Washington Beat

By Michael Pretzer, Washington Editor

Congress: Thinking large about Medicare reform

Sens. John Breaux (D-LA) and Bill Frist (R-TN) have one big idea and one less-big idea for reforming Medicare.

Their big idea is to strip the Health Care Financing Administration of its oversight of managed care Medicare, create a new federal agency (the Medicare Board, they'd call it) to handle that job, scrap Medicare+Choice, develop a new competitive system for managed care plans that want to serve seniors, and institute a drug plan that would pay for all or some of every senior's prescriptions.

Their smaller idea is to strip HCFA of its oversight of managed care, reconfigure Medicare+ Choice, create a new federal agency (the Competitive Medicare Agency, they'd call it) to oversee the reconstituted M+C program, and institute a drug plan that would pay for all or some of every senior's prescriptions.

The senators say they introduced Breaux-Frist heavy and Breaux-Frist lite "to allow the House and the Senate to use one, the other, or the best of both to craft Medicare reform legislation." Sen. Chuck Grassley (R-IA), chair of the Finance Committee, says the committee may use the less ambitious proposal as a basis for Medicare legislation.

It's doubtful that Congress will really reform Medicare this year. And if it does, the Breaux-Frist specifics are sure to be altered. But some of the themes articulated by the senators will be central to every discussion of Medicare's future. Those themes include:

• Reorganizing HCFA. The senators say HCFA's management of fee-for-service Medicare along with managed care Medicare creates a conflict of interest. Moreover, HCFA's "outdated mindset" doesn't allow it to properly oversee a competitive health care system. Let HCFA manage FFS and administer other programs, such as Medicaid and the State Children's Health Insurance Program, argue the senators. But assign the managed care competition derby to a new, hipper agency.

• Changing the payment rules for managed care.The managed care industry doesn't like the way Medicare+Choice pays plans. (It's not wild about the size of the payments, either.) Things would be different—and more palatable to the industry—under what Breaux and Frist call the Medicare Competitive Premium System. "Payment rates [will be] set through competition among plans rather than through a complicated statutory formula," promise the senators. "In addition, rates [will not be] tied to Medicare fee-for-service spending."

• Subsidizing prescription drugs. Big or small, the next change in Medicare has to include a drug plan. The senators' proposal would offer incremental benefits: Low-income seniors would have all of their drugs covered; wealthy seniors would get price discounts.

• Keeping the scope of reform in check.Although the senators' plans are bound to draw fire, nothing they've proposed is unthinkable—or unpassable—if Congress, the administration, and the stars all align for a magical moment. Breaux and Frist have steered clear of more controversial issues, such as raising the eligibility age, requiring seniors to share the cost of lab and home health services, and means testing to determine premiums. They've put forth a competitive managed care system that's proven to work—at least for federal employees. They've kept FFS Medicare intact and promised that benefits will not be scaled back for anyone. They've argued up front that both of their plans retain the entitlement basis of Medicare. Breaux-Frist heavy and Breaux-Frist lite "do not involve vouchers," they said emphatically on the day they introduced their reforms.

The New Privacy Regs: Oops—they don't keep medical records so private after all

When the Department of Health and Human Services issued regulations last December to protect the confidentiality of medical records, the AMA warned that the devil was in the details—a cliche frequently used in Washington to disparage legislation and regulations. Being timeworn, however, doesn't make the criticism less true.

As the medical community and others sort through the lengthy and complex privacy regs, a few devilish details have come to light. One in particular has sparked some pointed debate. It involves the lack of a rule aimed at keeping patient records out of the hands of commercial businesses hawking products and services through the mail, and away from organizations soliciting funds for various causes.

Instead, "doctors, clinics, hospitals, and others that normally have access to medical records—along with business associates working under contract with them—will be allowed to send out individualized health information and product promotions," writes Robert O'Harrow Jr. in The Washington Post. "A pregnant woman could receive pitches about vitamins or infant health care products. A patient who has been treated for sexually transmitted diseases could receive telemarketing calls offering condoms."

No one is accusing doctors of using their patient lists to sell products. A more realistic example of what could happen under the regulation occurred a few years ago. CVS and other pharmacies gave customer prescription data to a company so it could mail out prescription-refill reminders and other so-called educational information. Sharp criticism from the medical community and numerous complaints from customers forced the pharmacies to drop the program.

Not everyone sees this business provision in the new regs as a big mistake. The Association for Healthcare Philanthropy, for one, lobbied to make sure HHS gave fundraisers access to medical records in the final rules. The patient information, which was accessible to the association prior to the new privacy rules, "is used to solicit charitable contributions from grateful patients and their families and goes to fund prenatal screening, free dental care, community clinics, hospice programs, drug discovery programs, cancer screening initiatives, and mobile mammography vans," explains AHP.

Others, however, think the provision is a loophole that's ripe for exploitation. "The new regulations go too far," says AMA trustee Donald J. Palmisano, a surgeon in New Orleans. "The problem lies not with physicians, but with other entities that would learn about a patient and his diagnosis, then market products to the patient without his permission."

The regs do allow patients to put a stop to a promotion or solicitation, but only after they've received a mailing. In Washington parlance, that's known as an opt-out provision. But many reject the opt-out as wrongly putting the onus for privacy protection on patients.

At least one member of Congress is talking about introducing legislation to amend the opt-out provision. But the idea that Congress would fix HHS' mistake is more than a bit ironic. Back in 1996 Congress passed the Health Insurance Portability and Accountability Act, giving itself the task of writing privacy regulations. If we can't do it in three years, the legislators said, we'll hand the job to HHS. Congress didn't even come close to completing its assignment, and by default the job went to HHS.

While some critics have been sweating details such as the opt-out, others have argued that the regs as a whole need to be reviewed and revised—again. For instance, a coalition of 39 companies and organizations (including the Medical Group Management Association, the American Medical Group Association, and the American Association of Health Plans) petitioned new HHS Secretary Tommy Thompson to take yet another look. As they stand today, "key provisions are un-workable and could seriously disrupt patient care," the coalition complained.

Thompson's response was to reopen the debate. HHS wants to make sure it didn't overstep its authority when it wrote the regulations, says Thompson, and it wants to see if the regs are likely to have unintended consequences.

Point/Counterpoint: A backer and a critic sound off on the Bipartisan Patient Protection Act of 2001

In February, two Republican senators and four Democrats introduced a new patients' bill of rights. Opponents and proponents immediately climbed on the soapbox.

Our bill provides basic medical protections for all Americans, provides access to appropriate health services, protects employers from liability, and helps patients get the medical care they need rather than generating excessive and frivolous litigation.—Sen. John McCain (R-AZ), one of the bill's sponsors

The [act] is a clone of the sue-first, ask-questions-later proposals promoted in Congress during the past five years. These bills have had one thing in common: their dogged determination to substitute high-cost litigation for common-sense problem-solving.—Karen Ignagni, president and CEO of the American Association of Health Plans

Medicare+Choice: Though they're in the minority, some seniors seem to like managed care

Medicare+Choice isn't dead yet. During the first months of 2001, senior citizens gave the ailing program a small boost. The number of seniors opting for M+C increased by 0.8 percent. Enrollment climbed from 5,602,943 in January to 5,648,585 in February. The upswing doesn't set any record, but at least it begins to reverse last year's enrollment decline.

M+C's popularity is clustered in a few states, most of them on the West and East coasts. Ten states have one-fifth or more of their seniors in managed care, and together they account for nearly 65 percent of all M+C enrollees. (New York is also a big M+C contributor. The state has more than 398,000 enrollees, but that's only 15 percent of New York's Medicare population. Texas adds more than 200,000, about 9 percent of its seniors.)

There seems to be little correlation between the concentration of seniors in a state and Medicare+Choice popularity. Four of the 10 states with a large share of M+C enrollees have a senior population percentage that's below the national average.

States with at least 20 percent of seniors in Medicare+Choice

Michael Pretzer. Washington Beat.

Medical Economics

2001;8:33.