 |
| Issue #2, October 6, 2005 |
Cato Hill Briefing: Delaying the Medicare Drug Benefit
The devastation wrought by Hurricanes Katrina and Rita demands leadership and a reevaluation of spending priorities, first and foremost the costly and unwise Medicare prescription drug benefit set to take effect in January.
At a Cato Capitol Hill briefing tomorrow in room 2168 of the Rayburn House Office Building, Sen. John McCain (R-AZ), Rep. Jim Cooper (D-TN), and Rep. Jeff Flake (R-AZ) will argue that Congress should delay or repeal the Medicare drug benefit to help pay for hurricane relief. A two-year delay that retains "transitional" assistance for low-income seniors would save $84 billion. Cato's Director of Health Policy Studies, Michael Cannon, will argue the drug benefit was ill-conceived from the beginning and we now have an opportunity to fix its mistakes. For more information, and to register for the briefing, click here.
Health Policy News
Medicaid Fraud and Post-Katrina Relief
The federal government has announced a "relaxation in controls" so that hurricane victims can receive benefits under Medicaid and other programs without the "usual documentation requirements." Yet even when the usual requirements prevail, this program is a magnet for fraud and mismanagement. Recent examples include the following:
- A recent audit by the Department of Health and Human Services' Office of the Inspector General (OIG) found that in a sample of 120 claims filed by the New York City Department of Education for transportation services, exactly zero complied with the usual requirements. OIG estimates that nearly $100 million in federal Medicaid spending for transportation services claimed by NYCDE was unallowable.
- A Topeka, Kansas, pharmacy accidentally billed Medicaid for 99,999 bottles of eye drops instead of just one. Though Medicaid's claims processor denied the initial claim, minutes later the pharmacy resubmitted the same claim, which was then accepted. Medicaid then cut the pharmacy a check for $1 million. A pharmacy employee tried to return the check but was initially told that there was no procedure for doing so.
Despite the massive fraud that already occurs in Medicaid, Senate Finance Committee Chairman Chuck Grassley (R-IA) and ranking member Max Baucus (D-MT) are pushing legislation that would open the door to even more Medicaid fraud. The OIG recently testified, “the difficult circumstances created by Katrina provide an enormous opportunity for fraud, waste, and abuse.” Some seem determined to increase those opportunities.
For more on the need to curtail Medicaid, see "Medicaid's Unseen Costs," Cato Policy Analysis no. 548, August 18, 2005.
Study: "Cash and Counseling" Increases FL Medicaid Costs
Florida is experimenting with a new model for certain Medicaid benefits: giving enrollees cash to purchase services rather than having the state administer those services. But a study by the federal Department of Health and Human Services suggests that such reforms could worsen Medicaid's financial woes. HHS found that Florida's Cash and Counseling program for children with developmental disabilities increased state expenditures per enrollee by 26 percent ($3,319) in the first year and 34 percent in the second year ($4,812).
As Michael Cannon explains in a recent commentary: "HSAs and vouchers spell trouble for Medicaid. Though they may improve the quality of care, they would do so at the cost of greater dependence and higher taxes."
Beta-Blockers Study Warrants Caution on P4P
The administration of beta-blockers to patients with cardiovascular disease is an example of the type of quality indicators to which many "pay for performance" (P4P) proposals would tie payments to providers. But a new study in the Journal of the American Medical Association finds that this therapy may not benefit all groups equally. Among acute coronary syndrome patients prescribed beta-blockers, certain genotypes had a lower rate of survival than others.
The study thus highlights the major challenges facing P4P: collecting accurate data on which to base treatment protocols (and payments), making room for outliers, and ensuring that protocols can be changed quickly in light of new evidence. As the authors write, "Further studies of the efficacy of beta-blocker treatment . . . is warranted to be sure that we are not institutionalizing therapy through the adoption of health care quality performance measures that may offer little benefit, or even potential harm, to these patient subgroups."
Ignoring Deaths Due to Health Care Regulation
The Commonwealth Fund's Commission on a High Performance Health System recently released a chart book detailing the chronic problems of the U.S. health care system. Chart I-10 indicates that being uninsured contributes to more deaths annually than diabetes, respiratory disease, or HIV/AIDS. What the report fails to note is that the high cost of health care regulation induces even more deaths.
In a Cato Policy Analysis, Duke University professor Christopher Conover weighed the benefits and costs of federal and state health care regulation and found they impose a net cost of $169 billion per year. Studies have shown that mortality falls as societal income rises because people are able to purchase more health and safety. As a result, Conover estimated that regulation of the health sector induces upwards of 22,000 deaths annually. That’s more annual deaths than are attributed to suicide or a lack of insurance.
Upcoming Cato Institute Events
Shared Sacrifice: Delaying the Medicare Drug Benefit
Capitol Hill Briefing
Friday, October 7, 2005
8:45 AM (Breakfast Included)
Featuring: Sen. John McCain (R-AZ), Rep. Jim Cooper (D-TN), Rep. Jeff Flake (R-AZ), and Michael Cannon, Director of Health Policy Studies, Cato Institute
2168 Rayburn House Office Building (The Gold Room)
To register, click here.
Michael Cannon to speak at American Society for Bioethics and Humanities annual meeting
Discussion titled "Ensuring Insurance: Four Plans for Reforming the U.S. Health Insurance System." Panel to include John Podesta (Center for American Progress), Quentin Young (Physicians for a National Health Program), Benjamin Krohmal (NIH), and Ezekiel Emanuel (NIH).
October 21, 2005, 3:30–4:30 PM
Omni Shoreham Hotel, Washington, DC
For more information, click here.
Michael Cannon to speak at WHCC Summit on Consumer-Centric Healthcare Strategies
Topic: "The Impact Consumer-Directed Healthcare will have on Healthcare Quality, Delivery and Outcomes."
November 3, 2005, 3:15–4:15pm
Marriott Fisherman's Wharf Hotel, San Francisco, CA
For more information, click here.
Recent Cato Institute Events and Publications
"Health Care Needs A Dose of Competition," Michael F. Cannon, Investors Business Daily, October 4, 2005.
"In Praise of U.S. Health Care," Michael Tanner, Washington Times, October 1, 2005.
"Directions for the Disposition of My (and Your) Vital Organs," Lloyd R. Cohen, Regulation vol. 28, no. 3, Fall 2005.
"After spending 16 years urging legal reform that would permit compensation for organ donation in order to increase the supply of transplant organs, I have decided to reverse course. I will now decrease the supply of organs by one donor—myself—and hopefully by many more. Why this radical change in direction? Because my efforts to change the law and increase the supply of organs have proved fruitless and there is little that I or anyone else can add to the argument for employing a market incentive to increase organ donation."
"Defensive Medicine and Disappearing Doctors?," Katherine Baicker and Amitabh Chandra, Regulation vol. 28, no. 3, Fall 2005.
"There is a great deal of public debate about potential reforms of the malpractice system. A closer look at available data suggests that some of the rhetoric surrounding this debate may be misleading. First, increases in malpractice payments do not seem to be the driving force behind increases in premiums. Second, increases in malpractice costs do not seem to affect the overall size of the physician workforce, although they may affect some subsets of the physician population more severely. Third, we find evidence that the strongest effect of greater malpractice pressure is in increased use of imaging services, with somewhat smaller effects on the use of other discretionary, generally low-risk services such as physician visits and consultations, use of diagnostic tests, and minor procedures. We find little evidence of increased utilization of major surgical procedures."
"An Evaluation of Medicare's Prescription Drug Policy" Jagadeesh Gokhale, Testimony submitted to the Senate Subcommittee on Federal Financial Management, Government Information, and International Security, September 22, 2005.
"Medicaid is Behind the Decline in Private Health Coverage," Michael F. Cannon, New Hampshire Union Leader, September 19, 2005.
Healthy Competition is a periodic newsletter produced by the Cato Institute. It features news and commentary on current health policy issues from a free-market perspective. If you wish to subscribe to this free weekly newsletter, update your address, or be removed from our list, please click here and follow the instructions.