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Washington Beat


Medicare:The managed care program isn't working the way Congress intended. Congress:Legislators begin their effort to curb medical errors. Reimbursement:HCFA corrects the way it calculates annual changes to physician payments. Bureaucracy:Do the dead really need Medicare? Legislation: Stark's newest idea: Eliminate the freebies doctors get from drug companies. Data Watch: Adding up the pain and suffering from managed care.


Washington Beat

By Michael Pretzer, Washington Editor


The managed care program isn't working the way Congress intended

Has the Medicare managed care boom gone bust, or is it just in remission? Nobody knows for sure. But this much is certain: Managed care hasn't become as popular as Congress anticipated when it created Medicare+ Choice in 1997.

Back in 1993, only 4.8 percent of the nation's senior citizens were enrolled in Medicare managed care. Today, the figure is about 16 percent—but it's no longer rising.

Between December 1999 and April 2000, Medicare+Choice lost about 126,000 enrollees, according to Robert Berenson, director of the Health Care Financing Administration's Center for Health Plans and Providers. Most of the loss was caused by managed care plans' annual exodus from the program. Medicare+ Choice will recoup much of its loss, says Berenson, but only to the extent that enrollment at the end of this year will be about the same as at the end of 1999.

Berenson predicts that this year about 10,000 seniors per month will enroll in Medicare+ Choice—continuing the rate's downward spiral. The enrollment rate was 28,000 a month in 1999 and 90,000 a month in 1991, according to Kathleen Buto, the center's deputy director.

At the moment, there's little reason to think Medicare+Choice will reverse course and start to attract more seniors. If anything, the opposite will occur.

A recent survey by HHS's Office of Inspector General found that seniors cite low costs—small copayments, no monthly premiums, and the like—as the most influential factors in their decision to enroll in Medicare+Choice. And once they've tasted managed care, the thing they value most is prescription drug coverage.

But guess what? Medicare+ Choice plans are getting more expensive overall, and drug coverage now comes with a price tag. This year, 23 percent of the plans charge a monthly premium, up from 15 percent last year, according to Buto. Furthermore, every senior has a copay for prescription drugs, whereas 1 million beneficiaries got off scot-free last year.

"There has been a significant change in the benefits structure," says Buto. "Clearly it's had an effect on the enrollment rate."

Effect, indeed. Managed care plans are even having a hard time re-signing seasoned seniors. Fifty percent of the beneficiaries who are displaced when a plan drops out of Medicare+Choice opt to go into fee-for-service, says Buto. That's not the behavior Congress intended.

Legislators begin their effort to curb medical errors

When the Institute of Medicine issued its report on medical errors last year, doctors knew it was just a matter of time until Congress stepped in. They hoped that the inevitable legislation would be thoughtful and effective. They feared it would be punitive and counterproductive. So far, fear is running ahead of hope.

The IOM recommendation that medical professionals are unhappiest about is one that calls for a nationwide mandatory reporting system to collect "standardized information by state governments about adverse events that result in death or serious harm" (see Washington Beat, Feb. 21, 2000). Please, not another National Practitioner Data Bank, doctors entreated. Please, not a system that leads to witch hunts and malpractice suits.

"There's no evidence to show that mandatory reporting improves patient safety. [It] may have the perverse result of driving errors underground," says Nancy W. Dickey, a past president of the AMA. "Aviation safety programs have taught us that a culture of safety is created by avoiding a culture of blame. The same principle holds true for the health system."

Unfortunately for physicians, not everyone in Congress agrees with Dickey. Sen. Arlen Specter (R-PA), for one, says, "My own view is that mandatory reporting is necessary." And he's out to prove it.

In February, Specter and Sen. Tom Harkin (D-IA) introduced the first IOM-inspired bill. Their Medical Error Reduction Act of 2000 is specifically designed to show the value of mandatory error reporting.

Spector and Harkin want to set up no fewer than 15 demonstration projects that involve the confidential reporting of errors to the secretary of HHS. Five of the projects would permit voluntary reports of adverse events, sentinel events (occurrences resulting in death or serious injury that are unrelated to the expected course of an illness), health care-related errors, or medication-related errors. Five would require mandatory reports. And five would require mandatory reports to both HHS and the patient or the patient's family. But, doctors should note, the bill stipulates that the collected information (1) cannot be used "in any civil or criminal action or proceeding" and (2) is exempt from disclosure via the Freedom of Information Act.

Sens. Charles Grassley (R-IA), Joseph Lieberman (D-CT), Bob Kerrey (D-NE), and Richard Bryan (D-NV) don't buy Dickey's argument, either. In April, they introduced the Stop All Frequent Errors in Medicare and Medicaid Act of 2000. SAFE, as it's called on Capitol Hill, requires that Medicare- and Medicaid-participating facilities—from hospitals to ambulatory surgery centers to home health agencies—report "sentinel events and additional designated errors" to a state health department, the Joint Commission on the Accreditation of Healthcare Organizations, and a Medicare peer review organization. In addition, each facility must create a "patient safety program to reduce medical errors."

The senators seem to mean business. Facilities that "fail to comply with the reporting requirements or fail to implement corrective actions to address safety problems would have their names and addresses publicly disclosed," according to Bryan's office.

The president has also waded in. Clinton is pushing for an overall reporting requirement that follows the IOM's recommendation: mandatory reporting of errors that cause serious injury or death, and the voluntary reporting of other errors and what the White House terms "close calls."

Clinton expects mandatory reporting to do what many critics think impossible: serve two gods. "We'll support legislation that protects provider and patient confidentiality, but that does not undermine individual rights to remedies when they have, in fact, been harmed," the president says. "People should have access to information about a preventable medical error that causes serious injury or death of a family member, and providers should have protections to encourage reporting and prevent mistakes from happening."

But listen up, doctors. Although more legislation on medical errors is in the pipeline, no bill will be voted on this year. The issue is too big to be resolved quickly. A spokesman for Sen. James Jeffords (R-VT), who has already presided over four hearings on medical errors, likens the topic to patient protection. In one form or another, a patient-protection act has been in the works for about 10 years, he notes, and only now is it nearing passage.

Stark's newest idea: Eliminate the freebies doctors get from drug companies

If Rep. Pete Stark (D-CA) has his way, doctors who've been enjoying the largess of pharmaceutical companies may be facing withdrawal. The congressman wants to take away the companies' ability to write off those gifts. No more free meals, travel subsidies, or complimentary drug samples—unless the drug makers are willing to dole them out without deducting them.

"The drug industry's lobbying of physicians, which clearly leads to inappropriate overprescribing of drugs, must stop," Stark declares. "I'm introducing legislation that would deny tax deductions for spending on unnecessary promotions to physicians and encourage dedication of these funds for research and development."

Drug companies spend more than $11 billion a year on marketing and administration—more than twice what they allot for R&D, according to Stark. He claims the situation has become a concern even among those who benefit from the marketing: "I've gotten numerous letters from individual physicians who constantly receive unsolicited invitations from pharmaceutical companies to free dinners, ballgames, theater performances, and other events."

Every so often, Stark tilts at windmills. He knows marketing expenses are a legitimate cost of doing business, and he knows a bill to divert pharmaceutical marketing money to R&D constitutes little more than a chance to vent. It won't become law.

HCFA corrects the way it calculates annual changes to physician payments

HCFA, medicine's favorite whipping boy, has corrected a wrong. Even the AMA says so. It's "good news for America's seniors and the physicians who care for them," proclaims D. Ted Lewers, chair of the AMA.

HCFA has fixed the way it figures the sustainable growth rate, the annual target for an acceptable increase in Medicare expenditures and a critical element in the yearly calculation of physician fees. (The higher the SGR, the more likely that doctors will receive a raise.) The SGR, expressed as a percentage, is based on changes in general physician fees, Medicare FFS enrollment, gross domestic product, and Medicare expenditures that arise from laws and regulations. Because the SGR has to be determined a year in advance, HCFA bases its calculation on rough estimates.

The problem, until Congress revised Medicare regulations last year, was that HCFA wouldn't correct the estimated SGR when accurate data became available—claiming it didn't have the legal authority to do so. Now, the agency will periodically adjust the SGR to make it more realistic.

To illustrate: Last fall, HCFA said the SGR for 2000 would be 2.1 percent. No way, cried the AMA and a host of other medical associations. They argued that HCFA had underestimated the impact of both FFS enrollment and laws and regulations by at least 1 percentage point each. And recently, HCFA adjusted this year's estimated SGR—by nearly four points, to 5.8 percent. The new SGR will allow Medicare to incur an additional $1.8 billion in expenditures before the physician fee raise for 2001 is threatened.

There's a hitch, of course. In November, HCFA will revisit the 2000 SGR. Based on the figures for 2000 in that concoction of elements, the agency could revise the SGR downward—or upward. Let the chips fall where they may, says the AMA. At least HCFA is finally following the correct procedure.

Still, the controversy over the abstruse SGR isn't over. The AMA remains in a huff over the low SGRs that HCFA issued for 1998 and 1999. Until these SGRs are corrected—the SGR was begun in 1998—doctors won't be getting their just rewards, according to the AMA.

Visualize SGR percentage points as building blocks used to create a tower. Each year a certain number of blocks are stacked. If too few blocks are used during the first two years, the tower will always come up short—even if the correct number of blocks is added each subsequent year. HCFA's tower, the AMA estimates, is short about $3.2 billion.

Late last year, the AMA and 16 other medical societies filed a suit in Illinois against the Department of Health and Human Services to force HCFA to correct the 1998 and 1999 SGRs. No decision has been delivered.

Do the dead really need Medicare?

A recent audit of 1997 Medicare FFS claims by HHS's Office of Inspector General found something rather odd. HCFA has been paying millions of dollars annually for health care services delivered to deceased beneficiaries—those whose date of death preceded the start date of the service. Oops.

In 1997, HCFA paid $20.6 million for dead people's care, according to the OIG. Most of the money went for Part A claims ($10 million) and durable medical equipment claims ($9.2 million). Part B claims for physician and clinical lab services accounted for only $1.4 million.

The OIG attributes most of the erroneous payments to administrative screw-ups rather than provider mischief. It has made several recommendations to shore up HCFA's claims-processing procedures but none to initiate fraud investigations. Nancy-Ann DeParle, HCFA's administrator, says her agency is "disturbed" by the OIG's discovery and promises to follow up on its corrective suggestions.




Michael Pretzer. Washington Beat. Medical Economics 2000;12:31.

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