03/2003 State Update

Drug Price Controls

Governor Janet Napolitano (D) launched through an executive order a program that would entitle about 600,000 seniors and disabled Arizona residents to use a discount card to buy prescription drugs at cheaper prices. Residents 65 years or older would pay a $25 annual fee to participate in the program.

Before Napolitano’s plan can go into effect, a network of pharmacies choosing to participate will have to agree to drug price controls established by the state. Napolitano, who bypassed the Republican-controlled legislature with her order, thinks the program could be up and running by the end of April.

Last year, a similar idea died in the state legislature as lawmakers balked at the use of price controls–and the estimated $1 million start-up cost. Napolitano projected her program would cost the state nothing, saying the $25 enrollment fee would cover the costs.
Arizona Republic
January 8, 2003

Medicaid Failure

Colorado state is dismantling its Medicaid HMO program, started in 1995 as part of a federal pilot program to reduce health costs and improve care, the Denver Post reports.

Karen Reinertson, executive director of Colorado’s Department of Health Care Policy and Financing, called the program a “failed experiment,” noting the HMO plans are not saving the state enough money. She noted the Medicaid HMO program is spending more on administration costs than on medical care. The state Medicaid program costs about $2 billion annually: one-third of the state budget.
Lexis/Nexis news search 01/12/03
Denver Post

More Cuts Needed

Governor Paul Patton (D) announced a Medicaid reform proposal that would employ several methods in an effort to curtail Medicare spending, including ending some coverage for nursing home and at-home care, imposing fees for dental and other health services, and trimming reimbursements for outpatient hospital care.

The proposal is designed to cut about $250 million in Medicaid costs. Even with those cuts, the program still would report a $200 million deficit.
Owensboro Messenger-Inquirer
Associated Press, 01/17/2002

Exploding Costs

Health care spending increased by 11.8 percent in 2001–the biggest jump since the state began tracking health spending in 1995, according to a report issued by the Maryland Health Care Commission. “All service sectors are accelerating rapidly,” said Ben Steffen, the commission’s deputy director.

Patients, insurers, employers, and government programs in the state spent $21 billion on health care in 2001, up from $18.8 billion in 2000. The report includes spending on inpatient care, outpatient care, physician fees, prescriptions, and nursing home care. Steffen noted some health-related spending, such as workers’ compensation claims and auto insurance payments, was not included in the report.

Hospital outpatient care, including ER visits, saw the most rapid increase, at 18 percent. Out-of-pocket expenses for patients grew 13 percent, while spending by insurers grew 12 percent. The difference, according to Steffen, was explained by increasing deductibles and co-payments.

Until 2000, health care spending in Maryland was increasing at a rate lower than the national average. Steffen thinks the higher spending since then is due to falling HMO enrollment, which meant fewer patients were subject to the tight cost controls imposed by HMOs. Of Maryland residents with health insurance, 34.9 percent were enrolled in HMOs in 2001, compared with 39.5 percent in 2000, the report said.

Jon Gabel, vice president of health systems studies at the Health Research and Educational Trust, disagreed with Steffens’ assessment. Gabel said increased health spending in the state, and the nation as well, stems from a loosening of controls on managed care plans since the 1990s.

Patient demand for less micro-management of their health care has caused managed care plans to reduce or drop some restrictions on care, such as pre-authorizations and gatekeeper doctors who controlled access to specialists.
Maryland Health Commission Report, 01/16/03
Baltimore Sun, 01/17/03

Pass and Repeal

State Senator Richard Moore (D) has introduced legislation to repeal the state’s $2 co-pay for Medicaid prescriptions. Effective in January, the state increased the co-pay from 50 cents to $2 per prescription. Pharmacists say the additional payment is creating a barrier to treatment for beneficiaries with mental illnesses, some of whom already have difficulty adhering to medication regimens.

Providers are saying people with mental illnesses, who typically are “poorly organized and living on extremely restrictive incomes,” might not be aware of the higher co-pay. When they pick up their prescriptions and then learn of the requirement, that might be enough to discourage them from paying for and taking the prescription.

Advocates for repeal claim mentally ill patients should have been included in the list of “vulnerable” populations exempt from the co-payment. The list currently covers children under age 19, pregnant women, mothers with newborns, nursing home residents, those living in intermediate care facilities, people with mental retardation, and those suffering from chronic diseases.
The Boston Globe
01/20/03

Who’s on First?

A new study from the Kaiser Commission on the Uninsured examines the state’s Pharmaceutical Product List program. The current formulary forces drug companies to provide discounts in order to have their medications placed on the state’s approved prescription drug list for Medicaid and other public health insurance programs.

The Kaiser report noted implementation of the program did not go smoothly, in part due to the state’s desire to institute it rapidly. The implementation process excluded key stakeholders, and ineffective communication led to delays in beneficiary access to medication.

The report also finds the formulary too restrictive for a relatively expensive class of drugs used for treating mental health conditions, cardiac problems, and diabetes.

The Michigan Department of Community Health, which runs the formulary program, did not participate in the research leading to the report. Geralyn Lasher, a department spokesperson, told the Associated Press, “I’m not sitting here saying that everything went off without a hitch. When you make such a major change, of course there are going to be a lot of questions.”
Associated Press reports
January 15, 2003
Michigan Department of Community Health

Increase the Co-pay

Governor Bob Holden (D) has put forward a measure that would require Medicaid beneficiaries to pay co-payments of 50 cents to $3 for doctor visits and other services as part of an effort to cut $280 million from the state budget, the Kansas City Star reported. Most of the program’s 900,000 beneficiaries currently do not make any co-pays for physician visits.

Officials in the Department of Social Services predict the proposed co-pays would save the state $65.8 million. Holden is trying to cut a total of $150 million from the Medicaid program.
Columbia Tribune
Kansas City Star, 01/16/03

What Are Neighbors For?

After nine states and the District of Columbia announced a not-for-profit multi-state partnership to manage prescription drug benefits under Medicaid, Nevada legislators say they might partner with an undisclosed neighbor state in a similar effort. Costlier drugs and growing Medicaid enrollment contributed to $79 million in drug costs for the program last year, up from $59 million in 2001.
Las Vegas Sun
State Department of Health, 01/16/03

State of the Obvious

The state Department of Health and Human Services needs to reform “long-standing problems” in the state’s Medicaid program, says Governor Mike Easley (D). Accounting problems, which health officials first learned about last summer, led to overpayments to hospitals since 1997 that could total a “few million” or a “few hundred million,” according to news reports from the Raleigh News & Observer.

Hospital officials reportedly said accounting errors likely led to “minimal” overpayments, although a health department document says the total could be as high as $625 million, according to the News & Observer. Health department officials said they are extending a $64,000 contract with consulting firm Tucker Alan to probe possible overpayments.
Lexis/Nexis news search, 1/26/03

Fluff Stuff

Keystone State Governor Ed Rendell (D) has announced a new state agency to address the medical malpractice insurance crisis and coordinate efforts to reduce health care costs. The new Office of Health Care Reform will have authority over the state Departments of Aging, Health, Insurance and Public Welfare, as well as other departments that regulate or deliver health care services.

The agency will have a limited, as yet undetermined, budget and a small staff, led by Rosemarie Greco, former president and CEO of CoreStates Bank. The agency will work to reduce costs in the state’s $7 billion health care system and will partner with a task force established by Rendell to address high malpractice insurance rates in the state.

Although the new agency will not have regulatory authority, Greco will report directly to Rendell and will help implement agency recommendations the governor approves.

University of Pennsylvania health economist Mark Pauly said the agency might improve the “quality and satisfaction of care of public clients but will not likely reduce health care costs in the state.”
Associated Press wire services
Google Advanced News Search, 01/26/03

Can’t Get a Break

Because the state overestimated cost savings as a result of reforms to TennCare, the state’s Medicaid managed care program, the program has a budget shortfall of $258 million.

After receiving a federal waiver last year to restructure TennCare benefits and eligibility, the state began a process to reverify eligibility for current beneficiaries. The state planned to save about $150 per person for beneficiaries cut from the program, but those savings amounted to only about $100 per person.

Program Director Manny Martins told lawmakers if a federal appeals court upholds a lower court ruling ordering Tennessee to reinstate benefits to those who lost them, the program’s budget deficit could grow by between $260 million and $300 million.
Manny Martins testimony to the state legislature, 01/15/03
Memphis Commercial Appeal, 01/16/03

Finally a Good Idea

Incoming Republican Governor Jim Douglas announced in January that “Vermont has expanded its Medicaid benefit package to include those who do not qualify for traditional Medicaid.” The reform package concentrates on making health insurance more affordable by using a tax-deductible medical savings account (MSA) program tiered to income.

The target group for the pilot project will be uninsured or underinsured children from families with annual incomes between 225 percent and 300 percent of the federal poverty level. Enrollment in the program will be voluntary. Enrollees will receive the same medical benefits as Medicaid-covered children who are not enrolled in the MSA.

Legislation authored in 2002 by Representative Tom Koch (R-Barre) directed the state’s agency for Medicaid to devise a voucher to help the Medicaid population buy health insurance.

Families will fund the MSA with their current program fee payments, established at $600 per year for uninsured children, and $288 per year per family for underinsured children. Preliminary estimates are that up to 1,000 families may volunteer to enroll in the MSA program. The proposal cannot go into effect until it receives a waiver from the Centers for Medicare and Medicaid.
John McClaughry, Ethan Allen Institute, 01/26/03

Leaving Home Without it

According to a survey of West Virginia physicians commissioned by the U.S. Chamber of Commerce, inflationary medical malpractice insurance rates have forced many physicians to leave the state, hurting the quality of patient care.

The survey of 289 West Virginia physicians, conducted by Harris Interactive, found a “substantial majority believe that the state’s malpractice liability system is undermining the practice of medicine and the delivery of health care.”

In addition, about 90 percent of physicians surveyed said they “do not feel they can trust the current justice system to achieve reasonable outcomes,” and about two-thirds said they have considered moving to a different state as a result of high malpractice insurance rates.

About 90 percent of physicians surveyed said West Virginia has a physician shortage, and almost all attributed the problem in part to malpractice liability.

Kate Sullivan, director of health care policy for the U.S. Chamber of Commerce, called the poll “a siren call to West Virginia that their state’s litigation system is in critical condition.” Sullivan added, “Lawmakers must make meaningful changes to heal the civil justice system before patients suffer.”
U.S. Chamber of Commerce press release
Harris Interactive Surveys, 01/13/03

Conrad F. Meier is managing editor of Health Care News.