Alicia Ault

WASHINGTON — With health care costs accounting for the single largest expense in their budgets, states are increasingly looking for solutions from within, not from the federal government, according to an annual accounting of state legislative trends compiled by the Blue Cross and Blue Shield Association.

“Health care spending represented nearly one-third of total state expenditures last fiscal year,” said Susan Laudicina, BCBSA director for state research and policy at a briefing for reporters. And, she noted, as the economy weakens, health care costs will continue to rise, while tax revenues will fall. That will add to the pressure to find creative solutions, she said.

“The challenge for state lawmakers is how to avoid cutting existing programs like Medicaid and the State Children's Health Insurance Program while also finding new ways to cover the uninsured and contain costs,” said Ms. Laudicina.

The most significant trend observed in the states: an attempt to expand coverage. About half of the state legislatures debated universal coverage or expansion programs for children in fiscal 2007. State mandates requiring individuals to buy insurance were introduced in 12 states. All of those failed, largely because they are controversial, said Ms. Laudicina.

Connecticut and New York expanded eligibility for SCHIP to 400% of the federal poverty level and seven other states raised eligibility to 300%, but those efforts are threatened by a rule change issued by the Department of Health and Human Services last August that ostensibly caps eligibility at 250% of the federal poverty level. Eight states have sued to challenge that ruling.

Eight states—Connecticut, Indiana, Kansas, Louisiana, Maryland, New York, Texas and Washington—created programs in which public funds are used to subsidize the cost of private employer-sponsored health insurance to Medicaid-eligible workers. Oklahoma expanded its existing subsidy program, making more people eligible.

So-called “transparency” initiatives are gaining ground, also. These are proposals that require hospitals—and in some cases, physicians—to publicly share information on infections and other adverse events, and also other quality data and pricing. Twenty-one states debated proposals that would require transparency on some level. Transparency bills were enacted in 10 states: Arkansas, Delaware, Georgia, Indiana, Minnesota, New Jersey, Oregon, Pennsylvania, Texas, and Washington.

In Texas, for instance, the state is now requiring hospitals and physicians to provide patients with estimates of charges if requested. Hospitals will also be required to tell patients if there is the possibility that an out-of-network provider will be working in an in-network facility, and to inform them there may be costs to the patient as a result. The Texas law reflects a growing concern that patients aren't aware that they may be balance-billed, Ms. Laudicina said.

Eleven states will take up transparency measures in 2008, she said. The annual State Legislative Health Care and Insurance Issues report compiles information from the BCBSA's survey of 39 independent Blue Cross and Blue Shield plans.

WASHINGTON — With health care costs accounting for the single largest expense in their budgets, states are increasingly looking for solutions from within, not from the federal government, according to an annual accounting of state legislative trends compiled by the Blue Cross and Blue Shield Association.

“Health care spending represented nearly one-third of total state expenditures last fiscal year,” said Susan Laudicina, BCBSA director for state research and policy at a briefing for reporters. And, she noted, as the economy weakens, health care costs will continue to rise, while tax revenues will fall. That will add to the pressure to find creative solutions, she said.

“The challenge for state lawmakers is how to avoid cutting existing programs like Medicaid and the State Children's Health Insurance Program while also finding new ways to cover the uninsured and contain costs,” said Ms. Laudicina.

The most significant trend observed in the states: an attempt to expand coverage. About half of the state legislatures debated universal coverage or expansion programs for children in fiscal 2007. State mandates requiring individuals to buy insurance were introduced in 12 states. All of those failed, largely because they are controversial, said Ms. Laudicina.

Connecticut and New York expanded eligibility for SCHIP to 400% of the federal poverty level and seven other states raised eligibility to 300%, but those efforts are threatened by a rule change issued by the Department of Health and Human Services last August that ostensibly caps eligibility at 250% of the federal poverty level. Eight states have sued to challenge that ruling.

Eight states—Connecticut, Indiana, Kansas, Louisiana, Maryland, New York, Texas and Washington—created programs in which public funds are used to subsidize the cost of private employer-sponsored health insurance to Medicaid-eligible workers. Oklahoma expanded its existing subsidy program, making more people eligible.

So-called “transparency” initiatives are gaining ground, also. These are proposals that require hospitals—and in some cases, physicians—to publicly share information on infections and other adverse events, and also other quality data and pricing. Twenty-one states debated proposals that would require transparency on some level. Transparency bills were enacted in 10 states: Arkansas, Delaware, Georgia, Indiana, Minnesota, New Jersey, Oregon, Pennsylvania, Texas, and Washington.

In Texas, for instance, the state is now requiring hospitals and physicians to provide patients with estimates of charges if requested. Hospitals will also be required to tell patients if there is the possibility that an out-of-network provider will be working in an in-network facility, and to inform them there may be costs to the patient as a result. The Texas law reflects a growing concern that patients aren't aware that they may be balance-billed, Ms. Laudicina said.

Eleven states will take up transparency measures in 2008, she said. The annual State Legislative Health Care and Insurance Issues report compiles information from the BCBSA's survey of 39 independent Blue Cross and Blue Shield plans.

WASHINGTON — With health care costs accounting for the single largest expense in their budgets, states are increasingly looking for solutions from within, not from the federal government, according to an annual accounting of state legislative trends compiled by the Blue Cross and Blue Shield Association.

“Health care spending represented nearly one-third of total state expenditures last fiscal year,” said Susan Laudicina, BCBSA director for state research and policy at a briefing for reporters. And, she noted, as the economy weakens, health care costs will continue to rise, while tax revenues will fall. That will add to the pressure to find creative solutions, she said.

“The challenge for state lawmakers is how to avoid cutting existing programs like Medicaid and the State Children's Health Insurance Program while also finding new ways to cover the uninsured and contain costs,” said Ms. Laudicina.

The most significant trend observed in the states: an attempt to expand coverage. About half of the state legislatures debated universal coverage or expansion programs for children in fiscal 2007. State mandates requiring individuals to buy insurance were introduced in 12 states. All of those failed, largely because they are controversial, said Ms. Laudicina.

Connecticut and New York expanded eligibility for SCHIP to 400% of the federal poverty level and seven other states raised eligibility to 300%, but those efforts are threatened by a rule change issued by the Department of Health and Human Services last August that ostensibly caps eligibility at 250% of the federal poverty level. Eight states have sued to challenge that ruling.

Eight states—Connecticut, Indiana, Kansas, Louisiana, Maryland, New York, Texas and Washington—created programs in which public funds are used to subsidize the cost of private employer-sponsored health insurance to Medicaid-eligible workers. Oklahoma expanded its existing subsidy program, making more people eligible.

So-called “transparency” initiatives are gaining ground, also. These are proposals that require hospitals—and in some cases, physicians—to publicly share information on infections and other adverse events, and also other quality data and pricing. Twenty-one states debated proposals that would require transparency on some level. Transparency bills were enacted in 10 states: Arkansas, Delaware, Georgia, Indiana, Minnesota, New Jersey, Oregon, Pennsylvania, Texas, and Washington.

In Texas, for instance, the state is now requiring hospitals and physicians to provide patients with estimates of charges if requested. Hospitals will also be required to tell patients if there is the possibility that an out-of-network provider will be working in an in-network facility, and to inform them there may be costs to the patient as a result. The Texas law reflects a growing concern that patients aren't aware that they may be balance-billed, Ms. Laudicina said.

Eleven states will take up transparency measures in 2008, she said. The annual State Legislative Health Care and Insurance Issues report compiles information from the BCBSA's survey of 39 independent Blue Cross and Blue Shield plans.

LAS VEGAS — As more of the agreements signed by several large insurers to settle a class action suit alleging inappropriate billing practices expire, the possibility is increasing that the companies will return to the same behavior, especially given that many are being accused of violating the terms already, reported a compliance expert at an emergency medicine meeting in February.

Several of the health plans have said they will continue to comply with the terms of their settlements once they expire, but “not all have said that,” said Edward R. Gaines III, vice president and chief compliance officer for Healthcare Business Resources in Durham, N.C., who spoke at a meeting on reimbursement sponsored by the American College of Emergency Physicians.

Mr. Gaines said that noncompliance among all the plans that have settled has continued to be an issue, which is being dealt with in the courts and administratively. But, “the problem is, once the settlement agreement expires, I can't go back into federal court through an easy process to make my complaint heard,” he said.

The settlements were struck in response to Multidistrict Litigation 1334, which was certified as a class action in U.S. District Court for the Southern District of Florida in 2002 and named Aetna Inc., Anthem Insurance Cos. Inc., Cigna, Coventry Health Care Inc., Health Net Inc., Humana Inc., PacifiCare Health Systems Inc., Prudential Insurance Co. of America, United Health Care, and WellPoint Health Networks Inc. as defendants.

The suits alleged that the insurers violated the federal Racketeer Influenced and Corrupt Organizations Act by engaging in fraud and extortion in a common scheme to wrongfully deny payment to physicians.

Several state and county medical societies filed the suits on behalf of virtually every physician in the nation—about 900,000 doctors. United Health Care and Coventry both were summarily released from the litigation. Their release has been upheld on appeal.

Aetna and Cigna struck agreements that entailed an immediate payout in response to claims filed by physicians, some changes in billing behavior, and an agreement to provide prospective relief—$300 million from Aetna and $400 million from Cigna.

Cigna's 4-year agreement has now expired, and Aetna's 4-year agreement expired in June 2007; but Aetna's agreement was extended through June 2008 because of compliance disputes. After an investigation, the New Jersey insurance department fined Aetna $9.5 million in June 2007 for failing to properly pay for out-of-network providers. The insurer is paying nonparticipating physicians only 125% of Medicare rates and informing patients that they are not responsible for the difference.

The North Carolina Medical Society subsequently followed up with a complaint to the North Carolina insurance department in November, said Mr. Gaines. The North Carolina group is challenging bundling of 12-lead ECGs into evaluation and management codes, and bundling of other procedures that use the CPT -25 modifier codes.

“If we don't get prompt action from Aetna, we're going back to court [to] ask for an extension of the settlement agreement term,” he said.

The American Medical Association and Aetna recently announced that they are working together to resolve outstanding complaints.

Prudential's agreement expires in 2009, and agreements with three other insurers expire in 2010: HealthNet, Anthem/WellPoint, and Humana.

Agreements were reached with 90% of the nation's Blue Cross and Blue Shield plans and the Blue Cross and Blue Shield Association last year, but the final settlement date was unavailable at press time.

The Blues plans agreed to similar terms as did the other payers, with one exception: Anthem/WellPoint and the Blues plans refused to accept assignment of benefits. In fact, the Blues plans were willing to walk away from the settlement if they did not win that concession, said Mr. Gaines.

He urged physicians to hold the health plans that settled accountable to their agreements. Information on settlement terms and how to dispute claims can be found at www.hmosettlements.com

LAS VEGAS — As more of the agreements signed by several large insurers to settle a class action suit alleging inappropriate billing practices expire, the possibility is increasing that the companies will return to the same behavior, especially given that many are being accused of violating the terms already, reported a compliance expert at an emergency medicine meeting in February.

Several of the health plans have said they will continue to comply with the terms of their settlements once they expire, but “not all have said that,” said Edward R. Gaines III, vice president and chief compliance officer for Healthcare Business Resources in Durham, N.C., who spoke at a meeting on reimbursement sponsored by the American College of Emergency Physicians.

Mr. Gaines said that noncompliance among all the plans that have settled has continued to be an issue, which is being dealt with in the courts and administratively. But, “the problem is, once the settlement agreement expires, I can't go back into federal court through an easy process to make my complaint heard,” he said.

The settlements were struck in response to Multidistrict Litigation 1334, which was certified as a class action in U.S. District Court for the Southern District of Florida in 2002 and named Aetna Inc., Anthem Insurance Cos. Inc., Cigna, Coventry Health Care Inc., Health Net Inc., Humana Inc., PacifiCare Health Systems Inc., Prudential Insurance Co. of America, United Health Care, and WellPoint Health Networks Inc. as defendants.

The suits alleged that the insurers violated the federal Racketeer Influenced and Corrupt Organizations Act by engaging in fraud and extortion in a common scheme to wrongfully deny payment to physicians.

Several state and county medical societies filed the suits on behalf of virtually every physician in the nation—about 900,000 doctors. United Health Care and Coventry both were summarily released from the litigation. Their release has been upheld on appeal.

Aetna and Cigna struck agreements that entailed an immediate payout in response to claims filed by physicians, some changes in billing behavior, and an agreement to provide prospective relief—$300 million from Aetna and $400 million from Cigna.

Cigna's 4-year agreement has now expired, and Aetna's 4-year agreement expired in June 2007; but Aetna's agreement was extended through June 2008 because of compliance disputes. After an investigation, the New Jersey insurance department fined Aetna $9.5 million in June 2007 for failing to properly pay for out-of-network providers. The insurer is paying nonparticipating physicians only 125% of Medicare rates and informing patients that they are not responsible for the difference.

The North Carolina Medical Society subsequently followed up with a complaint to the North Carolina insurance department in November, said Mr. Gaines. The North Carolina group is challenging bundling of 12-lead ECGs into evaluation and management codes, and bundling of other procedures that use the CPT -25 modifier codes.

“If we don't get prompt action from Aetna, we're going back to court [to] ask for an extension of the settlement agreement term,” he said.

The American Medical Association and Aetna recently announced that they are working together to resolve outstanding complaints.

Prudential's agreement expires in 2009, and agreements with three other insurers expire in 2010: HealthNet, Anthem/WellPoint, and Humana.

Agreements were reached with 90% of the nation's Blue Cross and Blue Shield plans and the Blue Cross and Blue Shield Association last year, but the final settlement date was unavailable at press time.

The Blues plans agreed to similar terms as did the other payers, with one exception: Anthem/WellPoint and the Blues plans refused to accept assignment of benefits. In fact, the Blues plans were willing to walk away from the settlement if they did not win that concession, said Mr. Gaines.

He urged physicians to hold the health plans that settled accountable to their agreements. Information on settlement terms and how to dispute claims can be found at www.hmosettlements.com

LAS VEGAS — As more of the agreements signed by several large insurers to settle a class action suit alleging inappropriate billing practices expire, the possibility is increasing that the companies will return to the same behavior, especially given that many are being accused of violating the terms already, reported a compliance expert at an emergency medicine meeting in February.

Several of the health plans have said they will continue to comply with the terms of their settlements once they expire, but “not all have said that,” said Edward R. Gaines III, vice president and chief compliance officer for Healthcare Business Resources in Durham, N.C., who spoke at a meeting on reimbursement sponsored by the American College of Emergency Physicians.

Mr. Gaines said that noncompliance among all the plans that have settled has continued to be an issue, which is being dealt with in the courts and administratively. But, “the problem is, once the settlement agreement expires, I can't go back into federal court through an easy process to make my complaint heard,” he said.

The settlements were struck in response to Multidistrict Litigation 1334, which was certified as a class action in U.S. District Court for the Southern District of Florida in 2002 and named Aetna Inc., Anthem Insurance Cos. Inc., Cigna, Coventry Health Care Inc., Health Net Inc., Humana Inc., PacifiCare Health Systems Inc., Prudential Insurance Co. of America, United Health Care, and WellPoint Health Networks Inc. as defendants.

The suits alleged that the insurers violated the federal Racketeer Influenced and Corrupt Organizations Act by engaging in fraud and extortion in a common scheme to wrongfully deny payment to physicians.

Several state and county medical societies filed the suits on behalf of virtually every physician in the nation—about 900,000 doctors. United Health Care and Coventry both were summarily released from the litigation. Their release has been upheld on appeal.

Aetna and Cigna struck agreements that entailed an immediate payout in response to claims filed by physicians, some changes in billing behavior, and an agreement to provide prospective relief—$300 million from Aetna and $400 million from Cigna.

Cigna's 4-year agreement has now expired, and Aetna's 4-year agreement expired in June 2007; but Aetna's agreement was extended through June 2008 because of compliance disputes. After an investigation, the New Jersey insurance department fined Aetna $9.5 million in June 2007 for failing to properly pay for out-of-network providers. The insurer is paying nonparticipating physicians only 125% of Medicare rates and informing patients that they are not responsible for the difference.

The North Carolina Medical Society subsequently followed up with a complaint to the North Carolina insurance department in November, said Mr. Gaines. The North Carolina group is challenging bundling of 12-lead ECGs into evaluation and management codes, and bundling of other procedures that use the CPT -25 modifier codes.

“If we don't get prompt action from Aetna, we're going back to court [to] ask for an extension of the settlement agreement term,” he said.

The American Medical Association and Aetna recently announced that they are working together to resolve outstanding complaints.

Prudential's agreement expires in 2009, and agreements with three other insurers expire in 2010: HealthNet, Anthem/WellPoint, and Humana.

Agreements were reached with 90% of the nation's Blue Cross and Blue Shield plans and the Blue Cross and Blue Shield Association last year, but the final settlement date was unavailable at press time.

The Blues plans agreed to similar terms as did the other payers, with one exception: Anthem/WellPoint and the Blues plans refused to accept assignment of benefits. In fact, the Blues plans were willing to walk away from the settlement if they did not win that concession, said Mr. Gaines.

He urged physicians to hold the health plans that settled accountable to their agreements. Information on settlement terms and how to dispute claims can be found at www.hmosettlements.com

Directors of the American Board of Internal Medicine have decided to assess the competencies described in its draft comprehensive internist proposal before formalizing any maintenance of certification pathway.

The ABIM board of directors met in February to discuss comments on its proposed Recognition of Focused Practice in comprehensive internal medicine. If ABIM had proceeded, office-based internists who completed a maintenance of certification module could have said their practice was focused in “comprehensive care.”

During a public comment period, ABIM received more than 280 formal responses—from physicians, insurers, patients, and groups including the American College of Physicians, according to Dr. Richard Baron, chair-elect of the ABIM board of directors.

“The board has never sought this kind of feedback before,” he said. It is important for the public to know that “the actions we did take and didn't take were very much informed by what we heard from a variety of stakeholders,” said Dr. Baron, a practicing internist in Philadelphia.

The feedback prompted the board to rethink its proposal. At its meeting, it elected “to commit to develop the tools to assess the competencies” articulated in the proposal, Dr. Baron said.

The board also voted to test those tools in the real world with partners such as the ACP and others who have been developing the patient-centered medical home, he said.

There's no set time line for developing the assessment tools and piloting them, but work has begun, he said. The ABIM's statement about the proposal is available at www.ccimreport.org

The ACP believes the ABIM's process worked. The ABIM board “seemed to listen,” said Dr. Joel Levine, chairman of the American College of Physicians board of regents, in an interview.

Comments on the proposal varied widely, Dr. Baron said. He added, “Responses were quite blunt and candid in many ways, and quite thoughtful and constructive in many ways.” Those in favor of the proposal said they thought the comprehensive designation would, correctly, recognize core competencies, that it would provide a new model for primary care, that it could improve patient care, and that it could encourage educators to teach these skills to future internists.

Critics said that most internists already were demonstrating the competencies, and that acknowledging only some would lead to more fragmentation of the specialty. Others criticized ABIM for seemingly acting alone or for creating more hurdles for internists. Many suggested that adding new expectations without adding compensation would be unwise and might even discourage trainees from going into internal medicine.

ABIM still would like to find a way to recognize those competencies, Dr. Baron said. But no matter the pathway, it would always be voluntary.

“We are looking for opportunities to assist a future of internal medicine that's sustainable and professionally gratifying,” he said. “There's a lot of pain out there right now in the practice world. It is no one on the board's desire to make that worse.”

Directors of the American Board of Internal Medicine have decided to assess the competencies described in its draft comprehensive internist proposal before formalizing any maintenance of certification pathway.

The ABIM board of directors met in February to discuss comments on its proposed Recognition of Focused Practice in comprehensive internal medicine. If ABIM had proceeded, office-based internists who completed a maintenance of certification module could have said their practice was focused in “comprehensive care.”

During a public comment period, ABIM received more than 280 formal responses—from physicians, insurers, patients, and groups including the American College of Physicians, according to Dr. Richard Baron, chair-elect of the ABIM board of directors.

“The board has never sought this kind of feedback before,” he said. It is important for the public to know that “the actions we did take and didn't take were very much informed by what we heard from a variety of stakeholders,” said Dr. Baron, a practicing internist in Philadelphia.

The feedback prompted the board to rethink its proposal. At its meeting, it elected “to commit to develop the tools to assess the competencies” articulated in the proposal, Dr. Baron said.

The board also voted to test those tools in the real world with partners such as the ACP and others who have been developing the patient-centered medical home, he said.

There's no set time line for developing the assessment tools and piloting them, but work has begun, he said. The ABIM's statement about the proposal is available at www.ccimreport.org

The ACP believes the ABIM's process worked. The ABIM board “seemed to listen,” said Dr. Joel Levine, chairman of the American College of Physicians board of regents, in an interview.

Comments on the proposal varied widely, Dr. Baron said. He added, “Responses were quite blunt and candid in many ways, and quite thoughtful and constructive in many ways.” Those in favor of the proposal said they thought the comprehensive designation would, correctly, recognize core competencies, that it would provide a new model for primary care, that it could improve patient care, and that it could encourage educators to teach these skills to future internists.

Critics said that most internists already were demonstrating the competencies, and that acknowledging only some would lead to more fragmentation of the specialty. Others criticized ABIM for seemingly acting alone or for creating more hurdles for internists. Many suggested that adding new expectations without adding compensation would be unwise and might even discourage trainees from going into internal medicine.

ABIM still would like to find a way to recognize those competencies, Dr. Baron said. But no matter the pathway, it would always be voluntary.

“We are looking for opportunities to assist a future of internal medicine that's sustainable and professionally gratifying,” he said. “There's a lot of pain out there right now in the practice world. It is no one on the board's desire to make that worse.”

Directors of the American Board of Internal Medicine have decided to assess the competencies described in its draft comprehensive internist proposal before formalizing any maintenance of certification pathway.

The ABIM board of directors met in February to discuss comments on its proposed Recognition of Focused Practice in comprehensive internal medicine. If ABIM had proceeded, office-based internists who completed a maintenance of certification module could have said their practice was focused in “comprehensive care.”

During a public comment period, ABIM received more than 280 formal responses—from physicians, insurers, patients, and groups including the American College of Physicians, according to Dr. Richard Baron, chair-elect of the ABIM board of directors.

“The board has never sought this kind of feedback before,” he said. It is important for the public to know that “the actions we did take and didn't take were very much informed by what we heard from a variety of stakeholders,” said Dr. Baron, a practicing internist in Philadelphia.

The feedback prompted the board to rethink its proposal. At its meeting, it elected “to commit to develop the tools to assess the competencies” articulated in the proposal, Dr. Baron said.

The board also voted to test those tools in the real world with partners such as the ACP and others who have been developing the patient-centered medical home, he said.

There's no set time line for developing the assessment tools and piloting them, but work has begun, he said. The ABIM's statement about the proposal is available at www.ccimreport.org

The ACP believes the ABIM's process worked. The ABIM board “seemed to listen,” said Dr. Joel Levine, chairman of the American College of Physicians board of regents, in an interview.

Comments on the proposal varied widely, Dr. Baron said. He added, “Responses were quite blunt and candid in many ways, and quite thoughtful and constructive in many ways.” Those in favor of the proposal said they thought the comprehensive designation would, correctly, recognize core competencies, that it would provide a new model for primary care, that it could improve patient care, and that it could encourage educators to teach these skills to future internists.

Critics said that most internists already were demonstrating the competencies, and that acknowledging only some would lead to more fragmentation of the specialty. Others criticized ABIM for seemingly acting alone or for creating more hurdles for internists. Many suggested that adding new expectations without adding compensation would be unwise and might even discourage trainees from going into internal medicine.

ABIM still would like to find a way to recognize those competencies, Dr. Baron said. But no matter the pathway, it would always be voluntary.

“We are looking for opportunities to assist a future of internal medicine that's sustainable and professionally gratifying,” he said. “There's a lot of pain out there right now in the practice world. It is no one on the board's desire to make that worse.”

WASHINGTON — The nation spent $2 trillion, or $7,000 per person, on health care in 2006. While that was only a small increase from the previous year, America's prescription drug tab increased by 8.5%.

Health spending as a share of the nation's gross domestic product hit 16% in 2006.

Total spending on physician and clinical services grew 5.9% to $448 billion, which was the slowest rate of growth since 1999. Physician pay crawled almost to a halt, largely because of the freeze in Medicare's reimbursement rates in 2006. Private insurers seemed to have followed suit, said Cathy Cowan, an economist at the Centers for Medicare and Medicaid Services. Cowan, a coauthor of an annual analysis of the nation's health spending, spoke at a briefing on the report, which was published in the January/February issue of Health Affairs.

Spending on nursing home and home health declined from the previous year's growth. Nursing home prices dropped; spending still grew 3.5% in 2006, less than the 5% increase in 2005. Home health services—the fastest growing component of personal health spending—grew almost 10% in 2006, down from 12% in 2005.

Medicare had the fastest rate of growth since 1981, according to the report. Spending increased 19% in 2006 to $401 billion, driven largely by the prescription drug benefit and administration for that benefit and for Medicare Advantage.

Medicaid spending dropped for the first time since the program began in 1965. The 0.9% decrease was largely due to Medicaid enrollees being shifted into Medicare for prescription drugs.

Overall drug spending grew 8.5% in 2006—a far cry from the double-digit increases seen in the late 1990s, but still up from the 5.8% rise in 2005. Half of the increase was due to greater utilization, not surprising given that about 23 million Medicare beneficiaries took advantage of the new benefit. Prescription prices increased by only a little over 3%, according to an annual analysis by actuaries at the Centers for Medicare and Medicaid Services.

The change in the drug rebate picture also contributed to rising drug costs. Under Medicaid, states received an average 30% rebate from drugmakers. Medicare got only about 5% from manufacturers for the millions of beneficiaries who shifted out of Medicaid.

Medicare spent $41 billion on Part D in 2006, with $35 billion for drug purchases and $6 billion for administration and “net cost of insurance”–that is, the cost of subsidizing premiums for low-income beneficiaries and costs for transferring beneficiaries into private plans. Medicare paid for 18% of all retail drugs, compared with only 2% in 2005. Medicare took on costs that were previously covered by private insurers, Medicaid, and the uninsured.

On average, each Part D enrollee received $1,700 in benefits, according to CMS.

The largest increase in drug utilization came from beneficiaries using the Part D benefit. But there was also increased drug use due to new indications for existing drugs, growth in several therapeutic classes, and rising use of specialty drugs like injectable biologics for rheumatoid arthritis and multiple sclerosis, and anemia drugs for oncology.

The rising availability of generic drugs, and programs designed to encourage their use, also drove an increase in pharmaceutical utilization. A $4 generic program offered by Wal-Mart contributed to that trend and also helped keep prices down, according to the CMS authors. Sixty-three percent of drugs dispensed in the United States in 2006 were generic, according to the report.

Overall, the analysis shows the largest category of health spending is still hospital care, consuming 31% of the nation's health dollars. Other spending, which includes dental, home health, durable medical equipment, over-the-counter medications, public health, research, and capital equipment, consumes 25%. Physician and clinical services follow at 21%, then prescription drugs at 10%, administration at 7%, and nursing home care at 6%.

The authors said the data did not allow them to determine whether the prescription drug benefit had increased or lowered overall health care spending.

WASHINGTON — The nation spent $2 trillion, or $7,000 per person, on health care in 2006. While that was only a small increase from the previous year, America's prescription drug tab increased by 8.5%.

Health spending as a share of the nation's gross domestic product hit 16% in 2006.

Total spending on physician and clinical services grew 5.9% to $448 billion, which was the slowest rate of growth since 1999. Physician pay crawled almost to a halt, largely because of the freeze in Medicare's reimbursement rates in 2006. Private insurers seemed to have followed suit, said Cathy Cowan, an economist at the Centers for Medicare and Medicaid Services. Cowan, a coauthor of an annual analysis of the nation's health spending, spoke at a briefing on the report, which was published in the January/February issue of Health Affairs.

Spending on nursing home and home health declined from the previous year's growth. Nursing home prices dropped; spending still grew 3.5% in 2006, less than the 5% increase in 2005. Home health services—the fastest growing component of personal health spending—grew almost 10% in 2006, down from 12% in 2005.

Medicare had the fastest rate of growth since 1981, according to the report. Spending increased 19% in 2006 to $401 billion, driven largely by the prescription drug benefit and administration for that benefit and for Medicare Advantage.

Medicaid spending dropped for the first time since the program began in 1965. The 0.9% decrease was largely due to Medicaid enrollees being shifted into Medicare for prescription drugs.

Overall drug spending grew 8.5% in 2006—a far cry from the double-digit increases seen in the late 1990s, but still up from the 5.8% rise in 2005. Half of the increase was due to greater utilization, not surprising given that about 23 million Medicare beneficiaries took advantage of the new benefit. Prescription prices increased by only a little over 3%, according to an annual analysis by actuaries at the Centers for Medicare and Medicaid Services.

The change in the drug rebate picture also contributed to rising drug costs. Under Medicaid, states received an average 30% rebate from drugmakers. Medicare got only about 5% from manufacturers for the millions of beneficiaries who shifted out of Medicaid.

Medicare spent $41 billion on Part D in 2006, with $35 billion for drug purchases and $6 billion for administration and “net cost of insurance”–that is, the cost of subsidizing premiums for low-income beneficiaries and costs for transferring beneficiaries into private plans. Medicare paid for 18% of all retail drugs, compared with only 2% in 2005. Medicare took on costs that were previously covered by private insurers, Medicaid, and the uninsured.

On average, each Part D enrollee received $1,700 in benefits, according to CMS.

The largest increase in drug utilization came from beneficiaries using the Part D benefit. But there was also increased drug use due to new indications for existing drugs, growth in several therapeutic classes, and rising use of specialty drugs like injectable biologics for rheumatoid arthritis and multiple sclerosis, and anemia drugs for oncology.

The rising availability of generic drugs, and programs designed to encourage their use, also drove an increase in pharmaceutical utilization. A $4 generic program offered by Wal-Mart contributed to that trend and also helped keep prices down, according to the CMS authors. Sixty-three percent of drugs dispensed in the United States in 2006 were generic, according to the report.

Overall, the analysis shows the largest category of health spending is still hospital care, consuming 31% of the nation's health dollars. Other spending, which includes dental, home health, durable medical equipment, over-the-counter medications, public health, research, and capital equipment, consumes 25%. Physician and clinical services follow at 21%, then prescription drugs at 10%, administration at 7%, and nursing home care at 6%.

The authors said the data did not allow them to determine whether the prescription drug benefit had increased or lowered overall health care spending.

WASHINGTON — The nation spent $2 trillion, or $7,000 per person, on health care in 2006. While that was only a small increase from the previous year, America's prescription drug tab increased by 8.5%.

Health spending as a share of the nation's gross domestic product hit 16% in 2006.

Total spending on physician and clinical services grew 5.9% to $448 billion, which was the slowest rate of growth since 1999. Physician pay crawled almost to a halt, largely because of the freeze in Medicare's reimbursement rates in 2006. Private insurers seemed to have followed suit, said Cathy Cowan, an economist at the Centers for Medicare and Medicaid Services. Cowan, a coauthor of an annual analysis of the nation's health spending, spoke at a briefing on the report, which was published in the January/February issue of Health Affairs.

Spending on nursing home and home health declined from the previous year's growth. Nursing home prices dropped; spending still grew 3.5% in 2006, less than the 5% increase in 2005. Home health services—the fastest growing component of personal health spending—grew almost 10% in 2006, down from 12% in 2005.

Medicare had the fastest rate of growth since 1981, according to the report. Spending increased 19% in 2006 to $401 billion, driven largely by the prescription drug benefit and administration for that benefit and for Medicare Advantage.

Medicaid spending dropped for the first time since the program began in 1965. The 0.9% decrease was largely due to Medicaid enrollees being shifted into Medicare for prescription drugs.

Overall drug spending grew 8.5% in 2006—a far cry from the double-digit increases seen in the late 1990s, but still up from the 5.8% rise in 2005. Half of the increase was due to greater utilization, not surprising given that about 23 million Medicare beneficiaries took advantage of the new benefit. Prescription prices increased by only a little over 3%, according to an annual analysis by actuaries at the Centers for Medicare and Medicaid Services.

The change in the drug rebate picture also contributed to rising drug costs. Under Medicaid, states received an average 30% rebate from drugmakers. Medicare got only about 5% from manufacturers for the millions of beneficiaries who shifted out of Medicaid.

Medicare spent $41 billion on Part D in 2006, with $35 billion for drug purchases and $6 billion for administration and “net cost of insurance”–that is, the cost of subsidizing premiums for low-income beneficiaries and costs for transferring beneficiaries into private plans. Medicare paid for 18% of all retail drugs, compared with only 2% in 2005. Medicare took on costs that were previously covered by private insurers, Medicaid, and the uninsured.

On average, each Part D enrollee received $1,700 in benefits, according to CMS.

The largest increase in drug utilization came from beneficiaries using the Part D benefit. But there was also increased drug use due to new indications for existing drugs, growth in several therapeutic classes, and rising use of specialty drugs like injectable biologics for rheumatoid arthritis and multiple sclerosis, and anemia drugs for oncology.

The rising availability of generic drugs, and programs designed to encourage their use, also drove an increase in pharmaceutical utilization. A $4 generic program offered by Wal-Mart contributed to that trend and also helped keep prices down, according to the CMS authors. Sixty-three percent of drugs dispensed in the United States in 2006 were generic, according to the report.

Overall, the analysis shows the largest category of health spending is still hospital care, consuming 31% of the nation's health dollars. Other spending, which includes dental, home health, durable medical equipment, over-the-counter medications, public health, research, and capital equipment, consumes 25%. Physician and clinical services follow at 21%, then prescription drugs at 10%, administration at 7%, and nursing home care at 6%.

The authors said the data did not allow them to determine whether the prescription drug benefit had increased or lowered overall health care spending.

Mortality Warning on AneuRx Stent

The Food and Drug Administration has issued a public health warning on the AneuRx Stent Graft System. Patients who receive the graft to prevent abdominal aortic aneurysm rupture should be regularly monitored because they appear to have a higher mortality rate than patients who have an open repair, said the FDA in its March warning. Long-term data suggest that initial mortality is 2.3% (not the 1.5% originally calculated) and continues to rise 3 years after implant, hitting 1.3% in the fourth year and 1.5% in the fifth year. The agency recommended that the graft only be used in patients who fit criteria outlined in the product labeling. Medtronic said that several previously published studies have shown that the endovascular graft has an advantage in perioperative mortality over open repair. In a Lancet study there was a higher rate of late rupture in the AneuRx group, but it was balanced by increased reinterventions and hospitalization for open-repair patients, according to Medtronic spokesman Daniel Beach. He also said that FDA's higher late mortality figure is due to the agency adopting a broader definition of aneurysm-related death.

Supreme Court Limits Device Suits

The U.S. Supreme Court has bolstered medical device manufacturers' argument that Food and Drug Administration approval confers special protection against liability suits. The Justices voted 8–1 in finding that the Medical Device Amendments of 1976 supersedes state law. That FDA act regulates devices that have gone through the premarket approval process, the most rigorous path to approval. Plaintiff Charles Riegel's estate had sued Medtronic Inc., alleging that a catheter that ruptured during cardiac surgery was designed, labeled, and manufactured in violation of New York law. But the Justices said that FDA approval “bars common-law claims challenging the safety or effectiveness of a medical device …” They upheld two previous lower court decisions. Justice Ruth Bader Ginsburg was the sole dissenter. Only state law allows a plaintiff to recover damages from a manufacturer; that avenue now appears to be closed. Many pending cases could be dropped as a result. The device industry applauded the ruling. “The FDA—and not a patchwork of state regulations or multiple jury verdicts—should determine the safety and effectiveness of medical technology,” said Stephen Ubl, president and CEO of AdvaMed in a statement. But members of Congress involved in crafting the original device amendments were not as pleased. “Congress never intended that FDA approval would give blanket immunity to manufacturers from liability for injuries caused by faulty devices,” said Sen. Edward Kennedy (D-Mass.) in a statement. “Congress obviously needs to correct the court's decision,” he said.

49,000 Enroll in Vioxx Settlement

Merck & Co. says that 93% of those eligible to receive a settlement as a result of a Vioxx-induced stroke or heart attack have enrolled in the company's payout program. That encompasses 44,000 of the 47,000 who registered initially; another 5,000 people are seeking to enroll, but their eligibility has not yet been determined, according to a company statement issued in early March. Merck has agreed to put an estimated $4.85 billion into the settlement fund.

Woodcock Named CDER Head

Dr. Janet Woodcock has been named director of the FDA's Center for Drug Evaluation and Research. Dr. Woodcock, a rheumatologist, served as director of CDER once before, in the 1990s, and has served as acting director since October 2007. The drug industry's chief lobbying group, PhRMA, welcomed the appointment. Dr. Woodcock “has demonstrated willingness to work with diverse partners, including researchers, Congress, the White House, patients, and pharmaceutical research companies,” said a statement from the group. But Public Citizen's health research group director Dr. Sidney Wolfe said in an interview that he's “not terribly hopeful” that Dr. Woodcock will lead the center well, because she doesn't like conflict or controversy. “I don't think she's the kind of CDER director we need right now,” Dr. Wolfe said. “She's aware of a number of drugs on the market that should be taken off the market, but I don't think she has the fortitude to do something about it.” CDER is charged with ensuring that safe and effective drugs—including prescription, over-the-counter, and generic products—are available to Americans.

Physicians Respond to Medicare Pay

The current uncertainty about Medicare payments to physicians is causing practices to postpone hiring staff, postpone investments in new technology, or even stop accepting new Medicare patients, according to a survey from the Medical Group Management Association. For example, 46% of respondents said that in light of the 10.6% cut in Medicare payments expected in July, they will refuse to accept new Medicare patients or limit the number of new Medicare patients. Nearly 28% said they would limit the number of appointments for Medicare patients. The pending cut could also affect the implementation of health IT systems, including e-prescribing. More than 60% of respondents said that they were more likely to postpone purchasing decisions related to e-prescribing because of the Medicare payment situation. “The 6-month adjustment to payments only served to create further uncertainty and administrative burden to practices already scrambling to shield themselves from additional payment cuts looming in 2009,” Dr. William F. Jessee, president and CEO of MGMA, said in a statement. The results are based on responses from more than 1,000 group practices, according to MGMA.

Mortality Warning on AneuRx Stent

The Food and Drug Administration has issued a public health warning on the AneuRx Stent Graft System. Patients who receive the graft to prevent abdominal aortic aneurysm rupture should be regularly monitored because they appear to have a higher mortality rate than patients who have an open repair, said the FDA in its March warning. Long-term data suggest that initial mortality is 2.3% (not the 1.5% originally calculated) and continues to rise 3 years after implant, hitting 1.3% in the fourth year and 1.5% in the fifth year. The agency recommended that the graft only be used in patients who fit criteria outlined in the product labeling. Medtronic said that several previously published studies have shown that the endovascular graft has an advantage in perioperative mortality over open repair. In a Lancet study there was a higher rate of late rupture in the AneuRx group, but it was balanced by increased reinterventions and hospitalization for open-repair patients, according to Medtronic spokesman Daniel Beach. He also said that FDA's higher late mortality figure is due to the agency adopting a broader definition of aneurysm-related death.

Supreme Court Limits Device Suits

The U.S. Supreme Court has bolstered medical device manufacturers' argument that Food and Drug Administration approval confers special protection against liability suits. The Justices voted 8–1 in finding that the Medical Device Amendments of 1976 supersedes state law. That FDA act regulates devices that have gone through the premarket approval process, the most rigorous path to approval. Plaintiff Charles Riegel's estate had sued Medtronic Inc., alleging that a catheter that ruptured during cardiac surgery was designed, labeled, and manufactured in violation of New York law. But the Justices said that FDA approval “bars common-law claims challenging the safety or effectiveness of a medical device …” They upheld two previous lower court decisions. Justice Ruth Bader Ginsburg was the sole dissenter. Only state law allows a plaintiff to recover damages from a manufacturer; that avenue now appears to be closed. Many pending cases could be dropped as a result. The device industry applauded the ruling. “The FDA—and not a patchwork of state regulations or multiple jury verdicts—should determine the safety and effectiveness of medical technology,” said Stephen Ubl, president and CEO of AdvaMed in a statement. But members of Congress involved in crafting the original device amendments were not as pleased. “Congress never intended that FDA approval would give blanket immunity to manufacturers from liability for injuries caused by faulty devices,” said Sen. Edward Kennedy (D-Mass.) in a statement. “Congress obviously needs to correct the court's decision,” he said.

49,000 Enroll in Vioxx Settlement

Merck & Co. says that 93% of those eligible to receive a settlement as a result of a Vioxx-induced stroke or heart attack have enrolled in the company's payout program. That encompasses 44,000 of the 47,000 who registered initially; another 5,000 people are seeking to enroll, but their eligibility has not yet been determined, according to a company statement issued in early March. Merck has agreed to put an estimated $4.85 billion into the settlement fund.

Woodcock Named CDER Head

Dr. Janet Woodcock has been named director of the FDA's Center for Drug Evaluation and Research. Dr. Woodcock, a rheumatologist, served as director of CDER once before, in the 1990s, and has served as acting director since October 2007. The drug industry's chief lobbying group, PhRMA, welcomed the appointment. Dr. Woodcock “has demonstrated willingness to work with diverse partners, including researchers, Congress, the White House, patients, and pharmaceutical research companies,” said a statement from the group. But Public Citizen's health research group director Dr. Sidney Wolfe said in an interview that he's “not terribly hopeful” that Dr. Woodcock will lead the center well, because she doesn't like conflict or controversy. “I don't think she's the kind of CDER director we need right now,” Dr. Wolfe said. “She's aware of a number of drugs on the market that should be taken off the market, but I don't think she has the fortitude to do something about it.” CDER is charged with ensuring that safe and effective drugs—including prescription, over-the-counter, and generic products—are available to Americans.

Physicians Respond to Medicare Pay

The current uncertainty about Medicare payments to physicians is causing practices to postpone hiring staff, postpone investments in new technology, or even stop accepting new Medicare patients, according to a survey from the Medical Group Management Association. For example, 46% of respondents said that in light of the 10.6% cut in Medicare payments expected in July, they will refuse to accept new Medicare patients or limit the number of new Medicare patients. Nearly 28% said they would limit the number of appointments for Medicare patients. The pending cut could also affect the implementation of health IT systems, including e-prescribing. More than 60% of respondents said that they were more likely to postpone purchasing decisions related to e-prescribing because of the Medicare payment situation. “The 6-month adjustment to payments only served to create further uncertainty and administrative burden to practices already scrambling to shield themselves from additional payment cuts looming in 2009,” Dr. William F. Jessee, president and CEO of MGMA, said in a statement. The results are based on responses from more than 1,000 group practices, according to MGMA.

Mortality Warning on AneuRx Stent

The Food and Drug Administration has issued a public health warning on the AneuRx Stent Graft System. Patients who receive the graft to prevent abdominal aortic aneurysm rupture should be regularly monitored because they appear to have a higher mortality rate than patients who have an open repair, said the FDA in its March warning. Long-term data suggest that initial mortality is 2.3% (not the 1.5% originally calculated) and continues to rise 3 years after implant, hitting 1.3% in the fourth year and 1.5% in the fifth year. The agency recommended that the graft only be used in patients who fit criteria outlined in the product labeling. Medtronic said that several previously published studies have shown that the endovascular graft has an advantage in perioperative mortality over open repair. In a Lancet study there was a higher rate of late rupture in the AneuRx group, but it was balanced by increased reinterventions and hospitalization for open-repair patients, according to Medtronic spokesman Daniel Beach. He also said that FDA's higher late mortality figure is due to the agency adopting a broader definition of aneurysm-related death.

Supreme Court Limits Device Suits

The U.S. Supreme Court has bolstered medical device manufacturers' argument that Food and Drug Administration approval confers special protection against liability suits. The Justices voted 8–1 in finding that the Medical Device Amendments of 1976 supersedes state law. That FDA act regulates devices that have gone through the premarket approval process, the most rigorous path to approval. Plaintiff Charles Riegel's estate had sued Medtronic Inc., alleging that a catheter that ruptured during cardiac surgery was designed, labeled, and manufactured in violation of New York law. But the Justices said that FDA approval “bars common-law claims challenging the safety or effectiveness of a medical device …” They upheld two previous lower court decisions. Justice Ruth Bader Ginsburg was the sole dissenter. Only state law allows a plaintiff to recover damages from a manufacturer; that avenue now appears to be closed. Many pending cases could be dropped as a result. The device industry applauded the ruling. “The FDA—and not a patchwork of state regulations or multiple jury verdicts—should determine the safety and effectiveness of medical technology,” said Stephen Ubl, president and CEO of AdvaMed in a statement. But members of Congress involved in crafting the original device amendments were not as pleased. “Congress never intended that FDA approval would give blanket immunity to manufacturers from liability for injuries caused by faulty devices,” said Sen. Edward Kennedy (D-Mass.) in a statement. “Congress obviously needs to correct the court's decision,” he said.

49,000 Enroll in Vioxx Settlement

Merck & Co. says that 93% of those eligible to receive a settlement as a result of a Vioxx-induced stroke or heart attack have enrolled in the company's payout program. That encompasses 44,000 of the 47,000 who registered initially; another 5,000 people are seeking to enroll, but their eligibility has not yet been determined, according to a company statement issued in early March. Merck has agreed to put an estimated $4.85 billion into the settlement fund.

Woodcock Named CDER Head

Dr. Janet Woodcock has been named director of the FDA's Center for Drug Evaluation and Research. Dr. Woodcock, a rheumatologist, served as director of CDER once before, in the 1990s, and has served as acting director since October 2007. The drug industry's chief lobbying group, PhRMA, welcomed the appointment. Dr. Woodcock “has demonstrated willingness to work with diverse partners, including researchers, Congress, the White House, patients, and pharmaceutical research companies,” said a statement from the group. But Public Citizen's health research group director Dr. Sidney Wolfe said in an interview that he's “not terribly hopeful” that Dr. Woodcock will lead the center well, because she doesn't like conflict or controversy. “I don't think she's the kind of CDER director we need right now,” Dr. Wolfe said. “She's aware of a number of drugs on the market that should be taken off the market, but I don't think she has the fortitude to do something about it.” CDER is charged with ensuring that safe and effective drugs—including prescription, over-the-counter, and generic products—are available to Americans.

Physicians Respond to Medicare Pay

The current uncertainty about Medicare payments to physicians is causing practices to postpone hiring staff, postpone investments in new technology, or even stop accepting new Medicare patients, according to a survey from the Medical Group Management Association. For example, 46% of respondents said that in light of the 10.6% cut in Medicare payments expected in July, they will refuse to accept new Medicare patients or limit the number of new Medicare patients. Nearly 28% said they would limit the number of appointments for Medicare patients. The pending cut could also affect the implementation of health IT systems, including e-prescribing. More than 60% of respondents said that they were more likely to postpone purchasing decisions related to e-prescribing because of the Medicare payment situation. “The 6-month adjustment to payments only served to create further uncertainty and administrative burden to practices already scrambling to shield themselves from additional payment cuts looming in 2009,” Dr. William F. Jessee, president and CEO of MGMA, said in a statement. The results are based on responses from more than 1,000 group practices, according to MGMA.

The federal government's portrayal of enrollment growth in the State Children's Health Insurance Program in 2007 is disingenuous and somewhat misleading, advocates for children's programs said.

According to the Centers for Medicare and Medicaid Services, 7.1 million children were enrolled in the program (SCHIP) in 2007, up from 6.7 million in 2006.

“While we are pleased that SCHIP continues to grow, we must do more to reach those at the lowest income levels who still need this coverage,” Mike Leavitt, Health and Human Services secretary, said in a statement. “Toward that end, we will continue to work with Congress on the reauthorization of this vital program.”

That comment is “disingenuous,” Dr. Steve Wegner, chairman of the child health funding committee at the American Academy of Pediatrics, said in an interview. He noted that President Bush vetoed a compromise agreement to reauthorize SCHIP not once, but twice, in 2007.

“The administration did everything possible to stand in the way of the reauthorization,” Jenny Sullivan, a health policy analyst with Families USA, said in an interview.

SCHIP was finally given a reprieve, with Congress passing, and the president signing, a funding extension through March 2009. But the program still has not been formally reauthorized.

And, said Ms. Sullivan and Dr. Wegner, many millions more children would have been covered in 2007 if the reauthorization had been approved when it was first taken up early in the year.

CMS spokeswoman Mary Kahn said that it was not accurate to imply that the Bush administration did not want to continue the SCHIP program. The administration did, however, want to fund it at a lower level, she said in an interview.

Also in the HHS statement, Kerry Weems, CMS acting administrator, said, “We continue to work with states to [ensure] that as many eligible, uninsured children as possible are enrolled in SCHIP and Medicaid.”

Dr. Wegner took exception to that statement as well, noting that a CMS directive issued in August 2007 has effectively prevented states from expanding eligibility. The CMS said it would limit states' ability to expand coverage to children in families who had incomes at 250% of the poverty level or above.

Ms. Sullivan said that the directive had, in many cases, reversed expansion plans that previously were approved by the CMS.

Twenty-three states are expected to be affected by the directive, according to the Kaiser Family Foundation. Nine already cover children in families with incomes above 250%, and 13 states had received approval to expand eligibility at or above that level. In addition, Washington was covering children at the 250% level and had gotten approval to raise that cap.

The directive is consistent with the administration's belief that every effort should be made to enroll 95% of children eligible at the lowest income levels before expanding it to those who are in higher-income families, said Ms. Kahn.

The increase in SCHIP enrollment was not unusually high for the program, said Ms. Sullivan. And, she said, U.S. Census Bureau figures indicate that the overall number of uninsured children actually increased in the last 2 years. There are approximately 9 million uninsured children in the United States, according to a Families USA analysis.

Both Ms. Sullivan and Dr. Wegner said they expect that number to grow in the current year, as states face harsh budget realities.

A much larger number of children are covered under traditional Medicaid programs—about 28 million in 2005, according to Kaiser—but their coverage is also being threatened because of a series of CMS regulations taking effect this year. Rep. John Dingell (D-Mich.) and Rep. Tim Murphy (R-Penn.) introduced a bill in March (H.R. 5613) that would place a 1-year moratorium on seven of those regulations.

According to Congressional Budget Office estimates the two legislators cite, the regulations could translate to $20 billion in cuts to Medicaid over the next 5 years.

The National Governors Association, the National Association of State Medicaid Directors, and the American Public Human Services Association, have expressed their opposition to the regulations in letters to HHS.

Looking ahead into next year, the picture grows even dimmer.

For fiscal 2009, President Bush proposed increasing SCHIP funding by $19.7 billion (added to the current baseline of $25 billion) through 2013.

That is a far cry from the $35 billion that was authorized in the two legislative packages vetoed by the President last year.

And the budget also seeks to formalize the CMS directive that limited states' expansion plans by proposing to cap SCHIP eligibility at 250% of the poverty level.

The federal government's portrayal of enrollment growth in the State Children's Health Insurance Program in 2007 is disingenuous and somewhat misleading, advocates for children's programs said.

According to the Centers for Medicare and Medicaid Services, 7.1 million children were enrolled in the program (SCHIP) in 2007, up from 6.7 million in 2006.

“While we are pleased that SCHIP continues to grow, we must do more to reach those at the lowest income levels who still need this coverage,” Mike Leavitt, Health and Human Services secretary, said in a statement. “Toward that end, we will continue to work with Congress on the reauthorization of this vital program.”

That comment is “disingenuous,” Dr. Steve Wegner, chairman of the child health funding committee at the American Academy of Pediatrics, said in an interview. He noted that President Bush vetoed a compromise agreement to reauthorize SCHIP not once, but twice, in 2007.

“The administration did everything possible to stand in the way of the reauthorization,” Jenny Sullivan, a health policy analyst with Families USA, said in an interview.

SCHIP was finally given a reprieve, with Congress passing, and the president signing, a funding extension through March 2009. But the program still has not been formally reauthorized.

And, said Ms. Sullivan and Dr. Wegner, many millions more children would have been covered in 2007 if the reauthorization had been approved when it was first taken up early in the year.

CMS spokeswoman Mary Kahn said that it was not accurate to imply that the Bush administration did not want to continue the SCHIP program. The administration did, however, want to fund it at a lower level, she said in an interview.

Also in the HHS statement, Kerry Weems, CMS acting administrator, said, “We continue to work with states to [ensure] that as many eligible, uninsured children as possible are enrolled in SCHIP and Medicaid.”

Dr. Wegner took exception to that statement as well, noting that a CMS directive issued in August 2007 has effectively prevented states from expanding eligibility. The CMS said it would limit states' ability to expand coverage to children in families who had incomes at 250% of the poverty level or above.

Ms. Sullivan said that the directive had, in many cases, reversed expansion plans that previously were approved by the CMS.

Twenty-three states are expected to be affected by the directive, according to the Kaiser Family Foundation. Nine already cover children in families with incomes above 250%, and 13 states had received approval to expand eligibility at or above that level. In addition, Washington was covering children at the 250% level and had gotten approval to raise that cap.

The directive is consistent with the administration's belief that every effort should be made to enroll 95% of children eligible at the lowest income levels before expanding it to those who are in higher-income families, said Ms. Kahn.

The increase in SCHIP enrollment was not unusually high for the program, said Ms. Sullivan. And, she said, U.S. Census Bureau figures indicate that the overall number of uninsured children actually increased in the last 2 years. There are approximately 9 million uninsured children in the United States, according to a Families USA analysis.

Both Ms. Sullivan and Dr. Wegner said they expect that number to grow in the current year, as states face harsh budget realities.

A much larger number of children are covered under traditional Medicaid programs—about 28 million in 2005, according to Kaiser—but their coverage is also being threatened because of a series of CMS regulations taking effect this year. Rep. John Dingell (D-Mich.) and Rep. Tim Murphy (R-Penn.) introduced a bill in March (H.R. 5613) that would place a 1-year moratorium on seven of those regulations.

According to Congressional Budget Office estimates the two legislators cite, the regulations could translate to $20 billion in cuts to Medicaid over the next 5 years.

The National Governors Association, the National Association of State Medicaid Directors, and the American Public Human Services Association, have expressed their opposition to the regulations in letters to HHS.

Looking ahead into next year, the picture grows even dimmer.

For fiscal 2009, President Bush proposed increasing SCHIP funding by $19.7 billion (added to the current baseline of $25 billion) through 2013.

That is a far cry from the $35 billion that was authorized in the two legislative packages vetoed by the President last year.

And the budget also seeks to formalize the CMS directive that limited states' expansion plans by proposing to cap SCHIP eligibility at 250% of the poverty level.

The federal government's portrayal of enrollment growth in the State Children's Health Insurance Program in 2007 is disingenuous and somewhat misleading, advocates for children's programs said.

According to the Centers for Medicare and Medicaid Services, 7.1 million children were enrolled in the program (SCHIP) in 2007, up from 6.7 million in 2006.

“While we are pleased that SCHIP continues to grow, we must do more to reach those at the lowest income levels who still need this coverage,” Mike Leavitt, Health and Human Services secretary, said in a statement. “Toward that end, we will continue to work with Congress on the reauthorization of this vital program.”

That comment is “disingenuous,” Dr. Steve Wegner, chairman of the child health funding committee at the American Academy of Pediatrics, said in an interview. He noted that President Bush vetoed a compromise agreement to reauthorize SCHIP not once, but twice, in 2007.

“The administration did everything possible to stand in the way of the reauthorization,” Jenny Sullivan, a health policy analyst with Families USA, said in an interview.

SCHIP was finally given a reprieve, with Congress passing, and the president signing, a funding extension through March 2009. But the program still has not been formally reauthorized.

And, said Ms. Sullivan and Dr. Wegner, many millions more children would have been covered in 2007 if the reauthorization had been approved when it was first taken up early in the year.

CMS spokeswoman Mary Kahn said that it was not accurate to imply that the Bush administration did not want to continue the SCHIP program. The administration did, however, want to fund it at a lower level, she said in an interview.

Also in the HHS statement, Kerry Weems, CMS acting administrator, said, “We continue to work with states to [ensure] that as many eligible, uninsured children as possible are enrolled in SCHIP and Medicaid.”

Dr. Wegner took exception to that statement as well, noting that a CMS directive issued in August 2007 has effectively prevented states from expanding eligibility. The CMS said it would limit states' ability to expand coverage to children in families who had incomes at 250% of the poverty level or above.

Ms. Sullivan said that the directive had, in many cases, reversed expansion plans that previously were approved by the CMS.

Twenty-three states are expected to be affected by the directive, according to the Kaiser Family Foundation. Nine already cover children in families with incomes above 250%, and 13 states had received approval to expand eligibility at or above that level. In addition, Washington was covering children at the 250% level and had gotten approval to raise that cap.

The directive is consistent with the administration's belief that every effort should be made to enroll 95% of children eligible at the lowest income levels before expanding it to those who are in higher-income families, said Ms. Kahn.

The increase in SCHIP enrollment was not unusually high for the program, said Ms. Sullivan. And, she said, U.S. Census Bureau figures indicate that the overall number of uninsured children actually increased in the last 2 years. There are approximately 9 million uninsured children in the United States, according to a Families USA analysis.

Both Ms. Sullivan and Dr. Wegner said they expect that number to grow in the current year, as states face harsh budget realities.

A much larger number of children are covered under traditional Medicaid programs—about 28 million in 2005, according to Kaiser—but their coverage is also being threatened because of a series of CMS regulations taking effect this year. Rep. John Dingell (D-Mich.) and Rep. Tim Murphy (R-Penn.) introduced a bill in March (H.R. 5613) that would place a 1-year moratorium on seven of those regulations.

According to Congressional Budget Office estimates the two legislators cite, the regulations could translate to $20 billion in cuts to Medicaid over the next 5 years.

The National Governors Association, the National Association of State Medicaid Directors, and the American Public Human Services Association, have expressed their opposition to the regulations in letters to HHS.

Looking ahead into next year, the picture grows even dimmer.

For fiscal 2009, President Bush proposed increasing SCHIP funding by $19.7 billion (added to the current baseline of $25 billion) through 2013.

That is a far cry from the $35 billion that was authorized in the two legislative packages vetoed by the President last year.

And the budget also seeks to formalize the CMS directive that limited states' expansion plans by proposing to cap SCHIP eligibility at 250% of the poverty level.

LAS VEGAS — Large insurers will return to inappropriate billing practices as class action suit agreements expire, according to a compliance expert.

In fact, many companies have been accused of violating the terms already, said Edward R. Gaines III, vice president and chief compliance officer for Healthcare Business Resources in Durham, N.C., who spoke at a meeting on reimbursement sponsored by the American College of Emergency Physicians.

Mr. Gaines said that noncompliance among all the plans that have settled has continued to be an issue, which is being dealt with in the courts and administratively. But, “the problem is, once the settlement agreement expires, I can't go back into federal court through an easy process to make my complaint heard,” he said.

The settlements were struck in response to Multidistrict Litigation 1334, which was certified as a class action in U.S. District Court for the Southern District of Florida in 2002 and named Aetna Inc., Anthem Insurance Cos. Inc., Cigna, Coventry Health Care Inc., Health Net Inc., Humana Inc., PacifiCare Health Systems Inc., Prudential Insurance Co. of America, United Health Care, and WellPoint Health Networks Inc. as defendants. The suits alleged that the insurers violated the federal Racketeer Influenced and Corrupt Organizations Act by engaging in fraud and extortion in a common scheme to wrongfully deny payment to physicians.

Several state and county medical societies filed the suits on behalf of virtually every physician in the nation—about 900,000 doctors.

United Health Care and Coventry both were summarily released from the litigation. Their release has been upheld on appeal.

Aetna and Cigna struck agreements that entailed an immediate payout in response to claims filed by physicians, some changes in billing behavior, and an agreement to provide prospective relief—$300 million from Aetna and $400 million from Cigna.

Cigna's 4-year agreement has now expired, and Aetna's 4-year agreement expired in June 2007; but Aetna's agreement was extended through June 2008 because of compliance disputes. After an investigation, the New Jersey insurance department fined Aetna $9.5 million in June 2007 for failing to properly pay for out-of-network providers. The insurer is paying nonparticipating physicians only 125% of Medicare rates and informing patients that they are not responsible for the difference.

Mr. Gaines urged physicians to hold the health plans that settled accountable to their agreements. Information on settlement terms and how to dispute claims can be found at www.hmosettlements.com

LAS VEGAS — Large insurers will return to inappropriate billing practices as class action suit agreements expire, according to a compliance expert.

In fact, many companies have been accused of violating the terms already, said Edward R. Gaines III, vice president and chief compliance officer for Healthcare Business Resources in Durham, N.C., who spoke at a meeting on reimbursement sponsored by the American College of Emergency Physicians.

Mr. Gaines said that noncompliance among all the plans that have settled has continued to be an issue, which is being dealt with in the courts and administratively. But, “the problem is, once the settlement agreement expires, I can't go back into federal court through an easy process to make my complaint heard,” he said.

The settlements were struck in response to Multidistrict Litigation 1334, which was certified as a class action in U.S. District Court for the Southern District of Florida in 2002 and named Aetna Inc., Anthem Insurance Cos. Inc., Cigna, Coventry Health Care Inc., Health Net Inc., Humana Inc., PacifiCare Health Systems Inc., Prudential Insurance Co. of America, United Health Care, and WellPoint Health Networks Inc. as defendants. The suits alleged that the insurers violated the federal Racketeer Influenced and Corrupt Organizations Act by engaging in fraud and extortion in a common scheme to wrongfully deny payment to physicians.

Several state and county medical societies filed the suits on behalf of virtually every physician in the nation—about 900,000 doctors.

United Health Care and Coventry both were summarily released from the litigation. Their release has been upheld on appeal.

Aetna and Cigna struck agreements that entailed an immediate payout in response to claims filed by physicians, some changes in billing behavior, and an agreement to provide prospective relief—$300 million from Aetna and $400 million from Cigna.

Cigna's 4-year agreement has now expired, and Aetna's 4-year agreement expired in June 2007; but Aetna's agreement was extended through June 2008 because of compliance disputes. After an investigation, the New Jersey insurance department fined Aetna $9.5 million in June 2007 for failing to properly pay for out-of-network providers. The insurer is paying nonparticipating physicians only 125% of Medicare rates and informing patients that they are not responsible for the difference.

Mr. Gaines urged physicians to hold the health plans that settled accountable to their agreements. Information on settlement terms and how to dispute claims can be found at www.hmosettlements.com

LAS VEGAS — Large insurers will return to inappropriate billing practices as class action suit agreements expire, according to a compliance expert.

In fact, many companies have been accused of violating the terms already, said Edward R. Gaines III, vice president and chief compliance officer for Healthcare Business Resources in Durham, N.C., who spoke at a meeting on reimbursement sponsored by the American College of Emergency Physicians.

Mr. Gaines said that noncompliance among all the plans that have settled has continued to be an issue, which is being dealt with in the courts and administratively. But, “the problem is, once the settlement agreement expires, I can't go back into federal court through an easy process to make my complaint heard,” he said.

The settlements were struck in response to Multidistrict Litigation 1334, which was certified as a class action in U.S. District Court for the Southern District of Florida in 2002 and named Aetna Inc., Anthem Insurance Cos. Inc., Cigna, Coventry Health Care Inc., Health Net Inc., Humana Inc., PacifiCare Health Systems Inc., Prudential Insurance Co. of America, United Health Care, and WellPoint Health Networks Inc. as defendants. The suits alleged that the insurers violated the federal Racketeer Influenced and Corrupt Organizations Act by engaging in fraud and extortion in a common scheme to wrongfully deny payment to physicians.

Several state and county medical societies filed the suits on behalf of virtually every physician in the nation—about 900,000 doctors.

United Health Care and Coventry both were summarily released from the litigation. Their release has been upheld on appeal.

Aetna and Cigna struck agreements that entailed an immediate payout in response to claims filed by physicians, some changes in billing behavior, and an agreement to provide prospective relief—$300 million from Aetna and $400 million from Cigna.

Cigna's 4-year agreement has now expired, and Aetna's 4-year agreement expired in June 2007; but Aetna's agreement was extended through June 2008 because of compliance disputes. After an investigation, the New Jersey insurance department fined Aetna $9.5 million in June 2007 for failing to properly pay for out-of-network providers. The insurer is paying nonparticipating physicians only 125% of Medicare rates and informing patients that they are not responsible for the difference.

Mr. Gaines urged physicians to hold the health plans that settled accountable to their agreements. Information on settlement terms and how to dispute claims can be found at www.hmosettlements.com

WASHINGTON — With health care expenses accounting for the single largest expense in their budget, states are increasingly looking for solutions from within, not from the federal government, according to an annual accounting of state legislative trends compiled by the Blue Cross and Blue Shield Association.

“Health care spending represented nearly one-third of total state expenditures last fiscal year,” said Susan Laudicina, BCBSA director for state research and policy at a briefing for reporters. As the economy weakens, health care costs will continue to rise, while tax revenues will fall. That will add to the pressure to find creative solutions, she said.

The most significant trend observed in the states: an attempt to expand coverage. About half of the state legislatures debated universal coverage or expansion programs for children in fiscal 2007. State mandates requiring individuals to buy insurance were introduced in 12 states. All of those failed, largely because they are controversial, said Ms. Laudicina.

Connecticut and New York expanded eligibility for SCHIP to 400% of the federal poverty level and seven other states raised eligibility to 300%, but those efforts are threatened by a rule change issued by the Department of Health and Human Services last August that ostensibly caps eligibility at 250% of the federal poverty level. Eight states have sued to challenge that ruling.

Eight states—Connecticut, Indiana, Kansas, Louisiana, Maryland, New York, Texas and Washington—created programs in which public funds are used to subsidize the cost of private employer-sponsored health insurance to Medicaid-eligible workers. Oklahoma expanded its existing subsidy program, making more people eligible.

So-called “transparency” initiatives are gaining ground, also. These are proposals that require hospitals—and in some cases, physicians—to publicly share information on infections and other adverse events, and also other quality data and pricing. Twenty-one states debated proposals that would require transparency on some level. Transparency bills were enacted in 10 states: Arkansas, Delaware, Georgia, Indiana, Minnesota, New Jersey, Oregon, Pennsylvania, Texas, and Washington. Eleven states will take up transparency measures in 2008, she said.

WASHINGTON — With health care expenses accounting for the single largest expense in their budget, states are increasingly looking for solutions from within, not from the federal government, according to an annual accounting of state legislative trends compiled by the Blue Cross and Blue Shield Association.

“Health care spending represented nearly one-third of total state expenditures last fiscal year,” said Susan Laudicina, BCBSA director for state research and policy at a briefing for reporters. As the economy weakens, health care costs will continue to rise, while tax revenues will fall. That will add to the pressure to find creative solutions, she said.

The most significant trend observed in the states: an attempt to expand coverage. About half of the state legislatures debated universal coverage or expansion programs for children in fiscal 2007. State mandates requiring individuals to buy insurance were introduced in 12 states. All of those failed, largely because they are controversial, said Ms. Laudicina.

Connecticut and New York expanded eligibility for SCHIP to 400% of the federal poverty level and seven other states raised eligibility to 300%, but those efforts are threatened by a rule change issued by the Department of Health and Human Services last August that ostensibly caps eligibility at 250% of the federal poverty level. Eight states have sued to challenge that ruling.

Eight states—Connecticut, Indiana, Kansas, Louisiana, Maryland, New York, Texas and Washington—created programs in which public funds are used to subsidize the cost of private employer-sponsored health insurance to Medicaid-eligible workers. Oklahoma expanded its existing subsidy program, making more people eligible.

So-called “transparency” initiatives are gaining ground, also. These are proposals that require hospitals—and in some cases, physicians—to publicly share information on infections and other adverse events, and also other quality data and pricing. Twenty-one states debated proposals that would require transparency on some level. Transparency bills were enacted in 10 states: Arkansas, Delaware, Georgia, Indiana, Minnesota, New Jersey, Oregon, Pennsylvania, Texas, and Washington. Eleven states will take up transparency measures in 2008, she said.

WASHINGTON — With health care expenses accounting for the single largest expense in their budget, states are increasingly looking for solutions from within, not from the federal government, according to an annual accounting of state legislative trends compiled by the Blue Cross and Blue Shield Association.

“Health care spending represented nearly one-third of total state expenditures last fiscal year,” said Susan Laudicina, BCBSA director for state research and policy at a briefing for reporters. As the economy weakens, health care costs will continue to rise, while tax revenues will fall. That will add to the pressure to find creative solutions, she said.

The most significant trend observed in the states: an attempt to expand coverage. About half of the state legislatures debated universal coverage or expansion programs for children in fiscal 2007. State mandates requiring individuals to buy insurance were introduced in 12 states. All of those failed, largely because they are controversial, said Ms. Laudicina.

Connecticut and New York expanded eligibility for SCHIP to 400% of the federal poverty level and seven other states raised eligibility to 300%, but those efforts are threatened by a rule change issued by the Department of Health and Human Services last August that ostensibly caps eligibility at 250% of the federal poverty level. Eight states have sued to challenge that ruling.

Eight states—Connecticut, Indiana, Kansas, Louisiana, Maryland, New York, Texas and Washington—created programs in which public funds are used to subsidize the cost of private employer-sponsored health insurance to Medicaid-eligible workers. Oklahoma expanded its existing subsidy program, making more people eligible.

So-called “transparency” initiatives are gaining ground, also. These are proposals that require hospitals—and in some cases, physicians—to publicly share information on infections and other adverse events, and also other quality data and pricing. Twenty-one states debated proposals that would require transparency on some level. Transparency bills were enacted in 10 states: Arkansas, Delaware, Georgia, Indiana, Minnesota, New Jersey, Oregon, Pennsylvania, Texas, and Washington. Eleven states will take up transparency measures in 2008, she said.

WASHINGTON – With Congress scrambling to come up with the money to avert a physician fee cut scheduled for July, it appears once again that Medicare Advantage is being eyed as funding source by Democrats but as sacrosanct by Republicans.

It also may portend a repeat of last year's battle, one that ended with President Bush refusing to sign a legislative package that restored physician reimbursement but slashed Medicare Advantage payments.

The debate was front and center at a March hearing of the House Ways and Means Committee's Subcommittee on Health where recommendations from the Medicare Payment Advisory Commission's (MedPAC) spring report to Congress were discussed, including the recommendation that Congress increase physician fees by 1.5% in 2008 and 2009.

MedPAC said in its report that it supported Medicare Advantage (MA) plans–which let beneficiaries receive coverage from private plans such as HMOs and PPOs, and from private fee-for-service insurers. The commission also made the case that, for the third year in a row, the MA plans are overpaid relative to traditional fee-for-service (FFS) Medicare.

MedPAC Chairman Glenn Hackbarth told the subcommittee that the commission estimates that Medicare has paid the plans $10 billion more than it would have under traditional FFS for each of the last 3 years. Overall, MA plans on average will be paid 13% more than conventional Medicare providers in 2008, a 1% uptick from 2007.

The profit potential in those plans has stimulated a rush into the market and huge enrollment growth–a 101% increase from 2006 to 2007, according to MedPAC. Coordinated care plans, such as HMOs and PPOs, saw only an 8% increase in enrollment during that period, although those plans still account for the largest number of beneficiaries enrolled in an MA. Currently, about 20% of Medicare enrollees are in an MA plan.

Because MA plans are increasingly attractive to beneficiaries–they often offer additional benefits–MedPAC is concerned about the growth of the high-cost private FFS plans, Mr. Hackbarth said.

The plans are being rewarded for their costs and there is no penalty for poor quality, he said. “Payment policy is a powerful signal of what we value,” Mr. Hackbarth said, adding, “The benchmarks we use are a signal of what Medicare wants to buy.” The commission “supports financial neutrality between payment rates for the FFS program and the MA program,” he said, adding that about half of overpayments to MA plans now are going to insurers' bottom lines.

That fact has not been lost on the subcommittee chairman, Rep. Pete Stark (D-Calif.), who has held multiple hearings questioning the value and integrity of the MA plans. Republicans defended the MA program. Ranking minority member Rep. Dave Camp (R-Mich.) intensely questioned Mr. Hackbarth, eliciting the admission that MA plans had been successful in rural areas. Rep. Sam Johnson (R-Tenn.) at one point accused the MedPAC chairman of saying that the government is a more efficient insurer than the private sector.

Mr. Hackbarth disagreed and clarified his position. “The problem with this payment system is we are rewarding inefficient private plans,” he said.

WASHINGTON – With Congress scrambling to come up with the money to avert a physician fee cut scheduled for July, it appears once again that Medicare Advantage is being eyed as funding source by Democrats but as sacrosanct by Republicans.

It also may portend a repeat of last year's battle, one that ended with President Bush refusing to sign a legislative package that restored physician reimbursement but slashed Medicare Advantage payments.

The debate was front and center at a March hearing of the House Ways and Means Committee's Subcommittee on Health where recommendations from the Medicare Payment Advisory Commission's (MedPAC) spring report to Congress were discussed, including the recommendation that Congress increase physician fees by 1.5% in 2008 and 2009.

MedPAC said in its report that it supported Medicare Advantage (MA) plans–which let beneficiaries receive coverage from private plans such as HMOs and PPOs, and from private fee-for-service insurers. The commission also made the case that, for the third year in a row, the MA plans are overpaid relative to traditional fee-for-service (FFS) Medicare.

MedPAC Chairman Glenn Hackbarth told the subcommittee that the commission estimates that Medicare has paid the plans $10 billion more than it would have under traditional FFS for each of the last 3 years. Overall, MA plans on average will be paid 13% more than conventional Medicare providers in 2008, a 1% uptick from 2007.

The profit potential in those plans has stimulated a rush into the market and huge enrollment growth–a 101% increase from 2006 to 2007, according to MedPAC. Coordinated care plans, such as HMOs and PPOs, saw only an 8% increase in enrollment during that period, although those plans still account for the largest number of beneficiaries enrolled in an MA. Currently, about 20% of Medicare enrollees are in an MA plan.

Because MA plans are increasingly attractive to beneficiaries–they often offer additional benefits–MedPAC is concerned about the growth of the high-cost private FFS plans, Mr. Hackbarth said.

The plans are being rewarded for their costs and there is no penalty for poor quality, he said. “Payment policy is a powerful signal of what we value,” Mr. Hackbarth said, adding, “The benchmarks we use are a signal of what Medicare wants to buy.” The commission “supports financial neutrality between payment rates for the FFS program and the MA program,” he said, adding that about half of overpayments to MA plans now are going to insurers' bottom lines.

That fact has not been lost on the subcommittee chairman, Rep. Pete Stark (D-Calif.), who has held multiple hearings questioning the value and integrity of the MA plans. Republicans defended the MA program. Ranking minority member Rep. Dave Camp (R-Mich.) intensely questioned Mr. Hackbarth, eliciting the admission that MA plans had been successful in rural areas. Rep. Sam Johnson (R-Tenn.) at one point accused the MedPAC chairman of saying that the government is a more efficient insurer than the private sector.

Mr. Hackbarth disagreed and clarified his position. “The problem with this payment system is we are rewarding inefficient private plans,” he said.

WASHINGTON – With Congress scrambling to come up with the money to avert a physician fee cut scheduled for July, it appears once again that Medicare Advantage is being eyed as funding source by Democrats but as sacrosanct by Republicans.

It also may portend a repeat of last year's battle, one that ended with President Bush refusing to sign a legislative package that restored physician reimbursement but slashed Medicare Advantage payments.

The debate was front and center at a March hearing of the House Ways and Means Committee's Subcommittee on Health where recommendations from the Medicare Payment Advisory Commission's (MedPAC) spring report to Congress were discussed, including the recommendation that Congress increase physician fees by 1.5% in 2008 and 2009.

MedPAC said in its report that it supported Medicare Advantage (MA) plans–which let beneficiaries receive coverage from private plans such as HMOs and PPOs, and from private fee-for-service insurers. The commission also made the case that, for the third year in a row, the MA plans are overpaid relative to traditional fee-for-service (FFS) Medicare.

MedPAC Chairman Glenn Hackbarth told the subcommittee that the commission estimates that Medicare has paid the plans $10 billion more than it would have under traditional FFS for each of the last 3 years. Overall, MA plans on average will be paid 13% more than conventional Medicare providers in 2008, a 1% uptick from 2007.

The profit potential in those plans has stimulated a rush into the market and huge enrollment growth–a 101% increase from 2006 to 2007, according to MedPAC. Coordinated care plans, such as HMOs and PPOs, saw only an 8% increase in enrollment during that period, although those plans still account for the largest number of beneficiaries enrolled in an MA. Currently, about 20% of Medicare enrollees are in an MA plan.

Because MA plans are increasingly attractive to beneficiaries–they often offer additional benefits–MedPAC is concerned about the growth of the high-cost private FFS plans, Mr. Hackbarth said.

The plans are being rewarded for their costs and there is no penalty for poor quality, he said. “Payment policy is a powerful signal of what we value,” Mr. Hackbarth said, adding, “The benchmarks we use are a signal of what Medicare wants to buy.” The commission “supports financial neutrality between payment rates for the FFS program and the MA program,” he said, adding that about half of overpayments to MA plans now are going to insurers' bottom lines.

That fact has not been lost on the subcommittee chairman, Rep. Pete Stark (D-Calif.), who has held multiple hearings questioning the value and integrity of the MA plans. Republicans defended the MA program. Ranking minority member Rep. Dave Camp (R-Mich.) intensely questioned Mr. Hackbarth, eliciting the admission that MA plans had been successful in rural areas. Rep. Sam Johnson (R-Tenn.) at one point accused the MedPAC chairman of saying that the government is a more efficient insurer than the private sector.

Mr. Hackbarth disagreed and clarified his position. “The problem with this payment system is we are rewarding inefficient private plans,” he said.

WASHINGTON – At least 24 million Americans have diabetes, which cost the nation $174 billion in direct and indirect expenditures in 2007, according to the American Diabetes Association.

The ADA released data that were compiled from a variety of mostly federal sources, including the National Health Interview Survey, the National Health and Nutrition Examination Survey, and the Medical Expenditure Panel Survey. The Lewin Group conducted an analysis of that survey data for the ADA, drawing from the medical, public health, and economics literature.

The report currently does not split costs and incidence according to type of diabetes; those data will be available in a few months, said lead author Tim Dall, at a briefing on the analysis for congressional staff members and reporters.

According to the analysis, the cost of the disease has risen 32% since data were last tabulated in 2002. And the $174 billion figure is likely to be conservative because it doesn't include the approximately 6 million Americans with undiagnosed diabetes, said Ann L. Albright, Ph.D., president of health care and education at the ADA, at the briefing.

The cost estimate also does not include all of the expenses related to diabetes, such as over-the-counter medications or office visits to nonphysician providers other than podiatrists (such as optometrists or dentists).

“The findings reaffirm that diabetes is a public health crisis and its implications are painful and far reaching,” said Dr. Albright, who is also the director of the division of diabetes translation at the Centers for Disease Control and Prevention. “This underscores the importance of early diagnosis and treatment,” she said.

According to the analysis, 17.5 million Americans have been diagnosed with diabetes, up from 12.1 million in 2002. The diabetes population is growing by about 1 million people a year, driven by the aging of the population, more obesity, better detection, decreasing mortality, and growth in minority populations with higher rates of the disease, according to the study, which will be published in Diabetes Care in March (2008;31:1–20).

Most people with diabetes are insured, with their costs covered primarily through government programs. About 8.5 million diabetics are Medicare beneficiaries. Two million are uninsured and a third of those are undiagnosed, estimated the authors.

On the medical expenditure side, the total direct costs were an estimated $116 billion, with $27 billion for direct treatment, $58 billion for chronic complications, and $31 billion in “excess” general medical costs. The largest component of medical spending was for inpatient hospitalization, accounting for $58 billion. The inpatient costs for diabetes-related chronic complications–such as neurologic, peripheral vascular, cardiovascular, and renal–are higher than for diabetes-specific hospitalizations, at $2,281, compared with $1,853.

Diagnosed diabetics have medical costs that are two times higher than they would be without the presence of the disease.

Their expenditures average $11,744 a year, of which $6,649 is attributable directly to diabetes.

The indirect costs–pegged at $58 billion–include increased absenteeism, reduced productivity while at work and reduced productivity for those not in the labor force, unemployment from disease-related disability, and lost productive capacity because of early death. According to the study, there were 284,000 deaths related to diabetes in 2007.

The authors said that while it appears that the disease's burden falls mostly on insurers, employers, and people with diabetes and their families, “the burden is passed along to all of society in the form of higher insurance premiums and taxes, reduced earnings, and reduced standard of living.”

Diabetes affects just under 1 in 10 people, and thus “directly or indirectly touches everyone in society,” they wrote.

WASHINGTON – At least 24 million Americans have diabetes, which cost the nation $174 billion in direct and indirect expenditures in 2007, according to the American Diabetes Association.

The ADA released data that were compiled from a variety of mostly federal sources, including the National Health Interview Survey, the National Health and Nutrition Examination Survey, and the Medical Expenditure Panel Survey. The Lewin Group conducted an analysis of that survey data for the ADA, drawing from the medical, public health, and economics literature.

The report currently does not split costs and incidence according to type of diabetes; those data will be available in a few months, said lead author Tim Dall, at a briefing on the analysis for congressional staff members and reporters.

According to the analysis, the cost of the disease has risen 32% since data were last tabulated in 2002. And the $174 billion figure is likely to be conservative because it doesn't include the approximately 6 million Americans with undiagnosed diabetes, said Ann L. Albright, Ph.D., president of health care and education at the ADA, at the briefing.

The cost estimate also does not include all of the expenses related to diabetes, such as over-the-counter medications or office visits to nonphysician providers other than podiatrists (such as optometrists or dentists).

“The findings reaffirm that diabetes is a public health crisis and its implications are painful and far reaching,” said Dr. Albright, who is also the director of the division of diabetes translation at the Centers for Disease Control and Prevention. “This underscores the importance of early diagnosis and treatment,” she said.

According to the analysis, 17.5 million Americans have been diagnosed with diabetes, up from 12.1 million in 2002. The diabetes population is growing by about 1 million people a year, driven by the aging of the population, more obesity, better detection, decreasing mortality, and growth in minority populations with higher rates of the disease, according to the study, which will be published in Diabetes Care in March (2008;31:1–20).

Most people with diabetes are insured, with their costs covered primarily through government programs. About 8.5 million diabetics are Medicare beneficiaries. Two million are uninsured and a third of those are undiagnosed, estimated the authors.

On the medical expenditure side, the total direct costs were an estimated $116 billion, with $27 billion for direct treatment, $58 billion for chronic complications, and $31 billion in “excess” general medical costs. The largest component of medical spending was for inpatient hospitalization, accounting for $58 billion. The inpatient costs for diabetes-related chronic complications–such as neurologic, peripheral vascular, cardiovascular, and renal–are higher than for diabetes-specific hospitalizations, at $2,281, compared with $1,853.

Diagnosed diabetics have medical costs that are two times higher than they would be without the presence of the disease.

Their expenditures average $11,744 a year, of which $6,649 is attributable directly to diabetes.

The indirect costs–pegged at $58 billion–include increased absenteeism, reduced productivity while at work and reduced productivity for those not in the labor force, unemployment from disease-related disability, and lost productive capacity because of early death. According to the study, there were 284,000 deaths related to diabetes in 2007.

The authors said that while it appears that the disease's burden falls mostly on insurers, employers, and people with diabetes and their families, “the burden is passed along to all of society in the form of higher insurance premiums and taxes, reduced earnings, and reduced standard of living.”

Diabetes affects just under 1 in 10 people, and thus “directly or indirectly touches everyone in society,” they wrote.

WASHINGTON – At least 24 million Americans have diabetes, which cost the nation $174 billion in direct and indirect expenditures in 2007, according to the American Diabetes Association.

The ADA released data that were compiled from a variety of mostly federal sources, including the National Health Interview Survey, the National Health and Nutrition Examination Survey, and the Medical Expenditure Panel Survey. The Lewin Group conducted an analysis of that survey data for the ADA, drawing from the medical, public health, and economics literature.

The report currently does not split costs and incidence according to type of diabetes; those data will be available in a few months, said lead author Tim Dall, at a briefing on the analysis for congressional staff members and reporters.

According to the analysis, the cost of the disease has risen 32% since data were last tabulated in 2002. And the $174 billion figure is likely to be conservative because it doesn't include the approximately 6 million Americans with undiagnosed diabetes, said Ann L. Albright, Ph.D., president of health care and education at the ADA, at the briefing.

The cost estimate also does not include all of the expenses related to diabetes, such as over-the-counter medications or office visits to nonphysician providers other than podiatrists (such as optometrists or dentists).

“The findings reaffirm that diabetes is a public health crisis and its implications are painful and far reaching,” said Dr. Albright, who is also the director of the division of diabetes translation at the Centers for Disease Control and Prevention. “This underscores the importance of early diagnosis and treatment,” she said.

According to the analysis, 17.5 million Americans have been diagnosed with diabetes, up from 12.1 million in 2002. The diabetes population is growing by about 1 million people a year, driven by the aging of the population, more obesity, better detection, decreasing mortality, and growth in minority populations with higher rates of the disease, according to the study, which will be published in Diabetes Care in March (2008;31:1–20).

Most people with diabetes are insured, with their costs covered primarily through government programs. About 8.5 million diabetics are Medicare beneficiaries. Two million are uninsured and a third of those are undiagnosed, estimated the authors.

On the medical expenditure side, the total direct costs were an estimated $116 billion, with $27 billion for direct treatment, $58 billion for chronic complications, and $31 billion in “excess” general medical costs. The largest component of medical spending was for inpatient hospitalization, accounting for $58 billion. The inpatient costs for diabetes-related chronic complications–such as neurologic, peripheral vascular, cardiovascular, and renal–are higher than for diabetes-specific hospitalizations, at $2,281, compared with $1,853.

Diagnosed diabetics have medical costs that are two times higher than they would be without the presence of the disease.

Their expenditures average $11,744 a year, of which $6,649 is attributable directly to diabetes.

The indirect costs–pegged at $58 billion–include increased absenteeism, reduced productivity while at work and reduced productivity for those not in the labor force, unemployment from disease-related disability, and lost productive capacity because of early death. According to the study, there were 284,000 deaths related to diabetes in 2007.

The authors said that while it appears that the disease's burden falls mostly on insurers, employers, and people with diabetes and their families, “the burden is passed along to all of society in the form of higher insurance premiums and taxes, reduced earnings, and reduced standard of living.”

Diabetes affects just under 1 in 10 people, and thus “directly or indirectly touches everyone in society,” they wrote.