By Mary Agnes Carey, CQ HealthBeat Associate Editor

January 31, 2007 -- Medicare and Social Security officials said Wednesday that they're doing their best to identify and enroll Medicare beneficiaries who qualify for the drug program's financial assistance, but members of a Senate panel said more must be done.

Senate Special Committee on Aging Chairman Herb Kohl, D-Wis., said more than 3 million seniors are projected to be eligible for the low-income subsidy but are not receiving it. He also said that some 600,000 Medicare beneficiaries who received the financial assistance in the drug benefit's first year have lost it and must reapply.

"And since the application process is so onerous, we know that some seniors will simply give up," Kohl said. "As we enter the second year of the Medicare drug benefit, we have an obligation to make sure it is working for all seniors, but particularly for our poorest seniors, who need help the most. We are not there today."

S. Lawrence Kocot, senior adviser to the administrator of the Centers for Medicare and Medicaid Services (CMS), told the panel that his agency has worked with several partners, including grass-roots organizations; local, state, and federal agencies; State Health Insurance Assistance Programs (SHIPs); and others in an effort to enroll Medicare beneficiaries into the drug benefit and, if they qualify for low-income assistance, make sure beneficiaries receive it.

"Our work to identify and enroll these beneficiaries is a multifaceted, continuous effort that did not stop with the end of the first enrollment period; rather it has been a sustained and ongoing effort," Kocot said in prepared testimony.

Beatrice Disman, chair of the Social Security Administration's Medicare Planning and Implementation Task Force, said the agency has used "any and all means at our disposal," including targeted mailings, phone calls, computer data matches, and community forms, to reach eligible beneficiaries. Applications for Medicare Part D's low-income assistance program are filed with the Social Security Administration, which then determines if beneficiaries are financially eligible.

Approximately 10 million Medicare drug plan enrollees received the low-income assistance in 2006, Kocot said, adding that CMS expects that figure to grow throughout the year because beneficiaries approved for the subsidy can enroll in the drug benefit anytime in 2007.

About 35 percent of those who lost their financial assistance have regained their eligibility, he said. Beneficiaries lose eligibility for the Medicare drug benefit low-income assistance when they lose eligibility for Medicaid, the supplemental security income program, or Medicare savings programs that also offer financial assistance to low-income beneficiaries.

According to a National Council on Aging report released at the hearing, between 3.4 million and 4.4 million Medicare beneficiaries who are eligible for the low-income subsidy are not receiving it. The report also shows that there are 2.9 million beneficiaries who have no prescription drug coverage and have not enrolled in the drug benefit.

At the Aging hearing, Howard Bedlin, the group's vice president of policy and advocacy, urged Congress to eliminate the asset eligibility test because he said it disqualifies people with modest assets for the Medicare drug benefit's low-income subsidy. Half of all the people who fail the asset test have excess assets of $35,000 or less, he said, and they tend to be older, female, widowed, and living alone.

Some lawmakers on the panel agreed that the asset test is too difficult and must be simplified. Sen. Gordon H. Smith, R-Ore., the Aging panel's ranking member, said he plans to introduce legislation that would simplify the asset test now used to determine whether or not beneficiaries qualify for the assistance. Smith also said he would reintroduce a bill from the 109th Congress that would eliminate Medicare Part D cost-sharing for low-income seniors who receive their long-term care services in facilities such as assisted-living centers. Currently, beneficiaries' cost-sharing is waived only if they live in a nursing home.

Ellen Leitzer, executive director of the Health Assistance Partnership, a group that works with SHIPs all over the country, asked the Aging panel to help those organizations obtain more federal funding because she said SHIP counselors are handling many inquiries from beneficiaries that should be handled by the drug plans themselves or CMS. Yearly funding for the SHIP network was $31 million in 2006, while Pearson Government Solutions, a Medicare contractor that managed the Medicare hotline, received $440 million in 2006 for a 2.5-year contract.

Kohl also said that Wednesday's session was the beginning of a series of hearings the panel would conduct "to fix the problems with Medicare's prescription drug program so that seniors can finally enjoy a simple, affordable benefit."

Two of the panel's newest members, Bob Casey, D-Pa., and Sheldon Whitehouse, D-R.I., said that during their Senate campaigns they heard many complaints about the Medicare drug program's complexity and hoped the panel would examine those issues.

"I could not go into a senior citizen center and mention Part D without boos and hisses," Whitehouse said. "Every week, we had another heart-breaking story come through the door" of beneficiaries who found the program overly confusing and complex, he said

Aging committee member Larry E. Craig, R-Idaho, who said he had previously been skeptical about the drug program's implementation, declared it a "roaring success" and said that individuals must take more responsibility themselves to enroll in the program, understand how it works, and see if they can qualify for financial assistance.

By John Reichard, CQ HealthBeat Editor

February 1, 2007 -- The multiple challenges that must be met to maintain current levels of enrollment in the State Children's Health Insurance Program (SCHIP) dominated the attention of the Senate Finance Committee Thursday, with only muted discussion of expanding the program at a hearing on its reauthorization.

Chairman Max Baucus, D-Mont., saluted the cause of increasing coverage in his opening remarks. But evidence that the panel is busy figuring out how to come up with the dollars was not apparent at the hearing.

"Today, three out of four of our nation's nine million uninsured children are eligible for either SCHIP or Medicaid," he said. "But they are not enrolled. We must do a better job of covering all eligible children."

A committee aide said it would be premature to draw conclusions based on the hearing about the prospects of funding for much wider coverage. But the panel's top Republican, Charles E. Grassley of Iowa, spoke of the importance of managing expectations for reauthorization.

"A critical part of this discussion needs to be about how we are going to pay for the existing services before we can discuss expanding services," Grassley said in his opening statement. "I hope that we can effectively manage expectations about what we can do through this SCHIP reauthorization."

The challenges of simply maintaining SCHIP's current enrollment of six million are many. Baucus noted that over the next five years, the program will need an additional $12 billion to $15 billion to maintain services for those now receiving coverage. That's on top of the current rate of spending of $5 billion a year. In other words, running the program in the next five years will cost $7 billion to $8 billion a year, an increase needed to make up for rising health costs. But it appears that under budget rules that will be followed by Congress this year, lawmakers will have to find funds for the added costs of the program, meaning it would have to raise taxes or cut spending elsewhere or a combination of both to come up with $12 billion to $15 billion over five years.

Congress also has to come up with the cash to keep a number of SCHIP programs from running out of money this fiscal year. Although lawmakers redirected $271 million of SCHIP money late last year to states facing shortfalls, 14 states won't have enough money to keep their programs going unless Congress acts.

Georgia Republican Gov. Sonny Perdue pressed the case most forcefully, saying his state's program, the nation's fourth largest with 273,000 enrollees, will run out of federal money in March. "Georgia stands ready to meet its obligation to this program, but we cannot go it alone," he testified.

A Grassley aide estimated that the federal cost of preventing the shortfall and ensuring enough funds this year for temporary Medicaid coverage for people leaving welfare would cost $500 million.

Perdue and other witnesses noted a variety of difficulties created by the current funding formula. Testifying on behalf of the Southern Governors' Association, Perdue said a "state cost factor" used in calculating state allotments of SCHIP money penalizes his part of the country. The factor is based on annual wages for the health care industry for each state and is intended as a proxy for health care costs generally. But Perdue said there is little correlation between the factor and overall health care costs in low-wage states and it unfairly reduces their allotments.

Two other factors used in calculating allotments also are flawed, he said. The formula estimates allotment needs by counting low-income children in a state as well as the number of uninsured low-income children, he said. But those estimates do not keep pace with population growth in fast-growing states such as Georgia, he said. The more states cover kids, the less money they get the following year, he said. "How can we keep these children insured if we are penalized for insuring them?" Perdue asked.

Anita Smith, who heads Iowa's SCHIP program, also said the funding formula is flawed because it lacks an inflation factor to adjust for "ever-increasing health care costs." She said it also penalizes states such as Iowa that used SCHIP money to create a separate children's coverage program rather than expanding Medicaid coverage. Medicaid-expansion states can use Medicaid money to help fund their programs when SCHIP money runs out, but other states with a separate SCHIP program cannot, she said.

Kathryn G. Allen of the Government Accountability Office noted that in the earlier years of SCHIP, states that insured many children and spent their allotments were able to tap into unspent allocations of states that covered fewer kids. But "as spending has grown, the pool of funds available for redistribution has shrunk," she noted.

States that have spent their allotments are more likely to have a Medicaid component to their SCHIP programs, to cover children across a broader range of income groups and to cover adults in their programs, Allen testified.

Senators were critical of the use of SCHIP money to cover adults. The program covers a total of 639,000 adults. Some states cover parents of children in the program, pregnant women, and childless adults with low incomes.

Cindy Mann, executive director of the Georgetown University Center for Children and Families, said some states have covered adults because they were precluded from using SCHIP allotments to pay for existing programs they had to cover uninsured children when SCHIP was created. Existing SCHIP law allowed them to extend coverage to adults if there were no other uninsured kids on which they were permitted to spend funding. "Coverage for pregnant women and parents promotes children's health and well-being in a number of different ways," she said.

But Grassley said "the 'C' stands for children, and there is no letter 'A' in SCHIP." The senators' criticism suggested the possibility that they would seek to end the enrollment of more adults in the future. But achieving savings by ending coverage of adults now in the program could be politically difficult.

In her testimony, Mann sought to focus attention on the importance of expanding the program. "The single most important step that can be taken to lower the uninsured rate among children is to enroll the children eligible under current program rules," she testified.

"We can get health care to more kids who need it," Baucus said in a statement after the hearing. "We're going to need more money . . . and we need to move fast to find it to keep kids from losing coverage this year." Baucus said his goal is to complete legislation reauthorizing SCHIP and to address the funding shortfall by May. But whether the kind of money will be available to do what Mann is talking about is iffy. A committee aide estimated that the cost of continuing coverage at existing enrollment levels and of adding the six million children who are eligible for SCHIP and Medicaid but not enrolled would cost $60 billion to $75 billion over five years.

Whether the White House and Democratic leaders want to spend that kind of money will become more apparent over the next several weeks when the White House releases its budget proposal and Congress begins trying to assemble a fiscal 2008 budget resolution.

By Mary Agnes Carey, CQ HealthBeat Associate Editor

January 29, 2007 -- President Bush's fiscal 2008 budget request will include new funding to build an electronic "rapid learning" health care network, said Carolyn Clancy, director of the Agency for Healthcare Research and Quality (AHRQ).

The network would use the resources of individual data repositories at health plans and other large health systems, allowing "researchers to benefit from an extensive web of databases, without needing access to individual patient information or [creating] a mega central repository," Clancy said Friday at a Health Affairs forum.

"Health plans and other large health systems are already using their data systems to generate evidence as a natural byproduct of health care delivery," Clancy said. "Through this new partnership for effective health care, findings would be generated from these multiple sources and combined to produce more complete and powerful information."

Health information technology, or health IT, can make health information available when and where it's needed, reduce medical errors, and improve the physician–patient relationship, and it can also help medical professionals learn more about particular illnesses and how to treat them, Clancy and other speakers at the forum said.

"In the clinic, it can give providers real-time feedback to help them continually improve the effectiveness of their care," Clancy said. "In the community, it can help bring together stakeholders to look at patient outcomes and work toward improvement. And on the broadest level, it has the potential to be a kind of information 'nervous system,' enabling us to learn directly from the health delivery system itself."

Lynn Etheredge, a consultant with the Health Insurance Reform Project at George Washington University and author of the lead paper in the journal Health Affairs' special edition focusing on "a rapid-learning health system," said it was critical to use health IT to learn "as much as possible, as soon as possible" to speed medical discoveries and cures.

"In the current world of medical research, it takes several years to see if your first hunch or hypothesis was right," Etheredge said.

A "rapid-learning" health system could also use data to help determine why health costs are increasing, analyze the comparative benefits and risks of prescription drugs and medical treatments, and help determine why there are wide variations in how one treatment impacts one patient versus another, Etheredge said.

David Eddy, the founder and medical director of Archimedes Inc., said electronic medical records can be used not only to determine what has happened in the past as is currently happening, but also to build models that help predict what is likely in the future.

"With better data we can build better models," Eddy said, adding that such models also can be used to create virtual clinical trials that will speed up the research and development process of new drugs.

In a paper distributed at the event, Eddy noted that "data from EMRs can be invaluable for this purpose and can indeed put rapid learning on turbo."

By John Reichard, CQ HealthBeat Editor

January 29, 2007 -- Liberal budget analysts expressed alarm Monday over the outlook for the federal budget, saying projected shortfalls must be addressed through a combination of tax increases, budget cuts, and an overhaul of the U.S. health system.

Illustrating the long-term fiscal challenge, the Center on Budget and Policy Priorities estimated that keeping the national debt at its current level relative to the economy through 2050 would require tax increases, budget cuts, or a combination of both totaling $480 billion a year each year over the next 42 years.

If entitlement programs aren't changed and the Bush administration's 2001 and 2003 tax cuts are extended, "the national debt, now 37 percent of the size of the U.S. economy, will soar to 231 percent of the economy by 2050," the center said in a report released Monday that incorporates projections released last week by the Congressional Budget Office. "At that point, interest payments alone would soak up more than half of federal revenues," the report said.

"The problem we face is too large to be solved solely by raising taxes or solely by reducing programs," Jim Horney, the center's director of federal fiscal policy, said in a press release. Taking that path would require "the equivalent of an immediate and permanent 21 percent increase in tax revenues or an immediate and permanent 18 percent reduction in all government programs, including Social Security, Medicare, defense and anti-terrorism activities, education, veterans' benefits, law enforcement, border security, environmental protection, and assistance to the poor," the center said.

The report is striking in its tone, calling the projections "alarming," the budget outlook "grim," and the projected deficit and debt levels "dangerous." The direct focus on health costs also is striking in that while liberal analysts have acknowledged in a general way that the federal budget faces huge shortfalls in coming years, they have tended to focus much more on tax cuts rather than health spending increases as a major factor.

To be sure, the report does take aim at the Bush tax cuts. Allowing the Bush tax cuts to expire or fully offsetting the cost of extending them would reduce the budget shortfall through 2050 by 60 percent, the center said. Stated differently, "If Congress fully abided by the pay-as-you-go rule . . . that would close three-fifths of the budget gap through 2050," Center President Robert Greenstein told reporters in an afternoon telephone press briefing. Adopted by the House, the rule requires legislation that increases federal spending or reduces taxes to be offset by cuts elsewhere in the federal budget or by tax increases.

But even if the Bush tax cuts were eliminated, "the magnitude would still be very large" of changes needed in the health system, Greenstein said. "The three programs that will cause expenditures to grow faster than the economy over coming decades are Medicare, Social Security, and Medicaid," the report said. Medicare is "by far the largest contributor to the overall growth in expenditures through 2050 because it bears the full brunt of both demographic changes and health care cost growth," the report said. Medicare clearly looms largest in the crosshairs of those concerned with the budget.

But per capita increases in health care spending in Medicare are essentially the same as for enrollees in private health plans outside of federal programs, according to the center. "Cost growth in Medicare and Medicaid tends to mirror—and is driven to a large extent by—cost growth in the health care system as a whole, including private sector care," the report said.

The challenge "is to pursue major reforms that eliminate inefficiencies in the health care system and restrain costs in the system to the greatest extent possible without unduly constraining medical progress," the report said. Greenstein suggested that the goal of covering the uninsured isn't necessarily incompatible with improving the nation's fiscal outlook, characterizing current health care spending on the uninsured as one of the inefficiencies in the system.

By John Reichard, CQ HealthBeat Editor

January 29, 2007 -- Between Democrats looking for ways to pay for an expansion of children's health coverage and Republicans looking for ways to trim entitlement spending, Medicare is in line for major cuts, lobbyists and analysts are predicting in the days leading up to the Feb. 5 release of the Bush administration's fiscal 2008 budget proposal.

Treasury Secretary Henry Paulson told the Wall Street Journal in an interview published Friday that "you will see a number of changes relating to Medicare" aimed at slowing the trajectory of its spending growth.

The paper quoted unnamed sources as saying the administration would propose cuts totaling $90 billion over five years, a figure consistently mentioned in speculation in the past couple of weeks about the size of Medicare cuts to be proposed by the administration.

Last year, the administration proposed cuts in Medicare payments to providers totaling almost $36 billion, citing recommendations from the year before by the independent federal Medicare Payment Advisory Commission as the basis for the specific revisions proposed. These included cuts in payments to hospitals, home health agencies, and skilled nursing facilities.

By law, certain providers are entitled to a yearly increase in Medicare payments equal to a "market basket" that tracks the yearly cost of providing the particular type of care. Nicking the market basket increase in hospital care for a few years can generate significant cuts; cutting the increase sharply or freezing it at least for some providers likely would be the source of much of the savings sought by the administration.

But cuts in payments for home oxygen treatment and increases in out-of-pocket charges to wealthy Medicare beneficiaries also are sources of potential savings cited by budget analysts.

The Bush budget proposal last year called for lowering by 0.45 percentage points the market basket increase for inpatient hospital care. The proposal also would have reduced the market basket increase in fiscal 2008 and fiscal 2009 by market basket minus 0.4 percentage points. The same market basket adjustments would have applied to the Medicare hospital outpatient payment update.

The administration's budget would have provided a zero percent payment update for skilled nursing facilities, home health agencies, and inpatient rehabilitation facilities for fiscal 2007. Payments for hospice and ambulance services would have been reduced by 0.4 percent for each of the years 2007 through 2009.

By John Reichard, CQ HealthBeat Editor

January 30, 2007 -- One of the premises behind the emerging trend toward "consumer-driven health care" is that overall health costs won't rise as quickly if patients are prodded to shop for better value by requiring them to pay a significant share of their medical expenses. But what if the way benefits are designed fails to steer them to the products and services that offer the best value?

Fixing that problem is the key that will help unlock the savings potential of consumer-driven health care, according to an article posted Tuesday on the policy journal Health Affairs' Web site. And the way to fix it is to charge lower copayments for drugs and lower cost-sharing for services that provide the best value, said researchers from Harvard University and the University of Michigan.

"By using our knowledge wisely and abandoning the archaic principle that all services must cost the same for all patients, regardless of clinical situation, we can move toward a high-value system for all," wrote Michael E. Chernew of Harvard and Allison Rosen and Mark Fendrick of the University of Michigan.

A short-term increase in costs is a potential barrier toward what the researchers call "VBID," or value-based insurance design. Lower out-of-pocket charges could lead to greater use of a drug and higher insurer spending on the product.

But those near-term increases can quickly give way to larger savings by lessening the need for hospitalization, they said. "One year after Pitney Bowes lowered medication copays for asthma and diabetes medications in 2001, the company reported . . . a one-year savings of $1 million," the authors wrote.

Savings also can be obtained by raising out-of-pocket charges for products or services that don't provide the best value, they added.

In another analysis posted by Health Affairs, two managed care industry executives noted that there are other challenges posed by VBID. "More sophisticated clinical thinking must be incorporated into insurance arrangements," observed Troyen Brennan, chief medical officer of Aetna, and Lonny Reisman, chief executive officer of ActiveHealth Management.

Insurers will have to make a commitment to "developing information systems that can turn clinical data into useful consumer information for members and better advice for physicians," they said. But "this prospect is within our grasp," they concluded.