| News from CQ Roll Call. ANALYSIS from Thomson Reuters. |
APRIL 1, 2011 |
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ACO surprise: Lower pay if savings targets missed The long-awaited proposed rule for launching accountable care organizations in Medicare in January contains a big surprise: financial penalties if these new teams of providers exceed the spending target set for them under the program. The Centers for Medicare and Medicaid Services (CMS) clearly regards as controversial the inclusion of financial penalties in its 429-page proposal released on Thursday. Critics could say the health law contemplated only that ACOs receive financial rewards for meeting savings targets, an internal government document notes — not that ACOs also be at risk for penalties if they exceeded the spending targets. “Haven’t you essentially rewritten the law without involving Congress?” says the internal Q & A document on “sensitive or controversial” aspects of the proposal. The answer: “No, we propose to intensify the incentive for shared savings ... making the policy more likely to meet the goals laid out in the law.” The answer also notes that the Medicare Payment Advisory Commission has recommended a rewards-and-penalties approach as the best way to control spending and volume of care and that in any event, “the rule is in proposed form and we are interested in hearing public and stakeholder views.” Most analysts thought this “downside” risk would be an eventual goal. But under the proposal, ACOs will either be subject to the penalties in the first year or the third year. The incentive to take on downside risk in Year One is that if providers spend less than the target they can share a larger part of the savings than if they wait until Year Three to take on downside risk. Federal officials said that ACOs could save up to USD960 million in their first three years. The organizations would have to meet certain quality standards while producing savings. ACOs are networks of providers within the Medicare system created in the healthcare law, including physicians, hospitals and health systems. The aim of the networks is to improve the quality of care but also to produce cost efficiencies, with any savings to be shared by the government with the ACOs. According to Centers for Medicare and Medicaid Services (CMS) Administrator Donald M. Berwick, a total of 65 measures will be used to assess whether quality in an ACO is sufficient. In no other part of the economy can collaboration be as helpful as in healthcare, said Christine Varney, assistant attorney general at the Department of Justice. But she warned that “by forming an ACO, one is not exempt from the antitrust laws. Those who collaborate to fix prices inappropriately will be prosecuted.” [Also on Thursday, the Department of Justice and the Federal Trade Commission released a joint proposed antitrust policy statement. It said the accountable care organizations proposed for Medicare will allow providers to collaborate without running afoul of federal anti-trust laws.] FTC Chairman Jon Leibowitz said both agencies are committed to completing reviews of proposed ACOs within 90 days, allowing the organizations to get up and running quickly. Leibowitz said, for example, that to avoid antitrust trouble, providers in ACOs “should avoid restrictions that prevent payers from sharing information with their insurers about providers’ quality and cost.” He called the guidance “a major step forward and Administrator Berwick should get enormous credit for working on this with us.” Berwick emphasized that unlike in managed care, Medicare beneficiaries in an ACO have unfettered choice of providers. “The provider may not indicate to the beneficiary that there is any restriction on their choice whatsoever,” said Berwick. “As far as the beneficiary is concerned they are in the normal Medicare system and they may go anywhere they wish.” The American Medical Association (AMA) said in a statement that it will review the regulations but also issued a caution. “ACOs offer great promise for improving care coordination and quality while reducing cost, but only if all physicians who wish to are able to lead and participate in them,” said Jeremy A. Lazarus, speaker of the American Medical Association House of Delegates. “For this to happen, significant barriers must be addressed, including the large capital requirements to fund an ACO and to make required changes to an individual physician’s practice, existing antitrust rules and conflicting federal policies.” Under the law, an ACO must include primary care providers responsible for coordinating treatment for at least 5,000 Medicare beneficiaries. They must participate for three years. The premise of ACOs is that if the practitioners involved work carefully together to avoid duplicative or wasteful care, they can save Medicare money. Administration officials speaking on background said that much of the nation’s medical care is fragmented, developed in pieces without connections among providers. The price is paid by patients and their families, who face a lack of coordination that can result in unnecessary testing and repetitive requests for medical histories. “It’s easy for patients to get confused, to feel lost,” said one official. Physicians have been somewhat uneasy about the concept, though. While they recognize the need for change, many are fine with the current system and worry about being overshadowed by larger players within the ACOs. The AMA has laid out a set of principles for ACOs, chief among them that physicians retain the main role for medical decision-making. One major question is whether ACOs will live up to their intended purpose of bringing new efficiency and better quality to traditional Medicare, given that seniors will have the right to opt out of these organizations The idea of ACOs was bounced around by health policy experts long before the enactment of the healthcare law. “The approach is practical and feasible,” Elliott S. Fisher, a Dartmouth College researcher, said in a 2009 analysis co-written by Mark B. McClellan, former administrator of the Centers for Medicare and Medicaid Services and now director of the Engelberg Center for Health Care Reform at the Brookings Institution. Other co-authors include John M. Bertko, a former executive with the insurer Humana, Inc. The approach also is “voluntary for providers, builds on current referral patterns, requires no change in benefits or lock-in for beneficiaries, and offers the possibility of sustained provider incomes even as total costs are constrained,” said the analysis posted on the website of the policy journal Health Affairs.
Growth of exchanges a potential plus, Obama official says By Rebecca Adams, CQ HealthBeat Associate Editor March 29, 2011 If employers eventually see the insurance in exchanges as a better alternative to employer-sponsored coverage and shift workers into the new markets, it will be a positive development, Obama administration health official Joel Ario said Tuesday at a CQ Roll Call and Thomson Reuters briefing. Ario, who heads the Office of Insurance Exchanges at the Centers for Medicare and Medicaid Services (CMS), said he did not believe a move from employer-sponsored coverage would happen abruptly in 2014, the first year that the exchanges will be in operation. Employers “will continue to provide (insurance), and we may well end up with an employer-based system for a long time because exchanges may not develop” into a robust marketplace right away, Ario said. But Ario said he could envision a gradual move from employer-provided coverage to the exchanges if the choices available there are sufficient. “If it plays out the exchanges work pretty well, then the employer can say, ‘This is a great thing,’” Ario said. Employers could then move workers into the exchanges and feel confident that their insurance would be better than the coverage the company had provided. Ario said that he could imagine employers saying, “’It would be good for them, good for me.’” Ario made his remarks as he and other panelists debated the impact of the 2010 healthcare law. Ario noted employers are not required to offer health insurance, so companies are free to reduce or eliminate coverage for their workers if they choose. Many employers offer health insurance mainly because of competitive pressures from other companies for sought-after employees who value health benefits. That will change in 2014, when the healthcare law imposes penalties on employers with 50 or more workers who do not offer health insurance — assuming the law is not struck down by the U.S. Supreme Court. Ario declined to speculate on how the justices would rule on the constitutionality of the requirement that most Americans buy insurance or face a penalty. Ario wrangled with former Health and Human Services Deputy Secretary Tevi Troy about whether GOP healthcare proposals, particularly plans to offer insurance across state lines, would work. Ario called the proposal to sell coverage across state lines a “completely vacuous, poll-tested idea.” Earlier in the discussion, Troy said he believed Republicans would be wise to couple such an idea with a plan to cap medical malpractice awards and with tax credits that would help people afford insurance. Republicans “know they need to have something that’s a little more serious than one that only covered 3.5 million people,” he said, referring to a House Republican plan that was discussed during the congressional healthcare debate. When challenged by Ario about the feasibility of offering insurance across state lines and avoiding coverage mandates in some states, Troy defended the proposal. He said that the idea wouldn’t make a difference overnight but that over time it could lower insurance rates for some people, because they would be allowed to buy cheaper, less-comprehensive coverage than they can under current state laws in states such as New York, New Jersey and Massachusetts. Ario pressed Troy on how such a plan would work, posing a hypothetical example of a New York man who felt victimized and limited by the coverage offered in his state. If that man wanted to buy an Oklahoma health plan, then the Oklahoma insurer would have to set up a new network of medical providers in New York to care for the patient. “It won’t work,” Ario said. Ario said the healthcare law offered a solution that would help Americans find coverage because the exchanges would work seamlessly with other federal programs, such as the Medicaid program for the poor. Other panelists included John Reichard of CQ HealthBeat and Ray Fabius of Thomson Reuters. The panel was moderated by Morton Kondracke of Roll Call.
Supreme Court hears case on generic drug label rules Should generic drug makers that become aware of new product hazards be required to ask the Food and Drug Administration to revise labels in order to avoid state court liability for injuries? That’s what the makers of brand-name drugs must do. And generic drug companies should have to do the same thing, a lawyer for two women alleging injury from a generic drug told the U.S. Supreme Court on Wednesday. Jay P. Lefkowitz, the attorney representing generic drug makers in the case, countered that argument. While the generic companies have a duty to report to the FDA any adverse drug reactions, federal law pre-empted any requirement that generic makers seek revisions of the labels, Lefkowitz said. Brand-name companies have the power to make labeling changes, but generic drug makers cannot act on their own to do so, Lefkowitz argued in the case, Pliva v. Mensing. FDA regulations bar generic firms from adding a warning to a product label if that would make it different from a brand-name label, according to Lefkowitz. During oral argument in the case on Wednesday, some of the justices’ questions focused on the impact on generic drug makers of adding new responsibilities. Others zeroed in on the adequacy of remedies for consumers injured by generic drugs. The stakes in the case are big. If the court rules in favor of the generic drug makers, patients injured by their products won’t have a judicial remedy to recover damages from undisclosed hazards unless Congress acts to create or authorize one, according to an analysis of the case prepared by Steven D. Schwinn, associate professor of law at the John Marshall Law School. This case involved two women who had been given the drug metoclopramide for conditions including diabetic gastroparesis and gastroesophageal reflux disorder. After long-term use they developed tardive dyskinesia, a severe neurological disorder involving sudden, uncontrollable movements of the body. The women sued the generic manufacturers involved for failing to issue warnings based on mounting evidence of hazards posed by long-term use. Only after they said their injuries occurred did the company that made the brand-name version of the drug change the label to add a warning about long-term use. “Do you think Congress really intended to create a market where consumers could only sue a brand-name drug manufacturer, because if that were the case, why in the world would anybody take a generic?” asked Justice Sonia Sotomayor. “I understand that from the consumer’s perspective it may not make a lot of sense,” Lefkowitz replied. “What Congress specifically said is that a generic has to bear the same label.” He continued: “What the FDA has said time and time again is: ‘We’ll tell a generic when the generic has to change the label, because we don’t assume that the generics are going to know when the label should change ... they don’t have the same basis of clinical testing and results.”
GAO examines alternatives to individual mandate If the healthcare law’s requirement for most individuals to buy insurance is struck down by the U.S. Supreme Court, other viable alternatives exist, the Government Accountability Office said in a new report. But all of them involve tradeoffs or challenges. The report outlines the pros and cons of each approach, but it does not estimate how much more or less effective each would be when compared to the individual mandate. Some experts have said that if the U.S. Supreme Court finds that the individual mandate to buy insurance is unconstitutional, other alternatives could accomplish the same goal of expanding coverage. The GAO report, which was requested by Democratic Senator Ben Nelson of Nebraska, evaluated nine different approaches that also could encourage Americans to buy insurance. In order for the new system created by the healthcare law to succeed, it is important that a large number of healthy people buy insurance so that the costs of coverage can be spread across the population. The law adds a number of new regulations for insurance so that people who have been sick or have pre-existing conditions can gain coverage. But if those patients are added to the coverage pool, premiums for everyone else in the program will go up unless more healthy people also join and subsidize the costs of providing care for the ill. The American Cancer Society Cancer Action Network (ACS CAN), which supports the individual mandate, said in a statement that the GAO needs to do more work to determine the effectiveness of each approach in expanding coverage. The mandate “has proven to be one of the more unpopular provisions in an imperfect bill, but by insuring that nearly all Americans have coverage, the provision will enable consumer out-of-pocket costs to stay within reasonable limits and ensure that the law’s critical patient protections can remain in effect,” said the statement. “Although the GAO report discusses alternatives to the individual responsibility provision, it provides little analysis showing that any of them would lead to equivalent, economically sustainable insurance coverage for the 32 million additional Americans who will be covered under the Affordable Care Act.... Because of the weakness of the GAO findings, ACS CAN recommends that the GAO undertake additional analysis to assess whether any of these alternatives would result in quality, affordable coverage for as many Americans as would the individual responsibility provision.” The nine ideas that the report analyzed were proposals to:
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FDA could release rule soon for restaurant menu calorie counts A proposal outlining the kind of nutritional information that restaurants will have to put on their menus will be revealed soon, a Food and Drug Administration official said. A proposed rule had been expected by March 23. “We expect only a short delay,” FDA spokesman Michael Herndon said on March 25. “It is a reflection of the complexity of this issue but most importantly an indication that the FDA is willing to work with all interested parties to ensure the best policy is presented.” The rule was called for in the 2010 healthcare law. Under the law, chain restaurants with more than 20 locations have to post calorie counts for almost every item on their menu boards. Businesses will have to disclose the number of calories in each standard menu item, make additional nutrition information available to customers and provide per-item calorie information for self-service items. More than 200,000 eateries are expected to have to comply. The goal behind the rule is to make Americans more aware of the number of calories in the foods they eat in restaurants. Consumer advocacy groups say that one reason the average waistline of Americans has expanded in the past few decades is that people do not realize how much they are overeating when they dine out. National Restaurant Association (NRA) officials supported the provision because they viewed a uniform, national policy as a better idea than a patchwork of different policies in various areas. They have been eager to see the details of what the FDA will require. One worry of NRA officials and the International Franchise Association is that some chain restaurant owners have recently updated their menus because of state or local regulations that may differ from the national requirements. They hope the agency will take that into consideration and give restaurant owners enough time to transition to the new rules. They also note that the restaurant industry is diverse and want the FDA to write rules that could be seen as one-size-fits-all. They are encouraging the FDA to be as flexible as possible. “We’re anxious to see what’s in the regulations,” said Sue Hensley, senior vice president of public affairs for the restaurant association.
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