Multiple Gorings

Certainly one of the groups whose ox has been gored by seemingly everyone’s HCR discontent is the hospital industry.  As noted a few weeks ago, as per the HCR law, the hospitals are now under the gun to reduce hospital readmissions and are bucking the speed and cost such a measure will extract from them before January 1, 2014 (http://tinyurl.com/88nvguz ).  This readmission issue could end up being a real mess for them, especially if only parts of the law are OK’d by the Supremes.  HHS doesn’t care.

Additionally, hospitals continue to suffer from Republican retribution over the decisions the hospitals made during the summer of 2009.  At that time, although not the first to cave, they were right at the top of the total dollars ($155 billion) promised to HHS for implementation of HCR.  Republicans, surprised and hurt by the duplicity of the hospitals (who have walked this walk before) are now extracting pounds of payback from the hospitals in the damndest ways.  For example, the House Republicans decided last month that the hospitals should pay for the Sustainable Growth Rate (SGR) mess, that would benefit…the doctors (http://tinyurl.com/7nghqxr).

And now, the hospitals are watching in dismay as more and more organizations that initially were forced to support costs of HCR, are finding new ways to dodge this obligation.

As an example, take the case of the device manufacturing industry.  It seems that the device manufacturing folks have found a way to pass through their new HCR tax payment obligations onto their customers, who happen to be…the hospitals.  And guess what?  The hospitals don’t like that (http://tinyurl.com/6wkb4ja).   In fact, the hospitals have sent a letter to the IRS asking the agency to stop the medical device folks from passing along their new 2.3% tax, due January 1, 2013, to the hospitals and their other customers.  Great customer relations.

so, on the issue of HCR on Capitol Hill, for whatever reason, the hospitals just seem be an ox that is liable for multiple gorings.

‘Bubby’ Makes a Grab for Professional Turf

And in the latest grab for professional turf in the healthcare sector, a group known as the ‘Grande Aides’, has surfaced and is issuing notices about the wonder of their services (http://www.grand-aides.org).   What’s intriguing is that these folks are not doctors, or physician assistants, or nurses.

They are:

 “Typically local community members who are wise and nurturing, have cared for others, and generate respect and trust in patients.”

Hmm.  Like your Bubby, who soothed you with hot water bottles, chicken soup and all that when you were sick?  Yes.  Exactly.  Indeed, the creator of this concept, Dr. Arthur Garson Jr. of the University of Virginia, states, “The program was created on the idea that grandparents have been doing simple primary care for centuries.”

OK and so what does Bubby, er, the Grande Aide, cost?  Seems that the highly trained Grande Aides (one year) will be paid an estimated $16.88 per visit (rural Virginia), versus an ER visit @ $175.00(?) (Must be very rural Virginia.)  Cheap. Cheap. Cheap.

And what will the Grande Aides be treating?  Well, apparently, they will be do phone consults or actually visit the home of patients who are dealing with primary care issues like a high fever, common colds or vomiting.  But wait.  Isn’t that the kind of stuff a nurse practitioner, physician assistant, or, maybe even a primary care doc are supposed to be treating?  Oh dear.  Looks like the Grande Aide turf joust has begun!

The Biggest and the Baddest

Then we come to “the usual suspects” section of this discourse and more of the predictable.  Of all the groups that got into bed with the Obama Administration, hands down, the biggest and the baddest was the drug industry.

A quick historical review.  The Rx folks were the ones who caved first to Obama, (http://tinyurl.com/dxbquca) offered a huge financial concession in exchange for access to the estimated 32-40 million new patients in Medicaid who would need Rxs, and who, by so doing, infuriated the Republican House and Senate leadership who correctly saw nothing but total disloyalty to the Republicans on the Hill in these acts (See, also, hospitals, above).

And, yet, in an apparent Machiavellian-like move, the industry wise men decided to fire their association president, Billy Tauzin, who was charged with making a bad deal with the Administration, before the law was even signed (http://tinyurl.com/cvpxten).  Interestingly, while throwing over their own leader, the industry did not attempt to extricate itself from the HCR agreements made with Obama.  Hmm.  Does the term, “Having it both ways” come to mind?

Now, a scant two years later, we find that this same industry, supposedly still in the Republican ‘doghouse’, will likely succeed in passing a very important reup of the FDA User Fee Act for 2012  (http://tinyurl.com/dys7894 ).  Incredibly, this measure has received bipartisan support in both Chambers, with nary one nasty Republican amendments cutting off HCR funding, or anything like that, being tacked onto this measure…Think about this Republican treatment of the drug industry versus the treatment the hospitals have been getting lately.

Why the disparity?  Well, despite all the Republican chest beating over the ‘heresies’  committed by the drug guys during 2009, I think it is fair to say that the GOP, in an election year when they think they have a fair chance to: 1. hold the House, 2. possibly take the Senate, and 3. even have a shot at the White House, don’t want to mess around with the money and Hill stroke that the biggest and baddest guys in the healthcare industry can clearly deploy.  The shear political/financial firepower of the Rx industry seems to have tamed the outrage of the Republican leaders, especially when compared to second tier players, like say, the hospitals.  I am afraid it’s that simple.

And so, while anxious healthcare advocates and lawyers on both sides of the HCR issue pace their offices, anxiously awaiting Supreme Courts decision on what will happen with HCR, life in the world of healthcare, at least in Washington, DC, seems to be progressing quite normally, thank you.  Really, it’s just Business as Usual.  

Where, specifically, did this minimalist Rx concept come from?  It first appeared in HHS guidance offered to the public on December 16, 2011.  Here’s a brief discussion of the number of pharmaceuticals to be covered under EHB appeared on p. 13.  It stated:

“If a benchmark plan offers a drug in a certain category or class, all plans must offer at least one drug in that same category or class, even though the specific drugs on the formulary may vary.”

How to decipher that phrase?  Admittedly, I found it a bit hard to understand.  However, 104 disparate patient and health advocacy groups, representing 133 million patients and caregivers, had no trouble at all.   They read it to mean that only one drug per class would be required under the new EHB Rx offerings that will go into effect on January 1, 2014.  Based on this interpretation, a deluge of public letters to HHS was released by these organizations, all voicing strong opposition to this idea.  Here’s an example, released on April 11, 2012, signed by all 104 groups:

“The bulletin (12/16/11) states that EHB plans must only cover one drug per therapeutic category or class covered by a selected state benchmark plan to meet the EHB standard. This is wholly inadequate to meet the complex needs of patients with chronic diseases and disabilities, and runs counter to the government’s existing minimum prescription drug coverage standards, including under the Medicare Part D program.”

In their letter, the groups all pointed to a recent study released by Avalere, and funded by Pfizer, which revealed that the largest federal employees health benefit plans and major small-group plans in California, Colorado, Maryland and New York (similar to those that HHS is supposed to use in modeling EHB drug benefits) are all covering many more drugs in each class (an average of 70% of drugs available in a class) than the one drug concept proposed in the 12/16/11 HHS bulletin.

And to be fair, it is true that under Part D Medicare drug rules only two drugs are required to be provided per class (p. 395).  However, due to the private competition between the insurers in the Part D prescription drug offerings, many more products per class are regularly included.

So, how will all this be reconciled?  It’s hard to say, but there are several considerations to think about, should this one-drug-per-class mandate be implemented for HCR’s EHB. Let’s say, for example, you’re a patient who’s been dealing with hypertension.  Getting hypertension under control often entails trying many prescription drugs and often includes very careful titrating of the one drug that seems to be working.  What happens to you if you lose that one drug that controls your disease?  The lack of Rx options for these patients will only lead to major medical episodes down the road.

Or what if you are a physician dealing with rheumatoid arthritis in hundreds of Medicaid patients?  It’s a tough disease to manage because frequently, one anti-inflammatory may work on a patient for a while, and then inexplicably, it stops working for no logical reason. Utilizing other anti-inflammatories is the only course of action the doctor has to find new relief from the disease.  Limited to just one drug in the anti-inflammatory category, I really don’t know what doctors will do to manage the 30-40 million new Medicaid patients HCR will bring into their offices, many of whom will have rheumatoid arthritis.

And what if you are the CEO of a prescription pharmaceutical company? What is your response to this mandate for one drug per class?  If each of the single drugs chosen in each EHB Rx class is likely to be the cheapest generic, where does this leave brand drug makers?   Will branded drugs ever be reimbursed under HCR’s EHB Rx program?  Answer: No.   And if this 100% generic program is likely to impact 40% to 50% of your total American market, what do you do about future R&D?  Put more succinctly, who will your future customers be?  Who will buy brand name drugs after this EHB Rx rule is put in place?

But all is not gloom and doom in this “one drug per class” EHB scenario.  First of all, by restricting the EHB Rx segment, there will be an obvious decrease in overall medical spending across the county. As an example, consider hospital formularies and pharmacies.  Huge inventory savings will be realized, since every drug chosen for every category will be a low cost generic.  Also, in the important area of medical errors, the reduction in the actual numbers of available drugs used for each disease will insure the proper use of the proper drug in almost every case.  As a result, the billions of dollars wasted on medical errors and unintended deaths will be virtually eliminated.  And then there is the incredible free enterprise competition that will be unleashed among the generic manufacturers that will compete for the opportunity to provide the one drug for any class.  No doubt, low prices such as we have never seen before, will be realized by HHS.  All and all, then, there is a tremendous national health savings benefit, a very real upside, to be realized when this concept of one drug per class is adopted by the EHB.

Nevertheless, despite all this health savings evidence, it is curious to see that several of the fervent supporters of HCR, groups such as Families USA, NORD, The American Academy of Physician Assistants, and many others listed in the group of 104, have now decided that this “one drug per class” policy is just plain wrong.   As noted earlier, they submit that the EHB one drug concept is unfair and medically unsound policy for their members.

This response by these groups is interesting. By now, over two years into this HCR exercise, you would think that these organizations, and all others who strongly supported HCR, would clearly understand that this is where HCR is headed:  “Less is more, don’t you see?”  That’s because by reducing access, denying options, and limiting medical services, millions of people will now have the opportunity to have one drug per class, rather than none at all.

And so, as this HCR concept continues to take shape, and the nation gradually awakens to this new reality across the broad array of medical services, it truly is amazing just how much more — “less” — really can be. That’s my point of view on HCR’s one-drug-per-class EHB concept.  I’d be interested in your thoughts on this matter.

Tom Norton is principal at NHD Smart Communications. He can be reached at tnorton@nhdcomm.com.

Source: Pharmaceutical Executive

Reduction of Hospital Readmissions

One part of the law that I have been following closely for over a year — and is now set for full activation on October 1^st — is Section 3025 which is designed to “reduce hospital readmissions” (http://goo.gl/ipNH3 – p.408).  Actually, as the Los Angeles Times stated it on February 22, 2011 (http://goo.gl/GSLSn), the section appears to have been created to force hospitals to reduce readmissions…and here’s how that is planned to occur.

According to numerous articles, including a particularly good one from Thomson Reuters (http://goo.gl/6qWKF), high hospital readmission rates have long been viewed as an indicator of “low quality inpatient care.”  During the debate on healthcare reform, Congress focused on this issue and reported that in 2005 over 17 percent of initial Medicare admissions were readmitted within 30 days of discharge.  Further, according to the Medicare Payment Advisory Commission, these readmissions accounted for $15 billion in additional Medicare spending.  MedPAC has stated that of that total, about $12 billion was “preventable”, equaling an average potential payment savings of about $7,000 per readmission case.

So when HCR passed, Congress gave HHS the authority to penalize hospitals that produce “excess readmission rates.” To avoid these penalties, hospitals will be required to hit HHS designated numbers in lowering “preventable” readmission rates, starting in Federal Fiscal Year 2013, or they will be fined for missing the mark.

Initially, the top priorities will be heart failure, acute myocardial infarction, and pneumonia cases.  Beginning this October, those hospitals that do not achieve “preventable” readmissions for these three illnesses will be liable for reductions of up to 1 percent for all inpatient Medicare payments for FFY 2013; up to 2 percent of payments in FFY 2014; and up to 3 percent in FFY 2015 and beyond.

Additionally, after 2015, four more areas of “preventable” readmissions categories will be added, along with more “penalties” for not achieving satisfactory preventions.

The Preventable Readmissions Calculation

Here’s an example of how hospitals are going to have to calculate this.  Real simple:

• If a hospital treats 250 heart failure patients, and the average reimbursement for those patients is $5,000, and the readmission rate turns out to be 20 percent ‘higher than expected’ (i.e., as determined by HHS), the excessive Medicare payments will be calculated as follows:

• Heart Failure Excessive Payments = (250 patients) x ($5,000 per patient) x (0.20)= $250,000
• Next, add the ‘excessive payments’ calculated for AMI and pneumonia, say $0 and $100,000 respectively.

• So, Total Excessive Payments = $250,000 + $0 + $100,000 = $350,000

If the hospital’s total inpatient operating payments from Medicare were $25 million in FFY 2012, then their excessive payments were 1.4 percent of total operating payments ($350,000 ÷ $25,000,000).

However, since the maximum penalty in FFY 2013 is only 1 percent of the total operating payments, the 1.4 percent would not apply.

So, based on the above example, this hospital would be “penalized” only $250,000 of its inpatient Medicare Reimbursements for FYY 2013 under Section 3025 (http://goo.gl/6qWKF).

In other words, a quarter million bucks out the front door for failure to comply with the new HCR law on preventable readmissions…

The Future for Hospitals?

And so, what can we anticipate from the hospitals?  Well, given the above, it’s more than likely that they are frantically engaged in trying to get their readmission numbers in line with the anticipated HHS “risk adjusted models” for preventable readmissions which, according to the American Hospital Association, are still being debated. (http://goo.gl/I7IH8)

Interesting.  And so how do the hospitals get ready for this October then?  Here are some of the questions that hospitals are mulling over:

• What are the hospital’s current 30-day readmission rates?

• Can these rates be projected as excessive, or preventable (i.e., how many readmissions should the hospital expect given its patient mix)?

• And if excessive, how will reimbursement payments be impacted?

Overall, I think most folks understand that it’s not like a lot of American hospitals, especially the not-for-profits that are already serving large Medicare populations, are rolling in cash.  Many are reporting substantial loses for 2011 around the nation (http://goo.gl/isERK).   No doubt many hospital administrators are looking out over the HCR horizon with more than a little bit of fear as the concept of preventable readmissions takes hold.

Consider variables like these…What if a high Medicare population hospital is located in an area that serves a particularly older demographic—What will the hospital do?   Go out and recruit younger patients?  Or perhaps one is located in the middle of a poor, ethnic neighborhood in an inner city.  Will they have to extend their service area into wealthier, more diverse sections of a city?  Given the various unique issues that each hospital may have, you would hope HHS will be customizing the preventable readmissions “goals” for every hospital.  Will that happen?  For every single hospital across the US that is accepting Medicare patients, I would be surprised.

What’s a Hospital to do?

So financially, what else can a hospital think about in meeting this new law versus the likelihood of reduced reimbursements from Medicare?  Maybe reducing services?  Cutting back on medical and support staff?  Reducing new infrastructure?  Stop buying innovative medical devices?  Reducing hospital formularies?   Probably all of the above.  But if you think about it, won’t adoption of these options likely raise the chances for the readmissions of patients who are being hustled out the hospital’s door as fast as possible in the first place?

And here is a final point to chew on:  If HCR is going to force “reduced readmissions”, what will the private insurers be doing?  It’s not hard to imagine that a very bright “halo effect” will be created by HCR’s “reduced Medicare readmissions” policies, ultimately causing private industry to adopt the same.  So, in the end, this becomes a game of double jeopardy for the hospitals.

And where will this leave the hospitals?  Pressured and probably confused would be one easy guess.  Certainly anxious about the future.  And I would suspect completely unwilling to expand their hospitals or the services, going forward.

But, really this is only the beginning for the hospitals. Beyond the reduced admissions mandate, hospitals are going to have to dance to the tune of other persistent HCR implementations like ACO’s, IPAB, PCORI, EHB and all the rest, very shortly.  It does make you wonder what a stay in an American hospital will be like in the future.

That’s my point of view about the persistent implementation of HCR and how it may impact our hospitals, and those who service and supply them.  I would be interested in knowing how you feel about this aspect of HCR.

What’s interesting in this case is that currently H.R. 452 not only has Republican support, but also some 20 Democrat sponsors as well.  Depending on the success or failure of a couple of new amendments (http://goo.gl/ryQom), it is possible HR 452 could actually end up coming out of the House as a bipartisan HCR action.  Very strange, no?  We have to ask, why is rescission of this particular element of HCR getting bipartisan support?

Simply put, IPAB is the heart of HCR…Without it, HCR will fail.  Why do I say this?  As discussed about one year ago, (http://goo.gl/fHQSJ) this seemingly innocuous section of HCR is, I believe, the most important part of the entire law.  That is because IPAB is specifically responsible for controlling all Medicare health costs and in so doing, will set the prices for Medicare health delivery. Further, because of the future influence and growing size of Medicare, IPAB’s price controlling function, no doubt, will rapidly create a “halo effect” and influence all other healthcare costs and pricing in America.

So what are the IPAB basics we need to understand for the probable March 23^rd vote?

Structure

IPAB will consist of 15 appointed individuals. Congress will have some oversight, but the President will appoint the panel.  Day-to-day, IPAB will answer to HHS.  The IPAB appointments are supposed to start this year.

The appointments themselves are government “plums.”  Appointees can serve a maximum of two, six year terms with no election.  Pay is $165,300 per year.

Power

IPAB’s quiet power, starting in 2015, lies in its responsibility for controlling the bottom line costs of Medicare, based on annual per capita spending in Medicare.  That determination will be driven by the broader performance of the US economy.  I know that sounds wonky, and it is.  However, we have to appreciate that IPAB’s ability to impact the finances of Medicare, as well as its role in all US medical spending, will be deep and real.

Who Likes IPAB?

First and foremost, a lot of Members of Congress.  Why?  Because no matter how you dress this up, Congress gets out of the middle in having to make very tough medical calls on Medicare in the future.  All you have to do is think “Sustainable Growth Rate” to know that since 1997 Congress has royally mismanaged physician reimbursement for Medicare services…And they really want no more of the same.  IPAB would accomplish that for all Medicare services.

Second are the “medical planners.”  This is the group who views healthcare as a fully controllable, totally predictable commodity, one that can be literally tied to the nation’s economic performance.  IPAB, with its clear performance targets and annualized growth projections is music to the ears of these folks.

And finally, you have the Administration. Last year, the President made it clear he has big plans for IPAB.  He not only sees it as central to realizing the savings projected in HCR, but also as a primary tool for impacting the broader economy.  In May of 2011 Mr. Obama talked about deploying IPAB to manage our “general deficits” by creating an “automatic sequester” mechanism that would impact wide parts of the overall US economy (http://goo.gl/6T4xZ).  Apparently, he intends on giving IPAB even greater cost cutting authority that will drive even deeper savings in Medicare and American medicine.

Who Dislikes IPAB?

Certainly the most vibrant opposition to IPAB is coming from the healthcare industry.  As already noted, physicians see IPAB as a “super-sized” SGR and are formally on record through numerous professional organizations as opposing the concept (http://goo.gl/4oYeq).  Nor is it really hard to understand that most other hospitals, pharmaceutical manufacturers, implement and device makers, etc., are less than excited about the idea.  Ultimately, they see IPAB as an artificial, government run cost control mechanism.

The other big group that favors repeal is this unholy alliance of House Republicans and about 20 of their Democratic colleagues that I mentioned at the head of this piece.  I think we can all understand the position of the House Republicans, but the statements of Democrats who are opposing IPAB are interesting.  Many are ‘major domo’ Democrats…Reps. Barney Frank, Pete Stark, & John Lewis.  Consider this quote from a story in Human Events (http://goo.gl/oCGkp):

Rep. Frank’s spokesman, Diego Sanchez, says that his boss’ opposition to IPAB has been “consistent and firm.” On January 15, 2010, Frank — along with California’s Pete Stark, Georgia’s John Lewis, and dozens of other stalwart Democrats — signed a letter to then-Speaker Nancy Pelosi (D – Calif.) spurning “legislation that would place authority for Medicare payment policy in an unelected, executive branch commission or board.”

So the theme of the Dems opposing IPAB, at least on 1/15/12, was “separation of powers”.  Fair enough.

However, since Frank sent this message to Pelosi in January, many of the Dems, including all of the above, have hedged.  First, as a group they are saying they want “cost offsets” to be included in the repeal of IPAB — which is interesting since its being proven daily that no one really knows what any aspect of HCR will “save” (http://goo.gl/zq3gw).

Secondly, the House Republicans have decided to place a medical liability reform amendment on the bill (http://goo.gl/IVDbU), all but assuring every Dem will head for the exits.

As I have watched this IPAB dance unfold over the last few weeks, I have had to ask myself:  Is there any real substance in all of this, on either side?

Let me summarize what we have here:  The Republicans know they will never progress beyond the House.  While the Democrats know, in the end, they will never support the rescission of IPAB, the heart of HCR, in the middle of a national election year, and just before the Supremes start their review on the overall constitutionality of HCR.  In sum, it’s all a charade – on both sides.

Still, come Friday, I think we are very likely going to see a lot more of this partisan pirouetting.  Republicans will wail and gnash their teeth claiming IPAB is a “NHS-like NICE death panel”; “the beginning of medical price controls”; and “an Executive Branch power play in healthcare”.  Meanwhile, although initially a bit schizophrenic on the issue, the Democrats eventually will simply sit on the matter in the Senate.  Frankly, why would they ever want to debate it given its importance to the broader HCR law?

And so I project that IPAB, the heart of HCR, will continue to beat quit steadily, if set slightly aflutter by all the hubbub of this week.  I think, however, the broader controversy surrounding the idea of IPAB, i.e., that an unelected group of U. S. citizens will shortly have the power to determine what Americans are going to be allowed to spend on their healthcare — is certainly not over.   Look for a robust IPAB tango on this question going forward.

That’s my point of view.  I would be interested in your thoughts on IPAB, and its role as the heart of HCR.

A ruling from SCOTUS on key provisions of the healthcare reform law is likely to occur before July 4. Depending on how the Court comes down, the new law could either be fatally crippled; or, conversely, fully validated. Either outcome is sure to be legally controversial and each carries enormous political significance. In advance of that high drama moment this summer, I want to focus here on three upcoming days in March that will officially begin this important SCOTUS review. Remembering that I am not an attorney, I have taken my best shot at laying out a brief “layman’s” backgrounder as to how this will proceed.

The SCOTUS has dedicated 6 hours of deliberation (a very large chunk of the Court’s time) on four key issues the Court has determined warrants their attention:

• March 26: Whether the Anti-Injunction Act (federal tax law) bars lawsuits that challenge the insurance coverage mandate before it goes into effect (1.5 hours).
• March 27: Whether Congress has the power under Article 1 of the Constitution, the commerce clause, to regulate economic activity in order tomandate minimum coverage (2 hours).
• March 28: Whether, if the Court decides that the individual mandate is unconstitutional, the mandate is “severable” from the rest of the law – allowing the remainder of HCR to survive. On the other hand, if the mandate is found to be unconstitutional and not severable, will the entire HCR law be struck down? (1.5 hours)

Also, on the same day, SCOTUS will debate whether Congress exceeded its powers by forcing states to accept an expansion of Medicaid costs and administration under threat of losing Medicaid funding (1 hour).

Thoughts on Each Day

March 26: Anti-Injunction Act Day turns on whether or not an obscure 1867 federal tax law applies to HCR. At issue is whether the new law is a “tax” or not? If it is, under AIA, HCR cannot be revoked until it has been in place for one year. Therefore, as the law doesn’t start until Jan. 1, 2014, the new “tax” can’t be challenged until Jan. 1 2015. Therefore, if AIA applies to HCR, this 2012 challenge is invalid.

This position was held by the Administration until February 7. Then the Attorney General’s office announced they were not going to contest this issue. However, they continued to reserve comment on the matter for March 26^th, whatever that portends. This is a rather amazing development, but one that does not negate consideration of AIA’s impact by the Supremes. The bet? If SCOTUS determines the AIA is valid, that’s game, set, match as far as a legal challenge to HCR goes, at least until 2015. If not, several other issues are in play.

March 27: SCOTUS will get to the primary issue: whether Congress has the power under Article 1 of the Constitution, the commerce clause, to regulate economic activity, in this case by creating a “mandate” for citizens to obtain health insurance.

Reviewing the Appellate findings on this question, SCOTUS must ponder clear differences in conclusions:

• 11^th Circuit, Atlanta: “This economic mandate represents a wholly novel and potentially unbounded assertion of congressional authority: the ability to compel Americans to purchase an expensive health insurance product they have elected not to buy, and to make them repurchase that insurance product every month for their entire lives.”
• 6^th Circuit, Cincinnati: “First, the provision regulates economic activity that Congress had a rational basis to believe has substantial effects on interstate commerce. In addition, Congress had a rational basis to believe that the provision was essential to its larger economic scheme reforming the interstate markets in health care and health insurance.”

There is a very clear divergence, and it will be interesting to hear the questions posed by SCOTUS on March 27. A 5-4 finding, either way, is easily conceivable.

March 28: We have a double header. First up, arguments over “severability”, i.e., can the “mandate” be separated from the new law and still allow it go into effect? On Jan. 29th, the Administration filed the following statement in favor of severability and supporting the continuance of the new law if the “mandate” were removed:

“Many provisions of the act, focused on controlling costs, improving public health and other objectives, have no connection to insurance coverage at all. Congress directed that much of the act take effect several years before the minimum coverage provision’s effective date, further demonstrating that Congress intended those provisions to operate independently.”

Last year, however, U.S. District Judge Roger Vinson of the Northern District of Florida found that the individual mandate is not severable from the Affordable Care Act and, therefore, he ruled the entire law was unconstitutional. Ultimately, he was overruled by the 11^th Appellate Court, but his position has gained the notice of SCOTUS. Conclusion? Jump ball on “severability” as I read it.

And finally, the matter of Medicaid expansion being forced on the states. The position of the states is pretty clear:

“The nation’s governors, Democrats as well as Republicans, voiced deep concern Sunday about the shape of the health care plan emerging from Congress, fearing that Washington was about to hand them expensive new Medicaid obligations without money to pay for them.”

The position in favor of state Medicaid expansion was taken by Families USA, telling Politico: “This really is an essential piece of the architecture for expanding coverage for those people who don’t have it.”

This one is clearly a philosophical question that goes to the heart of HCR. However, it’s also one that presents huge potential financial consequences for all the states. In summary, probably with the exception of the AIA issue, any one of the other three could go either way.

What’s at stake?

Not only is the healthcare of every American on the line, so is the wellbeing of millions of foreign patients who are currently benefiting from American medical professionals, prescription drugs, implements and devices, and other healthcare services.

These three days in March may turn out to be the trip point that ultimately determines the future direction of global healthcare. No doubt the members of the Supreme Court understand this very clearly.

That’s my view. I would like to have your thoughts on the upcoming three days in March.

Source: PharmaExec.com

It seems that during the last Sustainable Growth Rate (SGR) battle in December 2011, Republicans decided that a reasonable way to pay for the cost of SGR was to dun the hospital industry for an additional $15 billion dollars in reduced Medicare/Medicaid reimbursements.  According to Republicans, this would cover the two year window Congress was trying to resolve during this latest scramble to manage the unmanageable SGR.

Outraged, the hospitals launched an advertising campaign strongly criticizing the Republican SGR solution and released very public letters calling out the Republicans for reducing senior access to Medicare hospital care. (http://tinyurl.com/7nghqxr )

In response, the Chairman of the powerful House Ways and Means Committee, Rep. David Camp, had this icy reply for the AHA:

“It’s important to add a little perspective to what the hospital industry is calling ‘major reductions’ to hospitals in H.R. 3630,” the GOP statement said, pointing out that the cuts would total 0.5 percent of 10-year Medicare spending on hospitals. “Not so long ago, the major hospital trade associations endorsed and strongly supported legislation that became law. It contained $155 billion in hospital Medicare cuts – more than 10 times the reductions in H.R. 3630.” (http://tinyurl.com/74ycxuu )

There’s no surprise that this exchange occurred, actually.  This is full-on Republican retribution.

Understanding this GOP sentiment, however, takes a little bit of doing as this “payback” is built upon events that are over two years old and not fully understood by many.  Here’s the pertinent history…

Over the course of 30 days, during the memorable summer of 2009, the American healthcare establishment concluded it was time to throw in with the Obama Administration on healthcare reform.  The result?  A series of elaborate announcements, each sponsored by the White House, that featured the chastened healthcare group of the moment pledging unequivocal support for HCR.

In return for these public statements, each industry was promised “deals” from the White House.  Overall, these “deals” not only granted important relief from key HCR issues that each organization disliked, but also painted a rosy picture of the promise of new business that the law would generate for each supporter.

Each deal, however, also extracted enormous promises of “cost savings” from each group that were designed to pay for the new services HCR would provide.  These funds were to be generated either in the form of new taxes on an industry, or as reductions in provider Medicare/Medicaid reimbursement fees.  It was classic Capitol Hill “quid pro quo” politics.

As a refresher, here’s a quick summary of how the summer of 2009 unfolded:

PhRMA

The first major health player to step forward was the Pharmaceutical Manufacturers and Researchers of America (PhRMA).  On Saturday, June 20, 2009, the White House announced a 10 year $80 billion deal approved by the PhRMA Board.  The new monies would go to cover the so called “donut hole” in Part D Rx coverage contained in the Medicare Reform Act of 2003.  The funding to pay for this would come from a new tax on each Rx Company doing business with Medicare.  Additionally, PhRMA pledged to provide advertising to support passage of the full HCR bill and to not oppose the law in Congress. (http://tinyurl.com/n44wwr )

In exchange, PhRMA got a White House pledge to keep price controls (i.e., single payer) out of Medicare and Medicaid, and also reject foreign drug importation.  The biggest incentive for PhRMA was the prospect of 30 to 40 million newly insured patients utilizing and paying for the industry’s prescription drugs.

American Hospital Association

About two weeks later, the American Hospital Association (AHA) and two other affiliated hospital groups also decided it was time to capitulate.  On July 8, 2009, AHA released an agreement with the White House indicating that AHA members would take a $155 billion cut in Medicare reimbursement over the next 10 years. (See above, Rep. Camp’s reference)

In return, they received a series of promises about how funding would be distributed, a guarantee that administrative red tape would be removed from Medicare hospitalizations, as well as gaining access to the aforementioned new 30/40 million newly insured patients and creating the prospect of no more uninsured patients entering American hospitals. (http://tinyurl.com/7jzxwjl ).  AHA also agreed to shoulder some of the costs for advertising aimed at passing the final legislation.

American Medical Association

Then about one week later on July 16, 2009, the American Medical Association (AMA) saw the light, too.  It endorsed the House version of the HCR, and the general HCR concept, going forward.  It was a huge win for the White House.  In their deal, the AMA was promised health insurance market reforms to cover most Americans, confirmation of several plans to be available to consumers through health insurance exchanges, new HHS money to boost primary care services, and a new focus on physician work force problems.

However, the chief issue AMA was promised action on was the full resolution of the disastrous 1997 SGR (See above, AHA / Republican dispute).  Without this action, AMA stated support would be withdrawn (http://tinyurl.com/ncnccj ).  The White House agreed to deal with SGR, as well as all of the above.

In the end, along with the above important healthcare players, the summer parade of 2009 ended up featuring insurers, device manufacturers, and more, all falling in line with HCR.  In sum, the White House succeeded in rounding up more than $250 billion in cuts and new taxes from the healthcare groups, worth about one quarter of the money needed to fund for the entire HCR law.

Most importantly for President Obama, the very sharp knives of these potent healthcare lobbies, by and large the same ones that had destroyed HillaryCare in 1993, were sheathed for the duration of the HCR debate.

It was quite an amazing time.

For one group in Washington, however, the results went beyond amazement:  Indeed, the actions of the healthcare industry were viewed by this crowd as practically traitorous.  That group was the Republican Party.  In short, they felt completely betrayed by the healthcare community.  Why?  Historically, Republican Hill policy ran in lockstep with the views of the healthcare industry. As a result they had steadfastly opposed price controls, restrictions on access to care, and all manner of other government control over the practice of medicine.  Now, as a result of the healthcare industry agreements, all of those positions were effectively null & void.  It left the Republicans with no solid policy position versus the new law.

As the White House agreements piled up that summer, strong words from the Republicans directed towards the healthcare community began to appear.  Consider this statement from then Minority Leader John Boehner, directed to Billy Tauzin, then CEO of PhRMA, following the industry’s announcement of support for HCR:

“Appeasement rarely works as a conflict resolution strategy. This is as true in the arena of policymaking as it is in schoolyards across America. When a bully asks for your lunch money, you may have no choice but to fork it over. But cutting a deal with the bully is a different story, particularly if the “deal” means helping him steal others’ money as the price of protecting your own” (http://tinyurl.com/6robmce )

No mistaking that.  In Washington speak, that’s a declaration of war — on one of the Republican Party’s most stalwart allies.  Reportedly, the same sense of betrayal was relayed to the AHA and the AMA, if more quietly.  Behind closed doors, the Republicans told Washington reps of the healthcare industry that they needn’t bother them the next time they wanted help on the Hill.

And so time has passed and much has changed in Washington since that summer of 2009…

In part, due to the new HCR law, the Election of 2010 swept the Republicans back into the majority in the House and resulted in significant gains in the Senate.

These election results also led to expressions of unhappiness by the membership of many of the healthcare associations that had parlayed with the White House.  As a result, some of those 2009 healthcare leaders are now gone — PhRMA’s Tauzin has departed, as has the AMA’s EVP Maves.  Others who survived were chastened by strong membership pushbacks that questioned the wisdom of the deals cut with the Administration.

But in the background of all these 2010 Hill changes, and the toxic swirl that is HCR in 2012, the breach between Republicans and the healthcare industry quietly festers.  For Republicans, punishment for the summer of 2009 is clearly an ongoing “order of the day” and will be tactically delivered whenever deemed appropriate.  The slap down of AHA this past week being the latest, clear example.

However, there is another broader, more strategic question that does need to be asked here:  What if the healthcare industry’s decision to throw in with the President during the summer of 2009 was correct?  What if the Administration’s view that “outcomes” really is what healthcare reimbursement should be based on, is true?  Has the healthcare industry’s long held position supporting fee for service reimbursement seen its day?

All of these possibilities, perhaps, would lead you to ask another, more profound question: Did the US healthcare industry make a prescient call in throwing the Republicans, en mass, under the HCR bus during the summer of 2009?

Time will tell, but I would suggest for now, we do not need to be overly concerned about that sort of “big picture,” philosophical question.  That’s because, near term, as long as Republicans hold a majority in either Chamber, the US healthcare industry will continue to experience spasms of retribution from the Hill GOP as direct payback for the perceived “transgressions” of the summer of 2009.

Those are my thoughts on the summer of 2009.  I would be interested in your views.

Essential Health Benefits –Late last year, the Obama Administration decided to delegate this responsibility for creating a list of” essential health benefits” to the states (http://tinyurl.com/8965pvg).  Consumer groups cried foul, claiming HHS had dodged a key HCR responsibility; others are saying it was a shrewd political move.  Much more to come on this important issue.

 PCORI – The quiet Patient Centered Outcomes Research Institute likely enters troubled waters this year.  Right after January 1st, PCORI drew fire from the Republican Policy Committee that charged PCORI’s real role is the creation of a cult of “parsimony”, i.e., extreme frugality, in delivering U.S. medical care.  Will PCORI join IPAB and become Congressional Republicans’ “Death Panel 2”?

ACO’s – Despite early rules trouble, this important aspect of the HCR program is now operational.  Confusion and skepticism still surround this concept, especially in the area of actual cost savings.  We’ll see where we are in 2013.

SCOTUS – No doubt here.  This is “the one.”  The US Supreme Court is set to rule this spring on the constitutionality of the HCR insurance mandate for all Americans.  So much is riding on this decision…if one is made.

OK.  But what about the multitude of other HCR actions that continue to ride “sidecar” to these major issues?  Which ones should we be watching?  Well, for my money, I continue to believe the most intriguing smaller piece of the HCR law is the expanding role of the IRS in our healthcare.

IRS as “Enforcer” and More…

You may be surprised to learn that the IRS is directly involved in HCR, and has issued rulings and guidance on no fewer than 18 new, major programs under the 2010 law (http://tinyurl.com/y45gf6g ).  And, today, as I write this, the agency is well on its way to implementing many of these new obligations.

For example, on September 30, 2012, the above mentioned PCORI program will be funded by a new $2 tax per covered life on all existing private health insurance plans.  This “operating budget” for PCORI is being collected from insurers by the IRS…

Another new IRS responsibility is the collection of a 10% tax on services that delivered by an estimated 25,000 tanning salons in the US.  Again, the IRS is responsible for getting the money and is directed to use all of its usual tools to insure full collection.

And on and on these HCR collection mandates go.  I guess, really, there is nothing that unusual here, other than the width and breadth of the new work the IRS has been tasked with undertaking.   But aside from “collections,” few people seem aware that there is also a lot of “mission creep” going on at the IRS that’s being driven by this new law.

Check this out:  One year ago, national Taxpayer Advocate, Nina Olson, released a general summary of developments ongoing at the IRS (http://tinyurl.com/7rrl7bx ).  As you scroll down the document, you will come to a section entitled:

“IRS CHALLENGES IN ADMINISTERING BENEFITS PROGRAMS, INCLUDING HEALTH CARE REFORM”

Give it a read.  It’s a fascinating discussion.  In particular, Olson suggests that beyond its traditional role of tax “collector,” HCR has caused the agency to become a “benefits administrator,”  responsible for deterring who gets the HCR Small Business Tax Credit, the Premium Assistance Credit, the Individual Responsibility Requirement, the Employer Requirement, and more.  In short, the IRS has gone into the “judgment” business.  As Olson suggests, these new responsibilities are “way of scope” versus the skills and training of most of the current IRS staff:

 “From an organizational standpoint, there are substantial differences between benefits agencies and enforcement agencies in terms of culture, mindset, and the skill sets and training of their employees.

“As the IRS prepares to administer large portions of the health care legislation, it will have to shift from being an enforcement agency that primarily says, in effect, ‘you owe us’ to an agency that places much greater emphasis on hiring and training caseworkers to help eligible taxpayers receive benefits and work one-on-one with taxpayers to resolve legitimate disagreements.”

• Among the new areas of “benefits” calls already made by the IRS are:
  • The Service has determined who shall be covered under the extended “dependents” insurance and has, for example, ruled that the age coverage limit is actually up to 27, not 26.  News to me.
  • In this same rule they determined that temporarily housed “foster children” can also be covered under this provision.  Somewhat surprising.
  • The IRS has also made the call on when certain government debit cards can be used for Rx prescriptions, and when they may not…

Given this expanded responsibility, how is the IRS planning to accomplish this new “benefits” mission?  Well, in the main, it appears that the agency plans to bring on a lot of new help…Hundreds of new staffers & auditors…Up to 1,100 – 1,300 for 2012, alone (http://tinyurl.com/73mpkh6), and potentially thousands more going forward.  In fact, exactly how many the IRS will need has become controversial (http://tinyurl.com/5tvpfrj).  About all I can say is, let’s hope Jon Huntsman’s estimate of 19,000 new IRS FTEs is incorrect.

However, given my initial reference to the 18 new areas in HCR that the IRS is now servicing, and the many more that are yet to come, there is a deeper, philosophical concern I have here.  Basically, I am troubled by the idea of the IRS as a factor, as a “decider” in our healthcare system.

For instance:  If the IPAB determines that the GDP and medical pricing ratios are not in sync versus the allowed percentage increases under HCR, how exactly will IPAB propose raising the dollars needed to cover the short fall?  Logically, it will either be a recommendation for a reduction in entitlement services; or a tax increase to cover the shortfall…It will be up to Congress to decide how to proceed with the IPAB recommendations and you tell me which recommendation Congress will act on?  Right. They will raise taxes…And who do you think Congress is going to turn to for administration of those new taxes?  Correct, the IRS.

So one clear potential outcome for this new IRS inclusion in HCR is the prospect that Congress will learn to regularly lean on the IRS…directing them to act as its HCR “enforcer.”   This will be especially true when Congress faces unpopular policy tasks like raising taxes to cover HCR’s deficits.

And here’s another angle to consider:  In this new area of the IRS acting as “benefits administrator” for large swaths of HCR programming, how do we feel about the IRS writing the rules to determine who gets what care and why?  Right, I realize their work will be subject to oversight by some entity.  However, to me the idea of the IRS getting first crack at deciding who gets access to various medical benefits under HCR is troubling on several levels…To put it succinctly, what the heck does the IRS know about medical care, anyway?

Anyway, a substantial amount of IRS/ HCR activity is now underway.  The challenge for all of us, seems to me, is not only paying attention to the major developments of the HCR, but also keeping an eye on those other, smaller matters flowing through HCR — like the clear incursion of the IRS into our American healthcare system.

That’s my point of view.  I would be interested in hearing your thoughts on the involvement of the IRS in HCR.

The savings, according to the final 2010 CBO estimate, would provide a “net reduction in federal deficits of $143 billion…over the 2010–2019 period as result of changes in direct spending and revenues.”

Further, in August 2010, an NEJM article co-authored by Peter Orzag and Ezekiel Emanuel, MD, estimated that by 2030, total HCR savings would be up to $1 trillion.

Now, however, as various HCR elements meet the real world, many of the “savings” have proved illusory, if not completely unachievable.

To illustrate these difficulties, let’s take a look at the current status of “savings” in three key programs — Medicare Advantage, the CLASS Act, and ACOs.

Medicare Advantage

Most of us know the story of Medicare Advantage (MA). Initially designed in the ‘90’s to provide managed care services in rural areas, the program was tapped by the Bush Administration to be dramatically expanded in 2003 under the Medicare Modernization Act.

However, because of higher premiums paid under the “new” MA, the program became a target of Congressional Democrats during the HCR debate. In the end, $136 billion of the $500 billion needed to start HCR’s expanded Medicaid program was sliced out of MA and credited as a “savings” in the final law.

All was well until last January when the first real “extractions” from MA services were scheduled to take hold. Interestingly, the designated cuts didn’t occur. In April, USA Today reported that rather than cutting MA premiums, HHS was actually “enhancing” them. Further, as pointed out by Kaiser Health News, more patients were signing up:

Despite predictions that last year’s healthcare law would doom Medicare’s private insurance plans, it’s not happening – at least not yet. Enrollment in Medicare Advantage plans continues to grow at a brisk pace…

So, MA certainly doesn’t seem like a program scheduled for significant cuts by January of 2014. And the projected CBO “savings” for HCR? The “S” word for MA isn’t being discussed by HHS.

ACOs

The concept of the accountable care organizations (ACOs), from the start, was predicated on projected “savings” that were to be driven by this new concept. As Families USA stated in September of 2010:

If the accountable care organization delivers high-quality care at lower costs…This new payment approach will create an estimated $5 billion in savings for the Medicare program (by 2019).

Sounds pretty good. However, problems with the ACO concept surfaced soon after HHS issued the first rules in April of this year. The pushback from providers was intense and focused on three key points of contention:

First, what was an ACO? An HMO, a PPO, or some other new medical delivery variant?

Secondly, what about liability for losses under ACOs? According to HHS, providers would be responsible for any losses that might occur under the program. Insurers and hospitals plans rejected this as they saw ACOs as “experimental” and as such, very risky business propositions.

Thirdly, how would ACOs save money? Of particular concern was one section of the concept that stated ACO patients were free to be seen by any doctor. The providers said if ACOs were going to save money, they would need to control patient access to medical care.

After a lot of discussion, HHS withdrew the initial rules and issued a new set in October. The new rules addressed the questions about liability (there is none); and to a degree, further defined an ACO.

But on the question of direct “savings”, nothing was settled. That’s because it appears HHS is still not willing to impose HMO-like closed panels on patients, so patients can get care wherever they wish. How do you control medical costs, and generate “savings”, if you have no access control over your patients?

So will ACOs and their projected “savings” start as scheduled on January 1, 2012? Not clear. Realistically, though, the “S” word in ACOs is very much in question.

CLASS ACT

The final HCR “savings” question is cut and dried…Of all the aspects of the law that has missed on projected “savings”, the CLASS Act is clearly at the top of the list. Why? Because the prospective long-term care program for seniors went kaput in October when HHS designated the plan as “unsustainable”. So, for the CLASS ACT, the “S” word is not an issue. A cool $86 billion in savings is off the table. If you’re counting, that’s nearly 10% of the total 20 year “savings” projected in the noted NEJM article.

Vanishing “Savings”

We can all wonder why the CBO-certified HCR “savings” asserted in 2010 have begun to vanish. Some of these occurrences, however, do seem explainable:

First, let’s take the most obvious case: The CLASS Act

From the beginning, the actuarial theory that drove the alleged “savings” in the program was flawed: in 2009, Rick Foster, the Medicare Actuary, said the “savings” projected in the CLASS Act were illusory. It took HHS until this fall to finally agree. In the meantime, $86 billion in “savings” has evaporated. The worrisome question is, will we find out other parts of HCR are equally “unsustainable?”

Second, we need to acknowledge that politics has entered into this “savings” picture. In the case of Medicare Advantage, someone at HHS apparently awakened to the fact that on January 1, 2011 the Administration was scheduled to take MA benefits away from nearly 10 million senior citizens. Not a wise thing to do with a national election coming in 2012. Solution? Don’t reduce MA in 2011. To my point on politics in the “savings” equation, do we expect the 2011 MA enhancements to continue after November 2012? I’ll leave that to you to ponder.

As for ACOs, I think it’s a similar case. The only way to realize savings in the new ACO concept is to lock people into a single physician, under a closed panel of services. Why hasn’t HHS done this? Because a lot of people really don’t like a closed panel approach to care. My guess is the $5 billion in “savings” scheduled to begin accruing in January 2012 will remain a mirage until after November of 2012.

So where do things stand with the “S” word in HCR as we close out 2011? Right now, the evidence of actual “savings” is rather murky. Taking just these three important programs (MA, CLASS, ACOs), and the approximate $225 billion of the projected 10 year “savings” they are designated to drive, we find their “savings” are either off the table completely, or, at best, appear to be suspended until we get by the November 2012 elections. Given that, the Administration’s anticipated overall savings of $143 billion for the period 2010–2019 would have to be charitably labeled as “behind schedule.”

That’s my point of view. I would like to have your thoughts on the “S” word in HCR.

Source: PharmaExecBlog

Over the last year, I have come across three people who I think belong in this category. Each has faced incredible political pressure and bureaucratic pummeling. However, in the end, each has held to his position and, as a result, had an incredible impact on HCR. Here are their stories:

Doug Elmendorf: (http://tinyurl.com/739tutl) Elmendorf has been the director of the Congressional Budget Office since 2009. His background before coming to CBO includes work at the Brookings Institute as the editor of the Brookings Papers on Economic Activity, a turn as an assistant professor at Harvard, as well as several DC economic agency appointments. Elmendorf personifies the thousands of very smart, unknown bureaucrats who toil silently behind the scenes in Washington, DC. Their job is grinding out data, producing arcane reports, and serving the needs of Congress and the Executive branch. Given this background, what is it that Elmendorf, the classic DC backroom player, did to capture our interest in the midst of the healthcare reform debate?

His story goes back to the fateful summer of 2009 when the debate over President Obama’s healthcare plan was still raging. Things were looking uncertain re: passage of the measure, but the White House had made the decision to press on with the plan, come what may. However, what the President had not anticipated that summer was a Democrat-appointed economic official repeatedly questioning the savings that HCR would drive. That person was Doug Elmendorf, the Director of CBO. During several public appearances in June and July, his concise fiscal evaluations indicated that HCR would unlikely generate any savings. In time, his presentations were viewed by the White House as jeopardizing passage of the law.

As a direct result, on the evening of July 17, 2009, Elmendorf was summoned to a personal meeting with the President of the United States to discuss his findings. To say that it was unusual moment for the Director of OMB is an understatement. We can only imagine how that conversation went.

From that point forward, Elmendorf made no further statements about the costs savings impact of the new law, and the President’s measure became law in March of 2010. Presumably, in the aftermath of the law’s passage, it was expected that Mr. Elmendorf would be gentled off into the deep night of HCR’s implementation, never to be heard from again on the savings issue.

But that is not what happened. On May 28th, 2010, just two months after the law had been passed, Elmendorf decided to set the record straight. In short order, this nameless, faceless, Democratic apparatchik, responding to a request from Republican Members of Congress, publicly stated, “CBO estimates that the health legislation will increase the federal budgetary commitment to health care by nearly $400 billion during the 2010-2019 period.” (http://tinyurl.com/7vwgttg )

Immediately described in the media as a “bombshell”, the then Director of the Obama Office of Management and Budget, Peter Orzag, quickly attacked Elmendorf and attempted to discredit him. But no one bought it. Since that day, Republicans…and Democrats, alike, have been skeptical about the alleged “cost savings” contained in HCR and, thanks to the information provided by Elmendorf, they have good reason to question this.

Bob Yee: (http://tinyurl.com/73bz2g7 ) After taking advanced degrees in math and statistics from the University of California, Bob Yee became a principal at the Strategic Health Management Corporation. Over the course of 17 years, he successfully managed the Genworth Financial Group account for his firm. His professional strength was in the design of private, long term care insurance products.

Following the passage of the new HCR law, Yee seems to have been inspired by what it might do for better public access to LTC and consequently sought an opportunity to use his skills in the implementation of the new measure in the early part of 2011. Reportedly, HHS Secretary Sebelius was delighted to have Yee involved. She viewed him as a major addition to the team that was tasked with designing the new Community Living Assistance Services & Support Program, or CLASS Act…a significant section of the HCR law that dealt with long term care.

Over the summer of 2011, Yee and his team toiled away on the design of the CLASS Act. But creation of the plan apparently did not go well. Things came to a head on the morning of September 22, 2011, when Yee surprised his HHS colleagues, and really, all of Washington, DC, when he unexpectedly shipped a “farewell” email announcing that he was leaving the CLASS team. Said Yee, “I’m leaving my position as the CLASS office actuary as HHS has decided to close down the CLASS office effective tomorrow (September 23rd)”. (http://tinyurl.com/3tmbvo3) The shocking implication was clear. The highly regarded LTC actuary was stating that creation of the CLASS Act had failed.

Within an hour of Yee’s email, a shocked HHS blasted out a reply, denying that CLASS was going down. But Yee stuck to his guns and by the end of the day was quoted as saying, “Legally, this is a government program — it should be run by the government. If you don’t have a plan, how are you going to collect premiums? Today’s my last day. I’m going home.” (http://tinyurl.com/3pe3afl)

To those who knew Yee, if he said CLASS could not be designed to work, it was not going to work.

And although HHS and the Administration floundered around for a few more weeks after the “Yee Moment,” on the morning of October 14th HHS Secretary Sebelius issued a letter to Congress that effectively cancelled the implementation of the CLASS Act. (http://tinyurl.com/7cnj9wq)

Today, Yee is likely back at SHMC reflecting on his experiences in the public sector. However, the impact of man’s email is still reverberating. If you are a Member of Congress you have to be asking yourself… “How many other aspects of HCR will be quietly shut down by HHS after they are found to be “unworkable” by people like Bob Yee?”

Rick Foster http://www.soa.org/files/pdf/health-foster-bio.pdf  like Elmendorf and Yee, Foster is well educated. With two degrees in mathematics, he has been in the public sector since he graduated from college, 29 years ago. All of his work has been with either the Social Security Administration or Medicare. For the last 16 years, Foster has held the title of Chief Medicare Actuary. Arguably one of the toughest jobs in DC, you would have to assume this guy is more than wise to the ways of Washington. However, somewhere along the line, Foster decided he wasn’t going to go along with the political flow of the place.

As a result, Foster has bedeviled both Democrat and Republican Administrations for nearly three decades. He apparently believes stating the truth as he sees it is important, no matter what political toes he may step on. And he has stepped on toes!

His current “truth telling” target is the math underpinning the HCR law. Here are a few examples of his work:

• In August of last year, Foster stated in an appendix of the Annual Medicare Report, that in his view, the Medicare “cuts” that Democrats wrote into HCR “exist only on paper” and were written so the Democrats could pretend they were reducing the deficit and perform the miracles that the Medicare trustees had outlined. With the exception of cuts in Medicare Advantage, Foster predicted all HCR reductions contained in the new law would never happen in practice. (http://tinyurl.com/24lxcb8 )
• Earlier, in November of 2009, during the initial hearings of the increasingly controversial CLASS Act, Foster stated, “Voluntary, unsubsidized and non-underwritten insurance programs such as CLASS face a significant risk of failure as a result of adverse selection by participants.” As we all now know, (See Bob Yee) it took until October of this year for folks to figure out that Foster was right two years ago. (http://tinyurl.com/7rnhlbm )
• And because Foster was discrediting CLASS back in 2009, it is alleged that the Administration was keeping him away from public comment on other aspects of HCR in 2011 — for obvious reasons. Review this closely:

On November 10, 2011, Republicans wanted the Obama administration to ask the Medicare Actuary Foster to confirm, in writing, that a new patient safety program for Medicare would actually save as much as the Administration said it would. But the Administration would not cooperate with this Republican request because Foster had already publicly stated that ‘no cost estimate is currently feasible’ for the program, i.e., the savings don’t exist.

Instead, the Administration sent CMS Deputy Administrator Jonathan Blum to testify before the Senate, and when an obviously annoyed Sen. Mark Kirk asked Blum if he could get a letter from Foster assuring the savings suggested in the law…Blum responded that he would not commit to getting such a letter from Foster. Why? Because Foster had already made it clear there are no savings in the law and that he refused generate such a statement. (http://tinyurl.com/6p564xz)

Why have these three public servants all done what they have done? Is it their education? Their intelligence? Their basic sense of professionalism?

Probably, all of these. However, I would also assert that a better explanation of why they do what they do is that all three have raw courage. Courage to stand up to the massive sea of inertia that is HCR; assert themselves forcefully as individuals; and stake their Washington careers on their convictions and truths that shake the very premises of HCR.

That we have these public servants such as these in Washington is refreshing, even hopeful. The pity is, however, that we don’t have thousands more like them. That’s my point of view for this month. I would like to know what yours is on these three individuals who are working in the roiling seas of HCR.

There’s a lot of health theory tied up in this new bureaucracy, and if history is once again predictive of the future, we do need to study PCORI carefully.  That is because, given the outcome research experiences of the past, PCORI could end up driving some very big changes in American healthcare, and relatively soon.  Let’s review why I believe knowing about PCORI is important…

To begin, what is PCORI?…According to a recent summary from the law firm of McDermott, Will & Emery, Section 6301 of the new HCR law created PCORI to undertake extensive comparative clinical effectiveness research and defines “comparative clinical effectiveness research” as research that evaluates and compares the patient health outcomes and benefits of two or more medical treatments or services (http://tinyurl.com/6c8bqb5).

These include comparisons for treatment, care management and delivery; procedures; diagnostic tools; medical devices; therapeutics; and any other strategies used to treat, diagnose or prevent illness or injury.  In short, PCORI’s CER evaluations will pretty much cover all aspects of American healthcare.

So when you think about this, PCORI’s CER certainly sounds like the correct thing to be doing.  I mean, who can really be against the idea of seeking the most effective medical care?   However, understanding what the basis of the CER being utilized in executing the research is very important.  There can be big differences in outcomes depending on your comparative effectiveness research approach.  A short review of CER history illustrates my point.

It appears the first serious system wide application of CER was generated in the UK in the early 1970’s.  An English doctor, named Archibald Cochrane, M.D., asked his peers, “Are doctors in the British National Health Service consistently making clinical decisions based on clinical evidence obtained from randomized controlled trials?” (http://tinyurl.com/3pzafcs) The answer to the question was, “No” and the rest is public health history.

Cochrane went on to develop CER in his NHS specialty area of perinatal services, and given the success of his work, other practice areas in the NHS soon followed suit.   Importantly, the overall Cochrane approach to CER was entirely clinically based, i.e., “What medical application worked best on patients, and what did not?”  Cost of the care being delivered was not a primary part of Cochrane’s original CER formula.

British medical history shows that for more than 20 years, Cochrane’s clinical approach to CER was how NHS applied research and generated comparative effectiveness evaluations.  However, an important point in the history of CER was reached in 1999.  That year, due to continuing fiscal stress in the NHS system, the British shifted gears and decided a more aggressive form of CER was needed.  In response, they established the National Institute for Health and Clinical Excellence, or NICE, to run comparative effectiveness research.  The big change in outcome recommendations generated by this new NICE concept was that they were heavily skewed towards the cost of care.  In short order, and although Cochrane’s original clinical approach continued to be mentioned in NICE reviews, his theory was replaced with NICE’s overarching focus on cost of care (http://tinyurl.com/yzf6cc8).  Since then, cost concerns in NHS comparative research have far outweighed quality of care issues.

A good example of how the new approach was utilized can be seen in this 2007 NICE CER determination which denied reimbursement for a new macular degeneration drug for NHS patients who were going progressively blind.  In this case, NICE recommended that older, less effective macular degeneration drugs were preferred, and that administration of the dated products was to be limited to only one eye.  NICE administrators determined that spending money on drugs for treatment of both eyes was not cost effective:

“When treatments are very expensive, we have to use them where they give the most benefit to patients.” (http://tinyurl.com/mvamgs)

Which brings us back to PCORI and the ongoing developments in the American version of CER…

Today, few of us realize that operationally PCORI is already a going CER concern.  Fully staffed for over one year, PCORI has a rapidly growing budget ($50 million in 2011; $150 million in 2012…http://tinyurl.com/3whm32x), that is set to increase exponentially over the next decade thanks to a new $2 tax collected from each Medicare patient, and a new $2 tax per-covered life collected from private healthcare insurance plans.  So far, PCORI has released no comparative research.  Logically, however, that will have to happen soon as the PCORI is linked to onset of the new HCR law in 2014.

We must also appreciate that PCORI is, in fact, just a small part of a larger CER network that the Administration has put in place.  This broader CER was fully funded through ARA:

“In 2009, Congress made a major investment in ensuring high-quality, patient-centered health care by allocating $1.1 billion for CER as part of the American Recovery and Reinvestment Act (ARRA).  Of that $1.1 billion for CER, AHRQ received $700 million; of that $700 million, $400 million was transferred to the Office of the Director of NIH to support CER as well as a variety of other research projects. The remaining $400 million was allocated to HHS to be disbursed at the discretion of the Secretary.  In addition, the federal budget for Fiscal Year 2011 includes $286 million for CER under AHRQ.” (http://tinyurl.com/3hdwf6p)

So a large amount of CER infrastructure has already created over the last three years, initially by ARA; and then more recently, by HCR in 2010.

Now, you may ask, what is it that PCORI and the other CER groups are doing with all this tax money?  Currently, according the Center for Medical Technology Policy, they are in the process of setting “national clinical comparative effectiveness research priorities” and generating contracts to manage the funding and conduct of this future research (http://tinyurl.com/44x3n4p ).  But what are the priorities that PCORI is setting?

No word on this right now.  In fact, this entire “prioritization process” seems a little hazy; a little circumspect at this point.  Why not just spell it out?  Well, part of the reason may be that PCORI realizes that with each research determination that PCORI makes, it will, in fact, be choosing and recommending the future medical winners and losers in American healthcare.

One real world physician, Dr. Scott Glaser, an interventional pain specialist from Chicago, (http://tinyurl.com/3kbt5lm) recently offered his take on PCORI’s future impact:

“PCORI is going to be drawing conclusions about what (services, medications, devices, etc.) should be compensated and what shouldn’t, and this is problematic because the PCORI panels aren’t specialists in the field and don’t understand the whole continuum of care.  It’s possible they will make recommendations that will have huge unintended consequences, especially for new and emerging subspecialties such as interventional pain management.”  (http://tinyurl.com/3oal8xd)

Glaser goes on to state that to him, what is most concerning about PCORI is that insurers will be waiting eagerly for each PCORI research pronouncement, and once the CER pronouncements are made, the companies will immediately drop coverage for whatever service, drug, or device PCORI determines is not comparatively effective.

This sort of possible market impact is certainly intriguing, but to me we still need to drill down on what the long term basis of PCORI’s research will be?  Clinical experience or cost of care?  As of today, PCORI leadership is emphatic about its position on this point:

During a conference focusing on the Patient-Centered Outcomes Research Institute (PCORI), the PCORI’s executive director, Dr. Joe Selby, stated, “You can take it to the bank that PCORI will never do a cost-effectiveness analysis”.
(http://tinyurl.com/3lmc8pk)

But you have to ask yourself, practically, does Selby’s statement make much sense?  All you have to do is consider the spiraling costs associated with the currently out of control budgets for Medicaid, Medicare and US Public Health, and it makes you wonder.  Remember it was a “cost crisis” that led the British NHS to abandon clinical CER in favor of financially based CER in 1999.  Given the financial state of affairs in US public healthcare, and the strong likelihood that the new HCR law being implemented in 2014 will reflect these problems, it’s hard to see how PCORI can avoid implementing a similar cost based CER, no matter what PCORI leadership may say in 2011.

So, as we look at the broad comparative effectiveness research approach that the United States government has set in place, what will the near term impact of PCORI be?

Logically, as PCORI’s clinically based research is generated, overtime an individual physician’s experience will gradually become less valued.  PCORI’s choices for comparative effectiveness will soon prevail and influence the market.

Also, if cost drivers do eventually seep into the U.S. CER system, the cost of a service or a prescription will likely determine whether it will be part of the medical care offered, or not.

In sum, on both the clinical side and the cost side, PCORI clearly has the potential to drive major changes in the delivery of US medical care.

If all of this does come to pass, and I believe it will, then it’s fair to assert that the CER health history established in the UK will, indeed, be repeating itself here in the US.  And going forward, discerning Americans will begin to carefully review and fully understand NICE’s pronouncements on CER.  Why?  Because the CER that NICE generates is very likely going to serve as PCORI’s CER guide to future.

That’s my point of view on the Patient Centered Outcomes Research Institute, or PCORI.  I’d be interested in hearing yours.

Tom Norton