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Citizens’ Health Care Working Group Meeting

Friday, May 13, 2005
Crystal City, VA



Randy Johnson, the Chair of the Citizens’ Working Group (CWG), called the meeting to order as scheduled; all members were present. Highlights of the discussion for the day are presented below.

Building the Foundation: Health Care Costs

Jennifer Jenson, Congressional Research Service
Rick Foster, Centers for Medicare and Medicaid
Stephen Heffler, Centers for Medicare and Medicaid

See Jennifer Jenson’s Powerpoint Slides and CWG-provided Comments.
See Rick Foster’s and Stephen Heffler’s Combined Powerpoint Slides and CWG-provided Comments. For a verbatim record of the speaker’s statements, see Transcript.


Randy Johnson: Is there an offset because drugs may reduce the need for other services? Foster responded that to some extent this is so. But he believes that, with regard to Part D (prescription) benefits, it will be too little to measure. Secondly, if one believes that it would be possible to stay out of the hospital by getting a certain drug, one would have a strong incentive to obtain the drug. Other studies conducted have indicated that by taking more drugs, there are increased likelihoods of drug-to-drug interactions; however, the Office of the Actuary has assumed nothing regarding this latter effect because there isn’t enough information at present to make an estimate.

Patricia Maryland: Is it true that hospitals have managed costs pretty well? Foster agreed with this assessment. He indicated there have been some improvements in productivity.. The prospective payment system for hospital has been a restraining factor encouraging hospitals to be more efficient. HMOs also have been partially successful in keeping people out of hospitals. Hospitals are not the big villain even though they are the big source of expenditures.

Patricia Maryland: Has there been any effort to correlate spending and outcomes for OECD countries? Richard Frank indicated that a recent issue of Health Affairs had information on this. Michael O’Grady indicated that Japan is trying to examine this. He indicated that most of the OECD countries believe they are facing similar challenges and constraints as the United States. The vast immigrant influx in OECD countries is also now presenting them with the types of challenges that the United States has been addressing for some time. Catherine McLaughlin indicated that in addition to the connection noted earlier between income and health status, research shows that the distribution of wealth is also an important factor explaining differences in health status in different countries. Brent James concurred that other countries are facing the same problems.

Richard Frank: Do the health accounts data isolate costs of fraud and abuse? Heffler confirmed that direct information on this was not available but indicated that if there is spending for providers, it will be reflected in provider revenue reports, whether for care or other expenditures. The Office of the Actuary (OA) collects revenue data so fraud and abuse in that sense is not excluded. Frank also asked about dealing with different sources of survey data; how would the OA recommend that the Citizens’ Working Group deal with these differences? Heffler indicated that an effort to reconcile Health Accounts and MEPS data was going to be completed by the end of 2005; and the OA could probably share that information with the Working Group – AHRQ has the lead on this effort.

Michael O’Grady: Medicare controls price but not utilization. How does the OA think about utilization and how it impacts on the overall growth rate in expenditures? Foster indicated that advances in technology are a social good but such advances also increase utilization (and therefore costs) (e.g.: hip replacements for people in their 90’s?). A large portion of the increase in expenditures per person in Medicare during the past 10 years has been for care/services during the last year of life. Studies have also revealed that when reimbursements and rates to physicians go down, utilization goes up.

Michael O’Grady: So called tax expenditures, which are scored as health “costs” to the government, result from health benefits not being taxable and businesses being able to take those costs as tax deductions. Can the OA track this information? Heffler indicated that this information is not included in the National Health Expenditure figures, but is reported as separately. Michael O’Grady indicated that the tax treatment of health benefits was a vestige of the Wage and Price controls coming out of World War II.

Montye Conlan: Would spending more on medical research result both in better health care and lower expenditures? Jenson indicated that medical research is a double edged sword: we discover new wonderful treatments but they also add costs to the system and increase spending. The costs may well be worthwhile but they are real costs that have to be acknowledged. Christine Wright indicated that the research and development is itself a cost, particularly because it is regulated (e.g., patient consent for clinical trials, etc.). Montye Conlan indicated that, in particular, the research for neurological diseases was limited and asked whether there was appropriate and sufficient inclusion of various patient groups in clinical trials (such as women). Michael O’Grady indicated that we have doubled the expenditures of NIH in the past several years. Therese Hughes observed that, as a several-year kidney transplant survivor, she owes her life to past medical discoveries; on the other hand, some regulations, such as that requiring defibrillators in dialysis units, have resulted in individuals surviving, at best, for only very short periods of time. Brent James commented that, having spent a career in cancer research and treatment, he recognizes the difficulty in measuring what constitutes value. Dorothy Bazos mentioned that the health care system ought to be focused on what individuals need. We should examine what is really driving the system. Brent James referred to Wennberg’s studies of “supplier-induced demand”--Elliott Fisher followed up on Wennberg’s studies and found that the costs of health care could be predicted by the number of providers who were available.

Joseph Hansen: Even though the OA data indicates that out-of-pocket expenditures between 1980 and 2003 declined as a proportion of total expenditures, the aggregate amount of spending is larger, so therefore out-of-pocket expenditures have also increased. Jenson presented some data from a study of private health insurance that she is completing (and that she will provide to the CWG). Joe Hansen and Randy Johnson commented on the administrative costs for health care and whether there are estimates of these costs concerning hospitals. Foster and Heffler said there was some such information, but that this information was not included in the National Health Accounts. Michael O’Grady indicated that these costs need to be considered in the context of what facilities are actually producing.

Hearing: Public Sector Initiatives to Control Costs

Jack Hoadley, Georgetown University, “Controlling Costs in Medicare”
Medicaid: Jim Verdier, Mathematica Policy Research, “Medicaid”
Genevieve Kenney, Urban Institute, “State Children's Health Insurance Program, (SCHIP)”

See Jack Hoadley’s Powerpoint Slides and CWG-provided Comments.
See Jim Verdier’s Powerpoint Slides and CWG-provided Comments [see also presenter's fact sheet].
See Genevieve Kenney’s Powerpoint Slides and CWG-provided Comments.
For verbatim records of the speakers’ statements, see Transcript.


Randy Johnson: What options to address estate planning asset shifting are there? Verdier indicated that this is difficult to control and many people engaging in such activities may never become eligible for Medicaid. It may be desirable, for perceptual reasons alone, to tighten up on Medicaid estate planning rules. Michael O’Grady pointed out that requirements vary widely from state-to-state; it’s also necessary to consider both Federal and State requirements. In general states are getting more aggressive about asset recovery.

Deborah Stehr: It would be helpful for consumers to know what the expenditures are for services/products they receive or the levels of payments that are made on their behalf through home and community based services, since there is considerable flexibility. There appears to be a big mark-up between what products may cost and the charges assessed by suppliers. Verdier mentioned that the theory of one of the home and community based programs, the cash and counseling program, was to provide a fixed amount of funding and support to enable individuals to stay in the community. Early results of studies of these programs indicate that the programs don’t save huge amounts of money but that beneficiary satisfaction was enormous (approaching/exceeding 90%). Michael O’Grady confirmed that in programs like cash and counseling, the costs are a wash but the value to cost benefit is high. The trade-off is that these programs probably have a net cost because individuals who were not receiving benefits are enabled to do so.

Aaron Shirley: Is a more detailed break-out of Medicaid and Medicare expenditures for Federally Qualified Health Centers available? Verdier indicated that it is available. Hoadley said the National Association of Community Health Centers could provide such information.

Montye Conlan: Is there a way to require a participating provider to accept Medicaid and Medicare at certain volume; and are physicians correct in thinking that there is more malpractice risk with Medicaid patients? Verdier indicated that (regarding the first question) it could be done by statute but that that might be politically difficult. (Regarding the second question) studies have indicated that Medicaid patients do not sue more frequently than other groups.

Catherine McLaughlin: About the 6 million kids covered by SCHIP, how long do kids stay in the program, do they exit the program, and what happens when they exit? Do they become insured through Medicaid or private insurance? Do they become uninsured? Do we know if and how the SCHIP kids may differ from Medicaid kids? Are the costs per kid comparable between Medicaid and SCHIP? Kenney indicated that at any one point of time there are probably about 4 million kids in SCHIP; they stay in the program an average of about 9 months. Some departing kids go to employer-sponsored care; a bigger group is going to Medicaid; a significant group is becoming uninsured either because parents don’t know the child is no longer in the program or the child is aging out and no longer eligible. But there are gaps in knowledge; the longitudinal studies now being conducted will provide more information. The kinds of kids exiting are different from Medicaid but not much information is available yet about these differences. Comparing the kids in the two programs is difficult since the case mix is different and the data available don’t provide clear information to answer the question. Catherine McLaughlin summarized the conversation and data, observing that it appeared that SCHIP kids cost less than Medicaid kids.

Michael O’Grady: In the case of a setting like Wisconsin where families at 200% of poverty are being supported, why not encourage people to accept more of the costs associated with insurance through increased premiums? Kenney agreed that the trade-offs are different for those with higher incomes versus those who are at or below poverty. We need to know more about the impact of cost-sharing on enrollment at these higher income levels.

Patricia Maryland: Is Medicare considering going to a formulary for the competitive bidding process for prescription drug benefits? It seems that this would be a place to look to help control costs. Hoadley indicated that the drug plans will be able to come up with their own formulary offerings and consumers can then choose from among them. Plans are doing a lot of guesswork for the first year about what to offer. There are currently not very many studies to show what methods would control costs the best (e.g., tighter formularies, preferred drug lists). Pat Maryland also asked if Medicaid provider tax information was available on a state-by-state basis. Verdier said that it was not but that the GAO had done a report with case studies of six states.

Montye Conlan: What is the effect of moving the appeals process out of the Social Security Administration and into the Department of Health and Human Services and permitting a hearing without having to use an Administrative Law Judge? Michael O’Grady indicated that in the past the hearings process has been slow—sometimes taking years and that most appeals were from providers, not consumers. The revised approach is intended to get the appeal addressed more quickly; but anyone who strongly feels the need for an Administrative Law Judge should still be able to obtain the a traditional hearing.

Hearing: Private Sector Initiatives to Control Costs

Alice Rosenblatt, WellPoint
Helen Darling, Washington Business Group on Health, “Private Sector Initiatives: Controlling Costs and Empowering Consumers”

See Alice Rosenblatt’s Powerpoint Slides and CWG-provided Comments.
See Helen Darling’s Powerpoint Slides and CWG-provided Comments.
For verbatim records of the speakers’ statements, see Transcript.


Richard Frank: Turns out that a person’s choice of health insurance plan depends a lot on what their experience has been in the current year. Achieving for most Americans the goals of transparency, quality, and controlled cost is going to be very difficult.. Rosenblatt agrees that some of these plans are extremely complex.. Darling indicated that most employees don’t make changes or even read about the implications of potential changes in brochures until after the fact. More employees are choosing high deductible options to save money; also many Americans over-insure themselves.

Montye Conlan: Has WellPoint considered educating the consumer about the technical specifics of their health care? Rosenblatt agrees that making sure that appropriate care is provided systemically is needed as well as educating the consumers.

Aaron Shirley: What is WellPoint looking at for measures of quality? Rosenblatt indicated that they are using the measurement of beta blockers and other specific clinical examples. As a country, we need to move in the direction of rewarding both cost/efficiency and also quality; it isn’t enough just to have cost/efficiency savings. Efficiency should capture not just low cost options but also allow a weighting for case mix. Darling indicated that the Washington Business Group on Health is encouraging its members to seek providers who are willing to report their health care outcomes.

Joseph Hansen: Regarding centers of excellence, are you taking into account distribution of resources? Rosenblatt said that WellPoint provides economic incentives to get patients to go to centers where they have the best outcomes and lowest costs.

Richard Frank: How do you get cost information for pay-for-performance? Rosenblatt indicated one thing they are looking at is prescription drugs. WellPoint is trying to create smaller provider networks that consider both cost and performance on HEDIS measures. WellPoint tracks per member per plan costs; it expects savings from generic drug utilization. Brent James mentioned that there were new “shared savings” models that are being used. Darling indicated there will be more shared savings in the future.

Randy Johnson: Please share what your organizations are doing for, and what you recommend be done about, mental health. Rosenblatt said state laws are important on this; she referenced her Behavioral health slide (slide 15). Darling said most of WBGH business members offer mental health care. She said that employee assistance plans (EAPs) needed to be kept out of high deductible health plans. The EAP benefit should be available as an unlimited benefit ; it is different from and should be outside mental health coverage.

Working Group Business

The CWG discussed various administrative matters.

Randy Johnson, Chair, adjourned the meeting as scheduled.



Randy Johnson, Chair
Catherine McLaughlin, Vice Chair
Frank J. Baumeister, Jr.
Dorothy A. Bazos
Montye S. Conlan
Richard G. Frank
Joseph T. Hansen
Therese A. Hughes
Brent C. James
Patricia A. Maryland
Rosario Perez
Aaron Shirley
Deborah R. Stehr
Christine L. Wright
Michael J. O’Grady


George Grob, Executive Director
Andy Rock
Caroline Taplin
Ken Cohen


Jennifer Jenson, Congressional Research Service
Rick Foster, Centers for Medicare and Medicaid
Stephen Heffler, Centers for Medicare and Medicaid
Jack Hoadley, Georgetown University
Jim Verdier, Mathematica Policy Research
Genevieve Kenney, Urban Institute
Alice Rosenblatt, WellPoint
Helen Darling, Washington Business Group on Health

Editor’s note: The Citizens’ Health Care Working Group is an independent body whose members were selected by the Comptroller General of the United States. The Agency for Healthcare Research and Quality provides administrative support as directed by the Medicare Modernization Act.

For more information, contact the Working Group at (301) 443-1502.

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