MA Plans Face Harsher Rules for 2010

April 16, 2009

Medicare Advantage (MA) plans will feel a major effect next year from the switchover from the Bush administration to the Obama administration. One of the first actions taken by President Barack Obama-just 2 days after his inauguration-was to revoke the 2010 draft Call Letter that the Centers for Medicare & Medicaid Services (CMS) had issued for MA plans. The new draft Call Letter suggests harsher rules and more oversight in a number of specific areas.

Medicare Advantage (MA) plans will feel a major effect next year from the switchover from the Bush administration to the Obama administration. One of the first actions taken by President Barack Obama-just 2 days after his inauguration-was to revoke the 2010 draft Call Letter that the Centers for Medicare & Medicaid Services (CMS) had issued for MA plans. The new draft Call Letter suggests harsher rules and more oversight in a number of specific areas.

The replacement Call Letter puts new teeth into curbs on the marketing of MA plans by warning that “very strong action” will be taken against plans that try to subvert rules meant to prevent pressure sales practices. It also targets plans that have tried to respond to CMS limits on agent sales commissions on MA plans by paying what the CMS calls “exorbitant” fees for referrals. “Organizations must cease this practice immediately,” the new letter says.

The CMS also warns that it intends to do more to protect MA enrollees from “excessively high or unexpected cost sharing” by scrutinizing more carefully the outlays of enrollees in plans with an out-of-pocket ceiling that exceeds $3400 (or has no ceiling). The agency announced that rather than use its resources for routine audits, it will conduct “more targeted, data-driven, and risk-based audits.” One goal is to ferret out plans that discriminate against enrollees with costly long-term–care needs. In addition, the CMS is seeking new ways to determine medical loss ratios so beneficiaries can compare how much of a plan’s income from enrollee premiums and government subsidy is used to pay for care.

Separate from the draft Call Letter provisions, the CMS is preparing to lower payments to MA plans in 2010; America’s Health Insurance Plans (AHIP) estimates that this reduction will be about 5%. The CMS published a preliminary estimate of the national MA growth percentage of 0.5% based on the anticipated increase in reimbursement for all Medicare beneficiaries, regardless of the kind of plan they choose. AHIP spokesperson Robert Zirkelbach says that this will translate into lower compensation for insurers, suggesting that many will either offer fewer benefits or charge more for some benefits. MA bids are due from insurers by June 1.

The full text of the new 2010 draft Call Letter is available at http://www.cms.hhs.gov/ PrescriptionDrugCovContra/Downloads/Draft2010CallLetter.pdf. ?

Medicare Prescription Drug Coverage CMS Plans Part D Changes
The MA 2010 draft Call Letter (see above) also covers Part D prescription drug plans. It contains a ban on the use of reference-based pricing, a technique the CMS calls a “legitimate utilization management tool” but says is too complicated for many beneficiaries to understand and makes it difficult to calculate how much more it will cost to choose a brand-name drug over a generic version. The agency also had harsh words for the way many MA plans have met the filing deadline by sending in incomplete or inaccurate data, stating that the submissions are “so lacking in required information or correct detail as to fail to constitute valid, timely submissions.” Starting with applications for 2010, the CMS warns, filings that are incomplete or contain errors will be considered to have missed the deadline.

The CMS is also proposing to increase the standard deductible for Part D enrollees to $305, up from $295, and the initial coverage limit by $80 (to $2780), after which enrollees enter the “doughnut hole” coverage gap. ?

Does New FDA Head Signal Splitting Agency?
President Obama’s unexpected choice of Margaret A. Hamburg, MD, to lead the FDA sends a number of signals of his vision of the agency’s role. First, he is hoping that the FDA can operate with a minimum of controversy, thereby restoring the public’s confidence in the safety of the drug supply without alienating pharmaceutical manufacturers in a way that the appointment of a more outspoken critic of the industry (such as Steven E. Nissen, MD, chairman of the department of cardiovascular medicine at the Cleveland Clinic and past president of the American College of Cardiology) would have done. Hamburg “appreciates the vital role of industry,” noted Harvey V. Fineberg, MD, PhD, president of the Institute of Medicine (IOM).

Another signal indicated by the selection of Hamburg and that of Baltimore health commissioner Joshua Sharfstein, MD, for the agency’s number 2 slot (deputy commissioner) is a recognition that “the FDA is a public health agency, and to have 2 public health leaders at the helm is a clear signal of the right direction for the agency,” said Ray Woolsey, MD, president of the Critical Path Institute, the think tank that is the FDA’s vehicle for developing innovative ways of approaching new drug applications.

From 1991 to 1997, Hamburg served as health commissioner of New York City; after that, she was assistant secretary for policy and evaluation at the Department of Health & Human Services (HHS), overseeing strategic planning. Since 2001, she has worked on bioterrorism issues as vice president of biological programs at the Nuclear Threat Initiative. Both she and Sharfstein served as members of the HHS team planning for the Obama administration transition.

The twin appointments send a third signal. The FDA’s duties in overseeing food and drug safety are increasingly less related, and many Washington insiders have suggested that it would be more efficient to have 2 separate agencies. Peter J. Pitts, president and cofounder of the Center for Medicine in the Public Interest and a former FDA associate commissioner for external relations, views the choices as evidence that President Obama backs such a split. “I think Dr Hamburg will become the commissioner of food, since she’s a safety and security person, and then Dr Sharfstein would slide into the FDA, which would become the Federal Drug Agency,” Pitts predicted. Both Hamburg and Sharfstein are from families that are deeply involved in health care.

Both sets of parents are physicians; Hamburg’s father was head of the IOM, and Sharfstein’s father is a past president of the American Psychiatric Association. ?

Major Drug Policy Changes in 2010 Budget
Although details of the Obama administration’s budget for the 2010 fiscal year beginning on October 1 were not scheduled to be released until April, the outline issued on February 26 revealed that a number of major changes in drug policy are being considered.

One proposal is to begin a 10-year phase-out of subsidies paid to companies that offer MA plans. This provision will cut an estimated $176.6 billion from the cost of the program during the period, according to the Office of Management and Budget (OMB), but it is opposed by the AHIP. “A cut of this scale would jeopardize the health security of more than 10 million seniors enrolled in MA plans and would turn back the clock on innovative payment incentives to improve the quality of care,” warned Karen Ignagni, president and CEO of the AHIP.

The budget also proposes saving another $316 billion during the decade via a combination of changes in the Medicare and Medicaid programs, including squeezing the prices paid for drugs under Part D and requiring a discount of 22.1% on drugs sold for the Medicaid program, up from the 15.1% currently required. The plan also calls for higher Part D premiums for beneficiaries with annual incomes above $85,000.

In addition, the budget contains 2 other changes in US policy that would reduce the prices paid for drugs under both federal and private programs. One policy change would end the ban on the reimportation of prescription drugs from outside the United States; prescription drug prices are substantially lower in other countries. The other change would pave the way to lower the cost of biologics by creating a pathway for “generic” versions of them to be approved for marketing. That change alone is projected to save an estimated $9.2 billion in the Medicare program over 10 years. The budget also calls for new curbs on maneuvering by pharmaceutical manufacturers of brand-name drugs to delay the introduction of generic versions after patents expire.

There is also a promise of a “substantial increase” in the FDA’s budget to help the agency more effectively ensure the safety of drugs sold in this country. Increased spending is also projected for research on autism and for HIV/ AIDS programs.

All of the budget proposals require action by Congress, where opposition to most of them will be intense. “Every ox that’s gored is going to begin to bellow and stomp its feet,” predicted Robert D. Reischauer, PhD, president of the Urban Institute and former OMB director. “Whether the Congress will have the gumption to go ahead at a time when there are other huge problems facing the nation is, I think, an open question.”

The full budget outline is available at http: //www.WhiteHouse.gov/OMB/budget. ?

In Other Legislative and Regulatory News . . . The US Department of Justice (DOJ) accused Forest Laboratories of unlawfully promoting the unapproved use of citalopram for the treatment of children with depression, even though the company’s top executives knew of studies that showed the drug to be ineffective in children. The FDA had refused to approve Forest’s application to market its 2 forms of the antidepressant, Celexa (citalopram) and Lexa- pro (escitalopram), for use in children. The government charges that nonetheless the company pushed such off-label uses for their brands and gave lavish kickbacks to physicians to encourage them to prescribe the drugs. In the complaint, the DOJ asks the US District Court in Boston to order the company to pay back to the government triple the amount it spent on reimbursements for pediatric use of the drugs in federally funded programs. Forest announced that 11 states and the District of Columbia were planning to join the action (US v Forest Laboratories [No. 03-10395]).

An amendment to the North Dakota Constitution that would have ensured the right of every resident to buy private health insurance will not be going to the voters. The measure, sponsored by Rep Jim Kasper (R), was defeated in the lower house of the state legislature by a 77 to 16 vote. The intent was to preserve the private plan option in case Congress moves to enact a government-sponsored health insurance program. However, lawmakers were persuaded to vote “no” by the argument that the provision would be unenforceable because any federal program would likely override state mandates.

A bill to limit drug marketing was defeated in the Colorado Senate. The legislation introduced by Sen Morgan Carroll (D) would have banned the sale of patient prescription drug histories for use in marketing campaigns and gifts from pharmaceutical manufacturers to prescribers. Members of the Business, Labor, and Technology Committee voted 6 to 1 against sending the bill to the full Senate, concerned that it might hurt Colorado’s bioscience industry and prevent physicians from learning about new drugs or receiving new information on older drugs. ?