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Medicare Reform Advisor, August 24, 2004

Medicare Reform Advisor, August 24, 2004

August 24, 2004
Vol. 1, No. 27

Weekly news and analysis

This Week's Feature

Election impact: Political consultants, advisors gaze into Medicare crystal ball

  1. Hospitals may forgo illegal immigrant funding

  2. Medicare Murmurs

  3. Battle over category count, drug limits heats up

  4. Early response to formulary guidelines

  5. Alien documentation method worries providers

  6. Hospitals see public health hazard

to Medicare Reform Advisor


A group of 2,200 hospitals and care centers are under investigation for possibly overcharging Medicare for supplies like surgical gloves and X-ray machines. The supplier in question, Novation, is owned by the hospital alliance. Richard Blumenthal, attorney general in Connecticut, says Novation is a major medical market supplier and "they're shutting out many smaller suppliers." In related cases, Blumenthal is helping federal investigators check into hospital executives who have conflicts of interest with medical supply companies. A Hartford Courant newspaper story contributed to this report

Hospitals may forgo illegal immigrant funding


Send letters to . Include tips, ideas, questions, and problems related to Medicare reform. The editors reserve the right to edit letters for clarity.

August 27-- Public meeting to discuss USP standards (see Top Story). 9-4 p.m. at the Wyndham Baltimore-Inner Harbor. More info: 301/816-8130.

September 17-- Due date to send comments on the formulary guidelines for prescription drug plans to USP. Go to to download the guidelines. Submit comments to Lynn Lang, U.S. Pharmacopeia, 12601 Twinbrook Parkway, Rockville, MD 20852 or via e-mail to

December 1-- A new rule takes effect allowing CMS to continue random prepayment reviews, but with restrictions. CMS may only identify a carrierwide or Medicare programwide error rate, not physician specific errors.

© 2004 HCPro, Inc.


Hospitals may forgo illegal immigrant money
Medicare Reform Advisor takes a close-up look in this week's edition and next week (Aug. 31) at the concerns hospitals have with the federal funding of emergency services and undocumented aliens outlined in section 1011 of the reform law, and what that could mean.

This week's coverage:

  • See this week's "Study" for details on a new poll from Medicare Reform Advisor on why some hospitals may not take advantage of the funding
  • See "Inside the Reforms" below for details on why hospital groups have concerns about CMS's documentation approach, and the public health hazards that could result

Next week's coverage

  • Hispanic leaders worry about possible discrimination
  • Coalition wants payments based on costs, not DRGs

Part D: What drug plans may have in store

As prescription drug plans come onto the scene, here's a quick look at what the government may require of them in 2006. Use this intel to further investigate the opportunities for your service lines and products. The government may require prescription drug plans, through regulation or emergency access standards, to
  1. choose medications with a wide variety of dosage forms, like liquid forms
  2. include injectable forms of medications, especially intravenous hydration and injectable antibiotics
  3. provide payment for all medically necessary medications for nursing facility residents (CMS would have to create a regulation for this, which some groups want them to do)
  4. create a specific formulary that long-term care pharmacies could use for their specialized population
  5. publish a list of potentially inappropriate medications that drug plans would not be allowed to include on their formularies
  6. designate high-risk conditions for which drug formularies may only guide initial selection of therapy for new patients

Source: Comments sent to CMS for its drug plan formulary categories.

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Battle over category count, drug limits heats up
The United States Pharmacopeia (USP) released guidelines Aug. 19 to help drug plans create their formularies. The guidelines ( ) take effect in December. There are currently 146 therapeutic categories and pharmacologic classes in the first draft. "The total number will change, and perhaps dramatically," USP director William Zeruld confirmed during a call yesterday with reporters. The two hot potatoes in the guidelines that CMS must juggle: Whether to expand the number of therapeutic categories and raise the limit per category beyond just two drugs. Several groups, in particular the pharma lobby, want CMS to create enough categories to accommodate all of the different medications and biopharmaceutical products. Access is the key, but money is the driving force, says Stanley Foodrich, a healthcare analyst based in New London, CT. "I would not be surprised if CMS raises the limit and requires the drug plans to include more than two drugs per category."

Frail elderly adults often depend upon a complex drug regimen to control their chronic conditions, and many have Alzheimer's or other diseases that make it difficult for them to manage the administrative payment and appeals process. The American Society of Consultant Pharmacists doesn't want CMS to overwhelm physicians with paperwork and prior authorization procedures. That's why they are calling for CMS to include in the draft drug formulary guidelines a liberal physician formulary override process.

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Early response to formulary guidelines
Though written comments on the drug formulary guidelines aren't due to the United States Pharmacopeia until Sept. 17 (see "Datebook" for comment instructions), several groups have already weighed in:

For example, several groups, including the ASCP, suggest CMS use at least three medications on the formulary when six or more medications are available with a therapeutic category. "Even this may be inadequate in many categories for treating the elderly population," Feather said. "In these cases, the liberal physician formulary override process becomes critical." Frail elderly adults often depend upon a complex drug regimen to control their chronic conditions, and many have Alzheimer's or other diseases that make it difficult for them to manage the administrative process. The ASCP doesn't want CMS to overwhelm physicians with paperwork and prior authorization procedures. That's why they are calling for CMS to include in the guidelines a liberal physician formulary override process.

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Alien documentation method worries providers
Requirements proposed by the Centers for Medicare and Medicaid Services (CMS) that healthcare providers in emergency service settings ask patients about their citizenship status have raised some concerns, according to letters sent to CMS during an open comment period that ended Aug. 16 on the proposed implementation of section 1011 of the Medicare Modernization Act (MMA). The comment period followed two open-door meetings earlier this year on the provision. The statutory implementation date is set for Sept. 1.

Under section 1011, $250 million a year-for the next four years (fiscal 2005-2008)-is to be set aside to help hospitals and emergency care providers recoup part of their costs associated with providing emergency services to "qualified individuals" who are uninsured or cannot afford emergency care. Two-thirds of the funds will be distributed to all states, with the remaining third going to those states with the largest number of "apprehensions of undocumented aliens" (Arizona, California, Florida, New Mexico, New York, and Texas).

CMS is calling for a "patient-based documentation approach" in which healthcare providers would ask for information about a patient's citizenship or immigration status prior to discharge, but after the patient is identified as self paying and not eligible for Medicaid. All individuals, however, would still be required to receive emergency care under the requirements of the federal Emergency Medical Treatment and Labor Act (EMTALA).

Washington correspondent Jan Simmons reporting

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Hospitals see public health hazards
The Coalition for Fair Payments to Healthcare Providers Treating Undocumented Immigrants-which includes the American Hospital Association and the state hospital associations of Arizona, California, Florida, Illinois, New Jersey, New Mexico, New York, North Carolina, South Carolina and Texas, as well as the Healthcare Association of San Diego and Imperial Counties and the Greater New York Hospital Association-said in an Aug. 16 letter to CMS that providers asking patients if they are American citizens will "be a deterrent to undocumented individuals seeking care."

Individuals who are ill and decline to seek care for fear of disclosure of their immigration status "not only jeopardize their own well being by avoiding care, but may also unintentionally create a public health hazard" if they have a communicable disease, says the letter signed by C. Duane Dauner, president of the California Healthcare Association and the coalition's chair. Also, avoiding or delaying care could "hamper the identification and containment of a bioterrorism attack."

The coalition suggested alternatives to limit data-collection functions that would allow hospitals to make "reasonable and informed decisions" regarding the eligibility of a patient. One alternative calls for a determination based on reviewing information that shows a foreign birthplace and the lack of specified information including a missing or invalid Social Security number, missing or invalid American driver's license, and lack of insurance, including Medicaid.

Washington correspondent Jan Simmons reporting

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Hospitals may forgo illegal immigrant funding
The federal government will start distributing $1 billion to the nation's emergency rooms in October to care for illegal immigrants, but 14 out of 20 hospitals polled by Medicare Reform Advisor last week say they may turn down the funding. "We'd have to ask our patients whether they're U.S. citizens, and we know many won't come because they fear they'll be deported," one chief executive said. All 20 hospitals polled had no idea how many illegal residents they treat because they don't track them. Sixteen of the 20 have formed an executive task force to see whether they ought to pursue the funding Medicare Reform Advisor called 30 hospitals for the survey. Twenty responded, eight did not, and two had no information about the reform law option.

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Election impact: Political consultants, advisors gaze into Medicare crystal ball

So what is the public perception of the Medicare Modernization Act (MMA) and its impact on the political campaigns? At a nonpartisan Alliance for Health Reform briefing held earlier this month in Washington, leading advisors and consultants from both sides of the aisle showed that there are many viewpoints-especially on how MMA will impact the November elections.

"The interpretation of the prescription drug bill is extraordinarily important," said David Winston, president and founder of the Winston group, which advises congressional Republicans. But he acknowledges that "the public may not see every single thing that they wanted in it."

"That is a very different standard than whether they think progress was made and whether they have better access to prescription drugs than they had before. That's the dynamic," he said, noting that the Kerry campaign wants to "cherry pick" and find "two or three things that are wrong with the bill and say this typifies the whole bill."

"What you're going to see from the Republican side is, 'We know there are a lot more things that need to be done, but what we've managed to do is make significant progress,'" he said, pointing out those individuals under the poverty level who are getting $600 free in prescription drugs. Republicans are going "to be using that and saying, 'We've made progress. It's not perfect,' and move forward."

Emphasis needs to be placed on making Medicare a "better purchaser of health care," said Chris Jennings, head of Jennings Policy Strategies and an unpaid advisor to the Kerry campaign on healthcare issues. "We have to do a better job of buying prescription drugs. As such, John Kerry and John Edwards believe that the [MMA] should be changed to repeal the explicit prohibition of direct negotiation by Medicare."

They also will be looking at ways to authorize reimportation of drugs approved by the Food and Drug Administration, as well as a "whole host of other initiatives" that will reduce pharmaceutical costs, Jennings said.

"There are options, choices, and preventive benefits being covered [under MMA}. We hear a lot of talk about that from the Kerry campaign. We love the fact that they're supportive of this, because this is something that we've implemented in the Medicare bill-preventive [health] benefits, chronic care disease management, as well as a rural package," said Megan Hauck, deputy policy director for the Bush/Cheney campaign.

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Bryan Cote
Executive Editor
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