Part D enrollment will fall short

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…


PBMs and Part D

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?


Part D (D=Disaster)

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:


Why should Medicare negotiate drug prices?

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.


Why seniors are saying NO to Part D

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.


Part D – the real problem

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.


Medicare Part D – the enrollment debacle

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.


Medicare to pay docs more if…

Medicare says they will compensate doctors for underpaying them if Congress succesfully rescinds the cuts in reimbursement that went into effect the first of this year.
CMS says they will simply figure out how much docs should have been paid and cut them a single check to make up the difference (the cut is 4.4%).
This is predicated on the belief that Congress will actually rescind the SGR cuts. It does not mention how much this bookkeeping will cost the doctors or Medicare processors, who may have to apply this amount retrospectively to specific bills, providers, procedures, etc.
Meanwhile, the Medicare fee schedule is the basis for most workers comp and other state-set fee schedules. Sources indicate some payers are not changing their WC payment schedules to reflect the official decrease, others are, and all are wondering what to do if Congress does something wierd.
Glad I’m not in operations…
What does this mean for you?
More work, probably more mistakes, and absolutely no benefit or increased profit, productivity, or pleasure for anyone.


Patients’ access to physicians under Medicare

A new study released by the Centers for Studying Health System Change indicates that almost three-quarters of the nation’s physicians are still accepting Medicare patients. A relatively small fraction (3.4%) stated their practices were completely closed to all new Medicare patients. Both results were from the 2004-2005 period, and reflect a relatively static level of physician acceptance of Medicare patients.
Medicare access is roughly comparable to access by individuals with private insurance despite the fact that Medicare reimbursement is about 20% lower than commercial payers. The good news for providers is that this rate is much better than it has been; historically Medicare paid only about 71% of private payers’ reimbursement for similar procedures.
Interestingly, the volume of services provided to medicare patients continues to increase, with the latest statistics showing an 18% increase in minor procedures from 2003-2005, after an average 6% annual increase in preceding years.
Perhaps physicians consider themselves fortunate to have Medicare and not Medicaid patients. The state-federal run Medicaid program is the worst payer, with rates over 30% less than Medicare.
The report did not delve into Medicare access results.
What does this mean for you?
Medicaid continues to get the short end of the stick, as do its patients and providers.
The data on the sharp increase in utilization in Medicare is potentially troubling; it may represent cost-shifting as providers seek to maximize compensation through additional billing.


Practice pattern variation in Medicaid

The folks at SignalHealth have published an interesting paper on practice pattern variation in Medicaid within New York State. I’ve been interested in variation, small area analysis and the results thereof ever since reading John Wennberg’s seminal study of hospital discharge variations in New England, and Signalhealth’s contribution is quite useful.
For those not quite as geeky about these matters, practice pattern variation is simply the geographical differences in medical practice for similar demographic groups. Or, why do people in New Haven have significantly fewer hospital admissions than those in Boston (to quote Wennberg).
One of the problems with this somewhat-arcane topic is what do you do with the information? Yes, there are significant public policy implications involved here, but what could an employer, insurer, or managed care firm do about practice pattern variation?
My recommendation to clients is to figure out where differences in practice patterns exist, then either sell health insurance in the “good” places(underwriting approach) or target case/utilization management at the “bad” places (managed care approach).
There actually might be a positive public policy impact from these private initatives – increased attention focused on providers treating outside the norm may impact their practice patterns, and higher prices and reduced availability of insurance in certain areas may encourage employers to seek change.
In the meantime, smart companies can take advantage of the inherent inefficiencies in the market revealed by practice pattern variation analysis.
What does this mean for you?
See above.