Posts Tagged ‘cost containment’

Delay of Generics Hurts Consumer and Taxpayer Wallets and Patient Health

Monday, March 11th, 2013

This spring, the U.S. Supreme Court faces several decisions that will impact millions of people: legal challenges to the Defense of Marriage Act (DOMA) and the Voting Rights Act, for instance. But another case getting less media attention will affect all Americans who pay health care premiums or taxes.

The Supreme Court will decide whether the increasingly frequent practice of brand-name drug companies paying off their competitors to keep new generics off the market is a violation of antitrust law. As former Federal Trade Commission (FTC) attorney David Balto told Politico “There’s no other case that can have as much impact on reducing health care costs.”

This practice, called “pay-for-delay,” has skyrocketed since an appeals court decision allowed the first such deal in 2005. Since then, over a hundred pay-for-delay deals have delayed generic versions of 20 to 30 brand-name drugs each year, according to federal regulators at FTC.

There is no question delaying access to generic drugs harms consumers. That’s why Community Catalyst has helped consumers and advocacy organizations join legal challenges to pay-for-delay deals that blocked consumer access to generics of Provigil, K-Dur and Tamoxifen for years. We have also filed or joined Amicus briefs, and organized national and state-based advocates calling on Congress to ban pay-for-delay agreements.

Recently, Politico ran another story about how one defendant drug-maker in the case (Solvay Pharmaceutical) claimed that these pay-for-delay agreements don’t harm consumers, a position echoed by the generic drug industry’s trade group GPhA. But the FTC, U.S. Department of Justice, Attorneys-General in 36 states and consumer advocates all disagree. Why? Because access to generic drugs brings big savings for consumers and health plans. Look at GPhA’s own data that estimates access to generic drugs has saved consumers and our health care system more than $1 trillion from 2002 to 2011. That’s because generics cost one-fifth to one-tenth as much as brand-name drugs.

How the System’s Supposed to Work

Traditionally, generic drug companies wait for the patent on a brand-name drug’s active ingredient to expire and then file an application with the FDA to bring the generic version of the drug to market. Then the brand-name drug company sues the generic drug company, claiming some “patent infringement.” But in nearly all cases, the drug itself is off-patent. So the infringement is of a “secondary” or “defensive” patent that addresses some minor detail, like how the drug is formulated into a pill, or some step in the manufacturing process. The generic drug company then defends themselves from the litigation, and if they win, they launch their generic right away.

How Pay-for-Delay Deals Broke the System

Since 2005, generic and “BigPharma” companies have decided to do what the federal and state anti-trust regulators see as collusion. During litigation, the brand-name drug company offers to settle the patent infringement lawsuit they filed by paying tens or even hundreds of millions to the generic company, which then agrees to not to start selling a generic for several years. Pay-for-delay settlements are very suspicious, not only because they are made in secret but also because the payments are going the wrong way. Usually the patent-infringer is forced to pay if they violate someone else’s patent. But in these pay-for-delay settlements, these roles are reversed.

For example, Bayer sued four generic manufacturers, saying, in essence: You have infringed the patent on our blockbuster drug Cipro. To show you how angry we are, we will pay you 400 million dollars. But only if you stay off the market.

As a result, consumers did not have a generic version of the antibiotic Cipro for another seven years, while Bayer made billions in unfair profits. Overall, these so-called settlements have caused consumers and their health plans to pay tens of billions right into the pockets of the brand-name drug companies. This creates a powerful incentive to collude and delay competition as long as possible. For the millions who are underinsured, delaying a generic can force patients to pay thousands of dollars a year, or go without needed medicine.

One story we collected from a consumer from Kansas describes his struggle to afford Provigil, whose generic was delayed from 2006 to 2011 by pay for delay. He reported: “[Despite] paying almost $17,000 in annual premiums for my family [health insurance plan] last year, I was paying around$650/month [for Provigil]… That is out of pocket money I have to come up with until later in the year when I reach my deductible [sic] and I can enjoy a few months of only paying $60/month. I cannot describe to you how much stress and difficulty this has caused for me and my family the last several years…”

The real question is whether the high court will allow these secret deals and legal maneuverings to continue? Or will it restore legitimate competition to this market, lowering health care costs and ensuring better access to affordable medicines for all Americans?

Stay tuned. We will be blogging regularly about this case as it unfolds and calling attention to how pay-for-delay deals harm consumers and increase the cost of health care.

Wells Wilkinson, JD
Staff Attorney, Community Catalyst

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Posted in prescription drugs, Uncategorized | No Comments »

Anti-fraud efforts by Attorneys-General and the Department of Justice are reaping billions more than expected

Friday, May 25th, 2012

The Affordable Care Act created some desperately needed means to start controlling ever-rising health care costs. Many — like preventive care or delivery reforms — will take some time to realize savings. In contrast, new anti-fraud efforts look to be paying off right away, in amounts much bigger than expected.

The health reform law provided $350 million over ten years to increase anti-fraud investigation and enforcement resources for the Department of Justice (DOJ) and State Attorneys-General. The goal? Saving $6.4 billion over the next decade. Given that some estimate that fraud and waste cost as much as $60 billion a year, or $600 billion over a decade, saving one percent of that amount seems a pretty modest impact.

But wait! New estimates project that current or pending settlements of drug fraud litigation by the DOJ and the Attorneys-General will top $8 billion in FY2012 alone, according to the group Taxpayers Against Fraud. (See their list below.) This is not the culmination of hundreds of lawsuits; it’s just the eight biggest. So it looks like this anti-fraud effort under the ACA will meet and then surpass this ten-year goal in less than two years!

To be fair, some of these fraud investigations were undoubtedly underway before the increased funding for anti-fraud efforts reached the DOJ and State Attorneys-General offices. But there is little doubt that providing these over-worked regulators with increased resources was a big help in increasing enforcement. DOJ probably has fewer lawyers working on all their pending drug fraud cases than some of the biggest drugmakers hire to defend in just one lawsuit. But despite these disparities, the results show that very modest government investment in fighting fraud, coupled with hard work by government lawyers and whistleblowers, can pay off big.

For example, earlier this week drugmaker Abbott Labs in Chicago settled a civil and criminal investigation of their illegal promotion of the anti-convulsant drug Depakote as an unapproved treatment of dementia in seniors, and of various conditions in children. Abbott pleaded guilty to promoting these unapproved, or ‘off-label’ uses of Depakote, and agreed to pay $1.6 billion – one of the biggest settlements for the illegal promotion of a single drug.

There could be a couple hundred pending whistle-blower lawsuits that are filed under seal and being investigated now by the federal or state regulators. These pending lawsuits may add up to billions of dollars of additional settlements.

Some critics have warned that even billion-dollar fines are an inadequate deterrent when a drug company can profit far more on illegal sales of a drug.

For instance, the $1.2 billion record-breaking settlement with Eli Lilly in 2009 for illegal promotion of their antipsychotic drug Zeprexa was less than 5 percent of Lilly’s gross sales. Yet eight months later, DOJ shattered this record with an even bigger $2.3 billion settlement with Pfizer, which amounted to 14 percent of their gross sales of eight illegally marketed drugs.

Similarly, this month’s $1.6 billion Depakote settlement is nearly 12 percent of the drug’s $13.8 billion in gross sales revenue from 1998 to 2008. Furthermore, DOJ is pioneering two mechanisms to deter future illegal conduct by Abbott, along with this hefty fine.

First, the Depakote settlement places Abbott on probation and imposes a corporate compliance and monitoring program, for five years. If Abbott violates the compliance agreement or significantly violates the law, the government can exclude Abbott, and all their drug products, from federal health care programs. That would cost Abbott billions in lost sales on numerous drugs.

The settlement also aims to hold Abbott’s corporate leadership accountable. Abbott’s CEO must personally certify compliance and the board of directors must review and report on compliance each year. If the CEO or board is lax in these duties, they could be excluded from their positions at Abbott. And if they intentionally lie to the government to cover up any misconduct, they could face personal criminal liability under the federal False Statements Statute.

Sadly, Abbott’s illegal promotion of ineffective and dangerous uses of Depakote has both harmed and put at risk what is arguably the most vulnerable patient population – seniors suffering from dementia, who live away from their families in nursing homes. Undoubtedly millions of seniors were and continue to be given Depakote inappropriately as a result of Abbott’s illegal promotional campaign.

More to come in Postscript, our prescription-focused blog, on (1) actions that Medicare and Medicaid can take to address the continuing effects on patients of illegal promotions of off-label use of drugs and (2) how the Arkansas AG fought prescription drug fraud, winning huge fines to plug the state’s Medicaid budget deficit.

– Wells Wilkinson, Director, Prescription Access Litigation
Staff Attorney, Community Catalyst

Projected Drug Fraud Settlements in FY 2012

Manufacturer Settlement($,millions) Fraudulent conduct
Merck: 950 Off-label marketing of Vioxx — settled
GlaxoSmithKline 3,000 Series of drug frauds, said to be settled in principle
Abbott: 1,500 Off-label marketing of Depakote, settled
Amgen 780 illegal marketing of Aranesp, funds reserved.
Pfizer 500 Illegal marketing of protonix, projected settlement amount
Johnson & Johnson 1,000 Off-label marketing of Risperdal, civil settlement is expected.
Ranbaxy 400 adulteration of HIV drugs, settlement in excess of $400 million expected
Sandoz (Novartis) 150 AWP pricing fraud, settled
TOTAL 8,280

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Posted in Affordable Care Act implementation, prescription drugs | 2 Comments »

IOM releases its long awaited EHB Guidance: Tough Medicine

Tuesday, October 11th, 2011

As the Institute of Medicine (IOM) unveiled its report on Essential Health Benefits (EHB) on Friday, there were few surprises.  The panel delivered a high level outline for selecting benefits with a strong recommendation that cost consciousness be its guiding principle.

Learn more about EHB process here and strategy here.

The IOM panel was tasked with outlining what criteria should be used to determine a minimum set of benefits for new health plans in the individual and small group market starting in 2014; these benefits serve as the benchmark for new Medicaid plans. The 300-plus page report recommends a framework for Health and Human Services (HHS) to use as they build the EHB package. The headline from this report is: cost before benefits. 

This is a disappointment for advocates. Shifting the focus from robustness to predefined cost parameters could leave many Americans underinsured. In recognition of the difficult task presented to the panel, cost is an important factor in determining health benefits. As correctly noted in the report, “the more expansive the benefit package was, the more it was likely to cost and the less affordable it would be. How to balance the competing goals of comprehensiveness of coverage and affordability was “key.” However, making cost the guiding decision point rather than a factor of many alters the conversation from what is a good package for consumers to how much does that benefit cost?

Affordability doesn’t just mean lowest cost. Rather, getting people what they need at a price that they can afford is paramount. Too much emphasis on costs risks achieving the lowest premium possible without regard to the health needs of consumers. 

The report guides HHS through five areas: 1) defining the EHB and developing a target premium; 2) public deliberation; 3) monitoring the EHB; 4) allowance for state variation; and 5) updating the EHB.

Consumer advocates will play an important role in each of these areas – particularly in defining priorities through public input. The IOM recommends that HHS hold public hearings or small group discussions throughout the country in order to aid in priority development. This is an opportunity for consumer advocates to voice their concerns and offer recommendations to HHS about services to include in the EHB package. 

The panel also recommends that the package be released for comment to HHS by late spring 2012.  For consumer advocates, this means a short time frame of influence.

A second priority for consumer advocates that is next in the development of the EHB package is how states will respond to it. By encouraging state-tailored options, the IOM suggests that there can be some state variation in the package. This may alleviate some stress regarding the many state mandates that exist in states – ranging from 13 in Idaho and 69 in Rhode Island – yet raises other concerns about exclusion of benefits.

Many challenges lie ahead for consumer advocates, including coordinating state- based consumer health care coalitions to respond to EHB. These coalitions can play a pivotal role in protecting consumers: a voice at public forums, a watch dog of EHB implementation from 2014 and beyond, and a feedback loop for HHS. The EHB will continue to change over time and advocates can play a key role in influencing EHB development.

IOM suggested timeline:

May 2012:  HHS has developed an EHB package with a national premium target based on typical small and individual market plans

January 2013:  HHS should develop a framework for data collection and analysis for purposes of monitoring implementation and updating the EHB package.

January 2016: The Secretary should update the EHB to make it increasingly more specific, and update annually.

-Eva Marie Stahl, Policy Analyst

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Posted in Affordable Care Act implementation, care coordination/quality, Uncategorized | No Comments »

A Tale of Two Deficit Reduction Approaches

Friday, April 15th, 2011

In his speech on Wednesday, President Obama laid out his plan for deficit reduction, and last week, Congressional Republicans released their 2012 budget proposal. Both plans reduce federal expenditures on Medicare and Medicaid, but they take strikingly different approaches. What are the key takeaways for health advocates?

Takeaway #1: The president gets the big picture right on key health care issues. Before the president’s speech, we laid out three key issues health advocates should be listening for. Between his speech and accompanying documents, it’s clear that the president is in a resoundingly good place on all three issues:

1. The president explicitly rejected proposals to turn Medicare into a voucher program and to convert Medicaid into a block grant. These approaches, the backbones of the 2012 Congressional Republican budget, do nothing to tackle the underlying drivers of health care costs. Instead, they shift these costs onto those who can least afford them: seniors, people with disabilities, and low-income families.

2. The president also understands the harm imposed by federal spending caps. While this is less clear from his remarks, follow up with White House officials makes it clear that the administration understands that a global cap is just a back door to turning Medicaid into a block grant and Medicare into a voucher.

3. He articulated an alternative, far more rational approach to cost containment, which builds on foundation of the Affordable Care Act. The president identified key approaches to build on the cost-containment structure laid out in the ACA. For example, he suggests strengthening the mandate of an independent commission of doctors, nurses, medical experts and consumers, created by the ACA, to weed out wasteful spending in Medicare without reducing benefits or increasing seniors’ costs. He also proposes using Medicare’s purchasing power to negotiate lower prescription drug prices for America’s seniors. And he recommends changing the way we reimburse for health care services, moving us away from a system that pays providers for more services and towards one that pays providers for better health outcomes.

(For more on the ACA’s approach to cost containment and how it can be enhanced going forward, see our one page graphic and issue brief.)

Of course there are still many details of the president’s proposal to be filled in, and there are some concerns about specific elements such as the overall size of the proposed Medicaid cut and new limits on states’ ability to tax health care providers to fund Medicaid. But it’s also important to put the President’s proposal in context, which brings us to…

Takeaway #2: The president’s approach presents a stark contrast to the one endorsed by Congressional Republicans. This contrast is most obvious in two key areas:

1. Reducing costs vs. shifting costs. As we laid out above, the president’s approach looks to reduce health care costs primarily by tackling their underlying causes.

Congressional Republicans, on the other hand, treat rising health care expenditures like a game of “hot potato”: they merely toss these costs onto states, seniors, people with disabilities, health care providers, and other vulnerable families. First, they turn Medicaid into a block-grant program that, by design, would not keep up with rising health care costs. This would impose crippling burden on states, leading to rollbacks in health care coverage for millions of nursing home residents, people with disabilities and low-income children and families. It is no exaggeration to say that some would die as a result.

Second, they end Medicare as we know it and replace it with a voucher that seniors would use to buy coverage on the private market. These vouchers, like the block grants above, are designed not to keep up with rising health care costs, leaving seniors to pay an ever-increasing share of their health care costs. According to the nonpartisan Congressional Budget Office, under this plan the average senior would shoulder $6,000 more in annual out-of-pocket costs by 2022.

2. Bank accounts of millionaires vs. health security for seniors, people with disabilities and low-income children. Unlike President Obama, the Congressional Republicans would extend Bush-era tax cuts for the wealthiest Americans. Under this plan, the average person earning at least a million dollars a year would receive an average tax cut of $125,000 per year. Through severe cuts to Medicaid and Medicare outlined above, Congressional Republicans essentially force America’s most vulnerable citizens to finance these tax cuts for its wealthiest citizens.

These contrasting budget proposals offer us a clear choice: We can maintain and improve health security for American families, or we can have tax cuts for the wealthiest people and corporations. We can’t have both and still reduce the deficit. The American people have already indicated their policy preference—for example, three quarters think Medicaid funding should either be kept the same or increased, and 70 percent would prefer shielding the program from cuts to using it for deficit reduction.

The president is clearly listening. Is Congress?

– Katherine Howitt, Policy Analyst and
Michael Miller, Policy Director

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Posted in Affordable Care Act implementation, Medicaid | No Comments »

Obama’s Speech Today: A Listeners Guide for Health Care Advocates

Wednesday, April 13th, 2011

Later today when the President speaks about the national debt, what should health care advocates be expecting and hoping to hear? Given that long-term projections of rising public debt rest almost entirely on growth in health spending, we should expect at least some substantial attention will be paid to health care cost containment. However, don’t expect a detailed prescription. 

Since the President is addressing the public at large, he is unlikely to get too deep in the policy weeds, but there are a few key things health care advocates should be listening for (even if only “between the lines”):

Does the President address block grants and vouchers?
We should expect the administration to reject explicitly or implicitly both a Medicare voucher and a Medicaid block grant. It’s notable that two of the President’s top health policy advisors were leading public opponents of Medicaid block grants during previous efforts to transform the program, and it is very unlikely that the President will move off of this position.  This is where we should expect the most clarity as the President works to distinguish his approach from the one laid out by Congressman Ryan in the context of the FY2012 federal budget.

Does the President endorse a global federal health spending cap a la Bowles-Simpson?
While the Bowles-Simpson debt reduction plan does not call for either a Medicaid block grant or a Medicare voucher, it does call for limiting the growth of federal health spending to the rate of GDP plus one percent. Such an inflexible spending target would fail to allow for growth in the number of elderly or Americans with disabilities, an economic downturn, an epidemic, or changes in health care delivery that bring substantial benefits but also new costs. While we can expect the President to be somewhat clear in rejecting a block grant or voucher, his position on a global spending cap is truly unknown. Since the spending cap approach has garnered some favorable attention from a bipartisan group of Senators working on a debt reduction plan, a signal of Presidential approval or disapproval of this position could be very important. Silence on this point would also be important and would likely be interpreted on Capitol Hill as a green light to continue to negotiate a global spending cap.

Does the President offer a rational framework for reducing health care spending, consistent with the Affordable Care Act?
One of the big lies about the ACA is that it doesn’t tackle health care cost containment.  In fact, the ACA approaches cost containment in a very rational way.  If you look at the sources of excess health care spending in the U.S. relative to the rest of the world, you see that high prices and high administrative costs, particularly in the private sector, are among the main causes. Within public programs, high administrative costs and high prices are much less of an issue (with prescription drug prices for Medicare beneficiaries being a notable exception). Instead, the sources of low-value public health care spending primarily include preventable hospital and nursing home admissions, preventable complications (such as infections and other medical errors) and improper payments. Finally, any long-term cost containment approach must include improvements in the underlying health of the population.

The ACA already tackles all of these issues with: Exchanges, Minimum Medical Loss Ratios, beefed up rate review, enhanced payment oversight for Medicare and Medicaid, new Medicare and Medicaid payment and delivery models, investments in community care and improving transitions between hospital and community, major investments in public health and more. 

Of course more could be done, but generally that would require reopening some of the deals that were negotiated in the context of the ACA debate.  It will be instructive to listen for clues as to whether President Obama stands behind the cost containment path chartered by the ACA and whether he indicates a desire to go further down that road, or if he signals a change in direction—one that would involve placing more of a burden on elders, people with disabilities, and low-income children and families. 

Stay tuned for follow up analysis tomorrow.

- Michael Miller, Policy Director

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Posted in Affordable Care Act implementation, Medicaid, Uncategorized | 1 Comment »

The Insider: Wishful Thinking

Wednesday, January 19th, 2011

Wishful Thinking Part One: The Vanishing Voter Mandate for Repeal
After a pause to remember those who were killed or wounded in Tucson, Congress is set to resume work this week, and the first order of business is a House vote to repeal the Affordable Care Act (read Community Catalyst’s statement opposing repeal here). As they move to take up repeal, the House leadership claims a popular mandate for repeal. A closer look at public opinion reveals that this “mandate” is nothing more than a figment of their imagination.

Unfortunately, polling questions that lack nuance will yield misleading results. Simple questions about repeal tend to track overall numbers for oppose/support. For example, a recent Gallup poll reported 46 percent supporting repeal and 40 percent opposing. These numbers fail to capture the significant percentage of the population who say they are opposed because they don’t believe the new law goes far enough.

When pollsters make the effort to dig deeper into public attitudes it turns out that repeal is much less popular. According to a recent ABC News poll, only about 15 percent of the population actually supports total repeal. Similarly, a recent Marist poll, while finding a larger percentage (30 percent) favoring total repeal, found that more people support expanding the law even further (35 percent).

If lawmakers were really listening to their constituents, they would give the ACA a chance to work rather than wasting time with a symbolic vote meant as a sop to the far right.

Wishful Thinking Part Two: Public Opinion-based Budgeting
Aside from claiming a mandate that doesn’t exist, Congressional Republicans have taken the radical step of replacing the CBO with the “Congressional Polling Office,” or CPO. Instead of relying on independent fiscal analysts to evaluate whether the ACA saves money, Republicans will determine whether the legislation raises or lowers the deficit based on what people believe. Other important economic effects, such as the effect of the ACA on job creation, will also be determined by public opinion rather than analysis. Using CPO estimates instead of those pesky numbers from the CBO, which show that repeal will increase the deficit by $230 billion over the next ten years, spares the new majority the embarrassment of having to disregard their own newly enacted rules that require legislation that raises the deficit to be “paid for.”

Cost Containment: There’s a right way and a wrong way
The recent report on national health care spending issued by the CMS Office of the Actuary highlights the importance of not disconnecting efforts to contain health care costs from the mission of revamping the health care system. The report shows growth of health care spending slowed during the 2009 recession. The biggest reason was that fewer people had health insurance. Reducing the number of people who have insurance saves money, but does it the wrong way: by undermining the goals of health insurance, which are to protect people against the cost of illness and facilitate their access to care.

The ACA, in contrast, tackles the problem of cost containment in the right way. Initially, it expands coverage without increasing costs. Over the longer run, it reduces health care spending by improving quality and efficiency.

While we’re on the subject of the right and wrong ways to reduce costs, it bears repeating that the wrong way to reduce federal health care spending is to decouple it from efforts to reduce the rate of growth of health care overall and instead substitute arbitrary spending caps. This was an idea that was advanced in the Rivlin-Dominici report on deficit reduction. We can expect efforts to revive the idea in the context of the upcoming debate over lifting the debt ceiling. It is important not to lose sight of this debate because, while many activists are gearing up for a fight to protect Social Security, it is health care (Medicare, Medicaid and the ACA affordability credits) that pose a greater long-term challenge to the federal budget and are at greater risk of being undermined.

Caution: Mad Scientists at Work
States are called the laboratories of democracy, but sometimes those labs can give birth to bad ideas as well as good ones. Two bad ideas being promoted at the state level are a call to eliminate the ACA ban on reducing Medicaid eligibility (known as the “Maintenance of Effort” requirement or MoE) and legislation being introduced in several states to criminalize implementation of the ACA.

Eliminating the MoE is a “wrong way to contain costs” idea a number of Republican Governors are embracing. It would lead to further reductions in the number of people with health insurance and increase cost-shifting onto the private sector. At the same time, it would fail to do anything to improve the way our health care system operates. Also, if states go backward on eligibility now, they will face increased implementation costs in 2014, making implementation more difficult.

Criminalizing the ACA
A number of legislators have filed legislation making it a crime to enforce the provisions of the ACA . See, for example, this proposal from Maine. (While such legislation, were it to pass, would likely be found unconstitutional, its purpose, like many other state nullification efforts, is not to make policy but to rally the opposition.) An effective response requires supporters to engage on the issue of what we want our health care system to look like on our own terms. Check out Community Catalyst’s list of the top 10 things activists can do in 2011 to keep the pressure on for quality affordable health care.

– Michael Miller, Policy Director

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The Insider: The Political Ecology of Health Reform Implementation

Wednesday, May 5th, 2010

Throughout the debate on passage, pollsters regularly found that the public wanted a “bipartisan solution” to health reform. Of course, no such solution was forthcoming if by bipartisan we mean something that attracts votes from members of both parties. As implementation moves forward, the partisan divide looks, if anything, to further grow.

The persistence of these bipartisan wishes suggests that many Americans do not fully appreciate the extent of the rightward shift in the Republican Party. This can clearly be seen in the standing of Republican Governor Charlie Crist of Florida, now a candidate for the U.S. Senate who recently decided to run as an independent after he was overtaken in the primary polls by tea-party favorite Marco Rubio. Crist, while less extreme than former governor Jeb Bush, is no liberal. But he finds no home for himself in today’s Republican party. Similarly, Utah Senator Robert Bennett is at risk of losing his party’s nomination to a challenger on his right, even though he has an 84 percent lifetime favorability rating from the American Conservative Union.

Another marker of this shift is the sharp contrast between the support for reform of recent Republican leaders such as former Senate Majority Leader Bill Frist from the pronouncements of today’s party leaders. Even some of the moderate Republican governors who have been more supportive of reform—e.g. Connecticut’s Rell, and Schwarzenegger—are about to exit the political stage.

If the elections were held today, most projections show that the Republican Party, increasingly indistinguishable from the extreme far right, would claim a significant though not decisive victory, bringing into office a new crop of officials publicly committed to repeal of reform.

That’s the bad news.

The good news comes in two parts:
a) Even if there is an electoral tsunami, the repeal strategy faces enormous hurdles and
b) While the repeal torch burns as hot as ever for the true (un)believers, there is some indication of an upswing in support from the general public.

The latest Kaiser poll shows 49 percent of the public supports reform, compared to 40 percent who are opposed. Importantly, all of the early implementation provisions rack up big majorities among Republicans and Independents as well as Democrats.

The popularity of these measures muddies the message of the repealers–but only if people know about them. Educating the public about the early provisions of reform, then, is crucial not only to make sure that people get the new benefits, but to influence the future political environment in which reform will be implemented.

Insurance Rate Regulation and Beyond
When it rains it pours for insurance giant Wellpoint. Last week it was outed for its aggressive policy of trying to dump women with breast cancer from its rolls. Then it withdrew its controversial proposal for a 39 percent premium rate increase in California, admitting that there were errors in its calculations but claiming those miscalculations were inadvertent.  (In related news, the company has announced it will be putting the Brooklyn Bridge on the market to help recoup the revenue from the cancelled rate increase, but so far no buyer has stepped forward).

Even taking the company at its word, Wellpoint’s debacle illustrates the need for stronger rate oversight. Leaders of the Senate HELP committee continue to debate the options for moving the Feinstein rate oversight bill, S.3078, which also picked up an important endorsement from the American Cancer Society/Cancer Action Network. Companion legislation has been filed in the House by Illinois Congresswoman Jan Schakowsky.

At the same time, advocates need to be mindful that strong oversight of insurance premiums is a necessary but not sufficient piece of the cost-containment puzzle. The anti-trust investigation into possible monopoly pricing by Partners Healthcare—the largest hospital system in Massachusetts—illustrates a pervasive problem in the U.S. health system. While it remains to be seen if there was anything actually illegal in Partners’ negotiating strategy, the issue of concentrated provider power is real and not confined to Massachusetts. (See this recent report on the effect of market power on health care costs in California.)

In fact, the high prices that we in the United States pay for health care across the board add much more to our high costs than do the mix or amount of services we use, as Ezra Klein shows here. On a series of charts comparing the prices U.S. insurers pay to those of other countries–regardless of procedure or number of appointments–“the block representing the prices paid by American health-insurance plans [looms] over the others like a New York skyscraper that got lost in downtown Des Moines.”

Sure, it’s fun to pick on the insurers, and certainly they deserve it. But we can’t approach cost-containment like the drunk looking for his keys under the streetlight–not because that’s where he dropped them, but because that’s where the light is. Going after the insurers may represent the low-hanging fruit, but the sustainability of health reform will depend on effective cost-containment–and that means taking a close, hard look at the delivery system.

–Michael Miller, director of strategic policy

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Posted in Health Reform Insider, national health reform, Repeal Watch | No Comments »

Immigration, Choice, and the Cost Containment Condundrum

Monday, November 16th, 2009

3882780399_b1fc48da7e_mThroughout the reform debate, a constellation of key issues—financing, affordability and the inclusion and design of a public insurance option—have been key focal points of discussion.  Now, as reform inches closer to the finish line, another set of issues that have always been present but have received less attention are taking new prominence.  Reproductive rights and immigration, two issues that the Obama administration and Congressional leadership were hoping to keep off the table during the health reform debate, are now at the heart of the discussion.

Concerns that the bills as written do not do enough to “bend the cost curve” are being voiced more strongly, but aggressive cost containment action risks upsetting the fragile support for reform among health-industry stakeholders.  In other corners, advocates are raising concerns that reform does not do enough to improve coverage for children, and may actually leave some children worse off.  This issue of the Insider gives an overview of each of these difficult issues, and where the debate seems to be heading.

Choice: Getting Beyond Getting to No
As the House was taking a historic vote last week to pass a major health care overhaul, a long-simmering conflict over abortion burst into the open and now complicates further action.  In order to secure a narrow victory in the House, leadership agreed to allow a vote on the Stupak amendment, which went beyond the compromise that had previously been approved by the House Energy and Commerce Committee and the Senate Finance Committee.  The Stupak amendment, named after Rep. Bart Stupak (D-MI), precludes coverage of abortions in the public insurance plan and also in any plan sold through the Exchange that receives subsidy dollars.  After intense lobbying by the U.S. Conference of Catholic Bishops and conservative Protestant groups, the amendment passed, and though pro-choice members of the House voted against it, they were left with a choice of voting for a health reform bill with Stupak, or rejecting health reform entirely.

As we know, they voted to keep health reform legislation moving forward. But as many as 40 House members have indicated that they will not vote in favor of the legislation if the same restrictive language comes back from a House-Senate conference committee.  At the same time, Rep. Stupak has warned that tinkering with the language could result in defeat of reform in the House, and Sen. Ben Nelson has announced that he wants to see similar language in the Senate bill, which is likely to complicate Majority Leader Reid’s efforts to secure 60 votes there.

But the anti-choice camp does not hold all the cards.  There is no guarantee that including Stupak-like language in the Senate wouldn’t cost as many votes as it would gain.  And if abortion foes overplay their hand and block a Senate compromise, it could force a bill to go to budget reconciliation, in which case language like Stupak’s would certainly be stricken as being non-germane (a major criteria for the budget reconciliation process).  Whether that would then lead to ultimate defeat in House or whether a bill rewritten for reconciliation would find some other way to thread the needle is a purely hypothetical question at this time, but it’s pretty clear that Stupak does not and cannot represent the last word on abortion coverage in health reform.

Bottom line: Expect a lot of conflict and an eventual, new compromise on abortion coverage to emerge from the Senate process.

The Cost Containment Conundrum
A growing chorus is emphasizing that “bending the cost curve,” not only for the public sector but for the private sector, as well, should be a central element of reform. (Notably absent from the choir is the general public, who is much more concerned about how much they have to pay out-of-pocket for premiums and co-payments than with the global cost of reform.) Two new reports cast a spotlight on this issue.

A report last week from the Business Roundtable (BRT) emphasized the potential for cost containment and held out a tantalizing carrot: major business backing for reform, which could be an important counterweight to opposition from groups such as the Chamber of Commerce and National Federation of Independent Businesses.

The politics of cost containment remain tricky. Much of the agenda advanced by the BRT, including malpractice reform and cautions about over-reliance on public sector spending cuts that could lead to cost being shifted to private payers, is likely to be warmly embraced by the health care industry.

But many proposals, such as increasing reliance on “value-based benefit design” (insurance benefits that include financial incentives not to use services considered to have little value or to not be cost-effective) and financial incentives for providers to adhere to best practice guidelines could touch off another round of controversy about “government rationing” similar to the “death panel” flap this past summer.  The report embraces the use of wellness incentives in employer health plans, but these provisions have raised concerns from many consumer advocates who worry that they are just a back door way to charge sick people more once such practices are supposedly eliminated by the proposed insurance reforms.  BRT also advocates for broader adoption of payment reductions for hospitals for preventable complications and readmissions, a recommendation the hospital industry is likely to resist.

At the same time, a new report by the CMS Office of the Actuary finds that the House legislation is unlikely to have a substantial impact on the overall growth of health spending (either positive or negative), and raises doubts about the ability of Congress to go through with proposed long term Medicare spending reductions.  The CMS Actuary’s report is already providing talking points for reform opponents, even though such opponents are also likely to fight changes that would drive costs down.

We should note that both bills out of the Senate made bigger inroads into delivery system reform than the final House bill did, and since such reforms are the biggest source of real cost containment, we anticipate the combined Senate bill will do better at bending the curve.

Bottom line: Expect “bending the curve” to play a much more prominent role in the Senate debate than it did in the House.  Look for Senate leaders to walk the tightrope by coming up with additional cost saving strategies to coax moderates on board without scaring of support from the health care industry.

Fault Lines on Immigrant Access
Immigrant rights groups have tried to keep immigration reform separate from health reform.  But after persistent attacks on immigrants in the context of health reform, coupled with responses from the Obama administration and Democratic leaders that were less vigorous and supportive than expected, many have come to feel that a more public case for health access for immigrants needs to be made.

Advocates for immigrant equality are focused on eliminating the five-year waiting period on coverage for legal immigrants in Medicaid and Medicare, preventing discrimination against legal immigrants in “mixed status” families (where some family members are citizens or legal immigrants and one or more members may lack legal authorization to be in the country), securing coverage for children regardless of their legal status, and allowing undocumented immigrants to purchase coverage with their own funds in the health insurance Exchange.  Reform opponents are likely to introduce amendments on the Senate floor to establish a five-year waiting period on subsidies for legal immigrants and to increase verification requirements in an effort to weed out any undocumented immigrants from getting coverage.

Bottom line: Expect Senate Democrats to beat back Republican attempts to add further restrictions on immigrant access.  Lifting the five-year bar on Medicaid access is a dark horse issue, but could come into play in conference committee because it saves money and conferees will be searching for adequate revenue and savings to pay for reform.

Will kids lose ground under reform?
Support for improving children’s health care is broad both within Congress and the general public, but lawmakers are struggling to figure out how to best integrate the current structure of children’s health coverage into a reformed system in a way that preserves the current benefits that children have.  The House and the Senate are taking distinctly different approaches—each of which has pros and cons—which will set up a challenging dynamic for conference committee.

In the recently passed House bill, Medicaid is expanded 150 percent of the federal poverty line and states that have Medicaid eligibility levels above this threshold will continue to cover children under Medicaid.  Once the Exchange is up and running, CHIP is eliminated and children on CHIP are transferred to the Exchange.

In contrast, in the Senate Finance proposal, Medicaid is only expanded to 133 percent FPL, but CHIP is maintained until 2019 (though the Finance proposal does not include funding for CHIP beyond 2013).  After 2019, CHIP would presumably be eliminated and CHIP kids would be moved to the Exchange.  States would also be free to roll back Medicaid coverage to the federally specified minimum.

The upside of the House approach is that it does more to preserve and expand Medicaid, the most comprehensive coverage for low-income children. When children are moved to the Exchange, they will be able to get the same coverage as their parents, and will no longer be subjected to the waiting lists and other enrollment restrictions some state CHIP programs feature.  The downside of the House approach is that even though premiums and cost-sharing are lower in the House than in the Senate, many moderate-income families could find themselves paying more and getting less for children’s coverage.  And the lack of a phase-in period for transition from CHIP to the Exchange could create confusion and gaps in coverage in the short run.

In the Senate, the current successes of CHIP would be preserved, at least in the short run, and any transition made more gradual.  On the other hand, there is no funding for the CHIP extension, which could mean another reauthorization fight in the offing, and if children are eventually moved over to the Exchange, their premiums and cost-sharing would not be as good as that offered in the House.  Additionally, the Senate bill would mean that some Medicaid children would lose eligibility and have to rely on the less comprehensive Exchange.

Bottom line: Who the heck knows?

Waiting for Harry
Although a Senate CBO score and a bill are expected any day, it’s unlikely that substantive debate will begin in the Senate before December.  While still possible for the Senate to move health reform legislation before the end of the year, it’s virtually certain that a bill will not go to the President’s desk before 2010.

–Michael Miller, Director of Strategic Policy

Photo: courtesy of ragesoss at flickr under creative commons license.

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