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Kaiser Daily Health Policy Report
The Latest Reports in Health Policy
Special Notice
Kaiser Daily Health Policy Report Will Not Publish Friday, July 4
[Jul 03, 2008]
The Kaiser Daily Health Policy Report will not publish on Friday, July 4, in observance of Independence Day. The report will resume publication on Monday, July 7.
Health Care Marketplace
UnitedHealth Group Announces Lower Profit Outlook, Will Restructure To Focus More on Regional Coverage
[Jul 03, 2008]
UnitedHealth Group on Wednesday lowered its earnings guidance because of reduced commercial businesses and higher-than-expected Medicare-related costs and said it would restructure the company with a greater focus on regional coverage, the Chicago Tribune reports (Chicago Tribune, 7/3). The insurer said that profits would drop about 16% from earlier estimates (Forster, St. Paul Pioneer Press, 7/2). Overall, the company expects earnings to be cut by about $1.1 billion, including $400 million related to problems in its commercial business and $500 million related to problems with its Medicare prescription drug benefit plan.
UnitedHealth CEO Stephen Hemsley said, "There are other elements which combined to negatively impact our earnings expectations by a further $200 million," adding, "Behavioral health utilization trends are up sharply this year due to the greater use of services directly related to the troubled economic environment as well as due to parity benefit changes in New York." UnitedHealth officials have said that in response to growing costs, more people are declining health care coverage or are enrolling in plans with lower premiums that have either fewer benefits or higher deductibles.
In addition, the company expects to lose 800,000 people from fully insured plans this year. The company said it has been forced by competition to discount premiums more than expected for new and renewed customer accounts. UnitedHealth spokesperson Don Nathan said, "The current economic environment means that potential customers are much more price sensitive," adding, "The market for commercial employer-sponsored insurance has not been increasing, it's been contracting."
In a note to investors on Wednesday, Goldman Sachs analyst Matthew Borsch wrote that UnitedHealth had been more direct that other insurers in acknowledging the effects of competition on earnings across the industry. Borsch wrote, "There is no easy fix here: We believe industry margins will move lower in 2009-2010" (Snowbeck, St. Paul Pioneer Press, 7/2).
The company said it would cut 4,000 jobs as part of its restructuring plan (Dunbar, AP/Atlanta Journal-Constitution, 7/2). Settlement
Also on Wednesday, the California Public Employees' Retirement System said that it and other pension funds have negotiated a $895 million settlement in a class-action lawsuit against UnitedHealth over stock-option backdating revealed in 2006, the Los Angeles Times reports (Lifsher, Los Angeles Times, 7/3).
CalPERS sued UnitedHealth in 2006 after the Wall Street Journal listed the health insurer among companies likely involved in stock-option backdating (Forster, St. Paul Pioneer Press, 7/2). CalPERS has about 1.5 million members, and its investment portfolio is valued at about $240 billion (AP/San Francisco Chronicle, 7/3). The pension fund holds about 4.9 million UnitedHealth shares, which are valued at about $127 million (Los Angeles Times, 7/3).
UnitedHealth agreed to the settlement to avoid "potentially costly and protracted litigation and allows us to continue to focus on providing Americans with high-quality, affordable health care solutions," Thomas Strickland, chief legal officer at UnitedHealth, said (Forster, St. Paul Pioneer Press, 7/2). The settlement, which also contains corporate governance provisions, must be approved by the CalPERS and UnitedHealth boards and the U.S. District Court in Minnesota where the lawsuit was filed (Los Angeles Times, 7/3). In addition to the large class-action settlement involving CalPERS, UnitedHealth also reached a proposed $17 million settlement to resolve a lawsuit related to the Employee Retirement Income Security Act (Forster, St. Paul Pioneer Press, 7/2).
Pfizer To Eliminate Direct Financial Support for Continuing Medical Education Programs Offered by For-Profit Companies
[Jul 03, 2008]
Pfizer officials recently announced that the company will no longer provide direct financial support for continuing medical education courses offered by for-profit medical education and communication companies, the Wall Street Journal reports. However, Pfizer will continue to provide direct financial support for CME courses offered by not-for-profit organizations, academic institutions, teaching hospitals and those supported by medical societies, which often contract with for-profit medical education companies. Pfizer also will honor current commitments to for-profit companies that offer CME programs.
Cathryn Clary, vice president of U.S. external medical affairs at Pfizer, said that the decision to no longer provide direct financial support for CME courses offered by for-profit companies "has to do with mitigating the perception of a conflict of interest." She added that Pfizer decided to continue to provide direct financial support for CME courses offered by other organizations and institutions because "their primary mission is patient care." According to Clary, for-profit companies received less than half of the $80 million that Pfizer spent on CME courses last year.
Clary said that Pfizer has provided financial support for CME courses because they can improve patient care and can "be aligned, in some cases, with our business interests" but added that the company does not require courses to promote Pfizer products. A report compiled last year by the Senate Finance Committee found that the pharmaceutical industry uses educational grants valued at $1 billion annually to increase the market for its products (Loftus, Wall Street Journal, 7/3).
Coverage & Access
DHS Inspector General Issues Recommendation on Reporting Procedures of Immigrant Detainee Deaths
[Jul 03, 2008]
The Immigration and Customs Enforcement bureau should promptly report all deaths of immigrants held at federal detention centers in the U.S. to the Department of Homeland Security, as well as to state authorities where required by law, according to recommendations in a report released Tuesday by the DHS Office of Inspector General, the New York Times reports. The 55-page report follows a "special review" of the deaths of two immigrant detainees. Although both detainees died of pre-existing medical conditions, the review found that the cases highlighted larger problems with oversight and medical care at immigration detention centers, including the failure to recognize or address serious health care deficiencies at the centers.
The review, conducted by the Office of the Federal Detention Trustee at the Department of Justice, involved the deaths of a 60-year-old South Korean woman with cancer in September 2006 at the Regional Correctional Center in Albuquerque, N.M., and a 30-year-old Ecuadorean woman with a severe brain infection caused by a parasite in April 2006 at the Ramsey County jail in St. Paul, Minn. According to the review, both women received inadequate medical treatment. In addition, a government investigation of the center in Albuquerque found detainees waited for up to one month for medical attention due to a nurse shortage.
The review also found that 11 of the 20 immigrant detainees with chronic health conditions were scheduled for regular visits at chronic care clinics and that centers were not adhering to requirements that they notify DOJ and DHS about detainee deaths.
The inspector general's report called on ICE and the detention trustee to pool information about the detention centers and recommended improved medical screening and education about the parasite. Kelly Nantel, a spokesperson for ICE, said that "as a result of the report," the agency has developed guidelines for all deaths to be reported to the appropriate state and federal authorities (Bernstein, New York Times, 7/3).
San Francisco Chronicle Examines Healthy San Francisco Program Enrollment Progress
[Jul 03, 2008]
Although city officials estimated in July 2007 that Healthy San Francisco would offer access to health care to all city residents by January, the program one year later remains open only to individuals with incomes up to 300% of the federal poverty level, the San Francisco Chronicle reports. The city has halted expansion of the program while it awaits a verdict from the Ninth U.S. Circuit Court of Appeals in San Francisco in a lawsuit challenging the program's legality.
Under Healthy San Francisco, residents are assigned to one of 27 primary care facilities in the city, which focus on preventive care, and have access to a range of other health services. Enrollees contribute a quarterly fee and copayments depending on their incomes. Coverage does not extend beyond the city. The program, projected to cost $200 million annually, is designed to be funded by employer contributions, a state grant and beneficiaries' fees.
City public health officials have committed to allowing people with incomes up to 500% of the poverty level to enroll beginning in February 2009, and they said that they expect all city residents will be able to apply by the summer of 2009. However, there is no new estimate for when full coverage will be achieved. Mitch Katz, director of the city Department of Public Health, said that he understands why people are frustrated but that he believes gradual enrollment makes better economic sense. Katz said that if everyone enrolled at once, there would not be enough health care providers to meet the demand.
Len Nichols, director of the New America Foundation, said, "For a city to try to do it at all is pretty amazing. Ultimately, we're going to need federal help to make health care access a reality in this nation, and it's impressive San Francisco is trying to do it in whatever patchwork they can" (Knight, San Francisco Chronicle, 7/2).
Prescription Drugs
Revised Study Maintains Link Between FDA Approvals Made Soon Before Deadlines, Safety Risks
[Jul 03, 2008]
Harvard University professor Daniel Carpenter has made revisions to a study published in March that found prescription drugs hurried through the FDA approval process are more likely to later be linked to safety risks, but he maintains that the study's conclusions are still accurate, the Wall Street Journal reports. In a letter published in the New England Journal of Medicine, Carpenter acknowledges mistakes FDA pointed out in the original study, also published in NEJM, but he says FDA's own records also contain errors.
According to the new numbers, between 1993 and 2005, 88 drugs approved near agency deadlines had a 15% chance of being flagged for severe safety problems -- either with a "black box" warning or a complete withdrawal -- compared with a 5% rate of safety problems for 226 other drugs. The March study showed that drugs approved near deadline had a 14% chance of safety problems, compared with 3% for other drugs.
Carpenter in a 151-page memo released online wrote, "I'll frankly admit that we omitted four or five of the black box warnings," but FDA also "missed a whole bunch of black box warnings." Carpenter also released his raw data online. An FDA spokesperson said the agency has not had a chance to review the revised analysis.
The Journal reports, "The findings suggest that the agency may have been under stress to meet deadlines imposed by agreements with the pharmaceutical industry since 1992." In exchange for "agreeing to quick approval of drug applications, FDA gained the legal authority to collect substantial fees from companies with business before the agency," the Journal reports. FDA promises to reach a decision on 90% of new drug applications within 10 months. Fees paid by drug makers account for about half of the $680 million the agency will spend on new drug reviews this year (Winstein, Wall Street Journal, 7/3).
 Carpenter's letter and a letter from FDA economist Clark Nardinelli are available online.
State Watch
Massachusetts Cigarette Tax Increases by $1 Per Pack To Fund State Health Insurance Law
[Jul 03, 2008]
Massachusetts Gov. Deval Patrick (D) on Tuesday signed into law a bill that increases the state cigarette tax by $1 per pack, the AP/Boston Globe reports. The increase, which brings the tax to $2.51, took effect immediately. On Monday, the bill was approved by the state House and Senate by votes of 93-52 and 26-9, respectively. The increase is expected to generate $174 million in revenue, which will be used to help offset the higher-than-expected costs of the Massachusetts health insurance law.
Opponents of the tax say the increase unfairly targets smokers who cannot quit and will hurt small businesses that sell cigarettes near the New Hampshire border, where the cigarette tax is $1.08 per pack but could reach $1.33 in October (Leblanc, AP/Boston Globe, 7/1). In addition, state Senate Minority Leader Richard Tisei (R) said the tax increase sends the message that the state is depending on smokers to continue smoking in order to pay for Commonwealth Care. He said, "If you smoke already, please continue to smoke and if you don't smoke, maybe you should start smoking." Sen. Harriette Chandler (D) said the tax is designed to be a disincentive as well as a source of revenue (Leblanc, AP/Nashua Telegraph, 7/1).
Pennsylvania Health Care Cost Containment Council Employees Let Go After Program Authorization Lapses
[Jul 03, 2008]
Nearly the entire staff of the Pennsylvania Health Care Cost Containment Council has been let go due to a political disagreement between Gov. Ed Rendell (D) and state Senate Republicans over whether a bill to reauthorize the council should also include an extension of a malpractice insurance subsidy for physicians, the Philadelphia Inquirer reports (Goldstein, Philadelphia Inquirer, 7/2).
Council spokesperson Joe Martin said 38 of the 43 council employees were informed Monday afternoon that they had been terminated, leaving five members to stay on until the close of business Thursday. A letter sent to the terminated employees states, "The General Assembly has yet to enact legislation for the reauthorization," and without that legislation, the council "has no statutory basis to perform work. Therefore, your services are no longer authorized" (Fahy/Barnes, Pittsburgh Post-Gazette, 7/2).
The state Senate on Saturday passed a bill to reauthorize the council after adding language to extend a malpractice subsidy, called the MCARE abatement program. Rendell threatened to veto the Senate bill. Rendell has said he will not extend MCARE until the Legislature passes a bill to provide affordable health care to more than 800,000 uninsured state residents. Rendell spokesperson Chuck Ardo said, "The governor would be more than willing to sign a clean bill if one were to reach his desk" (Philadelphia Inquirer, 7/2).
Erik Arneson, spokesperson for state Senate Majority Leader Dominic Pileggi (R), called the termination of council employees "a political stunt" on the part of the Rendell administration. "There is no legal requirement to take this action," he said, adding that the council remained open during 2003 when its authorization expired while lawmakers worked on an agreement (Pittsburgh Post-Gazette, 7/2).
The health coverage debate is expected to resume in September (Scolforo, AP/Pittsburgh Tribune-Review, 7/1).
Opinion
Wall Street Journal Letters to the Editor Address Recent Opinion Piece on Medicare Bill
[Jul 03, 2008]
The Wall Street Journal on Thursday published two letters to the editor in response to an opinion piece about a bill (HR 6331) approved last month by the House that would delay a scheduled 10.6% reduction in Medicare physician reimbursements and reduce funds for Medicare Advantage. The opinion piece, written by Scott Gottlieb, a former CMS official and an American Enterprise Institute fellow, appeared on June 24. Summaries of the letters appear below.
- Nancy Nielsen: Traditional Medicare "withers on the vine at the expense of access to care for the 80% of seniors and disabled who rely on the program," and, despite "naysayers' claims," the bill would not "cut Medicare Advantage benefits to seniors," Nielsen, president of the American Medical Association, writes in a Journal letter to the editor. The legislation would "simply make common sense changes to allow these plans to work better and ensure that vital Medicare dollars are going to patient care," Nielsen writes. According to Nielsen, many "physicians are added to Medicare Advantage plans unknowingly," and the bill would "provide more transparency and ensure that insurers form a real network of physicians, rather than 'deeming' them participants because they treat one patient who is part of a plan." The legislation also would eliminate duplicate payments to MA plans for medical education, she writes. "The extra funds that threaten the long-term health of the Medicare program are too often just another bonus for insurers -- at the expense of patient care," Nielsen writes, adding, "As supporters of Medicare Advantage programs cry wolf, the Medicare payment cut goes into effect in July and will force physicians to make the difficult decision to limit the number of Medicare patients in their practices" (Nielsen, Wall Street Journal, 7/3).
- Judith Stein: Much "more is needed to pay for long-term care," but Medicare "does not push people into nursing homes" as Gottlieb maintains, Stein, executive director of the Center for Medicare Advocacy, writes in a Journal letter to the editor. "Medicare's home health benefit covers nurses and home health aides for people who meet coverage criteria for as long as it is medically necessary," but "Medicare's nursing home coverage is only for 100 days," according to Stein (Stein, Wall Street Journal, 7/3).
U.S. Health Care System Overhaul Needed To Reduce Costs, Columnist Writes
[Jul 03, 2008]
"Health care will become one of the most onerous personal finance issues in coming years unless the system is changed to ensure universal access, cost control and long-term financing," Bloomberg columnist John Wasik writes in the Bloomberg/Boston Globe. He writes that the establishment of an "entirely government-run program may be untenable and politically unacceptable," and that the "road to a solution can merge both private and public interest." According to Wasik, such a "hybrid" health care system would use audit firms to determine areas to reduce costs, negotiate lower prices for services, base payments for services on performance and outcomes, and increase use of efficient technologies.
He writes, "Massive buying power through consolidation of separate programs and a public-private partnership" would "make health care available to more than 47 million who don't have coverage." Wasik writes, "The health care picture of the future isn't cloudy," adding, "There will be devastating financial consequences if we don't hunker down and prepare for a much more severe fiscal storm" (Wasik, Bloomberg/Boston Globe, 7/2).
The Latest Reports in Health Policy
NEJM Perspective Examines MedPAC Recommendations for Bundled Payments
[Jul 03, 2008]
"Collective Accountability for Medical Care -- Toward Bundled Medicare Payments," New England Journal of Medicine: In the NEJM perspective, Medicare Payment Advisory Commission officials discuss a recommendation made in June to bundle Medicare payments for certain hospital services, such as those for congestive heart failure, chronic obstructive pulmonary disease and cardiac bypass surgery. The authors write that bundling payments for multiple providers would create incentives for providers to hold down costs, improve efficiency and lead to better coordinated inpatient and outpatient care. The authors also discuss other MedPAC recommendations related to bundled payments (Hackbarth et al., NEJM, 7/3).
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