By Laura Blinkhorn, CQ Staff

December 11, 2006 -- Democrats will focus on a series of health policy changes in the 110th Congress, with top priorities likely to include giving the government the power to negotiate drug prices for Medicare beneficiaries and increasing federal funding for stem cell research, according to panelists speaking at a post-election break-down presented by Health360Strategies.

Incoming House Speaker Nancy Pelosi, D-Calif., has vowed to address those two issues in the first 100 hours of the Democratic Congress. While some Democrats might dislike the idea of giving the government power to negotiate drug prices on behalf of Medicare beneficiaries, panelists argued that passage in the House would put pressure on Senate Democrats to pass legislation as well. A Kaiser Family Foundation poll released Friday found 74 percent of Republicans and 92 percent of Democrats favor giving the government the power to negotiate Medicare drug prices with pharmaceutical companies.

President Bush, however, is likely to veto legislation allowing the government to negotiate prices with drug companies, as well as legislation allowing for federal funding of stem cell research, said House and Senate health care aides.

Another thing to expect from the 110th Congress is "a lot more oversight" of the Medicare prescription drug program and other federal health care programs and agencies, according to a Senate Democratic aide. The aide listed many other issues that could come up, including improving low-income subsidies for health insurance, repealing asset tests, overhauling the State Children's Health Insurance Program (SCHIP), reassessing the drug evaluation system used by the Food and Drug Administration, health information technology, and expanding access to health insurance for the uninsured.

A Republican Senate aide predicted that Medicare physician payments would be revisited in the 110th Congress, despite passage of a deal on payments late Friday night. The aide underscored the importance of reporting requirements and "advancing the idea of quality" of medical care.

The aide also noted legislation introduced in the 109th Congress by Sen. Charles E. Grassley, R-Iowa, and cosponsored by Sen. Max Baucus, D-Mont. The legislation (S 3897) would direct the Secretary of Health and Human Services to share data on the drug benefit with other government agencies, certain researchers, and congressional support agencies, such as the Congressional Budget Office and the Government Accountability Office. She cited this legislation as filling a need for more data to access the efficacy of existing programs.

A House Democratic staffer reiterated the prediction of more oversight and a commitment to take up "bipartisan issues," such as Medicare physician payments and health IT legislation. The aide also said lawmakers might examine a "Medicare-like" approach to children's health care and health disparities.

By John Reichard, CQ HealthBeat Editor

December 15, 2006 -- Although the pay for performance ship seems to have sailed in the Medicare program, Democrats may not be the most gung-ho of shipmates. Rep. Pete Stark, D-Calif., delivered a blistering attack on "P4P" in a recent speech, and at a Washington, D.C., forum Friday, a respected Democratic health policy analyst voiced pronounced skepticism about instituting P4P for physician payment.

That those two developments signal a potential reversing of the gears on pay for performance in a Democratic-controlled Congress is questionable, but it may sharpen the debate over which measures get added to Medicare payment as time goes by.

A former senior Bush administration official and a private sector executive at the event defended the current thrust toward P4P in Medicare.

Robert Berenson, a senior fellow at the Urban Institute who ran Medicare payment policy and managed care contracting late in the Clinton administration, told the forum that P4P in big doses might not strengthen quality much.

"We need to carefully develop criteria for opportunistically and strategically using P4P, and not overload it with expectations of transforming the health care system," he told the meeting sponsored by the nonpartisan Alliance for Health Reform and The Commonwealth Fund.

Berenson said the incentive of an added bonus payment might be "marginal," particularly with respect to physicians. An added percentage point or two of payment can make a big difference to a health plan or a hospital given their tight margins but may be of little significance to a doctor's office, he said.

The more powerful way to change provider behavior is to address the basic payments they receive, not the small add-ons they get for better performance, he suggested. "The incentives embedded in basic payments applying to all providers are much more powerful than P4P marginal incentives," he said.

"The tail of P4P should not wag the dog of basic payment policy," he said. Thus, if Medicare payments to primary care physicians do not support what they need to be doing for the chronically ill, "change the basic system," he counseled. "Don't expect P4P to solve the problem, although it might be part of the solution."

Performance measures now tilt toward "process" rather than "outcome" measures. Thus they assess whether a provider is giving care in a certain way—for example, giving a hospital patient who has had a heart attack a beta blocker drug—rather than whether the patient was alive a month after leaving the hospital, for example.

Berenson noted that there are problems with both types of measures. Worse outcomes might reflect the fact that a doctor treats a sicker group of patients, for example. And they don't tell the doctor what specifically he or she might do in treating a disease to improve the outcome, he said.

Outcome measures "require case-mix adjustment, create perverse incentives to not treat sicker or more difficult patients and usually do not produce actionable information," Berenson said.

Process measures solve some of these problems, and may not require case-mix adjustments, for example. But they "may not actually be associated with better outcomes," Berenson said. To drive home that point he referred to a study released earlier this week that found only a weak link between hospital performance on process measures used by Medicare to compare hospitals and the actual outcome of treatment at those facilities.

"Hospital performance measures predict small differences in hospital mortality rates," said the study led by Rachel M. Werner of the Philadelphia Veterans Affairs Medical Center. "Efforts should be made to develop performance measures that are tightly linked to patient outcomes." Published Dec. 13 in the Journal of the American Medical Association, the study said many other factors such as hospital staffing levels shape outcomes.

An "ideal" process measure is a "reliable surrogate for outcomes," Berenson said, giving as an example the measurement of hemoglobin A1C levels in diabetics. But many process measures do not fit that description, he suggested.

But Gail Wilensky, who headed the Medicare and Medicaid programs under President George Herbert Walker Bush, responded that changes in basic payment systems are no simple matter and involve many practical difficulties.

Robert Galvin, who oversees health programs at General Electric, suggested that Berenson's critique offers the kind of debate that is needed over performance measures, but said the payoff from P4P in the private sector should not be minimized.

Galvin, who noted that there are some 150 P4P programs now in the private sector, said that a "Bridges to Excellence" P4P program, created by a coalition of business, quality measurement and other organizations, has produced good results in treating diabetic patients. Doctors who score well on measures of diabetic care are getting paid up to $20,000 more per year, patients are getting better treatment and payers are saving money, he said.

"If we know something works, let's do it," he said.

Stark said in a recent speech, "The entire concept of pay for performance is offensive. We shouldn't ever expect anyone to get paid more for doing what they were . . . paid to do." Stark added that "quality should be expected from each and every provider. And my solution would be to the provider who can't provide quality care, to defrock 'em."

Berenson offered a more measured view Friday. Measures are relatively well developed for dialysis centers and managed care plans in Medicare, he said. P4P for hospitals rates a three on a scale of zero to five, he added. But P4P is not well suited to primary care doctors and specialists, he added.

By Drew Armstrong, CQ Staff

December 13, 2006 -- Surrounded by leaders from business and labor groups, Sen. Ron Wyden announced an ambitious plan Wednesday for the next Congress to create universal health care coverage.

The Oregon Democrat's proposal aims to provide health insurance to all Americans without increasing the $2.3 trillion spent annually on health care in the United States. Under Wyden's plan, the system of employment-linked health insurance would end.

"Employer-based coverage is melting like a popsicle in the summer sun," said Wyden, referring to the decreasing number of Americans who receive group health coverage through their jobs.

According to the Kaiser Family Foundation, working-age adults with employer-based health insurance declined from 68 percent in 2000 to 63 percent in 2004.

Instead of companies helping to buy insurance for their workers, Wyden proposes that private insurers offer coverage directly to consumers. Employers would transfer money they now spend on employee health insurance to workers' wages. State-based "Health Help Agencies" would offer information and guidance, and the proposal would encourage plans with low-cost preventive care and chronic disease management—all with an eye toward reducing future health care costs.

"I hope this will have appeal across the political spectrum," Wyden said.

Edward M. Kennedy, D-Mass., the incoming chairman of the Senate Health, Education, Labor and Pensions Committee, said he was "glad that Senator Wyden is working on such a critical issue," according to Wyden and Kennedy spokeswoman Laura Kapps.

Wyden's proposal would impose fines on anyone who does not buy health insurance, a tactic used by the universal coverage program in Kennedy's home state of Massachusetts. Wyden said he expected partially subsidized insurance premiums and lower co-payments, combined with the threat of penalties, would encourage near-total participation.

The Oregon senator also emphasized the necessity of support from the business community, saying "it was so important to have Andy Stern and Steve Burd standing side-by-side." Stern is president of the Service Employees Industry Union, a 1.8 million-member labor group; Burd is chief executive of Safeway, one of the nation's largest corporations. Both offered strong support for Wyden's plan.

According to Wyden, Stern and Burd's endorsement was a substantial change from previous efforts to create universal health coverage. "You didn't have that picture in 1994," Wyden said. "There was a picture this morning that did not exist the last time Congress took a run at this."

Stern said that while the Wyden proposal was not the final say on improving health care costs and efficiency, "I think we've seen in Washington the perfect may be the enemy of the good . . . this has a real chance of having a successful conclusion."

Absent from the coalition were representatives from any major physician, insurance, or hospital associations, all of whom would likely play major roles in changes to the health care system. Wyden acknowledged that insurers wouldn't necessarily favor all elements of his proposal.

In November, America's Health Insurance Plans, the industry's lobby group, presented its idea for universal coverage. It called for an expansion of government programs such as Medicare and Medicaid to cover the nation's more than 46 million uninsured.

The group's president and chief executive, Karen Ignagni, welcomed Wyden's proposal but said "we'll have some thoughts about the employer-sponsored programs. . . . This is something that needs to be prioritized by the country, and we're going to be a participant."

Several state governments have taken similar steps to offer universal coverage. Beginning in July, every resident of Massachusetts will be required to have health insurance under a program that combines public and private plans, without the expectation of raising taxes.

By Mary Agnes Carey, CQ HealthBeat Associate Editor

December 11, 2006 -- Proponents of health savings accounts are hailing an array of provisions Congress passed last week aimed at increasing enrollment in the accounts, while some analysts say the changes might do little to reduce the number of Americans without health insurance.

The new guidelines—which were included in the sweeping tax, trade, and health care legislation the Senate cleared Dec. 9—would allow both employees and employers to contribute more money to the tax-free accounts, which are used to pay health care expenses.

Health savings accounts, known as HSAs, were created in the 2003 Medicare drug law (PL 108-173). The accounts allow people who sign up for high-deductible health plans to contribute and withdraw funds to cover health care costs tax-free. Employers also may contribute money on behalf of their workers. The idea is that once patients are forced to pay more costs out-of-pocket, they will begin to comparison shop and request quality data, eventually driving down the costs of health care.

Currently, HSA contributions are limited to the smaller of the participant's deductible or $5,450 for a family and $2,700 for an individual. The new HSA rules would eliminate that restriction, with the account holder being able to contribute up to $5,450 for families and $2,850 for individuals, with that amount rising each year.

In addition, employees who are hired midyear would be able to contribute to the accounts and workers could make a one-time transfer on a tax-free basis from a flexible spending arrangement, a health reimbursement arrangement or an individual retirement account. The provisions would reduce federal revenues by $1 billion over the next decade, according to the Congressional Budget Office (CBO).

President Bush's fiscal 2007 budget proposal included several provisions aimed at increasing participation in HSAs, such as allowing money in the tax-free accounts to be used for premiums, and many Capitol Hill Republicans championed the changes as well. But opponents of HSAs, including many Democrats, say the accounts will do little to increase coverage for the uninsured and could discourage cash-strapped individuals from seeking care when they need it.

Many of the provisions included in HSA legislation (HR 6134) that the House Ways and Means Committee approved in September were folded into the tax-trade-health bill the Senate cleared early Dec. 9 before adjourning for the year. Rep. Eric Cantor, R-Va., the sponsor of HR 6134, said expanding HSA use is a priority for Republicans, who say the accounts will drive consumerism and transparency in health care and save consumers money. "They become more attractive the more people can save," he said.

James A. Klein, president of the American Benefits Council, a group that represents sponsors and administrators of retirement, health, and stock compensation plans, said the HSA changes would "help many Americans find more affordable and tax-preferred ways to pay for health care costs."

However, analysts at the left-leaning Center on Budget and Policy Priorities said the HSA provisions are aimed at allowing high-income people to use the accounts to shelter even more income from taxation.

Provisions that encourage people with HSAs to increase the amounts they spend for health care undercut claims that HSAs lower health care spending. Allowing individuals to "overfund" their HSAs by contributing up to $5,450 annually for family coverage while facing a deductible as low as $2,100 for coverage "could encourage some people to spend a portion of their excess HSA balances on health care," the Center said in a statement.

By John Reichard, CQ HealthBeat Editor

December 11, 2006 -- From Wall Street's point of view, the biggest winners in the Medicare provisions that Congress cleared early Saturday morning included dialysis clinics, home health agencies, and home oxygen equipment providers.

Investors in those firms were heartened, according to Washington, D.C., health care consultant Alec Vachon, because dialysis providers got a payment boost while home health agencies and home oxygen equipment providers ducked payment cuts.

Imaging providers were among the losers, Vachon added, but managed care plans rated as neither winners nor losers despite the trimming of $6.5 billion from a $10 billion fund created under the Medicare overhaul law (PL 108-173) to ensure participation in the program by regional PPOs.

Stock analysts "apparently assume regional PPOs are non-starters, at least for publicly traded health plans," Vachon said.

Doctors appeared to have missed being the biggest losers of all by avoiding a scheduled 5 percent payment cut in 2007. Their basic payment rates stay flat unless they report data on quality of care starting in July of next year, in which case they receive a 1.5 percent increase.

To qualify for that boost, doctors must report data on at least three quality measures, according to a House aide. For operational reasons, they won't actually get the bonus payments until early 2008, when the payments will be issued in the form of a lump-sum payment, the aide said.

The measures must be from a list produced through a consensus-setting process involving doctors and Medicare officials. If three measures haven't been approved for a particular specialty, doctors will receive the payment for meeting existing measures for that type of care, the aide said.

But opinions differ over how doctors will fare in 2008. The tax-trade-health package that included the Medicare provisions creates a fund in 2008 to "promote physician payment stability and physician quality initiatives," according to a House Ways and Means Committee summary. According to the aide, the new Medicare provisions place $1.35 billion into the fund in 2008 to be apportioned by the Department of Health and Human Services secretary among base payment rates or bonus payments for reporting on quality of care measures.

Because the fund blunts the reductions that would be required by the current Medicare payment formula, doctors are facing a 5 percent payment cut in 2008 rather than a larger cut, the aide said.

But Vachon, a former Senate Finance Committee aide involved in drafting Medicare legislation in the late 1990s, questioned that assessment Monday, putting the 2008 cut at a hefty 10 percent despite the fund. "I used to write this stuff," he said. "Please show me how I'm wrong."

Dialysis firms will see $400 million fall to the bottom line over five years, according to Vachon. Under the new Medicare language, they will see a 1.6 percent increase in Medicare payments in 2006. Ways and Means Chairman Bill Thomas, R-Calif., had urged higher payments in those rates, voicing concern last week that the lack of a regular yearly payment update is causing facilities to dangerously overuse anemia treatments.

Home health firms appeared to be a logical cost-cutting target to help pay for erasing the 2007 doctor payment cut because of their average profit margins on Medicare patients and a scheduled 2007 payment increase. Freestanding home health agencies reported average profit margins of 16.7 percent on Medicare patients in 2005, according to data released last week by the Medicare Payment Advisory Commission. In 2007, they are scheduled to get a 3.3 percent increase in payments.

Oxygen providers similarly appeared to be in line for cuts. The Bush administration has pushed for cuts, and the HHS Office of the Inspector General issued a report in mid-September saying Medicare was paying too much for home oxygen therapy.

But both oxygen and home health providers have staunch defenders on Capitol Hill and were able to breathe a sigh of relief when lawmakers spared them.

Imaging providers were not so lucky.

Stephen J. Ubl, chief executive officer of the Advanced Medical Technology Association, said the association was "disappointed that Congress failed to eliminate the draconian reductions for imaging procedures mandated by the Deficit Reduction Act of 2005 [PL 109-171]. Advanced imaging technologies are critical to early disease detection. They often eliminate the need for invasive exploratory surgeries and play a vital role in determining the best treatment options. We encourage the 110th Congress to recognize the benefits that imaging technologies provide to patients and revisit this issue early next year."

Opponents of the imaging cuts say drafters of the budget savings law popularly known as the DRA had no real policy rationale and were simply looking for savings. The cuts "were nothing that the CMS or MedPAC ever advocated," said Tim Trysla, executive director of the Access to Medical Imaging Coalition. "It appears to be a large money grab in the closed doors of the DRA conference." The cuts will be severe—"50 to 70 percent reductions in some modalities," he said. Patient advocacy groups, about 140 House members and about one-quarter of the U.S. Senate have gone on record opposing the reductions, Trysla added. "We're going to work to educate members to reverse the cuts," he declared.

By John Reichard, CQ HealthBeat Editor

December 11, 2006 -- In their final burst of lawmaking to wrap up the 109th Congress, lawmakers fended off looming shortfalls in funding for coverage of children and passed a separate measure praised by Wyoming Republican Sen. Michael B. Enzi as a "small but important step" toward preventing premature births.

Under provisions addressing funding of the State Children's Health Insurance Program (SCHIP), none of the 14 states facing a fiscal 2007 shortfall in funding for that program would run out of money before May 4, Sen. Edward M. Kennedy, D-Mass., said in a Dec. 9 statement.
"While not a complete solution, this proposal makes a down payment on the problem and gives the Congress time to consider more comprehensive solutions either through the [SCHIP] reauthorization process next year or through some other vehicle," Kennedy added.

The language does not appropriate new money for SCHIP funding, a step urged by Sen. John D. Rockefeller IV, D-W.Va. But it does allow the redistribution of certain SCHIP allotments given to states in fiscal 2004 that were not spent in all cases. And it also allows redistribution of unspent fiscal 2005 allocations.

States have three years to spend their yearly SCHIP allotments. Not all states spend them, while a number of other states that are covering a large number of uninsured children run out early.
The language appears to direct a total of $271 million toward states with shortfalls. Of that total, $146 million comes from unspent 2004 money that reverted to the U.S. Treasury. The money will be distributed on a monthly basis in the order that states begin to experience shortfalls.

The remaining $125 million comes from redistribution of unspent fiscal 2005 allotments. States that appear to have more funding than they need to meet projected demand would give up money to a new redistribution pool, but no state would have to give up more than $20 million.

Another provision would allow states that expanded their Medicaid programs to cover uninsured children before SCHIP was enacted to spend up to 20 percent of their fiscal 2006–07 SCHIP allotments to provide Medicaid coverage for eligible children. Eleven states including Rhode Island and Tennessee would benefit from that change.
Congress also passed a measure (S 707) championed by Sens. Lamar Alexander, R-Tenn., and Christopher J. Dodd, D-Conn., to expand research into the causes and prevention of premature births.

"By expanding, intensifying, and coordinating research into premature births, this bill will aim to reduce rates of premature delivery, promote evidence-based care and treatment for women and infants, and reduce infant mortality and disabilities caused by prematurity," said Enzi, whose Senate Health, Education, Labor and Pensions Committee had jurisdiction over the bill.

In addition to authorizing grants, the measure establishes an Interagency Coordinating Council on Prematurity and Low Birth Weight. And it requires the U.S. Surgeon General to hold a conference to develop a national agenda for preventing premature births.

March of Dimes President Jennifer L. Howse praised lawmakers for passing the measure, saying preterm birth is the leading cause of infant mortality, accounting for more than two-thirds of infant deaths. She noted that according to 2003 data, inpatient charges alone for premature birth totaled $18 billion, half of which was charged to the Medicaid program. Howse said she looks forward "to working with the administration and the 110th Congress on funding the provisions in the bill."