Secretary-designate Mike Leavitt, ex Governor of Utah (R), was confirmed by the Senate today. We have alluded to his background in health policy matters, specifically Medicaid experiments, when as Utah Gov. he received approval from CMS to reduce benefits in return for expanding coverage.
As his approval nears, deeper consideration of the Utah experiment is required. While no one knows what will happen with Medicaid, it certainly appears that his efforts as Gov. did not hinder his chances for high office in the present administration.
The program reduced benefits for substance abuse and mental health, increased physician and prescription fees to some beneficiaries, and terminated a program for chronically ill low-income patients.
In return, (According to California Healthline) “The program covers physician visits, basic dental care and up to four prescriptions monthly.
In addition, hospitals in the state agreed to provide $10 million a year in no-cost care for PCN patients, and some specialist physicians also offered their services for no cost. The state anticipated that the new program would allow 25,000 people to obtain coverage for preventive medical care, the Journal reports.
Results have been mixed. “with critics calling the new levels of coverage “so basic as to be inadequate,” and supporters pointing to early data that suggest a drop in the number of people requiring hospital stays and emergency department visits…”
Expect to see many more states adopt variations of the “standard” Medicaid programs as they struggle with rising Medicaid costs and reduced federal reimbursement.

Two interesting articles on drug pricing appeared in today’s California Healthline; one reporting drug manufacturers’ recent price increases, and the other noting the introduction of legislation authorizing Medicare to negotiate prices with drug companies.
Leaving aside the irony of juxtaposition (those CA Healthline editors know how to lay out a newsletter!), the rationales behind these related announcements is intriguing.
Price increases
According to one industry analyst, prices are going up because drug companies need to increase revenues to offset declines from other drugs going off patent and thus losing their high margins. Also, some feel that there will be downward pressure on drug prices after the Medicare prescription drug program goes into effect 1/1/2006.
Proposed legislation
As noted below, the Medicare Drug bill’s prohibition against CMS negotiation with drug companies for pricing has been contentious, to say the least. Outgoing Sec. Thompson has been rather blunt in his condemnation of the limitation. After all, every country in the EU and most of the rest of the world does negotiate with the manufacturers. However, there is some doubt whether the legalization of CMS’ negotiations with drug companies will have any material effect.
Nevertheless, expect this bill to get a lot of attention in the months to come, if for no other reason than the Democrats will use it to highlight perceived problems with the present Medicare program.

In testimony before Congress last week, Mike Leavitt, Secretary of HHS nominee, stated he did not believe the Secretary should have the ability or power to negotiate for drugs on behalf of Medicare recipients.
Here’s how the NYTimes reported it:
“Mr. Leavitt said he did not believe that the secretary should have the power to negotiate with drug manufacturers to secure lower prices for Medicare beneficiaries.
The current secretary of health and human services, Tommy G. Thompson, said last month that he wished Congress had given him that power. But Mr. Leavitt said that a healthy, competitive market was a better way to hold down drug prices.”
Huh? No fiduciary responsibility to his employers, the taxpayers? No mention of using the power of the position to encourage stronger competition? And this at a time when Medicare and Medicaid costs are accelerating at rates more than twice that of general inflation.
Kudos to medlogs.com for highlighting this…

A very interesting, if politically skewed, column claiming that the Veteran’s Administration’s ability to negotiate drug prices amounts to “drug price-fixing” appears in the January 21 issue of the LATimes.
The column is authored by an economist working for an institute which receives funding from the pharmaceutical research and manufacturers ass’n (PHRMA) and is somewhat breathtaking in its claims. For example, the author, Benjamin Zycher, senior fellow in economics at the Pacific Research Institute, states that the drug companies are forced to participate in the “price fixing” scheme required by the VA, for if they do not, they would be excluded from “a market accounting for roughly 10% to 15% of their sales.”
News flash to Mr. Zycher – for-profit companies do this all the time – if a potential customer can’t afford a Mercedes, Mercedes does not have to sell to them. Many companies would be delighted to have their products priced such that they are affordable for 85% of the total potential market.
Next, Mr. Zycher states
“Despite many casual assertions about “huge profits,” the truth is that pharmaceutical companies face enormous research-and-development costs

Mathew Holt has his usual way with the present administration in his latest post on The Health Care Blog. He also has two rather interesting quotes from the outging Secretary of HHS, which may provide insights into the future of Medicaid.
“In response to a question after his resignation speech, Secretary of Health and Human Services Tommy G. Thompson said, “I would have liked to negotiate” or bargain with pharmaceutical companies over the price of prescription drugs.
Thompson also said this:
“Out here, in this department, you get an idea and you have to vet it with all the division heads and the 67,000 employees. … then it goes over to the supergod in our society, and the supergod is.

A California legislator has announced plans to introduce legislation authorizing implementation of a universal health insurance system run by the State. California HealthLine reports that Sen Sheila Kuehl (D-LA) and an unnamed number of co-sponsors are working on plans to establish a state government run health system, funded by taxes, that would provide coverage to all residents.
Hopes are not high for eventual passage, as political stars do not appear aligned in favor of this sweeping change from today’s combined private and government-funded health care system.
According to California HealthLine, funds would come from a variety of sources;
“The system would not have participants contribute deductibles or copayments but rather would be funded through “a patchwork of taxes,” the Times reports. The taxes would include:
An employer payroll tax equal to 8.2% of salaries;
An employee payroll tax of 3.8% of salary;
A 3.5% tax on unearned income;
A 12% tax on the net business income of self-employed residents; and
An additional 1% tax on all income of more than $200,000 a year.”
The bill will likely be similar to one introduced by Keuhl in 2003. That bill did not get far; it may have been overshadowed by SB2, CA’s initiative to require employers to provide health insurance to all employees.
I wouldn’t make too much of this, nor would I dismiss it as a flakey CA thing.
Desparate times call for desparate (or is it disparate?) measures.

A very funny post on Mathew Holt’s “Health Beat” blog re the silver lining of the grey cloud of Cox-2s…
Highly recommended!

On MLK day
“Of all the forms of inequality, injustice in healthcare is the most shocking and inhumane.”
Rev. Dr. Martin Luther King, Jr.

Gov. Jeb Bush (R) of FL announced a proposal to enroll FL’s 2.1 million Medicaid recipients in private health plans, a sweeping change from the present program wherein the government acts as the sole administrator.
The program is designed to address FL’s rapidly growing Medicaid cost, which at $14 billion accounts for a quarter of the state budget. At present growth rates, the program will double in size, and consumption of the state’s budget, within eleven years.
Bush’s proposal, Mike Leavitt’s nomination to Sec HHS, and other recent pronouncements from the administration noted here and elsewhere are adding clarity to the picture of governmental health programs of the future. Here’s the essence –
–government as funder, not administrator
–funds based on defined contribution not defined benefit
–beginning to push responsibility for lifestyle-related diseases onto insureds
Not exactly Hillary II, but perhaps even more far-reaching.
Thanks to Andrea Lewis of Choice Medical Management in FL for pointing me to this…

In a rather stunning announcement, GM announced it’s earnings in 2005 would suffer a significant decline, due in large part to (free subscription required) GM’s increasing health care costs.
As a global competitor, GM is hampered by the US health care payment system, which is largely employer-driven. This has a direct, and very signficant, impact on its competitiveness. To quote the Times:
” G.M. is the largest automaker in the world by volume, but its profits are dwarfed by those of foreign competitors like Toyota and Nissan. The company is hampered on numerous fronts, including the obligation to pay health care and pension benefits to about a half million American retirees and their families. Competitors based in nations with socialized medical systems do not have similar retiree health care burdens. ”
By way of comparison, GM’s annual health care budget of approximately $73 BILLION is equivalent to about half of the UK’s National Health Service’s annual expenditures.
The silver lining in this funnel cloud is easily discerned – when companies the size and stature of GM are finding their earnings dragged down, and dragged down significantly, by health care costs, we are getting closer to the point where we must address our national health care cost crisis.
Health care is rapidly becoming an issue of global competitiveness.