Political lines were quickly drawn at Thursday's meeting of the House Energy and Commerce Committee's subcommittee on health where testimony about medical loss ratios was heard from representatives of small businesses, insurance underwriters, policy analysts, consumer advocates and health plans.
Chairman Joe Pitts (R-PA) said he called the meeting to "review the healthcare law's regulatory burden." Frank Pallone Jr. (D-NJ) countered that the meeting was "nothing more than another effort on the part of Republicans to undermine healthcare reform."
The Affordable Care Act requires health plans to spend 80% to 85% of premium revenue on reimbursements for clinical services and activities that improve health care quality. The Department of Health and Human Services has issued regulations defining activities that improve health care quality or fall within the department's definition of clinical services.
Rep. Pitts noted HHS's "vast control over the design of private health insurance coverage irrespective of consumer healthcare preferences."
A number of witnesses spoke in opposition to the MLR, which they said cause problems for brokers and could limit access to popular plans such as high-deductible health plans. Janet Trautwein, CEO of the National Association of Health Underwriters, said agents and brokers are facing a "desperate economic situation" because of the MLR requirement.She testified that because agents are mostly self-employed, their commissions shouldn't be considered administrative expenses.
Randi Reichel, an attorney who spoke on behalf of the health plan industry, said MLR requirements "impose an unprecedented new federal cap on the administrative costs of health plans, strictly micro-managing their ability to invest in new initiatives and innovations to benefit their enrollees."
Reichel added that because the MLR provision went into effect in January 2011 health plans and states didn't have a transition period to adjust to the new requirement. She noted that 12 states have submitted MLR waiver requests and three -- Maine, Nevada and New Hampshire -? have been approved with some modifications.
She contended that the MLR could limit consumer access to popular high-deductible health plans. "These lower-cost benefit options are not necessarily less costly to administer on a per-enrollee basis. They will have lower loss ratios and a greater likelihood of being noncompliant with the MLR rule."
Scott Harrington, a professor at the Wharton School at the University of Pennsylvania, said the MLR represents a "significant move toward government micromanagement of health insurance." He testified that the MLR provisions will "distort insurers' incentives for legitimate business decisions, destabilize some states' markets, and could reduce incentives for certain beneficial innovations in coverage and payment."
Harrington agreed with earlier testimony by Randi Reichel that the MLR requirement could "discourage some coverage designs that could lower premiums but involve relatively high nonmedical costs in relation to insured benefits, such as certain high-deductible plans. They could discourage potential innovations in coverage design and managed care that might require a lower MLR in conjunction with lower premiums and better value for buyers. They could cause some plans to contract with narrower provider networks and/or enter into arrangements shifting more administration to providers."
Harrington, whose testimony may be read in full here, said MLR regulations should be replaced with pro-competitive reforms that would encourage states to adopt policies that promote informed competition and consumer choice, including targeted minimum standards for state regulation, and providing the states with flexibility to meet regulatory objectives given differences in consumer needs, preferences, and economic conditions.
Speaking in support of the medical loss ratio, Terry Gardiner, vice president for policy and strategy at the Small Business Majority said that without the MLR "healthcare reform would lack the teeth needed to lower health insurance premiums and hold insurers accountable for unnecessary overhead costs that have nothing to do with medical care and more to do with poor accounting policies and minimal oversight."
He added that "the MLR will help keep premiums down so small businesses can save on healthcare-related expenses and invest in their companies. That means more jobs and greater economic growth."
In his testimony, executive director of Health Care for America Now Ethan Rome noted the MLR rule has already helped cut rates for Aetna subscribers in Connecticut where the insurer expects to pay customer rebates for 2011 for not meeting the MLR standards. Rome stated that across the country "premiums have risen sharply…..three times greater than wage growth. Insurers blame these increases on the rising cost of medical care, yet premiums have been going up at double the rate of medical inflation as gauged by the Bureau of Labor Statistics."
He opposes any effort to remove broker commissions from the MLR. "We need Congress to work on behalf of consumers to protect the ACA from efforts to undermine it, such as the proposal to weaken the MLR by giving a special break to health insurance brokers. If the broker commissions are taken out…premium rates will continue to increase even as healthcare costs drop."
Steve Larsen, deputy administrator and director of the center for consumer information and insurance oversight at the Centers for Medicare & Medicaid Services was expected to testify but instead submitted written comments.
He noted that the MLR regulations incorporate recommendations by the National Association of Insurance Commissioners, including methodologies for calculating MLR and the reporting format to be used by the industry. "The process included significant input from the public, states, and other key stakeholders, and was widely praised for its openness and transparency. The results of that process were approved unanimously by the NAIC Commissioners."
Larsen said state flexibility is already built into the MLR process because the ACA allows for a temporary adjustment to the individual market MLR standard if a state requests it and demonstrates that the 80% MLR standard may destabilize its individual insurance market. He added that the process and criteria for evaluating state requests for adjustments were based on NAIC recommendations.
Under a proposed rule, Medicare and private sector claims data could be used to produce public reports that evaluate the performance of physicians, other healthcare providers, and suppliers.
The Centers for Medicare & Medicaid Services is proposing to allow organizations that meet certain qualifications -- including having the capacity to process the data accurately and safely -- to have access, for a fee, to patient-protected Medicare claims data from Parts A, B and D. The Medicare information would be combined with private-sector claims data to identify physicians and hospitals that provide the highest quality care at the most cost-effective rates.
Webcast: Alternative ACO Strategies: June 7, 2011, 1:00–2:30 pm (ET)Register today.
Organizations would need to apply for access to the Medicare data. Applicants would need to demonstrate the ability to govern the access, use, and security of Medicare claims data and would be subject to strict security and privacy processes. CMS would continually monitor the process and an organization that did not follow the procedures would risk sanctions, including termination from the program.
The proposed rule is part of an effort to change the quality measurement landscape in a way that increases transparency for all stakeholders. Brian W. Lindberg at the Consumer Coalition in Washington, D.C. noted that the group has long argued for more meaningful information for consumer and purchasers to use to make healthcare decisions. “Consumers need standardized, understandable information about the quality of the providers in their communities. Further, we know that publically reporting data also influences providers to improve the quality of the care they provide.”
Webcast: Alternative ACO Strategies: June 7, 2011, 1:00–2:30 pm (ET)Register today.
The American Hospital Association and the American Medical Association have not yet published statements about the proposed rule. But providers have been frustrated by the limited and piecemeal availability of healthcare claims data and have complained that inaccuracies are difficult, if not impossible, to correct.
To prevent mistakes, the proposed rule requires that any reports generated from the Medicare data be shared confidentially with providers and suppliers before being released to the public. Publicly released reports would contain aggregated information only, meaning that no individual patient/beneficiary data would be shared or be available to the public.
“Making more Medicare data available can make it easier for employers and consumers to make smart decisions about their healthcare,” CMS administrator Donald M. Berwick, MD, said in a statement. “Performance reports that include Medicare data will result in higher quality and more cost effective care.”
Webcast: Alternative ACO Strategies: June 7, 2011, 1:00–2:30 pm (ET)Register today.
The proposed rule will be published in the Federal Register on June 8, and the CMS will accept public comments for 60 days. Until June 8 the proposed rule is available here.
Widespread concerns over accountable care organizations have health leaders pondering how to proceed. While the Centers for Medicare & Medicaid Services last month unveiled a number of enticements, some providers aren't biting. They're exploring alternatives.
Methodist Health System and Texas Health Resources announced recently an agreement to study the possible creation of a multi-provider accountable care organization. For now they plan to skip the formation of an accountable care organization as presented in the Affordable Care Act. Instead the two will explore other models of collaboration.
Recently Stephen L. Mansfield, PhD, president and CEO of Methodist Health System, sat down with HealthLeaders Media for a telephone interview. He talked about the new partnership, future prospects for ACOs and what he thinks it will take to make the ACOs successful.
Webcast: Alternative ACO Strategies: June 7, 2011, 1:00–2:30 pm (ET)Register today.
Q: What is happening with the Methodist Health System and Texas Health Resources partnership?
A: It's been in place less than a month. We have several groups that are meeting to look at what our working strategy might be. We plan to explore a variety of opportunities that will be good for our community from a cost and quality prospective. Together we may look at bundled payment strategies or readmissions, or we may partner on a facility. We just don't know yet what all we will do together.
Q: CMS just announced new initiatives for ACOs; will they help attract more participants in ACOs?
A: I think the three things CMS has done are positive. I don't know that I think they are enough to get the energy level and enthusiasm level back to what it was a year ago in the industry.
When this all started everyone was saying there would be 400 to 500 ACOs; now the scuttlebutt is 100. That's unfortunate because in my mind there are more than 100 organizations that are already there from the standpoint of having all the components parts to be an ACO today.
The new initiatives won't help Methodist Health and I don't think they will help many in the industry. It's a direct appeal to a targeted few that CMS really needs to get involved in ACOs early so they can get some positive momentum going. I think it's a move to get those organizations that already function like ACOs to go ahead and commit.
Webcast: Alternative ACO Strategies: June 7, 2011, 1:00–2:30 pm (ET)Register today.
As I understand it based on reading a synopsis, ACO Pioneer is for organizations like Cleveland Clinic, Geisinger Health and Kaiser Permanente that are already involved in coordinating patient care. These organizations have been functioning for decades like ACOs. That doesn't help us.
The second level, the accelerated payments, is really for organizations involved in the Medicare shared savings program. Methodist Health isn't so that doesn't help us and I don't think it will help most hospitals.
The third level, which we probably will take advantage of, is the accelerated development learning sessions that CMS will conduct to help the field migrate toward ACOs. Education and training might help get more hospitals interested in ACOs.
Q: So these initiatives haven't changed Methodist Health's position that it will not participate?
A: Unless something changes, our first overture for an ACO will be on the commercial side in 2014, not in Medicare in 2012. Our plan has always been to perfect the skill set with our own employees and our insurer then we'll move to the community and work with other employers and insurers. Then maybe we'll have a structure in place to take on Medicare.
We're encouraged with the results from our own employees who have chronic conditions and benefit from having a medical home and more longitudinal care. On the carrot side, we created an incentive where for every quarter they are compliant with their plan they receive a $250 bonus. As long as they are compliant their copays are waived. On the stick side, if they fail to comply they pay 20% more for their health insurance than other employees.
I think you can build in accountability systems for people who are paying something for their health insurance because they will have to pay more if they aren't compliant. I don't think it can be done the way Medicare is set up within the ACOs.
Q: Is the government model of ACOs sustainable?
A: I see the ACO as described by Elliott Fisher and others as a good model. This is a huge transition. For an industry as big as ours there are going to be fits and starts. This will probably evolve over the next decade or longer.
What concerns a lot of us is that you won't know what Medicare members are in your ACO until after the fact. Members can decide not to participate.
Webcast: Alternative ACO Strategies: June 7, 2011, 1:00–2:30 pm (ET)Register today.
The one person who has zero accountability in an ACO is the patient. Physicians will tell you that patients go home from the hospital, they don't fill their prescriptions or follow their diet regimen and then they end up right back in the hospital. There's nothing that I see in the ACO regs that makes the patient take accountability for care. I don't think it's going to work until we figure how to make patients have some degree of accountability for their personal care.
And, in my view, ACOs won't work until we figure out how to treat chronic illness differently than acute care illnesses. In our system we treat everything like it's an acute illness. We aren't structured as an industry to do a good job of dealing with people with complex chronic illnesses. We need to create a longitudinal model rather than an episodic model that cares for these people over time. How do you do that if you don't know for sure what patients are in your ACO?
Q: What's at stake if ACOs don't succeed?
A: I don't want to come across as cynical. I think the ACO concept is a very valid construct that holds the most promise for us to be able to improve the value of healthcare in America of anything I've seen in my career but it's just a concept. We've got to tweak it until we get the methodology right.
My personal opinion is that we need ACOs to work. I hope we're all going to stay in the game and continue to move our organizations to make the moves that will help ACOs succeed.
If this doesn't work then there will be a dramatic reduction in reimbursements for Medicare because the program is running out of money.
With enrollment in the Pre-Existing Condition Insurance Plan lagging well behind original estimates, the Obama administration Tuesday announced steps to lower premiums and increase enrollment in the high-risk insurance plans. And, to generate program interest among agents and brokers, payments will be made for successfully connecting eligible people with PCIPs.
Effective July 1, premium costs for the Pre-Existing Condition Insurance Plan will drop by between 2% and 40% in the 23 states and the District of Columbia where the PCIP program is federally administered. In addition, to qualify for the program applicants will only need to produce a physician's letter dated within the past 12 months, stating that the applicant has had a medical condition, disability or illness.
Applicants still need to have been uninsured for six months. Previously, applicants for the PCIP program needed a letter of coverage denial from an insurance company in addition to having been uninsured for six months.
When the $5 billion PCIP program was introduced in 2010 it was envisioned as a stop-gap measure to provide people with pre-existing conditions with access to affordable health insurance. Those people are often rejected by health plans. The temporary program will exist only until 2014 when insurers will no longer be able to deny coverage to people with pre-existing conditions.
The Congressional Budget Office estimated that about four million uninsured would be eligible for the $5 billion program and that 200,000 would be enrolled by 2013.
Instead, PCIPs had attracted only 18,313 enrollees as of March 31, 2011, according to the Department of Health and Human Services.
The goal of the premium reduction is to bring PCIP costs in line with private individual insurance. In Florida, state officials expect the premium reductions to attract new interest in the PCIPs. "We have a significant population on fixed incomes," explained Jerome Ashford, executive director of the Florida Comprehensive Health Association, which is responsible for the state's high-risk insurance program. That program has been closed to new enrollees since 1992.
The federal program in Florida was launched last fall and had 770 enrollees as of March 31, 2011. Florida is one of seven states expected to see premiums fall by 40%. That will mean beginning July 1 an enrollee aged 55 or older will pay $376 per month for insurance versus $626 before the reduction
Alabama, Arizona, Delaware, Florida, Kentucky and Virginia will also see a 40 percent drop in premiums. In other states, premium reductions will range from 2.1 percent in Mississippi to 38.3 percent in Minnesota.
Ashford is not sure how paying agents and brokers will affect PCIP enrollment. "It probably will depend on the payment and we don't know how that will be calculated."
"The Pre-Existing Condition Insurance Plan changes lives, and in many cases, literally saves lives," said HHS Secretary Kathleen Sebelius. "These changes will decrease costs and help insure more Americans." This chart details the state changes.
Thomson Reuters on Tuesday released its third annual study identifying the 10 top U.S. health systems based on quality of care, efficiency, and patient satisfaction.
"This year, the 10 Top Health Systems set a new standard for high quality of care across all of the communities they serve," Jean Chenoweth, senior vice president for performance improvement and 100 Top Hospitals programs at Thomson Reuters, said in a statement "These systems are positioned to continue performing well as we move further into the era of healthcare reform."
Webcast: Alternative ACO Strategies: June 7, 2011, 1:00–2:30 pm (ET)Register today.
The 10 were selected from among 285 U.S. health systems based on their performance in eight areas:
in-hospital mortality
medical complications
patient safety
severity-adjusted average length of stay
30-day post-discharge mortality rate
30-day post discharge readmission rate for heart attack, heart failure and pneumonia
adherence to clinical standards of care
Hospital Consumer Assessment of Healthcare Providers and Systems patient survey score
Thomson Reuters researchers evaluated health systems with at least two short-term, general, acute care hospitals that treat a broad spectrum of patients. Researchers used public data from the Medicare Provider Analysis and Review (MedPAR) dataset and the Centers for Medicare and Medicaid Services Hospital Compare datasets.
Listed alphabetically, the Top 10 Health Systems are:
1.Advocate Health Care - Oak Brook, IL
2.Cape Cod Healthcare - Hyannis, MA
3.CareGroup Healthcare System - Boston, MA
4.Kettering Health Network - Dayton, OH
5.Maury Regional Healthcare System - Columbia, TN
6.Mayo Foundation - Rochester, MN
7.NorthShore University HealthSystem - Evanston, IL
8.OhioHealth - Columbus, OH
9.Partners Healthcare - Boston, MA
10. Spectrum Health - Grand Rapids, MI
The study has been conducted annually since 2009. Advocate Health Care, Kettering Health Network and OhioHealth have appeared on the list three times. This is the second year that Mayo Foundation and Spectrum Health have been named.
Compared with their peers, the 10 top health systems have better short- and long-term survival rates and fewer patient complications; follow accepted care protocols and patient safety standards more closely; have an average length of stay that is more than half a day shorter; and their patients report a better overall hospital experience, the study shows.
Under orders from the Obama administration, the Department of Health and Human Services is setting out to review and update virtually every one of its rules and regulations. The effort is part of a government-wide initiative to create a simpler and smarter regulatory system that will annually save, according to government estimates, tens of millions of hours red tape, and billions of dollars in regulatory costs.
In the report HHS sets several goals for the review, including making the regulatory process more clear and providing a foundation for future regulatory decisions. HHS plans to increase transparency in its regulatory process by making available, when possible, information that stakeholders might need to understand the basis for a proposed regulation. Among the initiatives HHS will consider to achieve this goal:
Add a link to the HHS home page to allow an interactive, easy-to-navigate single entry portal to link to specific regulations.
Increase the use of regulations.gov to encourage public comment on proposed rules and rules subject to retrospective review.
Use a single regulation identification number to track regulations and one docket to manage regulatory action. The docket would include supplemental information to help the public understand the basis for the review of a regulation or a proposed change.
HHS has divided the review initiative into several broad categories, including conditions for participation, changing technology, recordkeeping requirements, pre-market review, and quality.
In a press statement, HHS Deputy Secretary Bill Corr confirmed that the review process will be ongoing. “Today’s report highlights many more opportunities for reform. We have redoubled our long-standing effort and commitment to making regulatory review an integral part of our operations and culture.”
Among the review initiatives:
CMS will review the conditions of participation it places on hospitals to remove or revise obsolete, unnecessary, or burdensome provisions. The concern is that removing a burdensome requirement may create problems down the road. CMS will first undertake an internal review and then work with stakeholders to tie burden-reducing steps to outcome-related health and safety reforms.
The Centers for Medicare & Medicaid Services has underway an initiative to address conflicting requirements between Medicaid and Medicare that create problems for dual eligible beneficiaries. For example, Medicaid and Medicare have different coverage standards for accessing durable medical equipment.
For the first time since 1978, HHS is updating the way it identifies health professional shortage and medically underserved areas.
CMS is working to reduce the barriers to telemedicine to provide better access to care in rural and critical access areas.
CMS has proposed in the inpatient prospective payment system rule for 2012 to eliminate the requirement that hospitals rely on an actuarial determination to report their pension costs.
Work with the FDA to develop a parallel review of medical devices for marketing and reimbursement coverage to reduce the time it takes to authorize the devices for sale.
Review quality measure reporting requirements to determine if any are outdated and should be eliminated and whether standardizing measures might simplify the reporting and analysis of quality measures.
Final revisions to the preliminary plan will be completed by mid-August 2011.
Gov. Peter Shumlin (D) has signed into law bill H202, which could make Vermont the first state in the nation with a single payer health insurance system. All of the state's more than 600,000 residents will qualify for the program called Green Mountain Care.
In a press statement Gov. Shumlin said the bill confirms that "we can reduce cost growth without compromising health care quality, but it will take a new approach – we can't simply cut provider fees."
Just as importantly, he added, "We have a moral imperative to fix this problem, with 47,000 Vermonters uninsured and another 150,000 underinsured and worried about how to afford keeping their families healthy."
The law states that federal waivers must be received to create the single-payer system.
The 213-page law presents a grab bag of reform measures, including:
Establish a state healthcare board to ensure cost-containment in healthcare, create system-wide budgets, and pursue payment reform
Establish a health benefit exchange for Vermont as required under federal health care reform laws
Create a public–private single-payer healthcare system to provide coverage for all Vermonters
Create a consumer and healthcare professional advisory board
Examine reforms to Vermont's medical malpractice system
Modify the insurance rate review process
Create a statewide drug formulary
The law calls for a healthcare board to will be appointed by the governor and be in place by October 2011. It will have the authority to control the rate of growth in the cost health insurance premiums as well as healthcare provider payments. The board will work with physicians and other providers to eliminate fee-for-service medicine and to establish incentives for improving the health of their patients.
How the law will be funded remains a question mark. Gov. Shumlin acknowledged in his press statement that "people have legitimate questions about how a single payer will be financed and operated, and we will answer those questions before the legislature takes the next step."
"We'll be getting input from all Vermonters moving forward, which is essential to the success of this effort," the Governor said. "But input from providers, businesses, and healthcare consumers will be especially important to assuring that our reforms are good for our health care system and good for our economy."
Healthcare providers have collected $75 million in incentive payments by demonstrating meaningful use of electronic health records, the Centers for Medicare and Medicaid Services announced Thursday.
The first round of payments rewarded providers who signed up in the first two weeks of the Medicare EHR incentive program and successfully attested to meeting the Stage One requirements for meaningful use, including complying with program requirements for a continuous 90-day reporting period.
Intelligence Report E-Health Systems: Opportunities and ObstaclesFREE DOWNLOAD.
The incentives were established by the American Reinvestment and Recovery Act of 2009 to reward hospitals and physicians that use certified EHR technology in ways that improve the quality, safety, and effectiveness of patient-centered care.
CMS officially released on Thursday information about the more than 300 hospitals and physicians that received the incentive payments. Award amounts were not included. The list includes:
Beth Israel Deaconess Medical Center (Boston, Mass.)
Bender Medical Group (Ft. Collins, Colo.)
El Paso Heart Center (El Paso, Texas)
Hewitt Medical Group (Bakersfield, Calif.)
Northshore University Health System (Evanston, Ill.)
Regents of the University of California (Sacramento, Calif.)
Wellmont Cardiology Services (Kingsport, Tenn.)
Medicare EHR incentive program payments will continue to be made on a monthly basis.
The maximum first-year incentive payment for eligible professionals is $18,000. Hospital payments are based on several factors but begin with a $2 million base.
In their second year and subsequent years of participation in the program, providers must demonstrate meaningful use based on a full year reporting period.
Intelligence Report E-Health Systems: Opportunities and ObstaclesFREE DOWNLOAD.
Including the $83.3 million in incentive paid for the Medicaid EHR program, CMS has now distributed $158.3 million in incentives. The Medicaid incentives were distributed to eligible professionals and hospitals between Jan. 3 and April 29, 2011 by state Medicaid EHR incentive programs.
Checklists have been touted as a method of elevating quality of care in hospitals for years. Yet, the medical community does not fully embrace them. Even Atul Gawande, MD, who literally wrote a manifesto on the subject has said, "There's a set of values in the idea of a checklist, and they're in distinct conflict with some of the values we have in medicine."
Nevertheless, the Patient Protection Checklist bill, which requires Nevada hospitals and other medical facilities to develop state-mandated patient safety checklists, was signed into law on Wednesday.
AB 280, sponsored by Assembly Speaker John Oceguera, faced little opposition in either the Senate or Assembly and was signed into law by Gov. Brian Sandoval.
Existing law requires hospital and medical facilities to adopt safety plans and establish patient safety committees to oversee anything related to the health and safety of patients. The new law takes safety a step further by requiring the patient safety committee create and adopt patient safety checklists to improve patient health outcomes.
The Patient Protection Checklist law also requires the patient safety committee to review the checklists each year, revise them if necessary, and to provide an annual report to the legislative committee on healthcare detailing how the checklists were developed and used. Administrative sanctions may be imposed if the bill is not followed.
The law does provide medical facilities with some leeway in creating the safety lists. It requires only that patient safety checklists "be appropriate for the type of treatment provided at the medical facility," and "be designed to ensure that the providers of health care follow a recognized protocol to improve the health outcomes of patients."
However, the law does have two specific requirements for checklists to:
Establish a protocol for identifying a patient and to making sure the patient is receiving the correct treatment, including requiring healthcare providers to positively identify a patient each time they interact with the patient.
Ensure that each healthcare provider adheres to the universal precautions protocol, including personal hygiene.
Despite making more work for hospital and medical facilities, AB 280 had the support of the Nevada Hospital Association. In an e-mail to HealthLeaders, an NHA representative said that the support reflected NHA's commitment to the "highest standards of care to our patients."
A representative for the SEIU, which represents healthcare and public service employees in the state, was unfamiliar with the bill.
Checklists have gained stature in the medical community not only through the work of Gawande, but also through the efforts of Peter Pronovost, MD, who developed a five-step checklist that nearly eliminated intensive care unit bloodstream infections at Johns Hopkins. Provonost has since warned of checklist overload.
Some cancer patients are walking away empty handed from the pharmacy because of the high cost of some medications.
A study linking the size of copayments to patient abandonment of oral cancer drugs released last week put a spotlight on the uncomfortable truth. Among the many findings: 25% of patients didn't purchase their prescription medication when they learned copayments or cost-sharing would require them to pay more than $500.
One of the drivers of high copayments is the high cost of cancer drug treatments. Medco Health Solutions has released a drug trend report that says cancer drugs are expected to see sharp increases in spending and use by 2013. More than 90% of cancer drugs approved since 2004 cost more than $20,000 for a 12-week course of therapy, that report says.
Another cost driver is the method that health plans use to provide coverage for cancer drugs. Chemotherapy is usually covered as part of medical benefit while oral cancer drugs are covered under pharmacy formularies and benefits. In general that means oral cancer drugs can be more expensive than non-oral chemotherapy treatments.
A few years ago, just when oral drugs were beginning to gain acceptance among physicians and patients, health plans began creating a specialty tier in their drug formularies for the expensive, biologic medications used to treat diseases like cancer. Oral cancer drugs found their way into this tier where the drugs carry significant copayments – often more than $100 – and may include cost sharing, which means the patients pays a fixed percent of the total cost of the drug.
Add to that mix the proliferation of high-deductible health plans, which place more of the cost burden for medical care on enrollees, and it's no wonder sick people are forced to make tough choices.
While no one thinks it's helpful for a patient to skip medications or not comply with a treatment regimen, real solutions to this problem are lacking. With oral cancer drugs accounting for 25% to 35% of the drugs in the cancer drug pipeline this is a parity issue and it's not going away.
I reached out to several health plans to explain why benefits for oral cancer drugs are paid from pharmacy while injectable cancer drugs are part of medical benefits. The silence was deafening; I didn't even get the classic "no comment." So I turned to Susan Pisano, a spokesperson for America's Health Insurance Plans, the advocacy group for health plans. Her explanation was simple: "It's because of the way the drugs are administered. Traditionally, injectables are a medical benefit."
She said there has been discussion within the health plan industry regarding shifting oral cancer drugs to the medical benefit but not much has happened on that front. She added that the assumption that the shift would automatically lower the cost of oral cancer drugs wasn't always valid. Without being too specific, she said, "there are instances where a member would end up paying more for their drugs."
Pisano noted that health plans have taken many steps to help hold down drug costs for their members, including bulk purchasing, but at the end of the day "[you] have to wonder why a cancer drug would cost $20,000."
That statement was the cue for a spokesperson at the Pharmaceutical Research and Manufacturers of America to wonder why patients pay a much higher share of total out-of-pocket costs for drugs than other medical services. In a press statement, deputy vice president Karl Uhlendorf said, "data from the Agency for Healthcare Research and Quality show that on average insured patients pay out of pocket about 4% of inpatient hospital costs, 16% of physician costs, and 27% of prescription drug costs."
He added that "given the high cost of these new oral medications, the implications for cancer patients of mandating full parity for oral and injectable chemotherapy medications is still unknown."
Like other disease-based interest groups, the American Cancer Society is keeping an eye on the essential benefits list being developed by the Institute of Medicine as part of the requirements of the Affordable Care Act. The hope is that the list will include some statements in support of evidence-based treatments for cancer that can be used to convince health plans to change their stance on oral cancer drugs.
Doctors aren't sitting around while their patient struggle to pay for these drugs. There are physician groups that lobby manufacturers to get free drugs for patients. And oncologists do have the fall back position of traditional chemotherapy if oral cancer drugs become too cost prohibitive. But physicians will tell you that the advantage of oral cancer medications, in addition to fewer side effects, is that they are more targeted to specific cancers and are often more effective.
There have been some legislative efforts to bring parity to oral cancer drugs so that insurance companies treat them the same way as injectable cancer drugs.
The American Cancer Society takes a cautious approach to oral parity. Stephen Finan, senior director of policy for the American Cancer Society Cancer Action Network, said in an e-mail that the group is monitoring the issue "to better understand how health plans are handling coverage for both oral and injectable treatments -- specifically to make sure that affordability isn't challenged through increased premiums, stricter utilization management tools or exclusion of anti-cancer medications from formularies to contain costs."