Health Care Reform: Consensus on Some Points

It is, of course, conflict and disagreement that make news. However, the coverage of protests at town hall meetings about health care reform legislation held by members of Congress in their home districts over summer recess and the differences between competing drafts of what such legislation should look like mask one core truth: there is a good bit of agreement on what should be in the final package. That is why President Obama in early August said: “We are moving toward a broad consensus on reform.”

One clear fact: health insurers will have to change their underwriting practices. All the major bills circulating in Washington contain provisions banning denials of applications based on a preexisting medical condition. In addition, they would end discrimination on the basis of gender and would demand that once a policy is issued it could not be rescinded. Moreover, those proposals outlaw benefit payment caps-either annual or lifetime limits.

It is also evident that the reform will contain a mandate that all Americans must get coverage-either through their employer or on their own-or else pay a penalty. There is disagreement on how that penalty should be figured, whether on the basis of average premiums or the individual’s income, but that is not a major stumbling block. In conjunction with that provision, there will be a federal subsidy to help those with insufficient income pay the premiums. Some lawmakers want that subsidy to go to anyone who makes less than 4 times the federal poverty level, and some want it available only to those who make less than 3 times the poverty level. Medicaid will also be expanded so that the states with the most stringent participation requirements will have to let more people take part in the program.

As a result, many more persons will have coverage and more persons will buy prescription drugs. That is why the pharmaceutical industry made an early agreement with the Obama administration: it would accept $80 billion in price reductions over the first decade of a reform measure. (The quid pro quo for that promise was never made clear, but perhaps the administration will oppose the efforts in Congress to force an even larger reduction on the industry by, for instance, allowing imports of drugs or negotiating prices on drugs delivered to Medicare Part D enrollees.) This also explains why Pharmaceutical Research and Manufacturers of America (PhRMA) has undertaken a massive promotional campaign urging voters to support reform efforts. PhRMA’s board in August authorized spending of as much as $150 million on broadcast ads backing the legislation-an amount analysts think opponents of the legislation are unlikely to match.

Medicare Prescription Drug Coverage
Proposal: Cap Monthly Out-of-Pocket Outlays
Legislation introduced on August 7 by Sen John D. Rockefeller IV (D, WVa) would assure Medicare Part D enrollees that their insurer would pick up the full cost of prescription drugs after the patient copays reach $500 per month. The bill also limits out-of-pocket outlays on a single drug to $200 per month.

The measure is aimed at the practice-followed by 90% of Part D plans, according to Rockefeller’s office-of moving high-cost drugs into a specialty tier, where the copay can be as high as 33%. The Senator’s staff say that almost 10% of Medicare beneficiaries use such drugs, examples of which are Avonex and Rebif (interferon beta 1a) multiple sclerosis (MS) medications that typically have a wholesale price of about $2500 for a month’s supply.

Part of the stimulus for Rockefeller’s legislation was a study conducted by Prime Therapeutics, which analyzed data on 7 million members of 8 Blue Cross Blue Shield plans, looking for those who filled a new prescription for MS medication but did not refill it in the next 3 months. The investigators found that 25% of those for whom the drug was prescribed discontinued it because of the high out-of-pocket cost.

Hawaii: State Workers Must Opt for Mail-Order Drugs
Under a new state policy, employees of Hawaii and its constituent counties who take a prescription medication regularly for a chronic condition must buy that drug by mail to get reimbursement from their health plan. For some covered by Hawaii’s Employer-Union Health Benefits Trust Fund, the mandatory mail-order plan will begin as soon as October, when they use up the final 90-day supply that the trust allowed them to buy at a local drug store. All future maintenance drugs must be ordered from InformedMail Service Pharmacy in Miramar, Fla.

“We looked at how we can achieve savings without cutting benefits, and that’s exactly what the mandatory mail order does,” explained Fund administrator James Williams. The new policy is calculated to save state and county governments $10.6 million in the next year and is the primary reason premiums will increase 23.7% rather than the 30% rise initially projected. About 87,000 persons are covered by the affected plan.

The mandatory mail-order policy may not be permanent. State workers began complaining about the change soon after it was announced, and state Sen Josh Green said, “I think they have to consider reversing some of this plan over the next year.” Green, who is an emergency department physician, says that he not infrequently sees patients who come to the emergency department because their supply of mail-order drugs has not arrived on time. The cost of the emergency department visit is much higher than the cost of buying the drugs from a more expensive local source, he claimed.

States Compromise on Insurance Premium Hikes
In August, the Connecticut Insurance Department told Anthem Blue Cross Blue Shield that its proposed increases for individual health insurance policies-ranging from 22% to 32%-were unacceptably high, but it also told the company that it would accept increases that state Attorney General Richard Blumenthal called still too steep. The regulator told the insurer that it would have to propose increases in the 13% to 20% range. It also said that it would not let higher rates go into effect until next January 1 (Anthem had wanted to increase premiums as of October 1). About 56,000 policies are affected.

Neither side was happy with the decision. Anthem spokesperson Sarah Yeager argued that the initial request is justified because “the increasing demand for medical services, including the use of expensive prescription drugs, and demand for advanced technologies are driving up the cost of health care at an unprecedented rate.” Blumenthal, who had opposed the original Anthem request, complained that even increases of 13% to 20% “makes health insurance unaffordable for thousands.” Insurance Department hearing officer Mary Ellen Breault, who wrote the report in the Anthem proceedings, rejected Blumenthal’s contention that affordability should be one of the criteria the regulator weighs.

At the same time, Michigan arrived at a similar split-the-difference agreement on individual policy rates with Blue Cross Blue Shield of Michigan. The company had sought an increase of 56%-or $257 per month for full family coverage-but agreed to take only 22%. There also was a 22% increase in conversion policy premiums for persons replacing employer-provided coverage; the insurer had asked for 41% more. With the lower increases, the company estimates it will lose $1 billion through 2011 on its individual policies and is asking Michigan to change its law so that Blue Cross Blue Shield companies are not the only ones forced to issue policies to all applicants.

In Other Legislative and Regulatory News . . . A new government analysis showed that outlays on treating mental illnesses are rising faster than any other component of health care. The August 5 report from the Agency for Healthcare Research and Quality showed that between 1996 and 2006, total US spending on treating such disorders rose from $35 billion (adjusted to 2006 dollars) to more than $57 billion. In 1996, roughly 19 million Americans sought treatment for mental illness; by 2006, that number had risen to 36 million.

Independence Blue Cross notified 36,000 subscribers in the Philadelphia market that as of January 1 it is dropping 2 of its Medicare Advantage plans. The insurer is stopping a plan aimed at dual Medicare/Medicaid beneficiaries and another, which includes copays but no subscriber premiums, aimed at seniors of limited means who do not qualify for Medicaid. The move came in response to the advisory from the Centers for Medicare & Medicaid Services that Medicare Advantage subsidies would be cut by about 4% in 2010. Independent Blue Cross sent enrollees in the canceled plans the names and addresses of other insurers in the market that may offer similar plans.

New York now requires employers to allow discharged workers to continue their health care coverage for a full 3 years. The new law-retroactive for all those laid off after July 1-doubles the reach of the federal COBRA statute and, as under that law, allows employers to charge the full cost of coverage, with no subsidization. The New York provision covers, beyond those dismissed from their jobs, workers whose hours have been cut back drastically enough so that they no longer qualify for their employer’s health benefits.