08/2002: State Legislative Update

Published August 1, 2002


Arizona’s Premium Sharing Program, a pilot program covering the cost of physician visits and medicines for low-income and chronically ill residents, has stopped accepting new applicants because of budget cuts. The program was designed to assist residents with incomes of up to 250 percent of the federal poverty level ($2,419 per month for a couple) and those with chronic illnesses whose incomes were no more than 400 percent of the poverty level ($3,870 per month for a couple).

Originally, the program operated on a $20 million annual budget, but in July its budget was nearly halved, to $10.5 million per year. As a result, the program has frozen its enrollment and is attempting to transfer many of its current 6,000 participants into other health programs.


Gubernatorial candidate Steve Grossman (D) has proposed a plan requiring pharmaceutical companies to publicly disclose the names of doctors who accept gifts valued at $25 or more. The proposal would authorize state officials to fine drug makers as much as $10,000 for each unreported gift to doctors valued at more than $25.

A similar measure was introduced in this year’s legislative session. Lawmakers in Maine, New York, and Wisconsin have also introduced similar bills, while Vermont already has such a law.

“The public has a right to know who’s spending the money and who’s receiving it. It is affecting decisions costing people a lot of money and possibly affecting care,” Grossman said. Grossman’s Democratic rival Robert Reich, a former U.S. secretary of labor, has called for an “outright ban” on gifts from pharmaceutical companies to doctors.

Critics of the proposals say they interfere with the right of pharmaceutical companies to inform doctors of their products, and giving free samples is a common practice in other industries.


Michigan state health officials recently “reminded” local health departments that children whose health plans cover vaccines may not receive free inoculations from local health departments.

Traditionally, local health departments in Michigan have immunized all children free of charge, using discounted vaccines purchased from the federal government. Although federal law has long precluded children whose insurance covers vaccines from receiving free vaccinations from local health clinics, the law has gone largely unheeded in Michigan. Now state officials say the rule must be enforced to save money.


Minnesota Attorney General Mike Hatch (D) filed a lawsuit in Minneapolis-based Hennepin County District Court claiming Pharmacia charged doctors $7.75 per dose of the cancer treatment Vincasar, but listed the Average Wholesale Price (AWP) as $742.50.

For Medicare purposes, prescribing doctors are reimbursed 95 percent of the AWP: roughly $705 for Vincasar. Medicare itself typically would pay 80 percent, about $564, and beneficiaries would pay the remaining 20 percent, or about $141, Hatch said.

Prescribing physicians have been allowed to keep the difference between the $7.75 they paid to Pharmacia for the medication, and the $705 they were reimbursed by Medicare. That practice, the lawsuit alleges, “created an incentive” for doctors to choose certain chemotherapy drugs over others. The suit seeks between $5 and $10 million in reimbursements from Pharmacia, some of which would go directly to patients who allegedly overpaid for the medications.

Hatch said he expects the National Association of Attorneys General to “not be far behind in taking action” against pharmaceutical companies nationwide. But John E. Calfee, a health scholar at the American Enterprise Institute, questions the legal basis for such suits. “Not only have Congress, HHS and other parties been aware of how AWP works, Congress and HHS have made AWP part of pricing arrangements through legislation or regulation.”


Missouri State Auditor Claire McCaskill claims her state could save more than $50 million a year on Medicaid drug costs if it employed a preferred drug list and lowered the reimbursement rate it pays pharmacies. Medicaid prescription drug costs in Missouri have more than doubled since 1997, reaching $660 million in 2001. “Missouri has not been as proactive as other states with certain containment programs,” according to McCaskill.

Although state legislators passed a law this year permitting a preferred drug list, the state’s complex rule-making process blocked its implementation. The rule-making process has also precluded implementation of a prior-authorization program, under which doctors would have to receive permission from the state before prescribing certain drugs.

The Division of Medical Services is crafting a preferred drug list and attempting to change the state’s rule-making process to make way for a prior-authorization program.


To comply with a judge’s order, TennCare officials have spent $136,000 since June 13 to sign up new applicants for the program … even though they will lose coverage if state lawmakers elect not to fully fund the program.

Last year U.S. District Judge William Haynes ordered the state to open TennCare enrollment when slots became available; accordingly, the state has mailed information packets to 220,000 individuals who previously had been rejected for TennCare benefits, inviting them to apply for about 5,000 slots vacated by individuals found ineligible.

TennCare lawyers called the process a “futile exercise,” saying the new beneficiaries may lose their coverage when the state’s recently approved Medicaid waiver takes effect. The waiver restructures eligibility and benefits and allows the state to create three separate programs: TennCare Medicaid; TennCare Assist, which would provide low-income workers assistance in purchasing private health insurance; and TennCare Standard, for people with high-risk medical conditions as well as low-income adults and families with no access to group insurance.

State Deputy Finance Commissioner John Tighe, who oversees TennCare, said up to 420,000 beneficiaries could lose coverage if lawmakers decide not to fully fund TennCare.


A Dallas County jury ordered Cigna Healthcare of Texas to pay $13 million in damages to the family of a Texas man who died after the HMO “forced him out” of a skilled nursing facility, marking the first jury award allowed under the state’s patients’ rights law.

Herschel Pybas, a member of Cigna’s Medicare+Choice plan, was admitted to a skilled nursing facility in 1998. He had congestive heart failure and renal failure and a history of stroke, anemia, upper respiratory infection, and malnutrition. According to the lawsuit, Pybas was “forced out” after less than one month in the facility.

Cigna indicated it would provide nursing care for Pybas at home. One day after being released, Pybas was taken to the hospital in “grave condition.” He died five days later.

In 1997, Texas passed the first-in-the-nation law allowing patients denied medical care to sue their HMOs. Between 20 and 30 suits have been filed, several of which were settled out of court. The only other case to go to trial ended in a victory for the HMO.


U.S. Secretary of Health and Human Services Tommy Thompson approved a Washington state program to allow people with disabilities to retain Medicaid coverage after returning to work. Under the program, Medicaid benefits will be available to all disabled people ages 18 to 64 with annual incomes up to 220 percent of the federal poverty level, or $19,492 for an individual.

State officials say they expect about 400 people to qualify for the program during the first year and about 1,100 by September 30, 2003. To implement the program, the state has received $1.125 million from Medicare under the Ticket to Work and Work Incentives Improvement Act of 1999.

“Now, hundreds of Washington state residents will be able to return to work without fear of losing access to medical care for a serious disabling condition,” Thompson said.

The State Legislative Update is compiled from a wide range of news sources, including the Council for Affordable Health (CAHI) http://www.cahi.org; the National Association of Health Underwriters (NAHU) http://nahu.org; Bizjournals at http://bizjournals.com; Stateline at http://stateline.org; and Lexis/Nexis research.