What's New with HCFO - March 23, 2005 (Print All Articles)
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HCFO provides public and private decision-makers with usable and timely information on health care policy, financing, and market developments through targeted face-to-face and virtual convening, research translation and dissemination, and issues identification. HCFO supports research and policy analysis, evaluation, and limited demonstration projects examining major changes in health care financing, and their effects on cost, access, or quality.
Hot Topic – Medicare Part D: Can the new outpatient prescription drug benefit effectively manage costs?
The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) will, for the first time in the 40 years of Medicare history, provide outpatient prescription drug benefits to seniors. Touted as a benefit especially for the very poor, AARP estimates that in 2006 more than 11 million low-income seniors will be helped by Medicare Part D, the new prescription drug benefit.1 This financial assistance, however, comes with a large price tag. Recent budget estimates suggest the prescription drug benefit will cost more than $1.2 trillion over the next ten years.2 In response to stern criticism about the skyrocketing costs of the program, Mark McClellan, administrator of the Centers for Medicare and Medicaid Services (CMS), suggested that predicted savings will offset part of the $1.2 trillion estimate, bringing the cost down to $724 billion.3 The current Administration anticipates that part of these savings will come from more effective bargaining by private plans that will administer the new program, as well as the creation of drug formularies and other cost savings tools used in the private sector.
Released by CMS on January 28, 2005, the final rule for the Medicare prescription drug benefit provides that all eligible seniors will have access to the medications they need through drug formularies and sufficient regulatory oversight. Additionally, the final rule projects an $8 billion savings to states in the first five years of the drug benefit as well as savings to beneficiaries through access to coordinated-care health plans offering lower cost-sharing. On January 1, 2006, Part D coverage begins for all beneficiaries enrolled in Medicare. It remains unclear whether the private sector structure will be a panacea for rising prescription drug costs and access issues.
HCFO grantee Jack Hoadley examined these new regulations in a recently released report funded by the Kaiser Family Foundation that discusses the MMA and the final rule. He suggests that since the law puts private prescription drug plans and Medicare Advantage plans at risk for the cost of the drug benefit, they will have a clear incentive to control the costs, both to protect their bottom line and to attract new enrollees through competitive premiums5. A tool commonly employed by the private sector that will be a prominent feature in the pharmacy plans is the development and use of drug formularies. Contracting with a pharmacy benefit manager (PBM), each new private plan will offer a defined list of drugs that will be covered based on beneficiary need and clinical effectiveness. Though the final MMA rule dictates specific mandates controlling these formularies (e.g., a requirement of coverage for drugs in selected classes such as mental health), the plans can design pricing tiers, cost sharing, and other incentives to encourage the use of certain drugs like generics. Though effective in the private sector, cost management tools may not function in the same way for Medicare, a public program designed to serve an older, sicker and poorer population than traditional employer-based insurance.6
A main concern of pricing tiers, copayments and cost sharing is the financial impact to beneficiaries. Research by HCFO grantees Haiden Huskamp and Richard Frank, Ph.D. shows that when prescription drug prices are shifted to enrollees, patients respond to high copayments and additional out-of-pocket expenses by discontinuing important medications7. Similarly, HCFO grantees Mark Doesher and Barry Saver found that unimpeded access to medications through a comprehensive prescription drug benefit is important for seniors with chronic conditions and may, in fact, lower overall health care costs.8
HCFO-funded research relevant to the Medicare legislation and prescription drug benefit:
Title: Establishing the Value of Stable Prescription Coverage for Medicare Beneficiaries
Institution: University of Maryland, Baltimore
Time: February, 2004 - July, 2005
Principal Investigator: Bruce C. Stuart, Ph.D.
How will future beneficiaries fare under the proposed Medicare prescription drug benefit programs? This research uses the Medicare Current Beneficiary Survey (MCBS) for 1997 – 2001 to identify gaps in pharmaceutical coverage for Medicare beneficiaries. The researchers (1) characterize beneficiaries who experienced gaps in coverage; (2) identify factors that contribute to lapses in coverage; (3) assess the impact of coverage gaps on drug utilization patterns and spending; and (4) determine whether coverage gaps adversely affect treatment patterns for beneficiaries with selected chronic cardiovascular conditions.
Click here for further information on this grant.
Title: State Experience with Pharmaceutical Assistance Programs
Institution: Georgetown University
Time: January, 2004 - September, 2005
Principal Investigator: Jack F. Hoadley, Ph.D
What has been the state experience in implementing pharmaceutical assistance programs serving Medicare beneficiaries? Through a series of case studies the researchers will gather information on issues such as communicating with enrollees, administering eligibility and cost sharing, and managing drug costs. The objective of the project is to reveal best practices and lessons learned that are useful to policymakers considering a Medicare prescription drug benefit and those in states implementing or modifying pharmaceutical assistance programs.
Click here for further information on this grant.
Title: Prescription Benefit Comprehensiveness and Costs of Care in Elderly Persons with Chronic Illness: The Medicare Enrollee Drug Study (MEDS)
Institution: University of Washington
Time: November 2000 - April 2003
Principal Investigator: Mark P. Doescher, M.D., MSPH
Is the cost of adding a prescription drug benefit to Medicare offset by a decrease in costs for other health care services? Researchers at the University of Washington examined this question by looking at the effects of prescription drugs on more resource-intensive care. Using a sample of enrollees in a Medicare HMO administered by the Group Health Cooperative of Puget Sound, they tested the following hypotheses: 1) as pharmaceutical benefit comprehensiveness increases, Medicare enrollees will engender higher outpatient pharmacy costs, but lower costs for other outpatient and inpatient services; and 2) the effects of increasing prescription drug benefits generosity will be amplified for low-income individuals. This project informs the current debate about Medicare prescription benefits on the possible cost off-setting that could be associated with improving pharmaceutical coverage for the elderly.
The researchers found that unimpeded access to medications through a comprehensive prescription drug benefit is important for seniors with chronic conditions and may, in fact, lower overall health care costs.9
Click here for further information on this grant.
Title: Capped Prescription Benefits and Medicare Managed Care
Institution: University of Arizona Health Services Center
Time: August 1999 - July 2000
Principal Investigator: Brenda Motheral, Ph.D.
What is the impact of capped prescription drug benefits on the drug-taking behavior of beneficiaries ages 65 or older enrolled in Medicare HMO plans? The elderly represent only 12 percent of the population, yet they incur 35 to 40 percent of all prescription costs. The dichotomy between the high utilization of prescription drugs by the elderly and the absence of a prescription benefit under traditional Medicare has motivated enrollment in Medicare risk plans that offer a prescription benefit. However, a high percentage of these HMOs that offer prescription drug benefits cap them in order to protect against financial risk. Hypothesizing that individuals reaching the limit on their cap may opt not to purchase or take the prescribed amounts of medications, leading to increased health costs for preventable conditions, the researchers evaluated changes in the amount of the cap on compliance with and utilization of prescribed medications among Medicare risk HMO enrollees. They also examined the effect of reaching the cap on disenrollment from the plan. The objective of this study was to provide public policymakers and plan administrators with better information about the impact of limiting prescription drug benefits as they seek to contain costs without negatively affecting the quality of care.
The researchers found that the exhaustion of drug benefits was associated with a significant increase in the likelihood of disenrollment of Medicare beneficiaries. This finding arouses concern that Medicare beneficiaries must change plans to have financial access to medications, which can lead to discontinuity in care and diversion of resources from care to administrative matters.10
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Title: Changes in Drug Payment and Management Strategies in Physician Organization
Institution: University of California, San Francisco
Time: September 1999 - December 2001
Principal Investigator: Helene Levens Lipton, Ph.D.
How do changes in payment methods for drug costs affect drug use management, and what are the potential effects of these changes on quality and costs of care? Researchers at the University of California, San Francisco conducted a series of case studies examining changes in payment methods for prescription drugs. They: 1) described drug risk-sharing arrangements between HMOs and physician organizations; and 2) developed and refined hypotheses and generated preliminary findings about the relationships between physician organization risk bearing for drug costs, adoption of innovations in managing drug utilization, and the potential effects of these on quality and costs of care. The investigators analyzed whether HMOs retain control of some core pharmacy functions, including rebate contracting with drug manufacturers and formulary management, and if so, whether retention of such functions serves as an impediment to drug management innovation or as a barrier to changing physicians' prescribing practices. They also examined whether physician organization risk bearing for drug costs leads to a preoccupation with interventions designed primarily to decrease drug budgets. The objective of this study was to better inform private and public policymakers as they strive to set appropriate standards for and monitor the effects of various strategies to pay for and manage drug costs.
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Title: The Impact of Pharmaceutical Formularies on Prescription Drug and Health Care Costs and Utilization
Institution: Harvard University
Time: May 2001 - April 2004
Principal Investigator: Richard G. Frank, Ph.D.
What are the effects of a health plan instituting a three-tiered co-payment (TTCP) financing mechanism on prescription drug spending, total health care spending, and patients' compliance with treatment protocols and quality of care? The study, conducted by researchers at Harvard University in conjunction with Merck-Medco, involved an analysis of Merck-Medco administrative, medical and pharmaceutical claims, and encounter data. The researchers investigated the effects of the three-tier co-payments on drug use and costs for both drugs and other health care services as well as the effects of the three-tier formulary on patterns of care for patients diagnosed with depression, congestive heart failure, and hypercholesterolemia. This study informs public and private policymakers - particularly those involved in designing proposals for adding a prescription drug benefit to Medicare - on the range of implications a three-tier copay strategy for prescription drug cost containment may have for patients, plans, and the market.
The researchers found that when prescription drug prices are shifted to enrollees, patients respond to high copayments and additional out-of-pocket expenses by discontinuing important medications.11
Click here for further information on this grant.
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1 aarp.org/health/medicare/drug_coverage/Articles/a2003-11-25-lowincome.html
2 “Medicare Drug Benefit May Cost $1.2 Trillion,” Washington Post, February 9, 2005. washingtonpost.com/ac2/wp-dyn/A9328-2005Feb8?language=printer
3 “Officials Defend Cost of Medicare Drug Benefit,” Washington Post, February 17, 2005. washingtonpost.com/ac2/wp-dyn/A30590-2005Feb16?language=printer
4 “Medicare Fact Sheet: Final Rules Implementing the New Medicare Law: A New Prescription Drug Benefit for All Medicare Beneficiaries, Improvements to Medicare Health Plans and Establishing Options for Retirees,” Centers for Medicare & Medicaid Services, January 21, 2005. cms.hhs.gov/medicarereform/pdbma/fs-pdbmafinalrules.pdf
5 “The Effects of Formularies and Other Cost Management Tools on Access to Medications: An Analysis of the MMA and the Final Rule,” Jack Hoadley, Health Policy Institute, Georgetown University for the Kaiser Family Foundation, March 2005. kff.org/medicare/7299.cfm
6 Policy Workshop on Drug Formularies and Medicare, The Kaiser Family Foundation, March 14, 2005, Washington D.C., kff.org/medicare/med031405pkg.cfm
7 “The Effect of Incentive-Based Formularies on Prescription-Drug Utilization and Spending”. Huskamp H, Deverka P, Epstein A, Epstein R, and McGuigan K, Frank R. The New England Journal of Medicine, 349(23), December 2003.
8 “Prescripton Drug Coverage, Health, and Medication Acquisition Among Seniors with One or More Chroic Conditions”. Jackson JE, Doescher MP, Saver BG, and Fishman P. Medical Care, 42(11), November 2004.
9 “Prescripton Drug Coverage, Health, and Medication Acquisition Among Seniors with One or More Chroic Conditions”. Jackson JE, Doescher MP, Saver BG, and Fishman P. Medical Care, 42(11), November 2004.
10 Cox ER, Motheral BR, Fairman K, “ Exhaustion of prescription benefits and Medicare beneficiaries' disenrollment from managed care”, Journal of the American Medical Association, 284(20), November 2000.
11 “The Effect of Incentive-Based Formularies on Prescription-Drug Utilization and Spending”. Huskamp H, Deverka P, Epstein A, Epstein R, and McGuigan K, Frank R. The New England Journal of Medicine, 349(23), December 2003.
Grantee Spotlight – Mila Kofman, J.D.
Mila Kofman, J.D., an assistant research professor at the Georgetown University Health Policy Institute, conducts a range of studies on the uninsured and underinsured, focusing on private market reforms, regulation, access, affordability, adequacy of job-based and individual health coverage, cost shifting, and financing strategies, including health savings accounts, association health plans and other multiple employer arrangements, and discount medical cards.
In a HCFO-funded study, Kofman has been examining the dynamics of pooled purchasing arrangements. Pooled purchasing arrangements involve several groups seeking to achieve cost savings by combining their purchasing power to negotiate rates lower than each could otherwise get from an insurance company or HMO.Some states have introduced legislation to help small businesses create pooled purchasing arrangements, as pooled purchasing arrangements are seen as a good opportunity to expand coverage.Kofman is identifying and describing different types of associations and pooled purchasing arrangements.In addition, she is examining how states and the federal government regulate such arrangements.She is focusing on key market reforms and consumer protections as well as applicable federal standards, providing estimates on the prevalence of such arrangements, summarizing how self-insured arrangements are regulated, identifying weaknesses in the law, discussing recent insolvencies, and identifying successful oversight approaches.Finally, Kofman is discussing market failures focusing on the recent influx in health insurance scams promoted through pooled purchasing arrangements (for example, some unscrupulous individuals have attempted and succeeded in defrauding employers and their workers by marketing non-existent health insurance through well-established associations or by establishing phony ones).
The objective of this study is to inform state and federal policy discussions on expanding the role of association health plans and other pooled purchasing arrangements.Through this research, Kofman hopes to help policymakers address how to protect consumers while encouraging the growth of GPAs, thus helping small employers offer insurance.Kofman says, “as policymakers consider ways to improve options for millions of Americans who rely on private health insurance, it is important to identify regulatory loopholes that have caused consumers to lose their health insurance.If we don’t fix these, then we’ll be building on a broken system.”
In 2002, Ms. Kofman was appointed to the National Association of Insurance Commissioners (NAIC) Consumer Participation Board of Trustees, and she also serves on the Board of Directors for URAC, a health care accreditation firm.Prior to joining Georgetown University, she was a federal regulator at the U.S. Department of Labor, and Counsel for Health Policy and Regulation at the Institute for Health Policy Solutions.She has published in the Journal of Insurance Regulation and Policy, Politics & Nursing Practice, and has produced issue briefs for RWJF’s State Coverage Initiatives program, The Commonwealth Fund, and the California HealthCare Foundation.Ms. Kofman holds a law degree from the Georgetown University Law Center and a Bachelor of Arts degree in Government and Politics from the University of Maryland, College Park (summa cum laude).
Selected Publications
Kofman, Mila, Eliza Bangit, and Kevin Lucia, “Multiple Employer Arrangements: Another Piece of a Puzzle, Analysis of Form M-1 Filings, Journal of Insurance Regulation 63 (Dec 2004)
Kofman, Mila, Issue Brief:“HSAs: Issues and Implementation Decisions for States,” State Coverage Initiatives Vol. V No. 3 Sept 2004.
Kofman, Mila and Karl Polzer, “Federal Association Health Plans – Will this Proposal Remedy the Health Insurance Crisis?” Policy, Politics and Nursing Practice 167 (Aug 2004)
Kofman, Mila, Eliza Bangit, Kevin Lucia, MEWAs: The Threat of Plan Insolvency and Other Challenges, Commonwealth Fund, March 2004.
Kofman, Mila, Kevin Lucia, and Eliza Bangit, Issue Brief: Health Insurance Scams: How Government is Responding and What Further Steps are Necessary, Commonwealth Fund, August 2003.
Kofman, Mila, “Issue Brief: Group Purchasing Arrangments: Isues for States,” State Coverage Initiatives, Vol. IV No. 3, Sept. 2002.
Focus on Grantee Publication
Gloria Bazzoli, Ph.D., of Virginia Commonwealth University, and colleagues author an article in the most recent issue of Inquiry titled “The Balanced Budget Act of 1997 and U.S. Hospital Operations”. The article details Bazzoli's HCFO-sponsored research findings.
Current HCFO grantee publications and recent grant findings will be regularly featured in the results section of our Web site.
New web resources available
The HCFO program disseminates grantee findings through grantee publications and HCFO-produced issue or findings briefs. Journal citations and grantee reports are also available in our grant findings database. As a new tool, we now categorize these results by topic area as grantee publications relate to their HCFO-funded research.
In response to inquiries about various aspects of HCFO’s grantmaking and in order to monitor the program for our own growth and planning, we collect and monitor a variety of data. New statistics about our grantmaking are available for 2004 at Inside HCFO: Numbers You Always Wondered About.
The California Health Policy Forum (CAHPF) provides an independent platform for education, idea sharing, and conversations among legislative and executive branch health policy staff about the complex and vast array of health issues facing the state today. Modeled after the National Health Policy Forum, CAHPF seeks to inform the public policy-making process through a series of briefing sessions that feature federal and other state as well as California speakers. As an additional resource the Health Policy Guide provides evidence-based, peer-reviewed policy guidance and resources to support advocacy and decision-making at the state and local levels for over 150 policy topics.A distinguishing feature of the California Health Policy Forum (CAHPF) is their partnerships with policy experts in Washington, DC, and around the county. AcademyHealth is proud to announce this new partnership.
A new report from the Urban Institute, Estimating Financial Support for Kinship Caregivers finds that children in kinship care, whose living situations make them ineligible for foster care payments, have surprisingly low levels of receipt for Temporary Assistance for Needy Families (TANF) child-only benefits, often their only source of financial assistance.This work compliments HCFO-funded research by the University of Colorado’s Stephen Berman, M.D., and Sara Carpenter, M.D. These researchers found that a lack of health insurance, poverty, poor health status, low level of caregiver education, and disability are some of the factors that contribute to the lack of adequate health care for children in foster and kinship care. A HCFO findings brief, Children in Foster Care and Kinship Care at Risk for Inadequate Health Care Coverage and Access examines these issues in further depth.
SCI Cyberseminar on ERISA
ERISA (the Employee Retirement Income Security Act of 1974) was created to establish uniform federal standards to protect private employee pension plans from fraud and mismanagement. But the federal statute also covers most other types of employee benefits plans, including health plans. Several of ERISA's provisions preempt state laws and complicate state efforts to make health care coverage more broadly available. The courts' interpretation of ERISA and the cases that have come before the courts have changed over the years. Patricia Butler, J.D., Dr.P.H., a leading national authority on ERISA and its implications for states, was the featured speaker of this Cyber Seminar, which was co-sponsored by the National Academy for State Health Policy (NASHP) and the State Coverage Initiatives (SCI) program. Background materials for this cyberseminar, along with a cyberseminar archive can be found at http://www.statecoverage.net/cyberseminar/index.htm.
2005 AcademyHealth Annual Research Meeting, June 26-28 in Boston
It's not too early to make your plans to attend the 2005 Annual Research Meeting in Boston. Register by Monday, May 2 for the early registration discount. Friday, May 27 is the cut-off date for discounted hotel reservations in the AcademyHealth block. View the full conference agenda online beginning March 25 to see the many new sessions that have been added through the abstracts peer review process.
Learn the latest in health services research methods, June 25 and 29
When making plans to attend the AcademyHealth Annual Research Meeting June 26-28 in Boston, consider extending your stay to take advantage of the Seminars in Health Services Research Methods. These full-day seminars provide a forum for researchers to enhance their academic and professional knowledge base. Registration for the seminars does not require registration for the Annual Research Meeting.