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2006-03-08 Kaiser Daily Health Policy Report - Wednesday, March
8, 2006
 Mar 08, 2006 16:20 PST 

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Wednesday, March 8, 2006

1. Medicare Drug Benefit Program To Feature Fewer Plans Next
Year, Officials Say

2. Senate Budget Committee Budget Proposal Thought To Drop Many
of President Bush's Planned Spending and Tax Cuts

3. Senate Finance Committee Leaders Seek HHS OIG, GAO Review of
Specialty Hospitals

4. Tauzin Denies Allegations About Discussions With PhRMA During
Negotiations Over 2003 Medicare Law in Letter to Lawmakers

5. HHS Approves Waiver for Arkansas Program That Would Provide
Insurance to 80,000 Uninsured, Low-Income Workers

6. Idaho House Passes Bill Allowing Medicaid Beneficiaries To
Work While Receiving Coverage

7. Prescription Drug Development Time Has Decreased Over 10
Years, Study Finds

8. Payment System for Oncologists Influences Choice of
Treatment, Study Says

9. Efforts by Large Tobacco Companies To Reduce Settlement
Payments Might Affect State Health Care Programs

10. Health Affairs Focuses on Global Health; Issue Features
Report on Utah's Medicaid Waiver

11. Bush's Proposal To Cut Government Survey Would Be 'Big
Loss,' Editorial States

12. Consumers Should Feel Impact of Provider Payments To Control
Health Costs, Opinion Piece Says



1. Medicare Drug Benefit Program To Feature Fewer Plans Next
Year, Officials Say

Access this story and related links online:

Market forces have helped lower prescription drug prices and
will reduce the number of plans offered under the Medicare
prescription drug benefit next year, HHS Secretary Mike Leavitt
told insurance executives on Tuesday at a meeting sponsored by
America's Health Insurance Plans, CQ HealthBeat reports. "The
market has very clearly driven the prices down," Leavitt said,
adding, "We believe that the market will also simplify this
program." Calling the initial version of the drug benefit
"Medicare Part D 1.0," Leavitt told executives that "Part D 2.0"
would reflect the "need for simplification and standardization"
in the program. CMS Administrator Mark McClellan said that "some
plans are definitely proving to be more popular than others" and
that there is "some consolidation." He added, "I suspect we are
going to see some more of that, particularly from plans that
haven't generated a large level of enrollment." However, CMS
might "not be leaving it entirely up to market forces to reduce
plan offerings," CQ HealthBeat reports (Reichard, CQ HealthBeat,
3/7). In late February, CMS sent a memo to insurers requesting
feedback on a proposal to limit insurers with Medicare drug
plans to offering one "basic" benefit plan and one "enhanced"
benefit plan in each region. For this year's coverage, insurers
were allowed to sponsor up to three plans per region (Kaiser
Daily Health Policy Report, 2/27). In the meeting Tuesday,
Leavitt cited elimination of "separate applications ... for
every plan" as an example of the program's future

Customer Service

Leavitt said that drug plans' customer service is improving but
has "a ways to go yet." He said he is concerned about the number
of beneficiaries who have yet to receive a plan number. He added
that "plans need to do a better job of responding to inquires by
beneficiaries and pharmacists" and that plans need to pay
pharmacists faster, particularly those in rural areas. He added,
"I am also concerned that there are too many people who are
getting answering machines during business hours asking them to
call back at a different time." Leavitt and McClellan said CMS
is increasing monitoring of plans' call centers and their speed
at processing enrollment applications. CMS is designing
performance measures to track those functions and will release
the data to the public, McClellan said. (CQ HealthBeat, 3/7).

A webcast of the AHIP conference is available online at

McClellan Interview

Separately, in an interview with the Associated Press, McClellan
said "at this point" he opposes proposals to extend the May 15
deadline for enrolling in the drug benefit. "Many people tend to
wait until close to the deadline to make a decision," he said.
McClellan also reiterated that there likely will be a decreased
number of plans being offered. He said the decrease will be
"dictated by the market, [and] by what consumers want," he but
added, "Nobody should be looking in detail through 40 different
choices, so the question is, how can you quickly help people go
from 40 to the four or five most useful to them" (Freking,
AP/Long Island Newsday, 3/8).

Savings Examined

In related news, the San Francisco Chronicle on Wednesday
examined the debate over whether the drug benefit "is offering
genuine discounts for medication." Three studies released in the
last week draw differing conclusions about how much
beneficiaries can save under the drug benefit, the Chronicle
reports. One study, released by Rep. Pete Stark (D-Calif.) and
other Democrats in California's congressional delegation, found
that prices for 10 commonly prescribed drugs under the drug
benefit are higher than Canadian drug prices and prices at the
retailer Costco. A second study, by Consumers Union, found that
beneficiaries enrolled in the drug benefit could save between
$2,300 and $5,000 annually by switching from brand-name drugs to
generics or other lower-cost alternatives. In addition, a CMS
study found that beneficiaries saved an average of 57% compared
with medication costs without drug coverage. Gail Shearer,
director of Consumer Reports Best Buy Drugs, which prepared the
CU study, said, "The one fairly consistent message Medicare
beneficiaries should be getting is that it probably makes sense
for them to sign up for a plan," although she added that the
drug benefit is "far from ideal" (Colliver, San Francisco
Chronicle, 3/8).


2. Senate Budget Committee Budget Proposal Thought To Drop Many
of President Bush's Planned Spending and Tax Cuts

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Senate Budget Committee Chair Judd Gregg (R-N.H.) on Tuesday
said he will not include President Bush's recommended cuts to
Medicare and other entitlement programs in the committee's
fiscal year 2007 budget bill because the proposals lack enough
votes for passage, the AP/Houston Chronicle reports (Taylor,
AP/Houston Chronicle, 3/8). Bush on Feb. 6 sent his FY 2007
budget proposal to Congress, which would reduce spending on
entitlement programs by $65 billion over five years, including
$37 billion in cuts to Medicare. Gregg said, "We didn't have the
votes on the floor" (Dennis/Evans, CQ Today, 3/7). He also said,
"I went to the chairmen of the committees which were responsible
for reconciliation and all of them felt that in this climate it
would be very difficult for them to do that." Gregg is expected
to introduce his budget blueprint on Wednesday and said it could
be brought for a committee vote on Thursday (AP/Houston
Chronicle, 3/8). CQ Today reports that "hopes among fiscal
conservatives for significant cuts" from entitlement programs
"now rest with the House." Senate Finance Committee Chair Chuck
Grassley (R-Iowa), whose committee has jurisdiction over
Medicare and Medicaid, said cuts to entitlement programs could
still move forward through the House budget resolution. However,
CQ Today reports that because "moderate Republicans have
questioned moving forward with a package of budget cuts without
bipartisan support in an election year," this scenario "appears
unlikely." House Budget Committee Chair Jim Nussle (R-Iowa)
said, "We'll wait and see what happens in conference," adding,
"We're not the Senate" (CQ Today, 3/8). The House is unlikely to
act on the FY 2007 budget until after St. Patrick's Day,
according to several sources, CongressDaily reports (Cohn,
CongressDaily, 3/8).

3. Senate Finance Committee Leaders Seek HHS OIG, GAO Review of
Specialty Hospitals

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Senate Finance Committee Chair Chuck Grassley (R-Iowa) and
ranking member Max Baucus (D-Mont.) on Monday asked the HHS
Office of Inspector General and the Government Accountability
Office to review quality, patient safety and financial
arrangements at physician-owned specialty hospitals, CQ
HealthBeat reports. In a statement, Grassley and Baucus said
that the review would serve as part of an effort by the
committee to determine the effect that specialty hospitals have
on patients, community hospitals, Medicare and Medicaid.
Grassley and Baucus on Feb. 14 asked HHS for information about
the enforcement of a moratorium on new specialty hospitals
included in the 2003 Medicare law. In addition, Grassley and
Baucus in a Feb. 27 letter to the Medicare Payment and Advisory
Commission asked for information on the effect of specialty
hospitals on community hospitals. Grassley said, "We need to
know the impact so we can make educated decisions to ensure that
patients receive the highest quality care for the most
cost-effective price" (CQ HealthBeat, 3/6).

4. Tauzin Denies Allegations About Discussions With PhRMA During
Negotiations Over 2003 Medicare Law in Letter to Lawmakers

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Former Rep. Billy Tauzin (R-La.), president of the
Pharmaceutical Research and Manufacturers of America, on Monday
in a letter sent to all member of Congress denied allegations
that he began negotiations for the PhRMA position at the same
time he, as chair of the House Energy and Commerce Committee,
helped pass the 2003 Medicare law, the New Orleans
Times-Picayune reports. In the letter, Tauzin writes that he has
"endured repeated injury to [his] name and reputation as a
result of the repetition of these false claims of impropriety."
President Bush signed the Medicare law on Dec. 8, 2003, and
Tauzin said that his first contact with PhRMA occurred after
Jan. 15, 2004. Tauzin in an interview said that the allegations
first appeared in a March 2004 article in The Hill and were
repeated in recent months by House Democrats and advocacy
groups. According to the Times-Picayune, House Democrats as part
of "an anti-corruption campaign going into this fall's
elections" have cited the "Republican's rapid rise from
legislating to lobbying as an example of backroom deals that
undermine public confidence." In January, House Minority Leader
Nancy Pelosi (D-Calif.) cited "Tauzin's PhRMA employment, as
well as 11th hour arm twisting by Republicans," when she called
for an investigation into the passage of the Medicare law, the
Times-Picayune reports. In addition, at a Feb. 1 news
conference, Sen. Barack Obama (D-Ill.) said that Tauzin was
"ushering through a bill as he is negotiating his employment
with PhRMA." Obama spokesperson Robert Gibbs said, "We want to
make sure we close the revolving door that leads members of
Congress from regulating industries to lobbying for them"
(Walsh, New Orleans Times-Picayune, 3/7).


5. HHS Approves Waiver for Arkansas Program That Would Provide
Insurance to 80,000 Uninsured, Low-Income Workers

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As expected, HHS officials on Tuesday approved a waiver to
allow Arkansas to receive federal Medicaid funds for a program
that will provide low-cost health insurance to small businesses,
the Arkansas Democrat-Gazette reports. The program first will
target businesses with 50 or fewer employees and will require
employers that participate to guarantee coverage for all
workers, regardless of income or other factors, with the
exception of those who have coverage though their spouses.
Employers must not have provided health insurance to employees
for 12 consecutive months to qualify for the program
(Smith/Baskin, Arkansas Democrat-Gazette, 3/8). Under the
program, employers must pay $15 monthly for employees with
annual incomes less than 200% of the poverty level and $100
monthly for higher-income employees. Employees who participate
in the program must pay annual deductibles of $100 and 15% of
the cost of services, with maximum out-of-pocket costs of $1,000
annually. The program each year will cover six physician visits,
seven days of inpatient hospital care and two outpatient
hospital procedures or emergency department visits, as well as
two prescriptions monthly (Kaiser Daily Health Policy Report,
3/7). The program will not provide catastrophic coverage. The
state will fund the program in part with $18 million in proceeds
from the 1998 national tobacco settlement over the next five
years. The federal government will pay 82 cents of each dollar
spent by the state for employees with children and 73 cents of
each dollar spent for those without children. Gov. Mike Huckabee
(R) said, "We're not announcing today perfection. We're not
announcing today a safety net that covers everything for all
time for all people. But we are announcing a significant safety
net for what could be up to 80,000 Arkansans per year" (Arkansas
Democrat-Gazette, 3/8).

6. Idaho House Passes Bill Allowing Medicaid Beneficiaries To
Work While Receiving Coverage

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The Idaho Legislature on Monday unanimously passed a bill (HB
664) that would enable Medicaid beneficiaries with disabilities
to continue their employment while receiving coverage, the
Spokane Spokesman-Review reports. According to the
Spokesman-Review, the plan, which has been in the works for more
than 10 years, would allow Medicaid beneficiaries with
disabilities to work or increase their hours and pay premiums on
a sliding scale, rather than lose coverage entirely. The plan
would cost the state $233,900 in 2007 and about $400,000 in
2008, according to the Spokesman-Review (Russel, Spokane
Spokesman-Review, 3/7).


7. Prescription Drug Development Time Has Decreased Over 10
Years, Study Finds

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The time it takes to develop and receive approval for a
medication has decreased over the last 10 years, according to a
study published Tuesday in the journal Health Affairs,
Bloomberg/Philadelphia Inquirer reports. For the study,
researchers examined drug development times for 168 drugs
approved in the U.S. between 1992 and 2002. The researchers
found that drugs starting development in 1985 took on average
more than 10 years to reach the market, compared with fewer than
four years on average for those that began the process in 1995
or later. According to Bloomberg/Inquirer, the "finding ...
might undercut [drug companies'] suggestions that higher prices
are linked to rising research and development costs." Salomeh
Keyhani, lead author of the study and health policy researcher
at Mount Sinai School of Medicine, said, "One of the factors
that has influenced development costs is time" in testing drugs,
adding, "There's not much public data on the drug industry, but
we found that drug development times are decreasing." She said
that the study shows that the time and resources for drug
development differ widely and that the best-selling drugs do not
take any longer to develop than those with lower sales. She
added that a lack of public information slows down research on
the factors behind drug development and pricing. Joseph DiMasi,
director of economic analysis for the Tufts Center for the Study
of Drug Development, said he noticed the same decline in
development times from 1992 to 2002, but that since 2002, drug
development times have increased. Pharmaceutical Research and
Manufacturers of America spokesperson Jeff Trewhitt noted that
many companies are testing medications in more people and are
conducting more tests, which leads to higher costs. (Lauerman,
Bloomberg/Philadelphia Inquirer, 3/8).

The study is available online.

8. Payment System for Oncologists Influences Choice of
Treatment, Study Says

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The current reimbursement system for chemotherapy medications
administered to cancer patients might affect the treatments that
oncologists use, according to a study published in the current
issue of Health Affairs, the New York Times reports. Medicare
and private health insurers reimburse oncologists for the full
cost of the chemotherapy medications administered intravenously
in their offices, although oncologists can obtain discounts of
as much as 86% on the price of the treatments. As a result,
oncologists "can profit from the sale of chemotherapy drugs,"
the Times reports. Oncologists maintain that they use the
profits to cover operational costs and to allow cancer patients
to receive chemotherapy medications in their offices, rather
than in hospitals. However, Medicare and private health insurers
have begun efforts to reduce the amount of profits that
oncologists can receive through reimbursements for chemotherapy

Study Details

For the study, researchers from the University of Michigan and
Harvard University examined Medicare reimbursement rates for
different chemotherapy medications and how oncologists treated
9,357 advanced cancer patients ages 65 and older between 1995
and 1998. The study finds that oncologists "who were more
generously reimbursed" for chemotherapy medications "prescribed
more costly chemotherapy regimens to metastatic breast,
colorectal and lung cancer patients." Reimbursement rates did
not affect whether oncologists favored chemotherapy medications
over other treatments, according to the study. Oncologists "have
more control over the agents chosen" because of a lack of
clinical evidence about the relative effectiveness of
chemotherapy medications, study co-author Joseph Newhouse, a
professor of health policy and management at Harvard, said.
However, Joseph Bailes of the American Society of Clinical
Oncology said that oncologists decide which chemotherapy
medications to use based on clinical evidence, not reimbursement
rates, adding that evidence exists to indicate which treatments
are more effective for different stages of cancer (Abelson, New
York Times, 3/8).

The study is available online.


9. Efforts by Large Tobacco Companies To Reduce Settlement
Payments Might Affect State Health Care Programs

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Large tobacco companies that make annual payments to states
under the 1998 national tobacco settlement maintain that they
can reduce their payments by $1.2 billion this year, and state
governments "addicted to billions in revenue from" the
settlement "have begun to worry that they will have to cut back"
on health care and other programs, the Wall Street Journal
reports. Philip Morris USA and other large tobacco companies to
date have paid states $41.1 billion of the $206 billion
settlement, which requires the companies to make payments for at
least 25 years, with a $6.5 billion payment this year. According
to the Journal, large tobacco companies maintain that they can
reduce their payments in the event their "collective market
share drops below certain thresholds" under a provision included
in the settlement over concerns "they would lose market share to
smaller upstart cigarette makers that they expected to come into
the market." Large tobacco companies maintain that their
collective market share decreased from 99.6% in 1997 to 92% in
2003 because smaller companies "aren't subject to the marketing
limits and cost burdens of the settlement" and "can sell
cigarettes at lower prices," the Journal reports. However,
states maintain that the decrease in market share resulted in
large part from increased online cigarette purchases and higher
demand for generic cigarettes. In addition, states maintain that
they have enacted laws to require smaller tobacco companies to
make payments in escrow accounts -- refundable after 25 years --
to ensure a fair market. An independent arbiter on March 1 found
that provisions in the settlement significantly contributed to
the decrease in market share held by large tobacco companies,
and states have until March 13 to submit arguments to the

'Bad News' for States?

According to the Journal, a "loss of revenue could be bad news
for many states that have come to count on the billions flowing
from the tobacco companies," which have "helped finance health
care programs, education and public works," as well as
operational costs. Joy Johnson Wilson, director of the health
committee at the National Conference of State Legislatures,
said, "It's important money -- and it's perpetual money -- and
at this point, it is part of states' ongoing budgets. A major
reduction would require some juggling" (O'Connell, Wall Street
Journal, 3/8).


10. Health Affairs Focuses on Global Health; Issue Features
Report on Utah's Medicaid Waiver

Access this story and related links online:

March/April 2006 issue, Health Affairs: The latest issue of
Health Affairs focuses on global health priorities, featuring
reports on drug development, health insurance in developing
countries and other topics. The issue also includes a report --
"Can States Stretch the Medicaid Dollar Without Passing the
Buck? Lessons From Utah" -- that presents new findings from the
Kaiser Family Foundation's 2004 survey of Utah Medicaid
beneficiaries. The report specifically examines a 2002 waiver
Utah received to provide expanded coverage for low-income
uninsured adults, offsetting costs by limiting benefits and
increasing cost sharing for poor parents receiving Medicaid. A
related report -- "A Case Study of the Utah Primary Care Network
Waiver: Insights Into Its Development, Design & Implementation"
-- from the Kaiser Commission on Medicaid and the Uninsured also
looks at the waiver, providing details of its design and
implementation, interviewing key stakeholders and examining
state enrollment data and other reports (Kaiser Family
Foundation release, 3/7).

A kaisernetwork.org webcast of a briefing to launch the
journal's Global Health Initiative is available online.


11. Bush's Proposal To Cut Government Survey Would Be 'Big
Loss,' Editorial States

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President Bush's fiscal year 2007 budget proposal would
eliminate a government survey that "captures the real-world
impact" of reforms to Medicaid and other programs, a New York
Times editorial states. The Survey of Income and Program
Participation, started by the Census Bureau in 1984, "questions
thousands of the same people every four months for two to four
years and gathers details about their lives, including their use
of government aid," the editorial states. "Getting rid of the
survey this year ... would make it very difficult to study the
fallout from deep cuts" in Medicaid and other programs,
according to the editorial, which adds that its elimination
"would be great for politicians who don't want to be held
accountable." The editorial concludes, "But it would be a big
loss for anyone who wants government to work well" (New York
Times, 3/4).

12. Consumers Should Feel Impact of Provider Payments To Control
Health Costs, Opinion Piece Says

Access this story and related links online:

Under the current health care system in which physicians are
reimbursed for services by a third-party payer, "[t]here is no
automatic balance between willingness to pay by the consumer and
willingness to accept by the producer that constrains and limits
the choices of each," Vernon Smith, a 2002 Nobel Laureate in
Economics and professor at George Mason University, writes in a
Wall Street Journal opinion piece. Smith states that if a
solution exists to control the rising costs, "it will take the
form of changing the incentive structure: empowering the
consumer by channeling third-party payment allowances through
the patients." If patients pay "the difference between the price
of the service and the insurance or subsidy allowance, ... we
have a better chance of disciplining cost and tailoring services
to the customer's willingness to pay," he continues. Vernon
concludes, "Would someone please just trust the customer?"
(Smith, Wall Street Journal, 3/8).


The Kaiser Daily Health Policy Report is published for
kaisernetwork.org, a website of The Henry J. Kaiser Family
Foundation. (c) 2006 Advisory Board Company and Kaiser Family
Foundation. All rights reserved.

Jill Braden Balderas, managing editor, kaisernetwork.org
Beth Liu, web writer, kaisernetwork.org
Simone Vozzolo, web producer, HealthCast
Francis Ying, web producer, HealthCast
Amanda Wolfe, senior editor, Kaiser Daily Health Policy Report
Evonne Carroll Young, senior web writer, kaisernetwork.org
Shari Lewis, online communications associate, Kaiser Family
Sahar Neyazi, online communications assistant, Kaiser Family
Robin Sidel, communications officer, online activities, Kaiser
Family Foundation
Larry Levitt, editor-in-chief, kaisernetwork.org; vice
president, Kaiser Family Foundation
DAILY REPORTS PHONE: 202-266-6312; FAX: 202-266-5700; E-MAIL:
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kaisernetwork.org is a website of the Kaiser Family Foundation.
For access to the Foundation's policy research, analyses,
reports and fact sheets, and media partnerships, visit the
Foundation's main website at http://www.kff.org.
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