Director of the Center for Medicare/Medicaid Services Mark McClellan was up on Capitol Hill yesterday testifying on Part D, conveying the message that all was going better, improvements were being made, and the cost of the program was lower than anticipated.
When one remembers that McClellan is the brother of White House press secretary Scott, his facile comments and ability to re-interpret reality are more understandable.
I’m reminded of the comments whispered to me by the mother of the young lad named “most improved” at a youth football dinner: “he was so bad at the start of the season that just running without falling down was a huge improvement”. While the Part D program is nowhere near running, and has yet to even advance beyond the crawling stage, it is likely to improve. That’s the good news. The bad news is the fatal flaw of adverse selection, discussed here ad nauseum, but still eluding the denizens of Capitol Hill.
One highly contentious issue continues to be the law preventing HHS from negotiating directly with pharmaceutical companies on drug prices. According to ABC News; Sen. Snowe (R ME) and what a great name for a senator from Maine…
“questioned the way the program was working and pushed for legislation that would allow the government to negotiate for better drug prices. The initial legislation included no such provision, an omission that at the time was seen as a boon to drug companies.
Snowe and Sen. Ron Wyden, D-Ore., have drafted bipartisan legislation that would give government the power to negotiate prices.
“I can’t imagine why we’d spend $700 billion on this benefit and not allow the secretary to maximize the taxpayers’ money,” Snowe said.
Me neither.

A June 2005 CMS Office of the Actuary report estimated there would be a total of 36.8 million enrolled in Part D in fiscal year 2006. Thus HHS Sec. Leavitt’s stated goal of 28-30 million enrolled in Part D by the end of 2006 either reflects an updated guesstimate or indicates the previous goal is now viewed as unreachable, or perhaps both. (remember almost 22 million seniors were automatically enrolled in Part D on 1/1/06) Especially when one recalls that the calendar year has three more months than the fiscal one.
As Bob Laszewski points out, historically the big enrollment date for employee benefits and health plans has been January 1. With all the hype, publicity, politicians-on-the-road-show circuit and marketing leading up to that date, and with that date well behind us, it looks very doubtful that enrollment numbers will even come close.
The well-publicized enrollment mess surely has not encouraged seniors to jump into a plan that had already confused them.
So, despite the taxpayer funding 75% of the costs of the program, millions of dollars in advertising and strong support from elected leaders (sell, some of them at least) and six weeks into the program, we have enrolled a grand total of less than 4 million into the voluntary program.
Not exactly a ringing endorsement of a privatized health care plan based on competition in the private sector.
What does this mean for you?
Bad news for advocates of national health insurance provided by private payers. That was me too, but I’m not nearly as convinced today as I was this time last year…

There is an excellent objective review of the role of PBMs in managing Part D costs at California HealthLine. While I hesitate to summarize what is already a summary, here are the main points.
1. The absence of any “transparency” requirements in the Part D enabling legislation makes it impossible to determine without legal investigation how PBMs may benefit from rebates and other confidential financial transactions.
2. There was an amendment proposed that would have addressed this but it was shot down due to the administrative expense ($40 billion over ten years).
3. Self-dealing, namely the direction of patients to a PBM-owned pharmacy, is not illegal, and is a likely fallout from Part D. This is not bad per se, as mail order costs are significantly cheaper, and the home delivery service means folks do not have to get out of the house to get their scripts (which may actually be a good or bad thing).
4. Not noted is the failure of the legislation to allow CMS to negotiate drug prices, not even as a last resort. I don’t get this.
PBMs Medco, Express Scripts, and Caremark have been besieged by allegations of impropriety, civil complaints, and customer action. While this PBM-pharmacy manufacturer-pharmacy-CMS-employer-patient thing is enough to make your head spin, this will confuse you even more –
If PBMs screw up really badly and lose a lot of money during the next two years, the taxpayers will bail them out .
What does this mean for you?
less faith in “free-market” capitalism?

Health policy expert (and good friend) Bob Laszewski was interviewed on NPR this morning about the Part D program, bringing a little much-needed perspective to this over-spun topic. The net – if enrollment among “voluntaries” (those without present coverage) does not increase 500% the program is a disaster.
Here are the quotes from Judy Rovner’s piece:
“

A reader asked why I’m in favor of allowing the Feds to negotiate prices with pharmaceutical manufacturers. The reader’s colleagues had the idea that since the PBMs and health plans in Part D are already negotiating, why have the Feds involved?
Here’s my response.
First, the whole Part D mess is a great example of how overcomplicated programs generate huge problems. Medicaid claimants were getting their drugs just fine before Part D went into effect, and are now having all kinds of problems. While those problems will likely go away in the near future, the problems did occur when the claimants were switched from a governmental to a private program. A little ammunition for the single payer advocates, if nothing else…
1. “price” is an elusive concept in pharma. The AWP and most other pricing mechanisms are based on the price but do not factor in rebates or any other funds transfer mechanisms that effectively reduce the actual, real “price”. So, while PBMs are in fact negotiating for “price”, we do not know in most cases what the actual real price is.
2. PBMs by definition have much less purchasing power than governments. As an example, the Veterans Administration is the only federal entity that is allowed under the law to negotiate drug prices. The VA is entitled under the law to receive either the minimum 24% discount off the non-federal average manufacturer price or the “best price” the manufacturer gives anyone, whichever is lower. These rates are much more favorable than any PBM gets.
3. The PBMs make money on the delta between what they buy the drugs for and what they charge CMS. So, while the PBM is incented to get the lowest possible price, they are more concerned w maximizing the price to CMS.

More on the adverse selection problems with Part D from a research study by DSS Research. The study indicates more than half of eligible seniors have no plans to enroll in a Part D program. And, their characteristics should set alarm bells ringing at every Part D sponsor:
“Disinterested, non-buyers are lowest users of medical services. Those who said they had not chosen a plan and had no plans to do so take fewer prescriptions; spend less on prescriptions; go to the doctor less often; and make fewer ER, inpatient hospital and outpatient clinic / surgery center visits.”
In other words, they are healthy, aren’t likely to need the coverage any time soon, and aren’t interested in subsidizing the costs of their less-healthy fellow seniors. This is exactly why Part D is a really bad idea, poorly executed too.

No, it is not going well. Despite what the spokespeople at HHS claim, enrollment in Medicare Part D has been a failure to date. Perhaps not a dismal failure, but certainly a lot further towards the “failure” end of the spectrum than the “exceeding our expectations” end. Here’s why, with thanks to Bob Laszewski for boiling down a complex topic to an understandable conclusion.
Enrollment goals
Only 21.3 million Medicare enrollees have the ability to make a decision on enrollment in Part D. Sure, there are a lot more Medicare eligibles, but many are covered under their employer’s plan (11 million), Medicaid (6.2 million of the so-called “dual eligibles”), and 4.5 million under MedicareAdvantage programs.
Of the 21.3 million, 17% have signed up so far. That’s right, 17%. As I have been noting for months, the stage is now set for big problems with Part D. You can read about the issues inherent in adverse selection here; briefly it is what happens when only sick people sign up for insurance.
In general insurers need at least 70% of eligibles to sign up to get a good spread of risk. If there is not a good spread of risk, it is highly likely that the only people who signed up are the ones who will gain more in benefits than they will pay in premiums. Result – insurers will lose money hand over fist on this deal (although their losses will be covered by the government, i.e. the taxpayer, for a period of about two years).
There continue to be problems with dual eligibles enrolled in the wrong plans, missing information, coverage issues, etc. But, as Bob points out, that is not the real problem (although it certainly is to those folks who can’t get their meds.) The real problem is taxpayers are going to foot the bill for a program that is a poster child for adverse selection.
What does this mean for you?
If you are a drug company, lots of profits. Eligibles, a great benefit. Taxpayers, bad news.

The news about the debacle that is the Medicare Part D roll-out has been well-publicized, along with the details that the individuals most heavily impacted are the 6 million dual-eligibles; those folks covered under both Medicaid and Medicare. They should have been automatically enrolled as of 1/1/06, but many states are experiencing big problems.
The key issue appears to be pharmacies are not able to access eligibility information in government databases through the normal EDI links, requiring the pharmacists to call Medicare where they spend hours on hold. Meanwhile, patients aren’t getting their drugs.
If this was just a case of a few scripts for Propecia or Viagra going astray, no big deal. But we’re talking beta blockers, insulin, cancer drugs, pain meds, scripts for Parkinson’s and the like. Life and death stuff.
Many states have provided emergency funding to enable these people to get their scripts. And this will get ironed out at some point.
The larger issue is the canary-in-the-mine nature of the problem. Many health care experts, politicians, and even some politicians who claim to be experts are putting a lot of faith in technology to root out fraud and abuse, enable better delivery of medical care, enhance evidence-based medicine and streamline the delivery of electronic health records. The Bush Administration in particular is highlighting technology as a big part of the “solution” to the health care crisis.
While there is no doubt technology can help address some of the problems in health care, history is also replete with examples of how solutions made problems worse.
Here’s hoping Sec. Leavitt and his colleagues at Health and Human Services get their act together before this gets really ugly.
What does this mean for you?
If you are a pharmacist, you don’t have time to read blogs unless you do so while on hold.