CMS Announces 2011 Electronic Prescribing (eRx) Incentive Program Final Rule

DEPARTMENT OF HEALTH & HUMAN SERVICES
Centers for Medicare & Medicaid Services
Room 352-G
200 Independence Avenue, SW
Washington, DC 20201
Office of Media Affairs

Fact Sheet

FOR IMMEDIATE RELEASE                          Contact: CMS Office of Media Affairs

August 31, 2011                                                                      (202) 690-6145

CMS Announces 2011 Electronic Prescribing (eRx) Incentive Program Final Rule

Overview

The Centers for Medicare & Medicaid Services (CMS) today announced Changes to the Medicare Electronic Prescribing (eRx) Incentive Program for Calendar Year 2011.

Background

Section 132 of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) required the Secretary to establish a new reporting program for eligible professionals who are successful electronic prescribers as defined by MIPPA, beginning on January 1, 2009.  While the eRx Incentive Program has similarities in structure and processes to the Physician Quality Reporting System (formerly the Physician Quality Reporting Initiative or PQRI), this program is a separate program with distinct reporting requirements and associated incentive payments and payment adjustments.

In addition to the electronic prescribing incentive payment, MIPPA called for a Medicare Physician Fee Schedule (MPFS) payment adjustment that will apply beginning in January 2012 to eligible professionals who are not successful electronic prescribers, as defined in the Calendar Year (CY) 2011 MPFS final rule. For eligible professionals who are subject to the 2012 eRx payment adjustment, the fee schedule amount for covered professional services furnished by eligible professionals during the year shall be 1 percent less than the fee schedule amount that would otherwise apply for 2012.  The potential MPFS reductions in the future are a 1.5 percent reduction for 2013 and 2.0 percent reduction for 2014.   

Provisions of the 2012 eRx Payment Adjustment Established in the CY 2011 MPFS Final Rule

In addition to establishing the requirements for successful reporting of the electronic prescribing measure for the 2011 eRx incentive, the CY 2011 MPFS Final Rule also establishes the program requirements for purposes of avoiding the 2012 payment adjustment. 

An eligible professional will not be subject to the 2012 payment adjustment if one of the following applies:

·        The eligible professional is not a physician (MD, DO, or podiatrist), nurse practitioner, or physician assistant as of June 30, 2011 (This determination is based on the primary taxonomy code in the National Plan and Provider Enumeration System (NPPES)) and does not generally have prescribing privileges, and reports g-code G8644 (defined as not having prescribing privileges) at least one time on an eligible claim prior to June 30, 2011;

·        The eligible professional does not have at least 100 cases containing an encounter code in the electronic prescribing measure’s denominator;

·        The eligible professional’s allowed charges for covered professional services submitted for the electronic prescribing measure’s denominator codes is less than 10 percent of the eligible professional’s total 2011 Medicare Part B PFS allowed charges;

·        The eligible professional reports a significant hardship code and CMS determines that the hardship code applies (see “Significant Hardship Exemptions” section below) and is granted an exemption; OR

·        The eligible professional becomes a successful electronic prescriber for purposes of the 2012 payment adjustment by reporting the electronic prescribing measure via claims for at least 10 unique electronic prescribing events for patients in the denominator of the measure between January 1, 2011 and June 30, 2011.

A group practice that is participating in the 2011 eRx group practice reporting option will not be subject to the 2012 payment adjustment if one of the following applies:

·        The group practice reports a significant hardship in its 2011 self-nomination letter for participation in the eRx Incentive Program group practice reporting option (see “Significant Hardship Exemptions” section below) and is granted an exemption; OR

·        The group practice becomes a successful electronic prescriber.  The group practice becomes a successful electronic prescriber for purposes of the 2012 payment adjustment by reporting the electronic prescribing measure via claims for between 75-2,500 unique electronic prescribing events (depending on the group practice size) for patients in the denominator of the measure between January 1, 2011 and June 30, 2011.

Significant Hardship Exemptions.  Section 1848(a)(5)(B) of the Act provides that the Secretary may, on a case-by-case basis, exempt an eligible professional from the payment adjustment, if the Secretary determines, subject to annual renewal, that compliance with the requirement for being a successful electronic prescriber would result in a significant hardship.  In the CY 2011 MPFS Final Rule, CMS established the following two significant hardship exemptions in the form of g-codes for purposes of the 2012 payment adjustment:

·        The eligible professional practices in a rural area without sufficient high speed internet access (report code G8642)

·        The eligible professional practices in an area without sufficient available pharmacies for electronic prescribing (report code G8643)

In order to request consideration for an exemption from the 2012 payment adjustment via one of the two aforementioned significant hardship g-codes, the eligible professional must report the g-code at least one time on a claim between January 1, 2011 and June 30, 2011.  A group practice participating in the eRx group practice reporting option for 2011 must have requested the significant hardship exemption at the time the practice self-nominated to participate.

Changes to the Medicare eRx Incentive Program for Calendar Year 2011

Since publication of the 2011 MPFS Final Rule, CMS has received public comments raising concerns that the Medicare eRx Incentive program did not better align with the Medicare or Medicaid EHR Incentive Program as well as the need for additional significant hardship exemption categories.  To address these concerns, we are finalizing the following changes:

Modify the existing 2011 electronic prescribing measure to address uncertainties related to the technological requirements of the Medicare eRx Incentive Program: The existing 2011 electronic prescribing measure is revised to indicate that a qualified electronic prescribing system includes certified EHR technology as defined at 42 CFR 495.4 and  45 CFR 170.102.

Provide additional significant hardship exemption categories for purposes of the 2012 payment adjustment: The eligible professional or group practice must demonstrate that one of these situations applies to the respective practice:

-          Eligible professionals who register to participate in the Medicare or Medicaid EHR Incentive Programs and adopt certified EHR technology;

-          Inability to electronically prescribe due to local, state, or federal law or regulation;

-          Limited prescribing activity; or

-          Insufficient opportunities to report the electronic prescribing measure.

Extend the deadline for requesting significant hardship exemptions to November 1, 2011.  This extended reporting deadline would apply to the two significant hardship exemptions established in the CY 2011 MPFS Final Rule as well as the additional significant hardship exemption categories above.

Require submission of significant hardship exemption requests for the 2012 eRx payment adjustment via a web-based tool for individual eligible professionals and via a mailed letter for group practices that are participating in the 2011 eRx group practice reporting option.  Instructions on how to request a hardship via the web-based tool will be available on the eRx Incentive Program website at http://www.cms.gov/ERXincentive/.

The final rule can be found athttp://www.ofr.gov/OFRUpload/OFRData/2011-22629_PI.pdf.

  For more information about this announcement, read the http://blog.cms.gov/2011/08/31/greater-flexibility-in-e-prescribing-means-greater-success/

Lower 2012 Medicare Part D Premiums Could Improve Plans’ Member Retention

Reprinted from DRUG BENEFIT NEWS, biweekly news, proven cost management strategies and unique data for health plans, PBMs, pharma companies and employers.

By Anthony Vecchione, Editor

August 19, 2011Volume 12Issue 17

The Aug. 4 announcement from HHS that average Medicare Prescription Drug Plan (PDP) premiums will not increase in 2012 reflects lower drug utilization and the increased availability of generics, experts tell DBN.

According to HHS, the cost of the average Medicare PDP premium in 2012 will be roughly $30, about flat from the 2011 average premium of $30.76. These figures are based on bids submitted by Part D plans for the 2012 plan year.

“Everything is very positive from a vendor or carrier perspective. I think that they have a couple of things going in their favor. First of all, if we take a look at a vendor or a carrier, these are one-year deals, so their downside is limited,” Michael Jacobs, national clinical practice leader at Buck Consultants, tells DBN.

In addition, Jacobs says that as a result of premiums not increasing, people are more likely to stay with their current Part D plan. “That’s a pretty good reason to stick around and build trust and faithfulness, and it also lets people on relatively fixed incomes survive a little bit easier in the current economic climate. I think for the providers, it’s probably a good thing, moving forward, that they will build up some additional loyalty with their current customers,” Jacobs says.

No Increase for Part D Premiums

Industry analysts point to the big wave of products that are going to pose generic competition in 2012 as one of the major factors keeping average premiums flat over the past few years. “Many of the plans were able to take advantage of predicting lower costs, assuming turning all those people that are on products like Lipitor over to generics. That’s certainly good for PBMs and plans,” Bonnie Washington, senior vice president of Avalere Health, LLC, tells DBN.

Lipitor, a statin and the world‘s biggest selling drug, loses patent protection in November. Generic competition is expected to cut into Lipitor’s annual sales of almost $11 billion.

Washington points to the low-premium, narrow-network product launched in October 2010 by Humana Inc. and Wal-Mart Stores, Inc. (DBN 10/8/10, p. 1). But, she warns, “there is competition in Part D to be able to attract that group of seniors who are looking for a low premium and provide an alternative to Humana/Walmart,” Washington says.

“Companies will try to modify their current programs or create new ones with premiums below $30 to compete with the $14.95 Humana-Walmart plan,” Washington says.

Washington says that plans and PBMs are trying to figure out new ways to keep costs low through mail order and preferred pharmacy networks. “If Part D is working well with low premiums and good competition, that is generally good for the plans and the PBMs that are participating in it.”

She adds that over the past five years, a fair number of people switched plans. “From 2009 to 2010, approximately 1.5 million low-income beneficiaries had to change plans. That number decreased to about 500,000 in 2011 due to the ACA changes. We are waiting to hear about the number for 2012.” Washington contends that if premiums remain stable, member retention will improve. “It’s a lot more efficient to have somebody year after year than to go through all the transitions.”

George Van Antwerp, general manager, pharmacy solutions at Silverlink Communications, Inc., says, “the model for managing prescription trend that the PBMs have applied in the commercial space such as formulary, utilization management, preferred networks and mail order were used for PDP, and the fact that premiums won’t go up is a validation that these tools can be used in Medicare.”

“If you look at all the stuff going on around managed Medicaid, validating that it works in Medicare is probably great for the business case around, ‘Can you apply these same frameworks? Can they help manage prescription drug costs within the Medicaid world?’ which I think is a big discussion area right now,” Van Antwerp tells DBN.

Van Antwerp says that in addition to the generic fill rate going up with Lipitor losing patent protection, more people are using lower-cost channels including a preferred pharmacy like the Walmart Humana Preferred Rx Plan and 90-day distribution at either mail order or retail.

Today's Datapoint

CMS BLOG

DEPARTMENT OF HEALTH & HUMAN SERVICES
Centers for Medicare & Medicaid Services
Room 352-G
200 Independence Avenue, SW
Washington, DC 20201
Office of Media Affairs


CMS BLOG

August 26, 2011
By Jonathan Blum, CMS Deputy Administrator and Director of the Center for Medicare

Today, CMS is finalizing rules implementing the Medicare Improvements to Patients and Providers Act (MIPPA) of 2008 that help people with Medicare receive high quality, coordinated care and choose the coverage they want.   Under these final rules, the Medicare program will provide:

Stronger Consumer Protections in Choosing Plans

Under these rules, we’ve strengthened our requirements for what agents and brokers selling Medicare Advantage and Medicare Prescription Drug plans can and can’t do when they are selling you a plan.  There are limits on the commissions agents and brokers can receive, so plans will compete on the basis of benefits and quality, and not the size of their agent commissions. This rule also makes sure that agents and brokers aren’t rewarded if they sell you a plan that doesn’t meet your needs and you leave the plan within the first 90 days.

The rules also now require that Private Fee-for-Service (PFFS) plans in most parts of the country have contracts with medical providers like hospitals and specialists. PFFS plans allow you to see any provider who agrees to accept payment from the plan. These new requirements give you greater security that you will be able to use the hospitals or specialists you need when you join a PFFS plan.

Better Care for People with Special Needs

These final rules ensure that Medicare Special Needs Plans (SNPs) are improving the quality of care they provide and making sure that care meets the needs of individual patients. SNPs are a type of Medicare Advantage plan for people who are enrolled in both Medicare and Medicaid, people who have certain serious chronic conditions, or who need institutional care, like in a nursing home.

Under these rules, SNPs must develop a Model of Care that ensures your health care needs are assessed, a plan of care is developed specifically for you, and a team of health care providers manages your care. SNPs must also have a quality improvement program that measures whether the care being provided is actually making you healthier.
The rules play a key part in CMS’s overall strategy to improve the care people receive in SNPs and in all Medicare Advantage plans. Under the Affordable Care Act, starting in 2012 SNPs must be approved by the National Committee for Quality Assurance (NCQA). And, also as a result of Affordable Care Act, all Medicare Advantage plans can receive bonuses from Medicare if they rate highly on the quality of care they deliver.

These are just a few ways we are helping to protect you from being sold a policy you don’t really want, and ensuring you feel safe and confident about the health care coverage decisions you make. Under the Affordable Care Act, CMS now sets limits on how much your Medicare Advantage plan can increase your premiums and copays each year. This helps make sure what you pay out-of-pocket does not skyrocket after you join the plan.

For more detail about the revisions to the Medicare Advantage and Medicare Prescription Drug Benefit Programs, go to http://www.ofr.gov/OFRUpload/OFRData/2011-22126_PI.pdf

CMS BLOG

DEPARTMENT OF HEALTH & HUMAN SERVICES
Centers for Medicare & Medicaid Services
Room 352-G
200 Independence Avenue, SW
Washington, DC 20201
Office of Media Affairs


CMS BLOG

August 26, 2011
By Jonathan Blum, CMS Deputy Administrator and Director of the Center for Medicare

Today, CMS is finalizing rules implementing the Medicare Improvements to Patients and Providers Act (MIPPA) of 2008 that help people with Medicare receive high quality, coordinated care and choose the coverage they want.   Under these final rules, the Medicare program will provide:

Stronger Consumer Protections in Choosing Plans

Under these rules, we’ve strengthened our requirements for what agents and brokers selling Medicare Advantage and Medicare Prescription Drug plans can and can’t do when they are selling you a plan.  There are limits on the commissions agents and brokers can receive, so plans will compete on the basis of benefits and quality, and not the size of their agent commissions. This rule also makes sure that agents and brokers aren’t rewarded if they sell you a plan that doesn’t meet your needs and you leave the plan within the first 90 days.

The rules also now require that Private Fee-for-Service (PFFS) plans in most parts of the country have contracts with medical providers like hospitals and specialists. PFFS plans allow you to see any provider who agrees to accept payment from the plan. These new requirements give you greater security that you will be able to use the hospitals or specialists you need when you join a PFFS plan.

Better Care for People with Special Needs

These final rules ensure that Medicare Special Needs Plans (SNPs) are improving the quality of care they provide and making sure that care meets the needs of individual patients. SNPs are a type of Medicare Advantage plan for people who are enrolled in both Medicare and Medicaid, people who have certain serious chronic conditions, or who need institutional care, like in a nursing home.

Under these rules, SNPs must develop a Model of Care that ensures your health care needs are assessed, a plan of care is developed specifically for you, and a team of health care providers manages your care. SNPs must also have a quality improvement program that measures whether the care being provided is actually making you healthier.
The rules play a key part in CMS’s overall strategy to improve the care people receive in SNPs and in all Medicare Advantage plans. Under the Affordable Care Act, starting in 2012 SNPs must be approved by the National Committee for Quality Assurance (NCQA). And, also as a result of Affordable Care Act, all Medicare Advantage plans can receive bonuses from Medicare if they rate highly on the quality of care they deliver.

These are just a few ways we are helping to protect you from being sold a policy you don’t really want, and ensuring you feel safe and confident about the health care coverage decisions you make. Under the Affordable Care Act, CMS now sets limits on how much your Medicare Advantage plan can increase your premiums and copays each year. This helps make sure what you pay out-of-pocket does not skyrocket after you join the plan.

For more detail about the revisions to the Medicare Advantage and Medicare Prescription Drug Benefit Programs, go to http://www.ofr.gov/OFRUpload/OFRData/2011-22126_PI.pdf

Medicare Reimbursement For Skilled Nursing Facilities Remains High For 2010 Despite Reductions In Overpayments

Is Less Choice Actually Better for Seniors in MA?

By James Gutman - August 19, 2011

When is having a lot of choices in health plans a bad thing? The answer, according to researchers in a Health Affairs website article released Aug. 18, is when it's seniors trying to choose among a plethora of Medicare Advantage plans. The authors contend, based on fairly old CMS data (running from 2004 to 2007), that too many choices confuse and overwhelm seniors, especially those with "cognitive deficits," and make beneficiaries less likely to enroll in MA plans. The findings could give added fuel to ongoing CMS efforts to make sure there are "meaningful differences" among MA product offerings of individual sponsors and to eliminate low-enrollment plans. But one of the major contributors to the rise in the mean number of MA options between 2004 and 2007 was the proliferation of private-fee-for-service plans, and they have been in retreat in the past two years because of the CMS-mandated end of PFFS network "deeming" in most counties at the close of 2010.

PFFS plans were cited in the study as a big factor in the growth of MA options, but there was no real discussion of what has happened to PFFS plans since 2007. The authors instead used the old data to find that having more options caused increased MA enrollment when beneficiaries were offered fewer than 15 plans, and that MA enrollment actually remained steady or declined "when beneficiaries had to choose from 15 to 30 or more than 30 plans." Moreover, the study conducted by Harvard Medical School professors found that "elderly respondents with low cognitive function were less responsive to the generosity of available benefits when choosing between traditional Medicare and Medicare Advantage."

New Initiatives to Improve Services for Dual Eligibles

The Centers for Medicare & Medicaid Services (CMS) recently announced several new initiatives focused on improving care for people who are eligible for both Medicare and Medicaid (dual eligibles).
Two initiatives relate to providing fully integrated services to dual eligibles, through both capitation and fee-for-service structures.  A third initiative addresses preventing unnecessary hospitalizations of nursing home residents, with special focus on nursing facilities that serve high numbers of dual eligibles and that have high hospitalization rates.  Finally, CMS announced the creation of a resource center to "assist States in delivering coordinated health care to high-need, high-cost beneficiaries."[1]  The goals of the resource center are to help States "to better serve beneficiaries, improve quality and reduce costs."[2] This Alert offers some more information on the three initiatives.
Initiatives 1 and 2 - Integrated Services
In a State Medicaid Director letter (SMDL) dated July 8, 2011, the Centers for Medicare & Medicaid Services outlined two new models for States to use to integrate primary, acute, behavioral health, and long-term supports and services for their enrollees who are dual eligibles.[3]
The new initiative comes from the work of the Medicare-Medicaid Coordinating Office (MMCO), which was established under authority of the Affordable Care Act to improve access to health care services for dual eligibles and to address issues of the high cost of care for that population.  In an earlier initiative, MMCO awarded contracts to 15 States to develop plans to integrate services.[4]
The capitated model contemplates a three-way contract between a State, CMS, and a health plan.  The plan will receive a capitated rate that is a blend of the Medicare and Medicaid rates to provide all benefits of both programs.  The blended rate is expected to provide savings for both States and the federal government.  The model anticipates testing certain flexibilities, including the provision of supplemental benefits, enrollment flexibilities, uniform appeals, audit, and marketing rules and procedures.  Under current law, each program may have different rules in such areas, making it complicated for a single plan to meet both sets of standards.
The fee-for-service model seeks to address an issue that has long been raised by States.  That is, if States improve quality and provide better long-term supports and services, beneficiaries may have fewer Medicare-paid-for hospitalizations, but the States do not get the benefit of the Medicare savings.  The new model allows States to share in Medicare savings that are produced by serving dual eligibles more efficiently and effectively.
The SMDL includes templates of Memoranda of Understanding relating to both models.

Initiative 3 - Improved Care Quality for Nursing Facility Residents

This demonstration is offered through collaboration between the MMCO and the Center for Medicare and Medicaid Innovation (CMMI), which was authorized by the Affordable Care Act to test a variety of payment models to improve health care without increasing cost or to reduce cost without reducing quality.  According to the CMS press release, the initiative addresses "a wide-spread and costly problem:  nursing facility residents are subject to frequent preventable inpatient hospitalizations" that are potentially harmful to the residents and very costly to Medicare.[5]
Under the nursing home demonstration, CMS will contract with independent entities (i.e., outside the nursing facility's staff) to provide enhanced clinical services to people in 150 skilled nursing facilities nationwide.  Such services could include focus on improving transitions between hospitals and skilled nursing facilities and implementing better practices to prevent the conditions that often lead to hospitalizations:  falls, pressure ulcers, and urinary tract infections.
As noted above, CMS will target facilities with high rates of hospitalization and high numbers of dual eligibles among their residents.
One concern about this initiative arises in connection with how "hospitalization" is defined when measuring the success of interventions.  Quality measures generally look at "inpatient" hospitalizations when calculating the rate of "hospitalizations" and "rehospitalizations."  In recent years, the Center for Medicare Advocacy has seen a substantial increase in the numbers of Medicare beneficiaries whose hospital stay is labeled as "observation" status rather than "inpatient" status.[6]  In the context of this initiative, a hospital stay on "observation status" could lead to an incorrect conclusion that the particular intervention has been successful, when, in fact, the resident was subject to all the potential bad outcomes associated with inappropriate hospitalizations.

Conclusion

The new initiatives offer promise of improved care for the sickest and frailest individuals in our society.  They also come with a clear emphasis on reducing the costs to Medicare and Medicaid of caring for these most vulnerable individuals.  Advocates will have to stay engaged with the process as details of the initiatives unfold to ensure that strong beneficiary protections are woven into all aspects of the initiatives.[7]  The Center will continue to analyze and write about these initiatives as details are reported.

For more information, contact attorney Patricia Nemore (pnemore@medicareadvocacy.org) in the Center for Medicare Advocacy's Washington, DC office at (202) 293-5760.
 

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[1]  CMS, "Obama Administration Offers States New Ways to Improve Care, Lower Costs for Medicaid; Initiatives Focus on People Receiving Medicare and Medicaid Benefits." Press Release (July 8, 2011) at:http://www.cms.gov/apps/media/press/release.asp?Counter=4024&intNumPerPage=
10&checkDate=&checkKey=&srchType=1&numDays=3500&srchOpt=
0&srchData=&keywordType=All&chkNewsType=1%2C+2%2C+3%2C+4%2C+5&intPage=
&showAll=&pYear=&year=&desc=&cboOrder=date.  See also CMS, "Testing Financial Models to Support State Efforts to Coordinate Care for Medicare-Medicaid Enrollees; Two New Models Available to States to Improve Quality and Decrease Costs," Fact Sheet (July 8, 2011) at:
https://www.cms.gov/apps/media/press/factsheet.asp?Counter=4023&intNumPerPage=
10&checkDate=&checkKey=&srchType=1&numDays=3500&srchOpt=0&srchData=&keywordType=
All&chkNewsType=6&intPage=&showAll=&pYear=&year=&desc=&cboOrder=date.[2] Id.[3] Letter from Cindy Mann, Director, Center for Medicaid, CHIP and Survey & Certification, and Melanie Bella, Director, Medicare-Medicaid Coordination Office, to State Medicaid Directors, re:  Financial Models to Support State Efforts to Integrate Care for Medicare-Medicaid Enrollees, SMDL #11-008, ACA #18 (July 8, 2011) at:https://www.cms.gov/smdl/downloads/Financial_Models_
Supporting_Integrated_Care_SMD.pdf.[4] The 15 states are:  CA, CO, CT, MA, MI, MN, NY, NC, OK, OR, SC, TN, VT, WA, WI[5] CMS, "Demonstration to Improve Care Quality for Nursing Facility Residents; Initiative to Reduce Preventable Hospitalizations," Fact Sheet (July 8, 2011) at:
https://www.cms.gov/apps/media/press/factsheet.asp?Counter=4022&intNumPerPage=
10&checkDate=&checkKey=&srchType=1&numDays=3500&srchOpt=0&srchData=&keywordType=
All&chkNewsType=6&intPage=&showAll=&pYear=&year=&desc=&cboOrder=date.[6] See Extended Observation Stays in Acute Care Hospitals:  Criticism, Legislation and Discussion at:
http://www.medicareadvocacy.org/InfoByTopic/ObservationStatus/
10_08.26.ObservationStatusCriticismEtc.htm and Preventable Emergency Department Visits by Nursing Home Residents at:http://www.medicareadvocacy.org/InfoByTopic/SkilledNursingFacility
/10_08.19.PreventableEmergencyVisits.htm
[7]   See, e.g. Letter of December 13, 2010 from 38 organizations and individuals to Secretary Sebelius and  attached Recommendations for Beneficiary Protections in Models Approved by the Center for Medicare and Medicaid Innovations, available at:
http://www.medicareadvocacy.org/2011/07/
recommendations-for-beneficiary-protections-in-models-approved-by-cmmi/.   See also, Kevin Prindiville and Georgia Burke, Ensuring Consumer Protections for Dual Eligibles in Integrated Models,  July 2011 at:
http://www.nsclc.org/areas/medicare-part-d/
Issue-Brief-Ensuring-Consumer-Protection-for-Duals.

Debunking Medicare Myths:Drug Rebates for Dual Eligibles

In the midst of ongoing deficit reduction proposals and negotiations, policymakers are considering a wide array of approaches for cutting spending and saving federal dollars. The Center for Medicare Advocacy recently wrote of ways to strengthen the Medicare program while tackling our deficit in a responsible manner that does not endanger the care of Medicare beneficiaries or their families.[1] Included in our analysis was a proposal that would save taxpayers billions of dollars: reinstating drug rebates currently available to Medicaid beneficiaries to those dually eligible for both Medicare and Medicaid (Duals). Since Duals received their prescription drugs through Medicaid prior to the implementation of Medicare Part D, their drugs were subject to the Medicaid rebates through 2005. Simply reinstituting such rebates could save more than $200 billion over ten years.[2] This alert addresses some common misconceptions about the merits of reinstating such drug rebates.
Myth: Competition among private plans in the Medicare Prescription Drug Program (Part D) program slowed increases in drug prices

Truth: On the contrary, evidence shows that drug prices in general soared after Part D was established and the cost of medications for the 9 million dually-eligible beneficiaries in particular increased when the duals began receiving drugs through Medicare Part D plans. In 2005, before Part D was enacted, the average retail cost of brand-name drugs for individuals with chronic conditions, largely duals, was $1,049. That cost rose over 30% by 2009 to $1,382.[3] In the 12 months before March 2010, the cost of brand-name prescriptions most widely used by Medicare beneficiaries, including duals, rose by 9.7%, far above the 0.3% inflation rate for the same period. The increased cost has been shifted to Medicare and consequently to all U.S. taxpayers.

According to drug pricing expert Stephen Schondelmeyer at the University of Minnesota, "the drug prices have gone up since Part D began; they haven't gone down. We thought these plans would negotiate better prices, but they haven’t."[4] A study by the Committee on Oversight and Reform confirmed that Part D plans produced little savings and the cost of ending the rebate for duals was $2.8 billion in 2007 alone.[5] The study found on average, Part D insurers reported receiving rebates on just 27% of the most used drugs by beneficiaries, while the Medicaid program receives rebates for all covered drugs.[6] Reinstating the drug rebates that existed prior to Part D will help curb costs that have been passed along from drug manufacturers and private plans to beneficiaries and taxpayers.

Myth: Reinstating drug rebates for duals will result in higher drug prices for other Medicare beneficiaries who purchase drugs.

Truth: When the rebate was eliminated, the price of prescription drugs for non-dually eligible Medicare beneficiaries rose. In fact, costs for common drugs rose much higher than the medical consumer price index's average annual increase from 2006 through the first quarter of 2010.[7] Extending previously-existing rebates for duals would not directly result in price increases for other populations.

Myth: Reinstating drug rebates for duals will result in decreased investments in research and development from drug manufacturers.

Truth: During most of the two decades when brand-name drug manufacturers were required to provide rebates, investment in research and development increased steadily. When the rebates were eliminated, the rate of increase in investment slowed rather than accelerating. According to the Pharmaceutical Research and Manufacturers of America's own calculation of their members' research and development investment, that investment increased from 2000 to 2005 by $13.9 billion but from 2005 to 2009, the increase was only $5.9 billion.[8] Ending the rebate did not spur investment in research and development, and reinstating it would not directly stifle innovation as claimed. In fact, assumptions of a direct link between additional profits and increased investment in research and development are undermined by the documented rise in the amount of dollars that brand-name drug manufacturers spend on advertising and promotion. In a 2008 study, researchers at NYU argued "in favor of changing the priorities of the [pharmaceutical] industry" after finding that despite their claim, brand-name drug manufacturers in the U.S. spent almost twice as much on promotion as they spent on research and development.[9] 

Conclusion

Reinstating the drug rebates that were available to dually-eligible beneficiaries prior to the Medicare Modernization Act will save taxpayers billions of dollars and help curb costs for beneficiaries.  As we have written, many other cost-saving proposals would harm the Medicare program and the many beneficiaries who are already struggling with high costs.[10] Policymakers should consider common-sense solutions, such as restoring drug rebates for duals, that save money for all taxpayers and Medicare.

For more information, contact Xenia Ruiz (xruiz@medicareadvocacy.org) or attorney Patricia Nemore (pnemore@medicareadvocacy.org) in the Center for Medicare Advocacy's Washington, DC office at (202) 293-5760.

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[1] Center for Medicare Advocacy, "So, What Would You Do? Real Solutions for Medicare Solvency and Reducing The Deficit", available at: http://www.medicareadvocacy.org/2011/06/so-what-would-you-do-real-solutions-for-medicare-solvency-and-reducing-the-deficit/.
[2] National Committee to Preserve Social Security and Medicare, available at: http://www.ncpssm.org/pdf/price_negotiation_part_d.pdf  [3] Ben Adams, InPharm, "U.S. Prescription Drug Prices Rise Above Inflation", August 27, 2010, available at: http://www.inpharm.com/news/us-prescription-drug-prices-rise-above-inflation.
[4] AARP Public Policy Institute, Rx Watchdog Report: Brand Name Drug Prices Continue to Climb Despite Low General Inflation Rate, available at: http://assets.aarp.org/rgcenter/ppi/health-care/i43-watchdog.pdf.
[5] Committee on Oversight and Government Reform, "Private Medicare Drug Plans: High Expenses and Low Rebates Increase the Costs of Medicare Drug Coverage", October 2007, available at: http://www.allhealth.org/briefingmaterials/housemajoritystaff-965.pdf.
[6] Id.
[7] GAO, Prescription Drugs: Trends in Usual and Customary Prices for Commonly Used Drugs, available at: http://www.gao.gov/new.items/d11306r.pdf.
[8] PhRMA, 2011 Profile Pharmaceutical Industry, available at: http://www.phrma.org/sites/default/files/159/phrma_profile_2011_final.pdf.
[9] Mac-Andre Gagnon, Joel Lexchin, "The Cost of Pushing Pills: A New Estimate of Pharmaceutical Promotion Expenditures in the United States", January 2008, available at: http://www.plosmedicine.org/article/info:doi/10.1371/journal.pmed.0050001.
[10] Center for Medicare Advocacy, "Keeping Medicare and Medicaid Strong?" available at: http://www.medicareadvocacy.org/2011/04/keeping-medicare-and-medicaid-strong/.

CMS Revises Its Medicare Secondary Payer Collection Letters Following Haro v. Sebelius Decision

The Medicare Secondary Payer (MSP) program authorizes the Centers for Medicare & Medicaid Services (CMS) to recover compensation payments from beneficiaries who have private insurance that should be primarily responsible for their medical expenses.[1]

In a class action lawsuit brought by Medicare beneficiaries and their attorney to challenge certain harsh MSP collection practices, a federal district court in Tucson, Arizona, recently held that these collection practices exceed the agency's statutory authority.[2] Although CMS filed a notice of appeal on June 30, 2011, it has also revised two of its MSP collection letters to comply with the district court's orders.[3]
In the first part of its decision, the court held that CMS cannot insist that it be paid within 60 days of demand if the beneficiary has exercised his or her right to either appeal the amount claimed as reimbursement by Medicare, or to request a waiver of recovery. In the second part of its decision, the court focused on the demands made on the beneficiary's attorney, holding that CMS cannot hold the attorney financially responsible if the attorney does not withhold funds from his or her client until the MSP claim has been paid.
The "Rights & Recovery" Letter
When the MSP recovery contractor first learns that an insurance liability claim is being made by a beneficiary, it sends the beneficiary and/or the beneficiary's attorney a "rights and responsibilities" letter. The newly revised form for this letter can be found on the contractor's website, www.msprc.info/.  The revised letter omits the statement made in earlier letters that Medicare should be repaid before funds are disbursed for other purposes. It adds a statement that Medicare will not take any collection action if an appeal or waiver request is pending. This change is significant because the demand for immediate repayment has had a chilling effect on beneficiaries' right to contest the MSP claim.
The Payment "Demand" Letter
A second letter is sent by the MSP contractor to the beneficiary and/or the beneficiary's attorney after the insurance claim has been resolved by settlement or judgment. The revised form for this "demand" letter states that repayment of the MSP claim within 60 days is "requested," replacing language from the earlier MSPRC letters that stated "you must repay Medicare within 60 days."  It also clarifies that Medicare will not initiate any recovery action while an appeal or waiver request is pending. Although it states that collection of unpaid Medicare debts may include Treasury offsets against monies payable by federal agencies, it no longer mentions termination of Social Security, Railroad Retirement, or future Medicare payments, and states that notice of any intended collection action will be provided. 

The MSP Manual

In addition to the revisions of the MSP form letters, CMS has also undertaken a review of Chapter 7 of the Medicare Secondary Payer Manual since the Haro decision. See CMS Pub 100-05, at www.cms.gov/Manuals/IOM/list.asp .   It is likely that CMS revisions to this chapter of the manual, which specified contractor recovery procedures for liability insurance, will reflect changes in MSP collection practices ordered by the court.

For more  information about the Medicare Secondary Payer program, contact Center for Medicare Advocacy attorney Sally Hart at shart@medicareadvocacy.org.

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[1] Additional information about the Medicare Secondary Payer program can be found in earlier Alerts at www.medicareadvocacy.org/medicare-info/medicare-secondary-payer-program/.
[2] Haro, et al. v. Sebelius, 2011 WL 2040219 (D.Ariz. May 9, 2011).
[3] CMS had already revised these notices once, after the Haro lawsuit was filed, but the district court held that those initial changes were not adequate to cure the deficiencies identified by the plaintiffs.