprescribing) in the Medicare Improvements for Patients and Providers Act of 2008 (HR 6331), it was projected that by 2014, 40% of physicians would have adopted the technology, according to a study conducted by Visante for the Pharmaceutical Care Management Association. However, now that lawmakers have provided direct grants to practices to pay for the initial costs of eprescribing, it seems reasonable that at least three-fourths of all practitioners will be eprescribing in 5 years. Today, fewer than 15% of US physicians use eprescribing, the study authors indicated.

If, in fact, 75% of physicians eprescribe, the federal government will save $22 billion during the decade, and other payers will save $34 billion more, the Visante analysts predict, and the increase in the adoption of health IT will prevent 3.5 million adverse drug events and 585,000 related hospitalizations. Those estimates are based on the belief that when eprescribing systems provide physicians with cost information on alternative medications, they will more often opt for the least expensive drugs, especially moving more often to generics. Other savings will come from sending patients to the pharmacies that offer the lowest out-of-pocket costs and from reducing the additional care needed or when a pharmacist misreads a physician’s handwritten prescription. The study authors acknowledge that the new federal incentive payments, topping out at $44,000, are unlikely to cover the full cost of a provider who is transitioning to eprescribing. But, they note, “pay-for-performance measures implemented by the private sector will likely provide further financial inducement for providers to adopt the technology.”

Medicare Prescription Drug Coverage
No Part D Means Test- For Now

A proposal to make wealthier senior citizens pay more for Medicare Part D prescription drug coverage was rejected by the US Senate on April 2. The plan submitted by Sen John Ensign (R, Nev) as an amendment to the bill outlining the federal budget for fiscal 2010 called for individual beneficiaries with an adjusted income of more than $85,000 and couples with an adjusted income of more than $170,000 to pay higher premiums for the Part D benefit. The increases would have ranged between $11.31 and $64 a month, depending on the enrollee’s income, and would have reduced the program’s cost by an estimated $3 billion. The amendment was defeated by a 58 to 39 vote, with most of the Senate’s Republicans supporting the plan and most Democrats opposing it.

The defeat of the Ensign amendment, however, is not the end of the debate over adding a means test to Part D, as there is in Medicare Part B. As Sen Max Baucus (D, Mont), chairman of the Senate Finance Committee, emphasized during the debate on the Ensign Amendment, President Obama also favors a sliding scale of Part D premiums, based on the enrollee’s income. A proposal to that effect is likely to come from the Obama administration. The big difference is that Ensign’s plan would have applied the savings on the Part D program to reducing the federal deficit, while the President’s proposal will provide that the savings be spent on making other improvements to the nation’s health care system.

Texas Medicaid Ends Coordinated Care Plan
The Texas Health and Human Services Commission (HHSC) decided that its attempt to pilot a coordinated care model emphasizing preventive care has not worked. The agency terminated as of the end of May its contract with UnitedHealth Group to run the Integrated Care Management (ICM) program covering elderly and disabled Medicaid recipients. On June 1, those patients were rolled over into a traditional fee-for-service Medicaid program or the Star Medicaid program, an HMO. The contract with UnitedHealth’s Evercare division, which specializes in coordinated care for older patients and those with advanced illnesses, was scheduled to run through August 2010. The HHSC had paid UnitedHealth about $1.8 million a month to serve more than 74,000 patients in northern Texas.

The ICM program began on February 1, 2008, and by the end of 2008, the HHSC had received more than 1300 complaints about the way it was being run. The HHSC fined UnitedHealth more than $630,000 for inadequate staffing and other shortcomings. Some enrollees said that they had to wait months to be assigned a medical coordinator, and others complained about long delays in getting approvals for needed treatment.

UnitedHealth admitted having problems with the ICM program. The model “proved complex, often making it challenging to provide timely service to members. It was a massive undertaking,” said Beth Mandell, regional executive director for Evercare in Texas.

UnitedHealth also found it difficult to sign up enough physicians for the program. “We recently had a number of our primary care physicians in this area close their practices to new members without notifying us,” Mandell acknowledged after the state had announced the program’s termination.

Albert Hawkins, HHSC executive commissioner, promised that the failure of the Evercare program was not the end of the state’s attempt to provide coordinated care for its most difficult-to-treat residents. He said that the program might be tried again with another contractor or that the HHSC might design a new model to achieve the same goals.

In Other Legislative and Regulatory News . . . The Obama administration abandoned a plan to shift more of the costs of treating military veterans to private health insurers. Now, when insured veterans are treated at facilities run by the Department of Veterans Affairs (VA), the VA bills the veterans’ private insurers for the costs of illnesses unrelated to military service. The Obama administration budget for 2010 had proposed saving $530 million a year by also billing the private insurers for care for medical conditions that were related to a patient’s military service. But after an outcry from veterans’ organizations and many members of Congress that the change would make it harder for veterans and their families to obtain care, the Obama administration agreed to leave the current policy in place.

The FDA’s policy on when a prescription is necessary to purchase the Plan B contraceptive (levonorgestrel), also known as the “morning-after pill,” was declared by a federal trial court judge to be too restrictive. The drug, available in the United States by prescription since 1999, received FDA approval for nonprescription sales in 2006 to buyers older than 18 years. This requirement meant that pharmacies had to stock the drug behind the counter. Judge Edward R. Korman of the US District Court in Brooklyn, NY, found that “the FDA’s justification for this age restriction-that pharmacists would be unable to enforce the prescription requirement if the cutoff were age 17 rather than 18-lacks all credibility.” He said that the agency’s own data show that the drug can be used safely by women 17 years old and ordered the FDA to change its rules to make it available to such purchasers without a prescription (Tummino v Torti [No. 05-CV-366]). On April 22, the FDA notified Duramed Research, the maker of the contraceptive, that it may, on submission and approval of an appropriate application, market the contraceptive without a prescription to women 17 years and older.

The FDA has ordered all OTC pain relievers and fever reducers to add more stringent safety warnings to their labeling by April 28, 2010. The new labeling must alert consumers about the potential safety risks, such as liver damage and internal bleeding, associated with the use of these medications-especially if they consume 3 or more alcoholic beverages while taking the drugs. The rule also requires that the drugs’ active ingredients be prominently displayed on the labeling on both the packages and bottles.

Reducing prescription drug copay terms in health insurance policies so they are more in line with patients’ obligations for other kinds of medical care is a primary objective of the new chairman of the PhRMA. David Brennan, former CEO of AstraZeneca, also pledged to seek more funding for the FDA, greater emphasis on preventive care, and increased access to prescription drug coverage for the uninsured and underinsured.

An analysis of annual outlays by the Arkansas State and Public School Health Plan put some hard numbers on the additional costs of covering persons who engage in unhealthy behaviors. Compared with health care expenses for employees who did not smoke, were at normal weight, and were physically active at least 5 days a week, those for obese employees were 45% higher. Costs were 33% and 13% higher for physically inactive employees and smokers, respectively. For employees who self-reported all 3 unhealthy behaviors, health care costs were 86% higher.