CQ HealthBeat Examines 'Call Letters' Sent to Insurers Regarding Medicare Drug Benefit Offerings for Next Year
[Apr 05, 2006]

      CQ HealthBeat on Tuesday examined CMS's new bidding instructions for private health insurers sponsoring Medicare prescription drug plans. CMS issued the "call letters" on Tuesday to instruct insurers on how to develop plans that will be available to beneficiaries in 2007. In the call letters, which went out to both stand-alone prescription drug plans and managed care plans, CMS said drug plan sponsors should present "clearly understandable" coverage options that beneficiaries can "reasonably" comprehend and use to make comparisons between plans. In addition, CMS said that beneficiaries are expressing "distinct preferences" for certain coverage options and that plans should offer alternatives in those coverage areas for beneficiaries to consider. The agency said sponsors should offer plans that allow beneficiaries to choose between having a deductible or no deductible; coinsurance or copayments; inclusive or limited formularies; a range of premium levels; and coverage or no coverage in the "doughnut hole" coverage gap, under which beneficiaries are responsible for 100% of prescription drug costs if they do not have supplemental coverage.

Two-Plan Limit for PDPs
CMS also said it wants insurers sponsoring stand-alone PDPs to offer no more than two plans. "In general, we expect that more than two bids from a sponsoring organization would not provide meaningful variation, unless one of the bids is an enhanced alternative plan that provides coverage in the coverage gap," the letter to PDP sponsors said. In the letter to Medicare Advantage Plans, CMS said MA plan sponsors should eliminate plans "that are substantially duplicative in terms of cost sharing, provider networks and benefit design," including prescription drug coverage. According to the letter, some beneficiaries "are unable to make meaningful distinctions between the various plans offered by a sponsor." CMS also said MA plan sponsors should not market plans as having a "zero premium" for Medicare Part B, which covers physician services and outpatient care. Plans will be permitted to say in marketing materials that a plan offers a premium rebate for Part B, the agency says. CMS noted that beneficiaries with higher incomes will begin paying higher premiums for MA plans in 2007 but that plans still will be required to offer uniform benefits, so the zero premium claim will not be permitted.

Call Centers, Other Issues
The call letters also address other issues, such as long waits for drug plans' toll-free phone lines. CMS said drug plans' call centers must answer 80% of calls within 30 seconds, and they must limit calls in which a caller on hold hangs up to 5% or less of total calls. Call centers also must be open whenever pharmacies participating in the PDP's plans are open, even if it is 24 hours a day, CMS said. The agency will issue weekly reports on call center performance. The call letters also said plans should create a "one-stop" area on their Web sites with information on how beneficiaries can appeal coverage decisions. The letter said CMS also "expects sponsors to develop and maintain information systems that accurately process updated enrollment information at least weekly" (Reichard, CQ HealthBeat, 4/4).

Formulary Changes
In related news, the Philadelphia Inquirer on Wednesday examined Independence Blue Cross's plans to change its formulary for Medicare drug plans. The coverage changes, which will take effect June 1, "mark the beginning of a shift that could alter drug plans across the country," the Inquirer reports. Under the 2003 Medicare law, insurers can add or remove medications from their formularies monthly, while beneficiaries can change plans once annually. Critics of the provision say formulary changes are "potentially troubling" because beneficiaries might lose access to medications they thought were covered under their Medicare plan, according to the Inquirer. However, Daniel Lyons, senior vice president for government programs at IBC, said the changes -- which will be made to about 22 medications -- will not affect the insurer's existing customers until next year. "The industry is aware of the concerns raised and we're being sensible and thoughtful," Lyons said, adding, "I think you will find the same type of soft-landing approach with most plans" (Sullivan, Philadelphia Inquirer, 4/5).

McClellan Speech
In other Medicare news, CMS Administrator Mark McClellan met with church leaders in Detroit last week to promote the drug benefit and urge more preventive care in Medicare, the Detroit News reports. McClellan, who visited Detroit as part of an ongoing nationwide tour that began last June, said changes to Medicare should focus on incentives for physicians to promote preventative care. "There's $300 billion in Medicare, and most of that money goes to treating complications," McClellan said, adding, "We could be doing so much more if we put just as much emphasis on keeping people well as we do on treating them." McClellan said Medicare should offer higher reimbursements for lower hospitalization rates and home care that replaces office visits for healthy patients (Terlep, Detroit News, 4/5).

Pharmacists
Two newspapers on Wednesday examined also how some independent pharmacists say slow reimbursements from Medicare drug plans are threatening their businesses. Headlines appear below.

• "Anguish at the Drug Counter" (Girion, Los Angeles Times, 4/5).
  


• "Battling a Middleman: Pharmacy Owner Says the Benefit Management Firms Take Too Big A Cut" (Colliver, San Francisco Chronicle, 4/5).

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  Capitol Hill Watch
   

  Defense Department Officials Discuss Need for Proposed TRICARE Fee Increases at House Subcommittee Hearing
  [Apr 05, 2006]

        Senior Department of Defense officials last week at a House Armed Services Subcommittee on Military Personnel hearing testified about the need to increase TRICARE fees for some military retirees, the Honolulu Advertiser reports (Philpott, Honolulu Advertiser, 4/3). According to a March 21 armytimes.com report, DOD informed TRICARE contractors that the proposed fee increases will not occur on Oct. 1 as previously announced. Under the proposal, developed by the Joint Chiefs of Staff, TRICARE copayments and enrollment fees would increase by 115% for military retirees younger than age 65. The Joint Chiefs have said that the fee increases would save TRICARE about $735 million in fiscal year 2007 and $11 billion over the next five years and are needed to improve the finances of the program (Kaiser Daily Health Policy Report, 3/28). David Chu, undersecretary of defense for personnel and readiness, and William Winkenwerder, assistant secretary of defense for health affairs, said that TRICARE benefits, membership and costs have increased annually since 1995, although fees have remained the same. Chu said that, for the past 11 years, "our beneficiary population has enjoyed a relief from indexing." However, subcommittee members questioned whether the savings estimate from the proposed fee increases is accurate and whether TRICARE should increase fees in wartime. Rep. Vic Snyder (D-Ark.) said, "We're going to pay for health care for our men and women in uniform, and retirees. We're going to sustain the program. The question is how, ... and right now there's not a lot of ... enthusiasm for the method you all have proposed." Retired Navy Vice Admiral Norbert Ryan, who testified on behalf of the Military Coalition, called the proposed fee increases "disproportional and inappropriate" (Honolulu Times, 4/3).

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  Health Care Marketplace

   

  Second Federal Criminal Trial Over Alleged Kickbacks at Tenet Healthcare Hospital Ends in Mistrial
  [Apr 05, 2006]

        The second federal criminal trial over allegations that Tenet HealthSystem Hospitals, a Tenet Healthcare subsidiary, Alvarado Hospital Medical Center and an Alvarado administrator paid illegal kickbacks to physician groups to increase patient referrals and revenue ended in a mistrial on Tuesday, the San Diego Union-Tribune reports (Laing [1], San Diego Union-Tribune, 4/5). In the case, federal prosecutors allege that Tenet HealthSystem, Alvarado and former Alvarado CEO Barry Weinbaum paid more than $10 million in illegal kickbacks to physicians through relocation agreements in exchange for patient referrals. Under Medicare anti-kickback laws for federal health care programs, hospitals cannot directly pay physicians for patient referrals. The first trial ended in a mistrial in February 2005 (Girion, Los Angeles Times, 4/5). In the second trial, federal prosecutors argued that the Alvarado relocation agreements -- which are legal and which are used to attract physicians to underserved areas -- were "overly generous and amounted to bribes for the doctors to refer patients to the hospital," the Union-Tribune reports. Defense attorneys argued that the Alvarado relocation agreements were reviewed and approved by health care attorneys and sought to address a physician shortage in the area. U.S. District Judge M. James Lorenz declared a mistrial after the jury in the trial deliberated for 62 days but failed to reach a unanimous verdict. Jurors said that their disagreement in large part resulted from an inability to determine whether Alvarado or Weinbaum sought to defraud the federal government intentionally. Attorneys for both sides will meet with Lorenz for a status conference on April 17, at which time U.S. Attorney Carol Lam will announce whether the federal prosecutors will seek a retrial. According to legal experts, the second mistrial "greatly increases the chances that the government will drop the charges," the Union-Tribune reports (Laing [1], San Diego Union-Tribune, 4/5).

  Comments
  Lam said, "The government continues to believe that it is important to address violations of the Medicare antikickback statute. We regret that the jury was unable to reach a verdict in this trial, and we will report back to the court with respect to our intentions regarding the case" (Los Angeles Times, 4/5). Charles La Bella, an attorney for Weinbaum, said of the allegations against his client, "It's been four years, and neither jury could conclude that this was occurring," adding, "The government threw their best health care trial lawyers they had on this case, and it still didn't change the outcome" (Laing [1], San Diego Union-Tribune, 4/5). Tenet spokesperson Steven Campanini said, "We would hope that this case is not going to be tried a third time, so we can focus our full energy on the broader issues" (Laing [2], San Diego Union-Tribune, 4/5).

  Implications
  Sheryl Skolnick, an analyst at CRT Capital, said the mistrial "is not a clean and positive catalyst for the turnaround to take place with respect to patient volume," adding, "And without patient volume, there is no turnaround" (Los Angeles Times, 4/5). Decreased patient admissions at Tenet hospitals, as well as bad debt from uninsured patients, has resulted in $3.5 billion in losses over the past two years for the company. A.J. Rice, an analyst at Merrill Lynch, said, "A clear verdict in the Alvarado case would have paved the way for the company to come to a relatively quick settlement with federal authorities regarding the remaining major federal investigation-related issues," but "with a hung jury that path is not as clear" (Laing [2], San Diego Union-Tribune, 4/5). However, Joseph Chiarelli, chair of the research company Chiarelli, said that the mistrial "is quite positive for Tenet," adding, "If they had lost, and the contracts were declared illegal, it would be a setback and an enormous issue for the entire hospital industry" (Rundle, Wall Street Journal, 4/5). In addition, legal experts said that the mistrial "makes it less likely" that federal prosecutors in other areas -- such as New Orleans; St. Louis; Memphis; Northern California; and El Paso, Texas; -- will file charges based on investigations of allegations of improper physician relationships at other Tenet hospitals, the Union-Tribune reports (Laing [1], San Diego Union-Tribune, 4/5).

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  Prescription Drugs

   

  Market Entry of Generic Versions of Medications Can Reduces Prices Compared With Brand-Name Versions, FDA Says
  [Apr 05, 2006]

        The market entry of at least two generic versions of a medication can reduce the price of the treatment by almost half compared with the price of the brand-name version, according to an FDA analysis released on Tuesday, the AP/Seattle Times reports. For the analysis, FDA examined retail data from 1999 to 2004 on single-ingredient medications collected by IMS Health. According to the analysis, the market entry of one generic version of a medication can reduce the price of the treatment by 6% compared with the price of the brand-name version, and the market entry of a second generic version can reduce the price by 48% (AP/Seattle Times, 4/4). In addition, the market entry of nine generic versions of a medication can reduce the price of the treatment by 80% compared with the price of the brand-name version, the analysis finds. "It's purely the economics of supply and demand," Ivan Feinseth, director of research at Matrix USA, said, adding, "All it takes is one competitor to have a price war." FDA recently has received criticism from lawmakers over concerns that a backlog of more than 800 applications for generic medications has led to higher prices for consumers (Bloomberg/Los Angels Times, 4/5).

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  Coverage & Access

   

  Medical Errors Leading Cause of Death in Hospitals, Study Says
  [Apr 05, 2006]

        Medical errors remain a leading cause of death and injury at hospitals nationwide, and the effort to improve patient safety at the facilities "is too slow and should be a cause for great alarm," according to a study released on Monday by HealthGrades, the Syracuse Post-Standard reports. For the study, researchers examined the records of Medicare beneficiaries treated at about 5,000 hospitals nationwide between 2002 and 2004 and used 13 patient safety indicators developed by the federal government to evaluate admissions (Mulder, Syracuse Post-Standard, 4/3). The study finds that about 1.24 million patient safety incidents occurred between 2002 and 2004, compared with 1.14 million between 2000 and 2002, at a cost of $9.3 billion. According to the study, failure to save the lives of Medicare beneficiaries who developed complications, bloodstream infections and bedsores accounted for almost 63% of the patient safety incidents (Nelson, Knoxville News-Sentinel, 4/3). Almost 25% of Medicare beneficiaries who experienced patient safety incidents died between 2002 and 2004, and 82% of those deaths likely were preventable, according to the study. The study finds that hospitals in Minnesota, Wisconsin, Iowa, Michigan and Kansas ranked highest on patient safety and that facilities in New York, New Jersey, Nevada, Tennessee and the District of Columbia ranked lowest (Syracuse Post-Standard, 4/3). Samantha Collier, vice president of medical affairs for HealthGrades, said, "Overall, we see the number of patient safety incidents in American hospitals continuing to increase, at an enormous cost, and we still see a large gap between the incidence rates at the nation's top-performing and worst-performing hospitals" (Knoxville News-Sentinel, 4/3).
  
  The study is available online. Note: You must have Adobe Acrobat Reader to view the study.

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  The Latest Reports in Health Policy

   

  Studies Compare Care Quality in U.S., Other Nations
  [Apr 05, 2006]

        The following two studies are from the Commonwealth Fund.
  
  

  • "Mirror, Mirror, on the Wall: An Update on the Quality of American Health Care Through the Patient's Lens": The study -- by Karen Davis, Commonwealth Fund president; Cathy Schoen, Commonwealth Fund senior vice president for health policy, research and evaluation; and colleagues -- evaluates the quality of health care systems in Australia, Canada, Germany, New Zealand, the U.K. and the U.S. by analyzing data from two previous Commonwealth Fund surveys. The study finds that the U.S. ranks last in patient safety, patient centeredness and equity; third on timeliness compared with adults in the other five nations; and first in preventive services.
    
    
  • "The U.S. Health Care Divide: Disparities in Primary Care Experiences by Income": The study -- by Phuong Trang Huynh, associate director of the International Program in Health Policy and Practice; Schoen; and colleagues -- presents a new analysis of data from the Commonwealth Fund's 2004 survey of primary care in five countries by income. The study finds that low-income U.S. patients were more likely to have negative health care experiences than low-income residents of other countries (Commonwealth Fund release, 4/4).
    

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