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Thomson Reuters-CQ Roll Call
News from CQ Roll Call. ANALYSIS from Thomson Reuters.
OCTOBER 7, 2011
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States and providers face off at the Supreme Court over Medicaid
By Jane Norman, CQ HealthBeat Associate Editor
October 3, 2011

States and healthcare providers are keeping a close eye on a suit argued Monday in the U.S. Supreme Court over whether hospitals, doctors, patients and other private parties can sue a state when it doesn’t meet federal Medicaid payment requirements.

It was the first case of the court’s new term and likely won’t be the last major healthcare battle to be brought before the justices in the coming months. Petitions were filed last week asking the high court to hear federal appeals court decisions on the healthcare law.

The issue of suing over Medicaid is an important one for states faced with cutting budgets and services in the midst of the economic downturn. Providers say it also has implications for implementing the federal healthcare overhaul law. They contend that if states are allowed to reduce reimbursements in the shared federal-state program for the needy, what’s to keep them from chopping rates to offset the cost of the large Medicaid expansion included in the law?

The fight over Medicaid funding is of enormous consequence for states “feeling their Wheaties these days" and trimming their Medicaid payments to the detriment of patients, said Ron Pollack, executive director of Families USA, which filed a brief along with AARP and other groups supporting the providers’ case to be allowed to sue states.

Physicians are worried as well. “Shoring up state budgets with politically expedient cuts to Medicaid funding has driven doctors and other health professionals from the program," Peter W. Carmel, president of the American Medical Association, said in a statement. “It is vital that Medicaid receive sufficient funding to enable the program to serve its purpose as a social safety net."

States, for their part, are concerned they will be bombarded with hundreds of suits challenging every Medicaid decision. “I don’t think it is more efficient to have 700 district court judges interpreting a statute that does not have any objective standard, but that is susceptible to many different interpretations," Karin S. Schwartz, California’s supervising deputy attorney general, said in her argument before the high court.

California roots

Monday’s suit, Douglas v. Independent Living of Southern California, originated in 2008 and 2009 when in the midst of a budget crisis, California state lawmakers decided that they had to scale back “Medi-Cal," the state Medicaid program. Provider payments were reduced by 1 percent to 10 percent, depending on the provider.

The action was taken without first submitting the proposed changes to the Department of Health and Human Services (HHS). The Centers for Medicare and Medicaid Services (CMS) eventually disapproved them.

During the arguments, Justice Elena Kagan asked if California had made an “end-run" around the administrative process by putting its regulations into effect without HHS approval. Schwartz said states are allowed to act while a request is pending.

Providers and patients sued the state to head off the cuts, saying they violated “equal access" provisions in the law. The Court of Appeals for the Ninth Circuit in seven rulings upheld lower court rulings blocking the cuts and overturned one decision that did not block a cut. California appealed to the high court.

The problem at the heart of the legal tangle is that Congress has not written the Medicaid law so as to explicitly give private parties the right to sue. In the California case, the plaintiffs are claiming that they have legal standing to sue because of the Supremacy Clause in the Constitution, which says federal law overrides state law. California, backed by other states and the National Governors Association, disagrees. Members of Congress — including House of Representatives Minority Leader Nancy Pelosi, Democrat of California — have filed briefs backing the private parties.

But the federal government agrees with California that private parties should not be in the middle of state-federal business. “Medicaid is a cooperative program between the federal government and the states," said Deputy Solicitor General Edwin S. Kneedler, who also took part in the arguments. “Congress has not created a cause-of-action under that act for private parties to enforce particular provisions of it."

Justice Stephen G. Breyer appeared to see problems with letting suits proceed. “There are only 50,000 kinds of reimbursement. Maybe there are a million. I don’t know how many," he said. “And they only take place in like, say, 400,000 counties. And we will have federal judges reaching different views about what is sufficient in each of those different places. And sometimes they will agree. Did Congress want that? Well, hmm, a problem."

Providers aren’t backing away. Lloyd Bookman, one of the lawyers for the plaintiffs, said in an interview after the arguments that if private parties can’t pursue legal action against states for their Medicaid actions, states will continue to reduce reimbursements and affect patient access when doctors drop out of the program.

Bookman said that hospitals in Arizona may be the next to challenge in court a proposed move by that state to cut their Medicaid reimbursements. But they are awaiting a CMS ruling. “We’ve got some hospitals in remote areas facing some significant problems," he said.

In a preview of the arguments for the American Bar Association, Steven D. Schwinn, an associate professor at the John Marshall Law School, said the case “pits two weighty and especially timely interests against each other." On the one hand, providers and recipients want to ensure their states comply with federal Medicaid requirements. But on the other hand, states want to avoid massive amounts of litigation, he said.

Congress could also intervene and undo whatever ruling emerges if it wanted, he pointed out, and create a legal right of action for private parties affected by Medicaid cuts.


Fabius Ray Fabius MD DFACPE
Chief Medical Officer,
Thomson Reuters
Taylor Michael L. Taylor, MD
VP & National Business Medical Leader,
Thomson Reuters

Ray Fabius and Michael L. Taylor of Thomson Reuters answer questions from Dena Bunis, CQ HealthBeat Managing Editor.

Q. What do you foresee happening if the Supreme Court allows states to be sued for not providing enough Medicaid services?

Fabius. This would invite a great deal of judicial activity that is unlikely to improve the health status of the Medicaid population. Perhaps it would cause Congress to legislate a better solution. Most healthcare providers are small businesses that cannot easily adjust to significant real-time reductions in compensation. This is especially the case among those who predominantly care for the poor. At the same time our country will need to develop more efficient ways to provide quality healthcare particularly to this segment of the population. Healthcare reform will add an additional 32 million covered lives - with a significant portion of those to the Medicaid plan.

Taylor. This legal challenge goes directly at the heart of providing adequate medical care for our most vulnerable citizens. Medicaid programs currently are among the lowest reimbursement rates for medical services; further attempts to lower payments in this program will certainly decrease access to care for those recipients. However, as stated by Justice Breyer, allowing 400,000 different court jurisdictions to make different reimbursement decisions seems to be an unworkable solution. This may be an opportunity for CMS to set basic coverage levels to avoid confusion and stabilize funding levels.

Q. How do you believe the court will rule?

Fabius. This is a difficult call. The case pits the opportunity for recourse at the individual level against the need for states and federal healthcare agencies to have flexibility in budgetary purchasing. Underlying this judgment are trusted clinician-patient relationships being tarnished and strained in the balance.

Taylor. The court will need to consider the issue of states’ rights vs. federal authority and balance this issue against the need to ensure Medicaid providers may continue in the program and recipients may continue to receive services. Since the Medicaid law does not explicitly grant private parties a right to sue, the court may be hampered trying to strike the right balance between states' rights and the needs of citizens to receive care under the Medicaid program.

Q. Should Congress have been clearer in the law on this point?

Fabius. Perhaps the real genius of our government framework is that cases which require Supreme Court deliberation can provide the impetus for legislative adjustment or correction.

Taylor. The challenge in enacting laws is the ability to write regulations to match the intent of the law.

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Aid to rural hospitals is threatened again, but it still has reliable allies

By David Harrison, CQ Staff Writer
October 3, 2011

Lawmakers, advocates and healthcare providers are gearing up for a fight to preserve special government assistance for rural hospitals that President Barack Obama has targeted in his deficit reduction proposal.

The White House plan estimates saving USD 6 billion over 10 years by trimming Medicare funding to rural facilities known as critical access hospitals. They serve patients in sparsely populated areas in all but five states: Maryland, New Jersey, Connecticut, Delaware and Rhode Island.

For years, lawmakers from rural states have fought to defend the special assistance programs from budget cuts. But the deficit-cutting drive under way in Congress is now threatening the payments, particularly with a new joint committee charged with suggesting at least USD 1.2 trillion in deficit reduction proposals.

Look for Obama’s plan to encounter stiff resistance from lawmakers such as Senate Finance Chairman Max Baucus, a Montana Democrat who serves on the joint deficit reduction panel and was instrumental in creating the critical access hospital designation in the late 1990s. One of the Finance panel’s senior Republicans, Charles E. Grassley of Iowa, wants a broad overhaul of the Medicare payment system to rural healthcare facilities. “It doesn’t make sense to take away critical-access hospital designation . . . unless Congress also fixes the severe disparities that already are hurting other rural hospitals," he said.

The American Hospital Association also is organizing advocates to press lawmakers to protect health programs, particularly at rural hospitals. Thomas Nickels, senior vice president for federal relations at the association, said the deficit reduction talks led last summer by Vice President Joseph R. Biden Jr. had put rural hospitals in line for cuts which last year’s presidential Bowles-Simpson commission did not.

Few expect Obama’s deficit-cutting plan to be adopted in its entirety, but lawmakers, hospital advocates and lobbyists are increasingly concerned that cutting rural hospital funding could find its way into the joint deficit committee’s proposal. “They’re really beginning to look at Medicare, Medicaid and health programs but I think that any cuts that were considered previously — Bowles-Simpson, the Biden group, the president’s proposal — any proposals that were in those documents will be under consideration by the super-committee. So if you’re on those lists you have reason to be concerned," Nickels said.

Medicare now reimburses critical access hospitals for 101 percent of the costs the facilities incur treating Medicare patients. Under the Obama proposal, they would be reimbursed for 100 percent of their costs, a rate that is still considerably higher than what other hospitals receive. Critical access hospitals tend to serve more Medicare patients than other facilities and a cut in their reimbursement rate would make it hard to continue to operate, advocates say.

Obama’s plan also calls for paring by about 100 the approximately 1,300 critical access hospitals defined as those located further than 35 miles by highway and 15 miles by secondary road from another hospital. Until 2006, states were empowered to waive that provision, resulting in a sharp climb in their numbers. Many facilities are close to other hospitals and enjoy the designation because Congress gave some an exception when it created the designation in the 1997 Balanced Budget Act to ensure rural areas have access to hospital services. The hospitals have received about USD 8 billion from Medicare since 1997, roughly USD 2 billion more than they would have received without the designation, according to a September report by the Medicare Payment Advisory Commission.

Reducing the number of critical access hospitals and trimming their reimbursement rate would shave USD 4 billion from the deficit over a decade. The remaining USD 2.2 billion would come from lowering payments to healthcare providers in “frontier states" that meet a population definition in the healthcare overhaul. Grassley opposes that program, which serves Montana, North Dakota, South Dakota, Nevada and Wyoming.

Some plans would cut further

A leaked memo from House of Representatives Ways and Means Committee Democrats estimated that eliminating all rural hospital assistance programs, a proposal far more sweeping than Obama’s focus on critical access hospitals, could save as much as USD 62.2 billion. This is just one sign that some lawmakers may be willing to back the president’s proposal. At a Sept. 21 hearing, Representative Wally Herger, Republican of California, chairman of the Ways and Means Subcommittee on Health, pressed lawmakers to look for Medicare savings and aides say they are considering Obama’s proposal.

But Rich Donkle, director of financial consulting services for the Rural Wisconsin Health Cooperative, said the president’s changes would be devastating for rural hospitals. “For the most part, a significant part of their business is with Medicare patients. If you make no margin on a significant portion of your business where do you make your margin? It’s a slow death," he said. “There’s a reason why these are called critical access hospitals. They provide a really critical access to people who otherwise may not have access to care. It’s not entirely a dollars issue."


Fabius Ray Fabius MD DFACPE
Chief Medical Officer,
Thomson Reuters
Taylor Michael L. Taylor, MD
VP & National Business Medical Leader,
Thomson Reuters

Ray Fabius and Michael L. Taylor of Thomson Reuters answer questions from Dena Bunis, CQ HealthBeat Managing Editor.

Q. Is there a sound rationale for paying rural hospitals differently than urban ones?

Fabius. Hospitals are dependent on the revenue generated by the population they serve within their catchment area. Rural hospitals are challenged because they still strive to provide a full array of inpatient services for a smaller dispersed population.

Taylor. Hospitals truly meeting the designation of a “critical access" hospital can provide medical services in remote areas and it is worth funding the program to assure the needs of those living in rural areas are met. The more important question might be, “How can these hospitals be re-configured to provide more cost-efficient care?" Congress and Health and Human Services might consider innovative funding mechanisms, where rural hospitals that are designed to triage and evacuate patients to more centralized healthcare systems might receive additional funding.

Q. If Obama’s cut in rural hospital payments happens, what would be the impact on patient care in these areas?

Fabius. From a public health standpoint our rural citizenship should have access to quality healthcare services within a responsible time-frame to address urgent and emergent conditions. At the same time elective care may need to be delivered at the closest metropolitan center to defray costs in the future.

Taylor. A basic question for the rural hospitals is to determine what services they need to provide and what services might be referred to larger centers. As funding pressure increases, the rural hospitals may be confronted with a need to develop innovative systems to change the way patient care is delivered.

Q. Do lawmakers from rural areas have the clout to stop these proposals?

Fabius. Our rural communities are well represented in both legislative houses. But small reductions in payments as proposed by the president are likely to receive strong consideration despite this fact. The bottom line is that we must find ways to stem the tide of rising costs within our social entitlement programs. In the long run, energy should be directed toward finding ways to deliver care more cost-effectively rather than simply adjusting reimbursement.

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Medicare official urged to limit choices for suspected abusers of pain pills
By Rebecca Adams, CQ HealthBeat Associate Editor
October 4, 2011

Medicare should take a tougher stance against the drug-dealing of medicines by beneficiaries and the potential abuse of prescription painkillers, senators urged an agency official who testified at a hearing on Tuesday.

“The difference between a street drug like cocaine and a prescription pain pill is that in many cases, as this hearing and previous work shows, the federal government is paying to feed this addiction with federal money," said Senator Thomas R. Carper, Democrat of Delaware, Chairman of the Homeland Security and Governmental Affairs Subcommittee on Federal Financial Management, Government Information, Federal Services and International Security.

A Government Accountability Office (GAO) report found that at least 170,029 Medicare beneficiaries received prescriptions for often-abused painkillers from five or more physicians, which indicated that the patients might be visiting different doctors to get more painkillers than a physician would normally give to a single patient.

In one case, a Georgia woman received prescriptions for a total of 3,655 Oxycodone pills from 58 different prescribers and she filled them at more than 40 pharmacies. That many pills would normally last for 1,679 days. Officials said that “doctor shopping" — the practice of getting care from more than one doctor in order to get more medicine than needed — is a growing problem in Medicare.

Senator Scott P. Brown, Republican of Massachusetts, noted that many of the examples GAO investigators found would have provided the patients with drugs worth hundreds of thousands of dollars on the black market. Brown pressed Jonathan Blum, deputy administrator and director of the Centers for Medicare and Medicaid Services (CMS), to be more aggressive in chasing down patients who appear to be gaming the system. Brown is the top Republican on the Subcommittee on Federal Financial Management, Government Information, Federal Services and International Security.

Blum said that the agency recognizes that it needs to do more to prevent beneficiaries from getting large amounts of powerful painkillers either to feed their own addictions or to sell. But when Brown urged Blum to limit patients who get prescriptions from multiple physicians to one or two pharmacies, Blum said the agency is reluctant to take that step because it could impede the ability of some patients to fill legitimate prescriptions or it might make it more inconvenient for them. Blum said that patients who visit several physicians may have complicated medical conditions and Medicare officials want to “ensure that those in need do not go without or face arbitrary restrictions."

The agency needs to strike a balance between preventing fraud and protecting the rights of patients with legitimate medical needs, Blum said.

That answer did not resonate with Brown.

“Just fix it," said Brown. “We’re talking hundreds of millions of dollars of taxpayers’ money. We need the money for other things, quite frankly."

CMS officials are collecting comments from the public on ways to strengthen oversight of prescription painkillers. But Brown said the agency needs to make its own plans to quickly remedy the problem.

“You’ve got to take the gloves off a little bit," said Brown, later adding, “Go right to the jugular and make sure it doesn’t happen."

Two other witnesses — Gregory Kutz, managing director of the GAO's Forensic Audits and Special Investigations Unit and Louis Saccoccio, executive director of the National Healthcare Anti-Fraud Association — argued that limiting patients who are suspected of doctor-shopping to one pharmacy would be useful.

“You have to have some consequences at the end of the day to deter them," said Kutz.

After Brown, Kutz, and Saccoccio continued to advocate for the idea of limiting the number of pharmacies for patients who are under suspicion, Blum at the end of the hearing said agency officials are “open to these ideas."

Carper said that he is looking for practical solutions that everyone can agree on, but that he and Brown will continue to push for more aggressive oversight from Medicare officials.

“We’re not going away on this issue," Carper said.


Fabius Ray Fabius MD DFACPE
Chief Medical Officer,
Thomson Reuters
Taylor Michael L. Taylor, MD
VP & National Business Medical Leader,
Thomson Reuters

Ray Fabius and Michael L. Taylor of Thomson Reuters answer questions from Dena Bunis, CQ HealthBeat Managing Editor.

Q. How big a problem is abuse of pain pills among seniors?

Fabius. Our data suggest that between USD 125-175 billion are wasted each year on fraudulent and abusive medical activities. The problem identified in this article sadly, is a significant contributor to this category of wasteful spending.

Taylor. The Government Accountability Office (GAO) data do need interpretation since many seniors receive medical care and prescriptions from multiple physicians. Further evaluation of the problem may be helpful before settling on a solution.

Q. Do you agree that CMS needs to limit either the number of pharmacies or doctors where seniors can get prescriptions?

Fabius. My approach would be to limit only those patients who require potentially abusive drugs to filling those prescriptions at a single pharmacy or pharmacy chain that is electronically connected. In this way you are only inconveniencing a small subset of patients who legitimately require these drugs.

Taylor. Very broad limits by CMS may be feasible, but significant restrictions may be difficult without a better understanding of the full nature of the problem.

Q. Will such initiatives as Medicare Accountable Care Organizations help rein in this problem?

Fabius. Theoretically yes, because all of the care providers would work in collaboration using the same electronic medical record system to easily identify those patients who are abusing their prescription coverage privileges. Moreover, there would be closer ties between the prescribing and dispensing clinicians. In fact every effort made to have patients utilize only those providers within the ACO might include encouraging them to access a limited number of affiliated pharmacies.

Taylor. Surveillance and control will likely be more effective at this level than at the broader level of a national mandate from CMS. It is hoped that ACOs will have the ability to improve the quality of care on many levels. ACOs will have the data and the systems to more appropriately monitor pharmaceutical use patterns and will be incented to help prevent abuse.

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