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March 30, 2004
Vol. 1, No. 7
Weekly news and analysis
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| MEDICARE MURMURS |
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Democratic members of the House Ways and Means Committee evaluating the Medicare Trustee's report March 24 attacked the Bush administration's plan in MMA to persuade more seniors to use HMOs and PPOs and to steer them away from traditional Medicare fee-for-service. "Passage of the Medicare prescription-drug bill is at fault," said Representative Pete Stark (D-CA). "That law lavishes billions of dollars on HMOs-$46 billion according to the administration's own estimate, most of which comes out of the trust fund. In other words, the part [of MMA] Republicans are bragging would save Medicare money is actually costing the program billions of dollars."
Stark and Representative Charles Rangel (D-NY) suggested that HHS stop promoting seniors' switch to HMOs and look instead to other Medicare cost-cutting measures, such as containing costs to hospitals under Part A and to private-practice physicians under Part B.
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| LETTERS TO THE EDITOR |
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US Oncology, the nation's largest healthcare network exclusive to cancer and research, agreed last week to be acquired by an investment banking company for $15.05 per share.
"This is pivotal in my opinion. For now, this means that management chose to provide its shareholders with a liquidity event. However, that event took place exactly two months after the new Medicare rates took place. I expect that US Oncology will try to reposition themselves as they deal with the uncertainty of Medicare reimbursement for oncologists. One scenario I can envision is that US Oncology might retreat from the Medicare program as its physicians might refer patients back to the hospital."
--Nick Opalich, Strategica Health Partners, LLC, based in Cleveland
Send letters to bcote@hcpro.com. Include tips, ideas, questions, and problems related to Medicare reform. The editors reserve the right to edit letters for clarity. |
| DATEBOOK |
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March 30-American Public Human Services Association (APHSA) and the National Association of State Medicaid Directors hold a news briefing today on the impact of the Medicare drug bill on state Medicaid programs. Story next week.
May 12-Audioconference on "Opportunities and new device coverage rules under Medicare Reform." For details or to register for this HCPro program, call 800-650-6787 or send an e-mail to the editor. |
© 2004 HCPro, Inc. |
Financial analysts predict cuts in hospital payments
Investors in large hospital chains such as Tenet Healthcare and HCA saw the value of their stocks slip last week upon news of the Medicare trustees' report that the program would be insolvent by 2019. "We believe cuts in Medicare reimbursement [to hospitals] are likely to be imposed in 2005 by a Congress struggling to find the money to pay for a very expensive prescription-drug plan," says financial analyst Sheryl Skolnick of Fulcrum. General hospitals financed in a large part by Medicare reimbursements stand to lose; in 1999 when the government cut funding for Medicare as part of the Balanced Budget Act, some hospitals went out of business.
| Group will estimate costs, safety of importing drugs |
A new government task force will explore how drug importation might be conducted safely and predict what effect importing prescription drugs will have on medical expenses for U.S. citizens, according to the agency. Surgeon General Richard Carmona has been tapped by Department of Health and Human Services (HHS) Secretary Tommy Thompson to serve as the task force's chairman.
The MMA required that the task force be formed to issue a study by December 2004 on importing prescription drugs. Several congressional leaders have pushed Thompson to move up the date for the study's release until this summer or fall because of the widespread public interest in importing cheaper prescription drugs from Canada.
Initially, Thompson had wanted incoming Centers for Medicare and Medicaid Services Administrator Mark McClellan to serve as chair, but backed off that proposal after objections from members of the Senate and House who said that McClellan has fought too hard against the import of prescription drugs from Canada to be an impartial leader for the group. McClellan will still serve as a member of the task force, however. The panel also includes representatives from the Food and Drug Administration, HHS General Counsel's office, U.S. Drug Enforcement Administration, and White House Office of Management and Budget.
The task force will ultimately offer recommendations to Thompson on several issues related to drug importation, including the following:
- The limits in resources and legal authority inhibiting the secretary from certifying the safety of imported drugs
- An assessment of the international pharmaceutical distribution chain
- An analysis of whether anti-counterfeiting technologies could improve the safety of imported drugs
- An assessment of the scope, volume, and safety of unapproved drugs, including controlled substances, entering the U.S. via mail shipment
- An analysis of the impacts, short- and long-term, on drug prices and prices for consumers associated with importing drugs from Canada and other countries
- An estimate of agency personnel needed to adequately inspect the current amount of pharmaceuticals entering the country
At a March 11 congressional hearing, McClellan estimated that it would cost the U.S. "several hundred million dollars" to establish a prescription drug importation program to ensure drug safety.
Report from Washington correspondent Sue Darcey |
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Drug card sweepstakes set for May
Twenty-eight companies will vie for Medicare beneficiaries starting May 1 by marketing their new medication discount cards, the government announced last week. Thing is, these companies won't have to do much marketing. The government will roll-out an aggressive television and direct home advertising campaign this spring to push the cards. It's then up to the eligible beneficiaries to pick which card they want to use starting June 1. There's a $30 fee to sign up.
One caution: People can't switch their card until late 2004 when an open enrollment period begins. This means some seniors may not have the best card for them; their drug could drop off the formulary or the patient could develop a new condition for which her current card doesn't offer the best deal.
Some sponsors will offer more than one card option. In addition, 43 Medicare Advantage companies will offer cards to beneficiaries enrolled in their health plans. At least three big insurers-Aetna, WellPoint, and UnitedHealth-have signed on to the program.
Besides medication discounts, the cards must give people with incomes below $12,569 (or couples with a combined income below $16,862) a $600 credit this year and again in 2005. Card sponsors must provide access to an extensive retail pharmacy network, establish a complaint resolution process, and publish prices for the drugs their card offers.
Resources and reader poll
For a list of companies that received government approval, go to www.cms.gov.
Editor's note: Are you interested in purchasing an independently review checklist of the 28 drug card sponsors for your patients and employees? Cast your vote by emailing your answer to bcote@hcpro.com.
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New fix-loss rate set to take effect
There is a new fixed-loss amount for hospitals to determine their cost outlier threshold. The amount, $30,150, takes effect for all discharges from April 1 through September 30. It results from payment changes made under sections 401, 402, and 504 of the MMA. With this change, there are new capital prospective-payment system rates for the same period. They are as follows:
- National: $413.48
- Puerto Rico: $202.96
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Section 402 increases pay to certain hospitals
Hospitals with fewer than 100 beds in rural and urban areas are eligible under the MMA to receive a pay hike for all discharges starting April 1. Medicare will pay these hospitals more if they serve a larger share of low-income Medicare and Medicaid patients through the inpatient prospective-payment system. To be eligible, each hospital's disproportionate share percentage must be 15% or more.
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Four metropolitan areas to receive a new wage index
Section 508 gives hospitals in the following four metropolitan statistical areas a new wage index for discharges through September 30, 2004 (the corresponding index appears to the right):
- Bergen-Passiac, NJ -- 1.1767
- Boston-Worcester-Lawrence-Lowell-Brockton, MA/NH -- 1.1120
- Lafayette, IN -- 0.9036
- New York, NY -- 1.3892
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Pharma: Changes ahead in Medicare allowables
Here, in our ongoing series that began February 10, is an example of what treatment regimens may look like under Medicare reform. The following is a sample breast cancer case:
Regimen: Carboplatin AUC = 6 and Taxol 175 mg/m2 for 3wks
Herceptin: 4mg/kg in week 1, Herceptin 2mg/kg (weeks 2-3)
Administration: Carboplatin, 1 hour infusion and Taxol, 3 hour infusion; Herceptin: 2 hour infusion
Codes: Assume the provider will use 96410/94612 for total of three hours
Analysis: With the transitional assistance the Medicare reform law allows in 2004, the drug and adminstration will bring in $9,339.25, $313.95 for the administration, up from $147.50 in December 2003. But since the drug alone brought in a $9,786 payment in 2003, there's a loss of almost $595 for this treatment regimen under Medicare reform. The patient would pay $1867, which is a slight drop from the 2003 out-of-pocket expense.
To request a treatment regimen, or submit one for publication, contact the editor.
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CMS to study specialty drugs
A study will begin this spring to help the Centers for Medicare and Medicaid Services (CMS) learn how it should handle expensive self-injectable drugs and oral cancer drugs drugs. The study will run through January 1, 2006 when the drug benefit takes effect.
The objective: assess whether coverage for self-injectable drugs will improve patients' health and cost less than paying for specialty drugs administered in doctors' offices and hospitals.
Here are some study details:
- Study costs $500 million
- 50,000 patients are authorized to participate as part of the Medicare reform law
- Americans spent almost $30 billion in 2002 on bio-pharmaceuticals like Enbrel (which costs $17,300 a year), or 18% of U.S. spending on all prescription drugs that year, according to Medco Health Solutions, the nation's largest pharmacy benefit manager.
Two groups are expected to benefit most: rheumatoid arthritis patients and people with multiple sclerosis (MS). There are almost 400,000 people with MS and roughly half use one of three injectables, which cost about $12,000 a year, according to the National Multiple Sclerosis Society.
Medicare now pays for drugs given in doctors' offices and hospitals, but not for outpatient medications.
A report from the Associated Press was included in this story.
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What's the impact on large corporations?
Large corporations stand to gain a huge windfall in savings on their employee health plans-over $11.8 billion for 18 companies over their current employees' lifetimes-thanks to provisions in the Medicare Modernization Act, according to a March 22 financial analysis report by Bear Stearns. The company analyzed 18 different large companies, including Alcoa, BellSouth, Consolidated Edison, and Ford Motor Company and found savings rates of $2 million to $4,142 million.
The savings comes from an MMA provision that will subsidize employers' prescription drug costs for their retirees beginning in 2006. The Medicare program will cover 28% of drug costs for retired employees that exceed $250 per retiree, up to $1,330 each.
Examples of the some of the costs savings, over the average working life of employees eligible for postretirement benefits, include the following:
- $180 million for Alcoa
- $572 million for BellSouth
- $256 million for Consolidated Edison
- $4,142 million for General Motors
- $45 million for Norfolk Southern
- $1,256 million for Verizon
Rather than estimating the savings as a one time increase in income, most companies will amortize the financial benefits of the Medicare law in their profit and loss statements over the average working lives of their employees. This method is based on recommendations of the Financial Accounting Standards Board, which early this month proposed a guideline letting companies record the amount they expect to receive under Medicare as a reduction to their future health care liabilities.
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Bryan Cote
Executive Editor
E-mail address: bcote@hcpro.com |
