Weekly Newsletter: September 15, 2008

Medicaid: More Spending Does Not Equal Reform

Today, Health and Human Services Secretary Mike Leavitt will be addressing a conference on Medicaid reform in Washington. The symposium comes at a time when some want Congress to pass legislation (H.R. 5268) providing more than $10 billion in Medicaid spending to states as a way to “fix” the program’s problems. However, many conservatives may believe that policy-makers should not use additional spending as a way to shirk from their duties to reform what is often an outmoded model of care.

In the past few years, several states have embarked upon novel and innovative reforms to improve the quality of care provided in the Medicaid program. Most recently, Rhode Island submitted a waiver application to the Centers for Medicare and Medicaid Services (CMS), asking for flexibility to revamp its program. Notable elements of this reform proposal include:

  • Incentives to promote wellness and prevention, including consumer-directed accounts and Health Savings Accounts (HSAs);
  • A shift to home and community-based care instead of a traditional nursing home setting for elderly populations;
  • Incentives to purchase long-term care insurance, so as to eliminate the need for Medicaid long-term care financing;
  • Competitive bidding for durable medical equipment; and
  • A novel financing model that ensures that total Medicaid expenses will rise by up to 5% per year.

    Many conservatives may support these and other similar reform initiatives proposed by states, as one way to slow the growth of health care costs and thereby reduce America’s unsustainable entitlement spending. Moreover, some conservatives may believe that time on the legislative calendar debating a Medicaid bailout should instead be used to discuss these types of comprehensive structural reforms to the program—so that the poorest beneficiaries are not subjected to more of the same from a government health system that does not work for many.

    The RSC has prepared a one-pager highlighting the need for comprehensive Medicaid reform based on examples from several states; the document can be found here.

    Cautionary Tales from Across the Pond

    This past week, a British think-tank published a paper that spoke the heretofore unthinkable: the policy group Reform advocated replacing the single-payer National Health Service with a voucher-based private health system. Under the proposal, individuals would receive a £2,000 voucher to purchase private insurance—injecting competition into a health system previously dominated by government, and bringing with it the potential to slow the growth of costs while achieving better value through improved care.

    The Reform proposal comes on the heels of several disturbing developments regarding the National Health Service last month. One survey found that a quarter of cancer specialists are purposely keeping their patients “in the dark” about treatment options—in order to avoid upsetting those patients when they find out the NHS will not pay for their treatments. Several weeks earlier, the National Institute of Health and Clinical Excellence (NICE)—Britain’s comparative effectiveness institute—adopted a policy of refusing to pay for four kidney cancer drugs, even though the pharmaceuticals made “significant gains” in survival times, because NICE did not believe the drugs were cost-effective.

    Conservatives may not be surprised by any of these developments—as the rationing of care frequently leads to demands to reform or abolish the governmental bureaucracies that deny life-saving treatments to patients. Some conservatives may also believe that the type of changes advocated by Reform with respect to the National Health Service, if applied to Medicare, could allow seniors a wide range of options to receive their health care, while achieving cost-savings through competition that could slow the growth of skyrocketing health and entitlement costs.

    Read the BBC News article: “Doctors ‘Keep Cancer Drugs Quiet’”

    Article of Note: The Hospital-Industrial Complex

    An article in the Wall Street Journal last month revealed the continuance of a troubling trend: hospitals using their monopoly power to raise prices for consumers—helping to contribute to the growth in health care costs. Consolidations in recent decades—coupled with state certificate-of-need laws that provide government-sanctioned exclusivity in most states—have allowed regional hospitals to tighten their grip on many markets, and the Journal article tells the tale of Carilion Health System in southwest Virginia:

  • Colonoscopy prices four to 10 times higher than a local clinic;
  • Neck CT scans more than double the price of an imaging center;
  • A significant spike in regional health insurance premiums to the highest level in the state; and
  • Over $105 million in net income achieved by a non-profit hospital over the past five years.

One local businessman called the area a “one-market town…in terms of health care,” noting that the hospital “has the leverage”—and the article demonstrates that its impact on both physician practices and the insurance premiums paid by thousands of Virginians has been significant.

The piece comes at a time when the hospital industry is attempting to eradicate one of its few remaining sources of competition, by asking Congress to place a ban on the development of physician-owned specialty hospitals. Some conservatives may oppose this measure as a high-handed approach by Washington policy-makers to interfere with free markets, further solidifying existing hospitals’ monopolies, and stifling the type of innovation in health care that new entrants like specialty hospitals can create to slow the growth of health care costs.

Additionally, conservatives may note a letter from the Department of Health and Human Services’ Inspector General from this April, which publicly rebuked several hospital trade associations for making “several statements that misrepresent our findings and draw[ing] several conclusions that we did not make” in a white paper to Congressional policy-makers on the need for a specialty hospital ban. Some conservatives may therefore be highly skeptical of claims from self-interested parties exhibiting monopolistic tendencies, who have made deceptive and misleading statements to Congress to advance their claims—and apparently lack the integrity to apologize for doing so.

Read the article here: Wall Street Journal: “Non-profit Hospitals Flex Pricing Power

Weekly Newsletter: July 7, 2008

Medicare Votes Likely This Week

After returning from its Independence Day recess, Congress will once again return to debate legislation addressing physician reimbursement levels under Medicare. Because Senate Democrats objected to Republicans’ unanimous consent requests to pass a “clean” physician payment bill before the recess, physicians will take a 10% cut in their reimbursement levels unless and until Congress passes a retroactive fix. Additional Senate votes are likely later in the week on this issue.

While all parties agree on the need to address the physician reimbursement provisions, Senate Republicans have called for passage of bipartisan legislation that would forestall the significant cuts to Medicare Advantage plans made in House-passed legislation (H.R. 6331). Some conservatives may be concerned that the House-passed bill’s significant cuts to Medicare Advantage would have the effect of driving beneficiaries away from a privately-run model of health insurance that has provided enhanced benefits and choice for millions of seniors, especially the 2.2 million beneficiaries in private fee-for-service plans. Some conservatives may also believe that the short-term nature of current physician reimbursement extensions, coupled with their potential to become entwined in unrelated disputes and/or “held hostage” due to various political considerations, makes a powerful argument for more comprehensive reforms to Medicare, including a long-term solution to physician reimbursement policy.

While it is currently unclear whether Democrats will continue to block Republican attempts to pass noncontroversial physician payment legislation, or what precise form a more bipartisan bill designed to address the reimbursement provisions will take, the RSC will weigh in with conservative concerns and updates on H.R. 6331 and any other physician payment legislation which may be introduced or considered.

The Legislative Bulletin on H.R. 6331 can be found here.

There are additional RSC Policy Briefs on issues related to the Medicare bill: Physician Payments; Medicare Advantage; Bidding for Durable Medical Equipment; and the Medicare Trustees Report.

Article of Note: Report Finds Comparative Effectiveness Rationing Not So NICE

A report released in Great Britain last week on the occasion of the National Health Service’s (NHS’) 60th anniversary noted the need for reforms in the way the NHS administers care based on comparative effectiveness research. Health Minister Lord Darzi’s study admitted problems with the existing National Institute for Health and Clinical Excellence (NICE), established in 1999 to review the effectiveness of drugs and other therapies. Specifically, the report conceded that “it has sometimes taken too long for NICE appraisal guidance to be made available on newly licensed drugs” and that “there remains unexplained variation in the way local decisions are made on the funding of new drugs before the appraisal takes place.”

With the Congressional Budget Office (CBO) holding up the British establishment of NICE as one model way to achieve comparative effectiveness research in the United States, some conservatives may be concerned by the implications such an institute would present. At a time when the British government has admitted that NICE’s introduction has led to years-long delays in drug approval times and inherently arbitrary rationing of access to drugs from location to location, some conservatives may believe that such a heavy-handed—to say nothing of bureaucratically ineffective—role for government to play in American health care would be both counter-productive and inappropriate.

Read a summary of the clinical effectiveness provisions from BBC News here.

The RSC has prepared a Policy Brief on comparative effectiveness research, which can be found here.