Panel I: Overview of Health Care Financing
in the United States
DR. GORDON: Good morning, Dr. O'Grady, and thank you for coming to give us this overview, to take on this daunting task.Presenter: Michael O'Grady, Ph.D.
DR. O'GRADY: Does everyone have the slides in front of them from your briefing material? Okay, good. I would like to talk to you this morning a little bit about the logic of health insurance, coverage, different benefit design to a certain degree, and the different ways that they have evolved over the last decade or so, because there have been a number of different changes that have gone on. I want to start, briefly, with the logic of insurance, the role of insurance, beyond health insurance. When we think of what insurance really does, the key underlying principle is this idea of replacing an unpredictable and potentially catastrophic financial situation, and that is important in some sense. There is the other, catastrophic, but a financial situation that can occur, and replacing that with something that is quite predictable and manageable as a financial situation. So when we think of not only a catastrophic health event, your house burning down, stepping in front of a bus, something else going on, no matter what that happens to be, that is the underlying logic, the death of the main worker in a family. That is the underlying logic, to not face yourself with something that will bankrupt you, and you can't predict when it is going to happen. That $2,000 premium that comes every year, year in and year out, for all its down side, does make sure you don't face that million-dollar bill, suddenly, one time when you don't know it is coming. Even if you did know it was coming, the million-dollar bill would probably wipe you out anyway. Now, health insurance is a hybrid of what we normally think of as classical insurance because it also has this budgeting component. We normally don't think of going to our homeowner's every time we want to replace a window or clean the gutters. In health insurance, for a number of historical reasons having to do with things as unrelated as wage and price controls during World War II, it has evolved into something that actually covers much more than simply catastrophic health events, the same way your homeowner's covers catastrophic homeowner events. So we now have this situation where we are really paying for what would normally be thought of as routine expenses, which is sort of odd and unique in health insurance. Now, on the next slide, it is certainly not limited to these four, but these are the four big ones in terms of when you think about the way health insurance is typically provided in this country. The traditional way is fee-for-service medicine, which, I will go into a little more detail, but that is pretty much what most people are familiar with. You submit a bill. You are reimbursed; reasonable and customary. An insurer is making an estimate of what is a reasonable payment and paying some percentage of that, with the beneficiary paying the rest. Health maintenance organizations arrived on the scene a good 30, maybe pushing 40 years ago now, in terms of a different form, a capitated payment. There is no longer an insurer, in the traditional sense, holding the risk. There is an organization of physicians and hospitals that has banded together to form a health maintenance organization. Now, there are two new forms that are starting to pick up their popularity. The one I am about to mention has really become quite popular in terms of this response to both fee-for-service medicine on the one hand, and HMOs on the other. The one is the Preferred Provider Organization. That is when you hear statistics quoted about 80 percent of Americans are now in managed care. To a certain degree, don't be misled to think they are all going to their Kaiser-Permanente group of 100 docs practicing in one building downtown. Much of that growth has been in these PPOs or Preferred Provider Organizations, which are a response from fee-for-service to some of the price and savings that you see in HMOs. The fourth one that I would like to talk briefly about is the point-of-service plan, and this, again, is a response from HMOs moving more towards fee-for-service in order to offer people more choice, because often the complaint in a traditional HMO is the lack of choice of a specialty provider. Now, taking it a little deeper into each of these, the key characteristics, the essentials in a traditional fee-for-service plan, and there are certainly tons of them. This is what we typically think of Blue Cross Blue Shield, at least Blue Cross Blue Shield 10 years ago, Medicare, the traditional government-run program, not the private plans. This is what we normally think of as traditional fee-for-service. Now, there is really, in effect, I say here, limited or no management by insurers. In the last five to six years, anyway, the Blues and some of the other fee-for-services have attempted to say that they at least do some minimal management. There is at least a passing of the data. Well, here is a typical example I will give you of what they would do in terms of a notion of management in this context. You take a look at various physicians operating in a particular hospital, and you take a look at who is the most expensive, who is costing you the most. Let's say it is six people. Then you go back and you dig, and you see who they are. Well, you find that three of them are doing the hardest burn cases, the hardest cancers; they are really taking the toughest cases. Then you see three really don't have a particularly tougher caseload than anyone else, but they are just ordering more tests; they are bringing their patients back in that much more frequently. That is the sort of thing that, in this environment, they are going to at least start to ask some questions about how that practice is going. That is normally referred to as physician profile. Now, one of the less managed aspects of this, and a key thing in terms of thinking about the economics of what is going on, is, there is a payment per procedure, so you do it; you send the bill in later; they pay you. The more procedures you do, the more you are paid. So there is clearly an incentive set up, or at least there is no disincentive to continue to do more and more and more. Certainly, this is quite limited in terms of its cost efficiency, and just in the competition that goes on between different health plans, these sorts of plans have not been very competitive, especially in recent years, with HMOs and with these other hybrid forms that I will talk about in a second. Their premiums have gone up faster. They are not managing the benefit; they are not being careful. The incentives for the providers, if there is anything, there is incentive to do more, not less. That has both its advantages and disadvantages, but at least in terms of, if you are in a situation where you are competing with other insurers to not have the highest premiums in town, that is not a great situation to be in. Now, any financial risk here is held by the insurance company. It is important to keep that in mind here. One of the common themes will be, who is holding the financial risk. If somebody miscalculates in how much it is going to cost one year to the next in terms of this, who is left holding the bag? In this case, the beneficiaries who have actually subscribed for this kind of coverage, they and their employers, as is typical, have shared the cost here, perhaps 80 percent employer, 20 percent being paid by the worker. If that premium isn't enough to cover the costs that come in at the end of the year, they are not willing to come back to the insurance company and say, would you like us to give you another $1,000 for this year. It doesn't work that way. The insurer is on the hook. If you would like to get into later, there are different models that have grown up that are a little different in terms of where employers actually hold the risk and let insurance companies simply manage the benefit, but I was trying to stay with key principles at this point. Now, when we think of HMOs, the main thing going on there, the distinction is, the notion of a capitated payment, that in effect the HMO is acting like the insurance company. They are given a capitated payment, normally by an employer or whoever is purchasing the coverage. They are given that amount. That gives them a certain freedom to do whatever they think is the right mix of benefits, services, providers, in order to offer coverage that will be satisfactory to the beneficiary, but it also means that, with that, they hold the risk that if they miscalculate in what that premium is, they are left holding the bag, they are the ones who will go bankrupt, not the insurance company. Certainly, there are very strong incentives, and it is a design for cost efficiency. Many people have said that they have gone overboard, that there is a question of quality. Now it is a situation when you have a capitated payment, it is the exact flip side of what we saw with fee-for-service. You are, in effect, financially in a situation where you have greater incentives to do less, not to do more, in terms of, you have a set pot of money. If you use it all up on various services and bringing them in for more and more visits, that cuts into what is available for providers' salaries and other profits of the HMO. So one of the things, rather than stay very general, to start thinking of some of the concerns that you folks might have, is, the HMOs have, in a sense, been more open than we normally see, certainly than some of the government programs like Medicare. They have been more open to the idea of alternatives. Now, to a certain degree, it is good medicine; to a certain degree, it is bottom line. They are certainly open to the idea of cost efficient alternatives: do you really need a physician to see this person in a traditional setting. You have a good group of diabetics. You are trying to tighten up their control. What can you do with a diabetes educator; what can you do with a nurse practitioner; what can you do with a dietician. So that notion of an openness to something other than somebody with an M.D. at the end of their name, constantly seeing this person every time, or, certainly open, in terms of a cost sense, to people having an alternative to going to a hospital. It is quite clear to HMOs that the way that costs them the most money is when people are hospitalized. Hospitals going at $1,500 or so per day, certainly, avoiding a day or two of hospitalization, you have saved yourself a fair amount of money, given that that is roughly the amount that people are paying in their annual premium for the whole time. So they certainly have been, at least historically, more open to alternatives. We will have to see how that continues in the future. The Preferred Provider Organizations, I would like to talk to you a little bit about them for a second because they are sometimes thought of as managed care lite. They are the fee-for-service industry's response to what is going on in terms of the rise of managed care. What I have talked about so far has mostly been the financial incentive for providers. What they also realized in most of the writing on fee-for-service medicine, is that one of the problems is that the beneficiaries have very little incentives themselves to be cost efficient. They basically cover their deductible, now typically maybe $250 for the year. They do have a certain amount that they pay, but they are paying probably at most 20 to 25 percent of any particular bill. What a PPO design offers them, is, it offers them an option to go to a lower cost, for them, alternative. They can go to a provider for a $10 co-pay rather than a 25 percent co-insurance. They can see different people, but they have to choose from the list of providers who have agreed to offer the insurer a price discount. Now, some of your other witnesses can talk about how those contracts work. Let's say I am -- and I don't want to keep picking on Blue Cross Blue Shield -- so, Aetna or somebody, and you are coming in and you are dealing with a hospital in particular, and you take a look at this hospital and you say, my god; from our analysis of the bills and the claims and whatnot, it looks like we must be 35, 40 percent of these people's business. Well, we certainly are a very good customer. So, at a minimum, you go to that hospital and you say, we know that at this point maybe 10 to 15 percent of your people are uninsured, and that is, in effect, to you, bad debt. Your prices are that much higher in order to cover that bad debt. Well, we know that if you come in and somebody has got our card, there is no bad debt; you will be paid. You may be squabble with us about whether it is the right amount you are paid, but you will not have bad debt if that person has an Aetna or a Blue Cross Blue Shield card. So right off the bat, we really don't expect to be charged that extra 10 or 15 percent that you are charging everyone else who might be presenting a bad debt situation for you. That is right off the bat, they are going to ask for some sort of a discount. As they said, they are going to look, and they will say, it looks to us like we are a good 30 or 40 percent of your business. Now, in any other business that is out there, if I am 30 or 40 percent of your business, don't I get some sort of volume discount. If you were an airline and we were buying that many tickets on your plane, we would expect some sort of a price break. Those are the initial rounds of things, as you can see in the economics of how you negotiate these things, you would want to do. Now, PPOs even go a step beyond that. What they are asking -- normally, you will see it on both the physician and the hospital side, but I think we normally see it on the physician side -- is the notion where they are asking you to come forward and offer them a price discount. There are certain things in the contract that will also protect them against you, simply upping your volume. If you used to see patients normally twice a year, you give them a 10, 15 percent discount and see them three and four times a year. So there are some protections in there. At least, the smarter insurers put those kind of protections in there. What they are saying to you is that we would like a price break, and for that price break, what we will do is we will make it very easy for our people to come to you. Rather than facing the deductible and the 25 percent co-insurance, they will only face $10. That certainly, at least in an emotional sense, can annoy quite a few providers, to have, all of a sudden, somebody come in; they used to charge $50 a visit, and now somebody says, we want you to charge our people $35. They are annoyed at that. Well, the dynamic that is going on there is this situation, especially in areas where you see an over-supply of providers, and it is particularly true in specialists. So you are a cardiac practice, and you have got five or six guys; you have got a payroll to meet; you have got to pay for that very expensive equipment, and your waiting room is only 50 percent full; your physicians are only seeing people, maybe, five and a half, six hours a day. You have to figure out some way to fill up that waiting room. So if someone comes to you and says, yes, I know it is not $50 per person that you see; it is only $35, but here is an opportunity to fill up those extra two or three hours, especially if you are a young provider, just out, who hasn't built up much of a practice. This can be an attractive offer, especially if the alternative is to continue to only work, effectively, half or two-thirds time and have a big, empty waiting room, and have the durable medical equipment people coming by to talk to you about when they are going to be paid. So that is the dynamic that is being offered here. It is traditional insurance in some sense. It is not a situation where these providers are on payroll the way we think of a traditional HMO, but at the same time, there is a negotiation based on price and there is also a set of incentives provided to the subscribers, to the beneficiaries, to the actual people who come and see you that will be given a price break on this if they come to the providers that have agreed to this discount. So the beneficiary saves money and the insurer saves money. It simply is an economic calculation on the provider side: Is this a deal that is worth making. The one little point I wanted to make here, also, is what we talked about before. To digress quickly for a second, what you will see is, you will see amazing variation across the country in terms of what it costs to practice medicine, things that certainly drives the Medicare program crazy in terms of why it is costing their people $700 a month in Dade County, and $300 a month in rural Iowa. They know that one is too high. One is probably too low. It is not like Iowa is the gold standard. Those people are having access problems and other things like that. But this sort of variation drives them crazy. As I said, in fee-for-services where you have an over-supply, especially, and if people are paid more the more procedures they do, part of those areas that are very, very high cost areas that have an over-supply. As I say, sometimes of hospitals, sometimes of specialists, there is not too many of them. So this, in effect, switches some of that incentive around from the insurer's point of view. From the insurer's point of view, an over-supply of physicians in a traditional fee-for-service is going to drive their costs up. In this sort of situation where you are asking providers to offer you a discount, and they are in fairly fierce competition with their colleagues, an over-supply of physicians drives costs down, or at least has the potential to, depending on how they negotiate. Now, the fourth type of plan I would like to talk to you briefly about is the point-of-service plan. This is a response, the same way that PPO was a response from traditional fee-for-service to try and move towards some of the things they thought they could do that managed care was able to do: negotiating discounts; offering some price incentives for people; offering some sort of a break. The point-of-service plan is the traditional HMO moving, to a certain degree, in the direction of fee-for-service. The main complaint there being the lack of choice of provider. This allows, in the sense you can think that fee-for-service built an in-network benefit when they moved to a PPO, and an HMO as building an out-of-network benefit for themselves, to be able to say, if people are traveling or if people really have a particular provider that they were really very, very loyal to, that they could continue to see them, but come into their HMO and see the HMO physicians for the rest of their care. It, in many, many ways, looks like a PPO in terms of, you see these differences between an in-network and out-of-network design. You go in-network, it is $10, no matter what the visit is. If you go out-of-network, it is a percentage, 25, 30 percent of the reasonable and customary charge. Now, the key distinction between a PPO and a point-of-service plan is the notion of, do you need a referral. It is coming out of the HMO world, and therefore, if you go out-of-network, still there is a strong connection there of a gatekeeper and some notion. Certainly, different plans have been diluting this down considerably over the last few years, but when you see people in either your own practices, if you are providers, or when you sit in the waiting room and you hear someone say, well, I am in, whatever; I am in Kaiser, or I am in CareFirst, or whatever. Then you hear the receptionist say something about, do you have a referral. Now, they are being careful. They are simply to be assured that they will get paid eventually, or they need to know that that person is really coming in and has agreed in effect, whether they know it or not, to pay 100 percent out of pocket for that care. The thing that sometimes is missed on the beneficiaries is, none of these organizations are saying you can't go to another provider. They are just saying you will have to pay for it if you go to another provider. So part of what is going on now, the PPOs and the point-of-service, within the last 10, maybe 15 years -- I think Abby could speak better to exactly when we first started to see them on scene -- it sets up a trade-off here, and it is a trade-off being offered to the beneficiaries; do they want to maximize choice of provider. They certainly can do that, but for that greater choice, they almost always have to pay more. Certainly, in recent years, it has been they pay more in premiums, but they also pay more in terms of the obvious out-of-pocket costs. That is where they are going to be paying a percentage of a charge. In some of the more traditional plans, if the provider charges more than the insurance company is willing to pay, there is also the chance that the beneficiary, the subscriber, will be paying what we call balanced billing. It is a $100 charge. The insurer says, we don't think so; we only think it is worth $80 when we look at reasonable and customary in your area. So the beneficiary is charged 25 percent of the $80, and then the additional $20 difference between what the insurance company is going to pay and what the provider feels that they should be paid. So certainly in that situation, for the beneficiary, for the subscriber, maximum choice, but also maximum financial out-of-pocket exposure. As we come down, you can save some more money if you go to a PPO, you can save even more on point-of-service, and eventually you are in the tightest control and the least choice of provider in what we think of as a traditional HMO. Now, what do we tend to see in terms of this? I don't know of anything systematic. We know some anecdotal sorts of things where what you will see, especially in the PPOs, is, you will see something where someone will have their longtime provider that they see, whether that is a general practitioner or someone. They will stay with them whether they are in-network or out-of-network, but then when they have something come up, they need to see an ophthalmologist, if they don't have a longtime ophthalmologist they have always seen, they turn to this, what is the network providers. They certainly, at that point, can go back to old Doc Jones that they have loved and worked with for the last 20 years and say, are there two or three guys here on this list that you are comfortable with me seeing for ophthalmology? And so, you can see this mixed pattern. There may be different things where they will stay with an out-of-network, more traditional provider that they have had for a long time to maintain that relationship, and pay more for it, but if it is somebody that they don't have that long-term relationship with and the guy that they do trust has said, oh, yes, Charlie and Joe are just fine, they will save the money and go to the guy on the in-network list. I wanted to talk a little bit in terms of the logic of why different things get covered and don't get covered. Correct me if I'm wrong, but certainly the medicine of it, you guys don't need me to tell you anything about, but this is more to think of the economics of it and, as Dr. Gordon mentioned, the business side of these things. If a new benefit actually is going to increase costs, and the kind of people who are normally doing this kind of work are actuaries and benefit design people, and whatnot. There is, perhaps, a slight bias based on experience that normally new benefits do increase costs. No matter what they were presented as, over time they tend to increase cost. Let's just say for a minute, you are looking at something that you know will increase cost, I mean, that certainly can be done, but it has to be done in such a sense that you know that the people who are your bottom line clients, whether that is employers or individuals, workers and retirees, et cetera, et cetera, are going to value that. The best example I can think of is prescription drugs. We are now in a situation, with the Medicare program, where there certainly is quite a debate going on about prescription drugs. Of the Medicare beneficiaries right now, if any of them think they are going to get prescription drugs without having to pay more, I don't think they have been paying attention to the news. They almost undoubtedly will be heavily subsidized. They won't pay dollar for dollar. They may pay 50 cents on the dollar, and the taxpayers will pick up the other 50. For the most part, is that still a popular benefit? Sure. They are very interested in being able to expand and pick up this extra benefit of prescription drug coverage, even though they know that it will cost them more, because they value that benefit more than they feel they will probably be charged. That is quite true of any of these sorts of things. So if there really is a compelling case, and the insurer knows that the people are not going to flinch at whatever the premium difference is going to be by the new benefit being covered, that is not anywhere near as controversial a move as it might be otherwise. If it is something that they are going to start to cover but there will be quite a concern about the premium effects, and it is liable to make them uncompetitive in this often very competitive market, there certainly is going to be quite a bit of hesitation. Now, the second situation is if it is basically cost-neutral, and we certainly have seen a couple of these. In terms of offering alternatives, that is certainly what is often put forward as the presentation of what you can do. It certainly is true if it is not going to cost anything more to the insurer, they have the option to remain agnostic on this. It is mostly in terms of when their actuaries go over it, is there some unpredictable cost that is hidden here. The examples I have given are things that are treatment-specific. If you have coverage and you know you have got X number of diabetics, you have got 5,000 diabetics out of 100,000 people that you insure, and you are deciding whether you are going to cover insulin pumps or not, well, you are pretty sure that somehow your exposure is not going to grow much beyond 5,000. It is not something where all of a sudden, there is going to be an off-label use for insulin pumps. You basically know what you are getting into. You can work that out. You can say: insulin pumps; 5,000 people; $5,000 a pump; what do we think we are going to reduce in terms of hospitalizations; what do we think we are going to reduce in terms of other sorts of complications of these people; and what is it going to mean long-term. Now, as I said, in terms of the weigh-off, if you decide that even if those pumps are better but they are still going to cost you a little bit of money, they may go forward and do it anyway as long as they don't think there will be too much of a push back from the employers or the beneficiaries. Certainly, if you can look at it, know that it is contained, know that you are not suddenly going to find that people are coming out of the woodwork to ask for insulin pumps, you can know what you are getting into. That is basically it. Now, capitated payments, the example I would give this is the debate that went on over mental health parity over the last five to six years -- well, I guess longer than that, because it certainly started around the time of the Clinton health care reform. This was a situation, especially in the managed behavioral health, where they came in and they said, at a minimum, we can guarantee you that this won't cost you any more. We can expand the kind of coverage we are doing for mental health. We can offer more, and because we manage it so well, it is not going to cost a dime. We will basically take the efficiencies out of managing it, and use that to expand benefits. Not an atypical insurer response was, fine, and we will give you the capitated payment that we currently spend on mental health, and you will be responsible for these new expanded benefits. That way, if you can do it, more power to you; but if you can't, don't come back to us for more money. So that, certainly, is another way. Is an insurer willing to move into a new area? Yes, if someone else holds the risk for them. That certainly lightens up their decision-making process quite a bit. The third one I just wanted to mention is, there are some that are really lucky when an insurer hits it, where you have something that adds value and doesn't add cost. The example, in terms of discussing with actuaries over the last decade or so, and this certainly is not true for the elderly -- this is not true for the Medicare population -- but for the non-elderly population, the addition of home health benefits was viewed as a great thing, because it was clearly a trade-off. It didn't cost them anything more, but those workers, those employees, who suddenly saw they had this option to not sit in a hospital, to be able to go home, to have a visiting nurse, to have that sort of service, it increased the value of the benefit package to them. They saw it as more valuable and it cost the insurer, it cost their employer, no more money. So that certainly was a great situation for them to be in. As I say, in the elderly, that is quite a bit different. It cost quite a bit of money. Now, covering a new benefit. If it decreases cost, everybody is happy; win-win; adds value; reduces premium; and also helps in terms of, you are offering more to the beneficiaries in terms of choice. You are offering them more benefits, in effect, and you are in a better price situation in terms of your competition. If it something that you are really pretty sure is not going to increase your premiums, and there are not really decreasing premiums in this world, but there is slowing the growth of premiums, that is a situation where certainly they are quite open-minded to the idea. MS. CHANG: Just to let you know, you have three minutes. DR. O'GRADY: Sure. Don't even need it. A couple of final points, just to think about. Clearly, much of insurance and much of when we think of coverage and what is going on, is based on incentives. There are incentives for the beneficiary, for the subscriber of the insurance, for the individual that is out there. There are incentives for the insurance company. There are incentives for providers. To a certain degree, people often get very frustrated with that, especially with the insurance companies. You can certainly get frustrated with them, but it is not the most productive thing if they are responding to the incentives that they are confronted with. So that is the dilemma in terms of thinking about this; do you want to try and think about how to respond to those incentives, or do you want to try and change those incentives, a tougher task. But, right or wrong, that i what is out there, is the only thing that I would, hopefully, leave you with. The other thing to keep in mind here, when different decisions are being made on coverage and whatnot, that the final decision, whether it appears this way or whether it is even in the short-term, this answer, really does stay with the person who holds the long-term financial risk. For example, let's take the very lean and mean squeeze-down of HMOs over the last five to eight years. Now, was that the HMOs just deciding that this was a better way to practice medicine, to deny care the way that they were, and to really question a lot more? No. They were basically receiving pressure from the employers, who are their major clients, their major customers, that said that premium growth was getting out of hand, and that if this HMO could not keep premium growth down, they would go to another and they would take their business elsewhere. And so, in times of very high premiums, they were receiving pressure from employers and other purchasers in order to keep it down. Now, did they go overboard? Sure. Some did, some didn't. Just to keep in mind, when we talk about things like Medicare, Medicaid, we are talking the government, for the most part, and when we are talking about private sector, we are normally talking employers. If we are talking within an HMO environment, we have this mix of a number. To a certain degree, they have these outside clients with employers in the government, and at the same time, they also have their internal notions of what they need to do to meet the bottom line. Thank you.Panel Discussion
DR. GORDON: Thank you very much. I just want to check with people in the audience. Can you hear okay? Can everybody hear okay? Great. Tom and Dean, Joe and George. MR. CHAPPELL: Thank you, Dr. O'Grady. To the question of managing the risk for the insurer, I have two scenarios to ask you about. Would the insurer find acceptable a notion of the government providing reinsurance the same way reinsurance is provided in casualty lines when risk goes beyond the calculated? That is my first question. My second question is, you were describing two types of insurance, the catastrophic, and then the budgeted. The budgeted example I think of is the industry's example to fund a dental hygiene checkup; no injury, no illness, just preventative maintenance. Many of the CAM services fit into that preventative or potentially budgeted program. In your opinion, do you think the insurers could entertain either a reinsurance concept and/or a continuation of the concept of the budgeting approach for CAM services? DR. O'GRADY: To take your second first, if that is okay. Assuming on the notion of budgeted versus long-term catastrophic there has been a logic there that tries to be flexible, although it may not appear that way to the outside, in terms of that if there are things that you normally wouldn't cover, but that if it appears cost effective in that it is going to avoid something you do cover that is liable to be much more expensive, there is certainly a notion to a certain degree, depending on the insurer, kind of extra contractual agreements that are done, but it is also the idea of are you willing to cover certain things that might avoid a hospitalization down the line, which is always sort of the big ticket item that you are trying to avoid. So I think that in terms of are they willing to pick up certain things that you would think of as being routine to avoid -- I think your example about the dental is fine, we don't normally think if dental hygiene as avoiding a hospitalization -- but are there other things that you could do. That is why they tend to be very generous sometimes on things, on immunizations, things that you know, if you get the kids the shots, you are going to avoid a lot of big, expensive trouble for those kids, sort of lose/lose; they-are-real-sick and you-are-out-a-lot-of-money situations. So I think that there is more this idea of, if there is some notion of something that they do cover that is liable to have a cost effect, are they willing to be more flexible in terms of how they do that. Different insurers look at that differently. The government is particularly poor at that, in that the government is not very flexible in terms of its ability to change its benefits. Let me draw a distinction because it is not fair to one of the next speakers. The Medicare program is not very flexible in doing it. FEHBP is not bad at all in terms of evolving their benefits and taking a look and being more flexible like that. I am not sure that a reinsurance mechanism in some question like that, of, what is going on. Certainly, if there is a need for a reinsurance mechanism, it would be more on the catastrophic. What we normally see on that in some of the things that have come up about covering the uninsured, where there is a subpopulation out there that has not had health insurance coverage, the insurers, the private market, is just nervous, it is just unpredictable. They don't know those folks. They don't know, given the same age, sex, part of the country, whether they will be someone who will cost the same amount as people who currently have insurance. Therefore, they are looking for someone to share their risk with, and the government is certainly a prime candidate for that sort of thing. Now, you also had a question about reinsurance. In terms of? I'm sorry, I forgot your first question. MR. CHAPPELL: The entities you have described are the beneficiary, the doctor, as far as discounts are concerned, and then the insurance, the private insurer. I am simply suggesting that the government could be a fourth party in the system. DR. O'GRADY: It could, yes. MR. CHAPPELL: But insofar as we are trying to increase choice for consumers, the industry loses leverage on price. So the government can be an additional entity in that system as a concept. DR. O'GRADY: It is, right. It can be. It can be in two ways. There are two types of reinsurance that we normally think of in this sort of situation. Is everybody comfortable with the notion of what reinsurance is? Okay. There are those where smaller insurers band together, the private insurers. What they do is they band together. They know they pay into a certain pool and they spread the risk for costs over, whatever, $100,000, any cases, whatever. The other one that has been brought up recently has to do with Medicare prescription drug benefit, where insurers will be responsible for costs up to a certain amount, but then in effect government-provided reinsurance picks up after that. The House Republican proposal last year had I think it was at somewhere around $7,000 or so, after that then the government would cover 80 percent of the cost over $7,000. That certainly is a mechanism that does throw you into the same mix here of everyone else who is competing for budget money. That is not an inexpensive way to go, and that will be tax money and then subsidy from the taxpayers. So that then puts you in that whole political mix. To a certain degree, I am glad you brought that up, because there are two ways to go here. One way is the idea of thinking about this market, thinking about the insurers, how that sort of goes. The other way is to go the government route. Now, that doesn't have quite the economic incentives that you face in terms of dealing with the insurance companies and employers and whatnot, but that puts you then in a different kind competition with people like the AMA and the AHA and other folks like that, which certainly can be done, but that is, in many ways, as tough a competition as the market competition. DR. GORDON: Thank you. Dean? DR. ORNISH: Well, first I want to thank you. I thought that was a really great overview, and I appreciate it, very clear. A couple questions. One of the things that you said very clearly was how financial incentives determine medical practice to a large degree, and that the idea behind HMOs and other iterations of managed care was to try to change the incentives for doing, say, procedures, and to look at cardiology, for example bypass surgery and angioplasty, and yet if you look at managed organizations, you really don't find that kind of decrease in those kinds of procedures, nor do you really find the corollary to that, which would be an increase in preventive approaches or wellness or health education or CAM. My first question is why do you see neither the reduction in procedures nor the increase in alternative approaches or preventive approaches when the incentives are supposed to be encouraging those two things? DR. O'GRADY: I don't know that I can answer that. I'm not sure why you wouldn't. Are you sure that it is across the board that all HMOs don't? As I look at different HMOs, I find that their practices do tend to very and that there are those that simply are called HMOs but they certainly spend most of their time just negotiating discounts with providers. DR. ORNISH: Right. DR. O'GRADY: And I don't see the kind of behavior. There are others that we see that certainly have tried to do different things, certainly some of the disease-management programs, some of the things in end-stage renal disease where the HMOs have been pretty effective. That is something again where they would want a very strong financial protection because those are very expensive cases, but they have been fairly effective in terms of managing them in a more coordinated sense, in terms of putting the team together and making sure that there is not this sort of sometimes disjointed care that you can get in a traditional fee-for-service environment. I don't want to sound overly cynical about them in terms of that they are only out to make money. They are certainly not out to go bankrupt, that is quite clear. DR. ORNISH: My question, though, is the whole point of HMOs and other managed care was to try to change the incentives. In a fee-for-service, as you said, the more procedures you do, the more money you make. In an HMO, it is supposed to be opposite. DR. O'GRADY: Right. DR. ORNISH: In practice, you don't find that. Likewise, there should be more of an emphasis, an economic incentive for preventive approaches, for wellness, for alterative interventions in a capitated environment, but you don't see that either. My question is I'm just curious why you might speculate that that is the case. DR. O'GRADY: To speculate would be that some of the things we have seen from them are things where the cost effectives are clearly nailed down, and if they had some doubts about the cost effectiveness. I mean, certainly what we see is when you see the sort of cost effectiveness studies that are done by some of the large pharmaceutical companies, now those are very expensive to do, the use of ase inhibitors as a prophylactic against kidney disease among diabetics, something like that, but that is a very hard -- DR. ORNISH: That kind of begs the question, because if we again focus on things like angioplasty and bypass surgery, those have been covered since inception and yet those kinds of cost effectiveness studies have not been done. They don't prolong life. They don't reduce cardiac events for most patients, and yet those have been covered. Even now, there are no randomized control trial data showing, for example, that angioplasty prolongs life or prevents cardiac events. So, I'm just curious, again, what is going on here? DR. O'GRADY: I don't know. DR. ORNISH: It is just the corollary to my question. Until we first understand why these aren't being done, it is hard to understand how we change that. I mean, it certainly made sense to think that changing the economic incentives would change that, but it really hasn't, by and large, on either side, in part because I think there is a certain inherent conflict of interest that the same cardiologists who are deciding if you need an angioplasty are the ones who personally benefit, or for that matter a bypass, if you have the procedure, but still there are no checks and balances from the payment side. As Jim is saying, part of our charge is to make recommendations, and to the degree that complementary and alternative medicine interventions are not affected by economic incentives, then what would affect that? DR. O'GRADY: I don't know that I can accept your first premise here, that the economic incentives are not in play here. DR. ORNISH: Certainly they are in cardiology. DR. O'GRADY: All I'm saying is if they are not convinced that it is a cost effective alternative, whether you are dealing with a built-up momentum of a particular way of practicing over the years, certainly that is a tough nut to crack, and I don't have any particularly good advice on that one. But the idea that these folks are certainly in fairly tight competition with each other to keep their premiums down, it may be a question of convincing them that this is something that actually will both provide better treatment and save them money. But if they are not convinced, they are not going to do it. DR. ORNISH: This will be the last thing I say, but just without belaboring the point, but that presumes that the conventional interventions have been shown to be cost effective, and, by and large, certainly things like angioplasty, bypass surgery have not made that same test. So the question is why is there a double standard, what can be done, and how if economic incentives are not really determining that, what are the factors? DR. O'GRADY: I would say that certainly what you say is true on the idea that what has traditionally been done has not had to go over the hurdles that we are talking about here. I would say that in terms of demonstrating cost effectiveness, that is the control case, and if you can demonstrate that you come in at a more cost effective manner than the traditional way of doing things, you have in effect demonstrated that the traditional way is not -- I don't know whether you want to say not competitive, but is not necessarily the preferred route, compare both in terms of medical outcomes and in terms of how much it costs, but I don't know quite else what to tell you. DR. PIZZORNO: I have about four questions. First, how do *-- [off mike]. DR. O'GRADY: Some of those I can't answer, like the percentage that goes to billing, but I certainly can take a crack at a couple of them. Certainly medical savings accounts is one that I have done a fair amount of work on, both in terms of thinking about for the general population and the not-very-long-lived Medicare version of medical savings accounts. I listed the big four here. Medical savings accounts and probably physician sponsored organizations, PSOs, are five and six, neither of which has picked up very much market share in terms of enrollees, but are interesting alternatives. Medical savings accounts are certainly the idea, and normally it is not just a medical savings account, it is an account that looks like a health IRA in some sort of a sense, linked with a high deductible plan. The idea, again, is to go to beneficiaries and give them a strong financial incentive to be prudent consumers of their own health care. So the idea is that they typically have a $250 deductible, they now have a $2,500 deductible. Really, it is moving the insurance back to that more classic model of, it is there for catastrophic events to occur, the idea being that if you move someone from a $250 deductible to a $2,500 deductible, their premiums should come down. You are not covering that much more of the expenses that go on. How do you then share those savings back with the beneficiary? The idea is that the premium reduction there is put into an account that gains interest, that has certain tax advantages to it if you leave it there and let it roll over, the same way it would in an IRA. If you have a particularly bad year and have $2,500, you can use that account to pay your $2,500. If you don't and it accrues over time, you can get it out the same way you could get out an IRA, or you can use it for long-term care expenses and continue to have the tax advantages. A couple of years ago, maybe more than a couple now, four or five, this was presented very strongly to Congress by a number of large insurers as a great new idea. It was probably oversold to a certain degree. They were, at that point, pushing that it could reduce premiums in half. Most of the independent estimates were more like 25 percent, but reducing health insurance premiums 25 percent is nothing to sneeze at. That is really quite substantial. The opponents thought that it was going to come in and be just terrible, that it meant a lot of people were not going to get needed care, et cetera, et cetera. The bottom line is that, what it has worked out to be is, in effect, a sort of targeted product. It works very well for people who are fairly high-income, who work in small firms; architects, lawyers, physicians, those sorts, where you have five or six partners who are in some sort of an operation that $2,500 deductibles are not going to stop them from getting needed care, they are making $75-, $100,000 or more, a year. So it doesn't have the negative sides. Those folks can now get a lower premium. It is very hard to get insurance -- I don't know how many are in this boat -- if you really are in a firm of 10 or 12 people or less. So this allows them a break on that. It has turned out to be something, at this point anyway, of a niche product and served that particular niche quite well. Some of the analysts who have looked at it view it as sort of an income-related deductible, that you have basically talked higher income people into taking a higher deductible, and you share the savings with them. It works fine for 5 to 10 percent of the population. It hasn't really caught on in other than that particular 5 or 10 percent of the population. Physician-sponsored organizations, the other one, is the idea of physicians actually banding together to form their own insurance company, in some sense. That has not taken off, that I am aware of, while there are a few. In 1997, there was a change in law that allowed them to form. How they significantly differ from a physician-owned HMO? Not totally clear what the big distinction is there between them. Like I say, they were an idea that was thought would really catch on. I think that doing the insurance side of the business, in many ways, is a lot harder than some providers think when they get into it. They are not actuaries. This idea of, what is the right premium to charge people, is a pretty tough calculation to make and to do it well. So that is the MSA side. Certainly, I have no idea what physicians now spend in terms of their expenses. There is this idea, in terms of when you look at this sort of continuum of HMOs, point-of-service, PPOs, there is some idea there of different providers, and it is almost a generational effect. Who is it that can afford to still have a full waiting room and not have to consider offering discounts, or not have to wonder whether it is time to simply give up trying to have this whole business side of things and just go work for the HMO and take that salary? The correlation tends to be that that tends to be older, more established providers who can continue to do that and operate in a more traditional way. The younger guys feel a certain financial pressure to either offer price discounts or to just say I can go down to Kaiser, they will pay me $120 a year and I can go home at 5:00. DR. GORDON: Joe, I want to move on because there are two more. DR. PIZZORNO: The other question was of these four plans, which tend to be more receptive to inclusion of CAM providers? DR. O'GRADY: Until Dr. Ornish said what he said, I would have said the HMOs because they tend to be more open to alternatives that will save them money, but he doesn't seem to feel that they are very open. So, in that sense, I think it is back to the idea of what my final point was, to a certain degree whether things are going to be covered or not is going to go back to the people who pay in the end, whether it is the employers or the beneficiaries themselves who push for these kinds of benefits to be covered, which is where, to the earlier example, where coverage of things like dental came in. There was a push for it, the beneficiaries wanted it, and where people had choice, they chose the plans that offered dental coverage and they moved out of plans that didn't. So, again, it was a market response to say I better offer some dental coverage here or I'm going to lose customers. DR. GORDON: George? MR. DEVRIES: Dr. O'Grady, thank you for your overview and introduction to third-party reimbursement systems. My question, two of them, really are along what are some practical steps that are happening related to introduction of CAM benefits into third-party reimbursement benefit plans? I am speaking of, specifically, one thing we are seeing out there is a health plan, an HMO may not cover chiropractic or acupuncture or massage therapy or naturopathy for all their members as a mandated benefit, but they might do a supplemental benefit rider, much like they do dental, vision, behavioral health, or pharmacy. Blue Cross Blue Shield of South Carolina is going to testify today. They are rolling out this type of program. So your comments on that kind of incremental approach to at least starting inclusion of CAM benefits within health plans. Then, secondly, maybe some overview from you related to you had mentioned the concept of behavioral health care management firms, and we see that happening a lot in the CAM side, where there are basically specialty vendors that work with the health plan, much like pharmacy, dental, vision, organizations also do. So maybe some comment there, maybe drilling down a little bit and giving us your thoughts in terms of how some of the inclusion of CAM into health plan can practically be achieved? DR. O'GRADY: First of all, to think about the idea offering as kind of supplemental rider in some sense, the one thing you want to be careful of there is that much of insurance is spreading risk over large numbers of people, some who will use the benefits, some who won't. I guess my advice would be you would have to offer a variety of different benefits bundled together. Where we have seen individual riders at times, they can be very expensive because the only people who sign up for them are those who have a pretty good likelihood that they are going to use them. MR. DEVRIES: Just a comment. DR. O'GRADY: Yes? MR. DEVRIES: Being offered as group riders, not individual riders. DR. O'GRADY: Yes. And that gets back to the earlier point about the idea of if there is enough of a push from the employees in a particular firm, that they are asking their benefits people and it is sliding back up that what our people are looking for is this kind of benefit to be added, the same way, like I said, dental before or I guess even bigger would be when prescription drug first came in 10, 15, 20 years ago, that it is a perceived demand for it. Also I guess I would say that the idea of saying that you have the ability to sort of pop it in, pop it out, depending on what that is, that they don't have to change every piece of insurance that they offer in a particular state to include it has got to be more attractive than all of a sudden they find that it is a state-mandated benefit and if they want to operate in their state, they have to do it. Yes, that is much more attractive. On the carve-out notion, I think again, like with the mental health, the idea is that if there is some way to carve out and there was some notion that someone other than the insurer is at least sharing in the risk, if not accepting it outright, again, that tends to make things look more attractive. So the behavioral, mental health people, I didn't want to leave you with the impression that tons of those behavioral, mental health folks necessarily came forward and said, yes, we will take all risks, that was sort of the put-up or shut-up sort of point in those discussions that I could see, at least in terms of whether there would be federal benefit change. If these guys are so sure it is going to save money, then let it be their money. DR. GORDON: Joe Fins. DR. FINS: Thank you for your comments. Your last line talks about the insurers responding. We can't blame them for responding rationally. But another way of looking at it is that they are responding entrepreneurially in offering low-cost, relatively low-cost CAM benefits that will increase market share. We have heard that from previous witnesses. So, is it rational or is it entrepreneurial, and what should the standards be, and how do we regulate it so that patients and buyers get the best set of products that enhance health, not the ones that increase margin? DR. O'GRADY: The question is how do you overlap those two? How do you make it quite clear? That is, I guess, without sounding like a broken record, is back to the idea of convincing the employers and the beneficiaries themselves that this is something that is of value to them, that they ask the insurer to do it. I don't want to discount the notion of convincing insurers that it is a cost-effective alternative, because that certainly lowers whatever other hurdles there are, but if you are going to make an argument that even if this does cost more money, it is just better medicine and it should be covered, that is certainly a reasonable argument to make. Then it is back to the idea of can you demonstrate that it is worth it. DR. FINS: What I'm asking, though, are there different sets of standards that if the industry has an economic advantage by offering a product that costs relatively less compared to other items, say we can increase our cherry picking in this context, get well people who are into health promotion, who have good lifestyles, who will cost us less, that not only is it going to cost less, it is less filling. DR. O'GRADY: Right. DR. FINS: So, how do we not create another set of perverse incentives and graft on to the incentives that are already problematic in offering, if we do offer, a set of CAM benefits or consider that? DR. O'GRADY: The alternative to simply convincing them on a cost-effectiveness basis or on that this will be, as you put it, the entrepreneurial attractiveness of it is to certainly -- and we have seen this in other sorts of benefits in the past -- is to take a more public point of view in terms of either state legislatures or coming to Congress and saying this really needs to be a covered benefit, even if it costs more, even if it is not to the market advantage of particular private firms, it needs to be done. That is certainly another discussion in terms of the incentives there and who you are in competition with for that limited budget or just simply saying that this is. It is certainly not unusual to see at the state level something of these are the benefits if you want to offer coverage in this state that you need to be able to cover as a minimum. Certainly the Medicare benefit package is quite clearly laid out of what is covered and what is not expected to be covered, acute care, and it is laid out in the statute. That certainly is another way to go. It is a question of, certainly, is if it is viewed as something that will not raise cost significantly, or let's go with your entrepreneurial notion again, disproportionately. If everybody knows that because something is going to happen, their premiums are going to go up 2 percent, but their competitors premiums are going to go up 2 percent, entrepreneurial they are not disadvantaged by that. But that normally does mean a more public-policy sort of response, which is what we have seen the mental health providers doing, they are pushing for parity. DR. GORDON: Charlotte? MS. KERR: Thank you, Dr. O'Grady. I'm looking at your bio, and I see that your present work is focusing on Medicare reform issues, and I would assume certainly a part of that is the prescription drug coverage. DR. O'GRADY: Yes, it is. MS. KERR: Some people, including some of us, would probably think when you look at how to meet the needs of, in this case, Medicare, the elderly, that things like botanicals and perhaps homeopathy might meet some of those needs. What I am wondering is have there been steps to investigate the use of these alternatives in your process in planning in Medicare, and, if not, why not, not from a point of view of blame, but what would you need, for example, to be able to consider these alternatives in a rational way? Do you have representatives, for example, of CAM in your planning teams? You have got the point of my question, take it from there. DR. O'GRADY: Sure. I don't think anybody has drilled down enough to say what you would list out on a particular proposal of what would be covered and what wouldn't. What they have done, to a certain degree, and there is certainly an ongoing debate about how much choice you allow and how much variation you allow. Part of it is the concern that was mentioned before, the idea that to a certain degree there is a certain school of health economists, and certainly, the actuaries who tend to look at that, that you don't want tons of variation. Now, that has to do with, simply, if you have five different insurers that are offering something, the best way to be sure that people are the prudent consumers that they want to be is if they offer the exact same benefits. And so, you know the real difference is your perceived quality of what you are getting and what you are paying for it. That makes the transaction as clean as possible. The alternative is one that says, well, no, really you would like to be able to have different people sort of try and meet the needs of different groups. Now, they know that anyone has to be careful. You want to be very careful about the idea of the cherry-picking that was mentioned before, that you simply pick off the healthiest people, and you have a very low premium because you have people who never reach their deductible, much less have any hospitalizations. Therefore, you are manipulating the game rather than being a cost-efficient provider of care. So, long way around, in terms of thinking about this and thinking about the options, it comes down to this dilemma, in terms of an option, to a certain degree those proposals that talked about there being one provider in a particular region, the government list of what is offered -- not the government -- for the most part, they would contract out to a pharmaceutical benefit manager. The Clinton plan had this design. The country would be split into X number of regions. HCFA would give the contract to a particular provider, who then would negotiate with all the drug companies and work up what would be offered. That has certain large-volume buying advantages in terms of, you are buying for all the Medicare beneficiaries in these four states or whatever. It has certain disadvantages in terms of, that does not allow tons of variation. Now, if you happen to get your stuff on the list, you are made in the shade, but if you are not, if you are an alternative, that is a little iffier. The House Republicans had another proposal that had its own warts in different ways, but it did have more of the idea that you would have multiple different coverage in a particular geographic area, so that if someone decided they wanted to offer X or Y, there would be some allowance of variation. Now, most of the variation in that, I have to say, was being discussed, more, the idea that we know that with people like the Medicare population, there is a wide variety in terms of their incomes. So that, the same way we see this, in who chooses HMOs versus who chooses fee-for-service, that for lower-income people, they are willing to give up some choice to reduce their expenses, and that higher-income people do not. No one that I am aware of has gotten to anything that has said anything, one way or another, about what would be included, how tight formularies would be, those sorts of questions. MS. KERR: My question gets back to something Dean Ornish was speaking to, and I am actually asking a question in a way that I wonder if there is something you need for us to help in with this kind of problem solving. For example, is it the research? Is it the body that actually gets in the room? We happen to know a particular program our colleague has in cardiovascular work -- I don't know the proper name, Dean, of what you call your program -- but, there is data there to say that this may be more successful than angioplasty. That is a good question, why isn't that there? In the same way, you may not have the data that the pharmaceuticals have given you -- I can't think of any drugs at the moment -- for homeopathy or botanicals. I am asking a very simple question. Is that so? Is it, the data is not there? Is the person, the body, not in the room to bring up the conversation? Or, can you say yourself, and you are an expert -- just reflect a little more, now or later -- what would be an intervention? Where would the needle go to bring about a new conversation, speaking as an acupuncturist? DR. O'GRADY: I guess at this point, in terms of, if you are talking about various treatments or procedures, or whatever, that are not part of the status quo, it is hard for me to see that, under a model that has one plan for the entire region, that you are going to do better than one that allows there to be four or five of them to be in competition with each other. I certainly may be wrong on that. It may be that there is some race to the bottom, quickly, among the four or five to not offer anything other than generics. I have not seen plans that look like that. Again, it comes down to what is perhaps the overall dilemma here, is it a market-based approach to expand coverage or is it a government-based; I guess, who do you want to lobby, insurers or Congress. DR. GORDON: Thank you very much. We really very much appreciate your testimony. DR. O'GRADY: Thank you. DR. GORDON: One of the things we would like to do, if this is okay with you, is to give you a transcript of your testimony, and if there is anything you would like to add to it, on reflection -- DR. O'GRADY: It depends on how open you make that offer. DR. GORDON: That would be great. DR. O'GRADY: Thank you. DR. GORDON: One thing I want say to the Commissioners before the next panel comes up is, we went 10 minutes over time on this panel. I am trying to think of ground rules that will make things move along. I think we should begin with just asking one question each, and then we can come back if there is more time. The other thing is, I am going to ask all the panelists who are coming forward to answer as succinctly and as to the point as possible. That way, we will be able to have more back-and-forth dialogue. Thank you.Panel II: Federal Purchasers
MS. CHANG: Panel Session II. If Dr. John Whyte and Abby Block would come up from the Health Care Financing Administration and the U.S. Office of Personnel Management. Thank you. Again, I will remind the speakers to speak directly into the microphone. I will give you a three-minute warning, just so you know when to sum up. Presenter: John Whyte, M.D. DR. WHYTE: Good morning. I think you have a copy of most of what I'm going to say in front of you. I'm John Whyte, and I'm a general internist by training. Presently, I am the Acting Director of the Division of Items and Devices at the Health Care Financing Administration. I want to thank Maureen Miller and Steve Groft for inviting me to speak today. Steve, Maureen, I think Joe Kaczmarczyk, and I, had a very good meeting about two months ago at HCFA, and I am delighted that we are able to come here to continue to build upon that relationship and really create a dialogue, and to exchange information. We have had several meetings with the National Center for Complementary and Alternative Medicine. I will be here most of today and others from HCFA will be here some of the other days to answer any questions you might have, because we really look at this as a dialogue and not as a single point in time. As most of you know, the Health Care Financing Administration, HCFA, is the federal agency that administers the Medicare program. In the program we have 39 million beneficiaries, 32 million of those beneficiaries are over the age of 65. We also have about 7 million beneficiaries who are under the age of 65. Five hundred thousand patients participate in the end-stage renal disease program, and about six and a half million people are covered by Medicare because of disability. I am going to give you a brief overview of the coverage process at HCFA, as well as the payment policies. Within that discussion, I am going to answer some of the questions that were posed to HCFA by the Commission. So, on your first slide you have basically the overall structure of the Health Care Financing Administration. The head of the Agency is known as the administrator. This person is appointed by the President and confirmed by the Senate. Presently, we have an administrator designee, who is Tom Scully from the Federation of American Hospitals. The centers or the offices that you would primarily be interested in are the Center for Health Plans and Providers, which we refer to as CHIP, because they deal with the physician fee schedule, some of the scope of practice issues, our payment policies relating to durable medical equipment and other policies of that nature. Two other centers or offices would be the Center for Medicaid and State Operations, CMSO. I know many of you have had questions about Medicaid coverage policies, and that would be the office that would primarily deal with Medicaid issues. The office that I am a part of is the Office of Clinical Standards and Quality. Within that office, we have a Coverage and Analysis Group. On your next slide, you will see that there are basically three divisions. There is a Division of Operations. There is a Division of Medical and Surgical Services, and then there is the Division of Medical Items and Devices that I am a part of. The devices that I deal with are non-implantable devises. Those devices are in the Division of Medical and Surgical Services. I refer you to our website, which is www.hcfa.gov, which is a great source of information. Much of what I say today is available on that website. So, whenever we talk about coverage in the Medicare program, I have to refer to certain statutes. I guess you learn that you become somewhat a government person when you are able to quote statutes off the top of your head, and say Section 1862(a)(1)(A) of the Social Security Act, which I'm going to refer to, says that no payment may be made or expenses incurred for items or services which are not reasonable and necessary for the diagnosis or treatment of illness or injury. There are two points about that, and you really have to keep the statute in mind when you think about complementary and alternative medicine. The first is that the statute is phrased in the negative, that we shall not pay. So, the premise that a device, a service, or a procedure might be of some benefit to some patient under some circumstance is not a criterion in which the Medicare program can base coverage decisions on. Now, I can empathize as a physician, as a provider when people come to HCFA to talk to us about if only Medicare would cover something, then we would be able to collect the information to know that this is a good coverage policy. What I have to tell you is we have to start at square one, where we must know that there is data demonstrating effectiveness, because that is the way the statute is phrased. The second point is that preventive services are not mentioned here. So, we talk about the diagnosis or treatment of illness or injury. So, in general, the Medicare program does not cover preventive benefits. I am going to come back to that, but, in general, we don't cover preventive medicine. The other issue relating to the Social Security Act, it also defines providers and the scopes of services that some of them can provide. Now, I am going to come back to that a little later, because some of the issues relating to complementary and alternative medicine, there are providers that may not necessarily be recognized by Medicare in order to be paid. So, although you may feel that massage therapists may offer certain services, if they are not recognized as a provider by Medicare, we wouldn't have to authority to pay for those services by those types of providers. Now, there are three general methods by which coverage decisions are made in the Medicare programs, and this is one of the most misunderstood concepts of the program. The first is that our Medicare contractors, and there is a contractor in every state and some contractors cover more than one state, there is not actually 50 carriers, there is approximately 43. The reason I say approximately is because sometimes they change, so in the course of a week, it might be 42 or 44. So, approximately 43 contractors develop local medical review policies, which we refer to LMRPs. Basically they consult with a group of practicing providers, beneficiaries, and others in their community as a part of a carrier advisory committee. Then they publish in their bulletin what a draft policy is, and then it becomes effective within a certain period of time. A great source of information on these LMRPs, local medical review policies, can be found at www.lmrp.net. Now, HCFA also develops national coverage policies, and that is where I spend 100 percent of my time, looking at national coverage policies; but the reality is that in 35 years, 36 years in the Medicare program there are 250 to 300 national coverage policies. There are 6,000 local medical review policies. So, the point I'm trying to make for you is that although everyone thinks of Medicare as a national program, and, indeed, it is a national program, there is a significant amount of carrier variation. This discretion on the part of carriers sometimes does cause disparity and beneficiaries will often be very concerned, and members of Congress will be concerned for their beneficiaries when they find that you can get a certain device or procedure or perhaps transurethral needle ablation of the prostrate for BPH in a state like Texas, but if you looked in Arkansas, you might not be able to. People can't really understand that, because they think of it as a national program. Yet, at the same time, many people from the medical device industry, which predominately are small companies, not the typical large pharmaceutical company, they often contract or work with a group of local physicians, their local academic medical community, and with 43 carriers, they may be able to get a few carriers to cover it for a period of time and, therefore, they can have some diffusion of technology. So, there are both strengths and weaknesses of care or discretion. Sometimes it causes disparity, but at the same time, it can also have diffusion of technology. Other important points there are that local medical review policies are subject to greater appeal. Beneficiaries will often appeal to administrative law judge if claims are denied, whereas national coverage policies have less ability to be appealed. There are going to be some changes in some recent congressional action. But the point I'm trying to make to you is that there may be opportunities for all of you to work with our local carriers to think about coverage policies for some of your therapies. Everything does not always have to be done at the national level. So, if you leave with one thing from my talk, you should remember that there is local carrier discretion, and that might be something that you want to explore within the context of Section 1862(a)(1)(A) of the Social Security Act. The next slide talks about that Medicare is a defined-benefit program. This is also important for you to know. There are approximately 55 statutorily defined benefit categories, and you must fit into a benefit category as a first step towards coverage. They are very broad categories, physician services, physical therapy, occupational therapy, durable medical equipment. But the point is, Congress defines what these benefit categories are. The Health Care Financing Administration does not have the ability or authority to create a new benefit category. Two points about this, I talked to you about preventive benefits, that in general the statute doesn't allow us, and you might want to say in your question session, but, Dr. Whyte, don't you cover Pap smears, don't you cover mammography, don't you cover colo-rectal screening, they are all screening benefits, and you are right, they are. What I can tell you is that Congress has mandated each of those benefits and has written into statute, line by line, that the Medicare program shall cover those screening services, and that is because we don't have the authority to cover preventive benefits. So that is something for you to keep in mind. In some questions that you posed to HCFA prior to this meeting, you asked me about the benefit category for chiropractic, and basically that is Section 1861(r), which basically refers to subluxation. Now, after you fall into a benefit category, you then have to satisfy our process for what is medically necessary and reasonable. Another important point for you to remember -- so, now you know that we have local carrier discretion -- is the issue of FDA approval or FDA clearance, because a lot of people will come to us and say, but it is been approved by the FDA, so what is the holdup with Medicare, why isn't Medicare paying for it. What we say is that FDA approval or more often FDA clearance is a prerequisite but it is not a guarantee for coverage. The statutory language of the FDA is that something is safe and effective. Our statutory language is that it is medically necessary and reasonable, as I just referred to. So, in many ways you could use the analogy of a supermarket, that FDA approval puts something on the shelf. Then HCFA has to come around as a prudent purchaser and decide what to put in that care. Hopefully, none of you would assert that everything that is on the shelf we have to buy. There needs to be some criteria, and I'm going to talk to you about what some of those criteria are that we use to determine what we are going to buy. Basically, we have a process which relies upon authoritative evidence in demonstrated medical effectiveness. We want to see that benefits outweigh reasonably anticipated risks. We want to see evidence of improved health outcomes. Again, we want to know that something complies with our regulatory requirements. The next slide, which is on Page 5 of your handout, is our process, basically in a schematic. I know you can't really see it, it is not relevant for you to be able to read the writing. I see Dr. Ornish is looking very closely at it with its small print. But the point is for you to see that the process actually does flow, that there is some reason to what HCFA does, and there is an orderly process, and I'm going to go through that. Basically, it all starts with a request. The reason why I am going over this for you is because at the end of the day in your ultimate deliberations later, you might want to talk about Medicare covering certain alternative medicine and complementary medicine policies, so you need to know what our process is, because I think that will give your recommendations greater weight. It basically all starts with a request. It can either be internal, meaning that HCFA decides to do it, or it could be external. Our Federal Register Notice in April of 1999, which is on our website, explains this process. It must be in writing. It must identify the request as a request for national coverage determination. Then there needs to be some supporting documentation. What we say as part of this process is that we will get back to you within 90 days with some type of decision. I will explain what those decisions could be. But in terms of the supporting documentation, and this goes to some of the questions raised in the earlier discussion, we want to see a full description of the service in question, including the benefit category, because, remember, something has to fall into a benefit category. We want to see a compilation of medical and scientific information currently available, because, remember, we say this is an evidence-based decision-making process, so there needs to be some body of evidence. We want to know about description of clinical trials underway. We also want to know about the status of FDA activity. So, when we talk about supporting documentation, I want to talk about some of the evidence that we look at. An important point here is that there is a continuum. There is randomized clinical trials. There is controlled case series. There is case reports. There is consensus statements. The important point is that we look at everything. One of the criticisms of the new process is that we only look at randomized clinical trials. We have never said that, and if you look at our recent coverage decisions, and there is approximately 30 of them, we talk to the fact that there is a hierarchy of evidence and that really we need to look at everything. Randomized clinical trials are not always possible. There is some argument they may not always be ethical. But the point is there are other ways to do analytic studies, and that is the important point. One of the previous questioners asked about does there need to be a body of literature. The answer, of course there needs to be a body of literature. For us, at least in our Division of Items and Devices, what we say is that we need to hold the same standards, both to conventional therapies, as well as some alternative therapies. Maureen, Steve, and I have talked about that maybe alternative is not the best word, because an intervention is an intervention is an intervention. Really, what we are trying to do is determine the body of evidence behind that intervention, to know that it works. I think Dean Ornish is a very good example of what has been done in terms of trying to use the scientific method that has answered questions. What I have seen from Dr. Ornish is not simply assertions that his constellation of services works, but rather he has asked the appropriate analytic questions. He has designed an appropriate scientific study. He has used statistical methods to analyze that data. Then he has published it in peer-reviewed scientific literature in very well-respected journals. So, when you talk about body of literature, I would urge you to look at the example of Dr. Ornish and what he has done to really try to show that there is evidence of effectiveness. I am sure he will tell you how much difficulty he still had with that approach, even though that is the preferred approach. So, it is something that I really want to emphasize, that there does need to be a body of literature. Everything doesn't have to be a randomized clinical trial. But I think at times, sometimes the field of alternative medicine has not benefitted from some of the supporters and advocates who really don't want to have a scientific literature base. I'm using it in a very broad sense, because clinical consensus and other opinions are important as well. As part of the process, we often order technology assessments, and this goes to the whole body of literature, and it is just something for you to know, that there are 13 evidence-based practice centers of the Agency for Health, Research, and Quality, which we often use to do technology assessments. We also have a Medicare Coverage Advisory Committee. Presently there are six panels, medical, surgical, drugs -- biologic, therapeutic -- laboratory, medical devices, durable medical equipment and diagnostic imaging. An important point here is that we presently are soliciting new nominees. We have about 100 members, and they are on a rotating -- not rotating, I'm blanking on the word -- but a third are expiring this year. So, we are looking for new members. Nominations are due by May 30th. On our website it describes how you can apply to be a member of the Medicare Coverage Advisory Committee. So, I suggest that you look at that, because some of you might be interested in that. We do accept self-nominations, although it is always good to be nominated by someone, but we do accept self-nominations. Earlier, I talked about a formal request, which I think all of you should consider for some of your therapies, what we say is we will get back in 90 days. What are some of the decisions that we can make in those 90 days? That also assumes that we might have ordered a technology assessment or referred something to Advisory Committee, which obviously would take longer than 90 days. There could be national non-coverage, meaning that we forbid the carriers to cover it under any circumstance. There could be no national decision, and essentially we will leave it to carrier discretion, where most policies are done. There could be national coverage decision with limitations. An example of that, someone referred to the insulin pump earlier, we presently only cover the continuous subcutaneous insulin infusion pump for type one diabetics. There could be national coverage decision without limitations. So, that is something for you also to think about, because some people will come to HCFA and ask coverage for everyone. That may not necessarily be wrong, but at the same time, when we talk about an evidence-based approach, there may be more appropriate patient populations that would benefit from a therapy, and sometimes coverage policies have to be incremental. You first look to see where the greatest body of the literature is and look at that patient population first. So, that is something that I would encourage you to look at, as well. Basically, when we make a coverage decision, there still is some time lag until a decision is implemented. So, I wouldn't want you to get all excited and think that you are going to submit a national coverage request and then in 90 days it will be able to be covered. That is not necessarily true. What we say is that in some ways it is like a law. Not all laws take effect at day one. What we say is that within 180 days from the next full calendar quarter we hope that payment is effected. We actually have been doing better in recent months, and we continue to strive to do better, but that is just something that I want to alert you all to. Two other points that I want to touch very briefly upon, because I anticipated that you all would have a lot of questions, so I want to be able to be sure that you are able to ask those, is that we do have a clinical trial policy, presently issued in the Executive Memorandum earlier last year, basically telling us that we would cover the routine patient care costs for clinical trials. I'm not going to go into it in this discussion, because most of the information is available on our website, and I encourage you to look at it. The only other point I wanted to touch upon are two demonstrations that we are doing, which I think all of you are very familiar with. I have enclosed information on those in your packet. The first is the Dean Ornish program for reversing heart disease and the second is the cardiac wellness extended program by Dr. Herbert Benson, involving up to 1,800 patients in each of those programs. Basically, it will extend from October '99 to November 2003. The handout that I have enclosed basically provides most of the information. Some other attachments that I have included is more specific information on our payment policies and basically how we determine how much providers are paid for various services. That is mostly what I am going to say. I have my contact information and phone number at the end of my slides. I realize that HCFA can be a confusing place at times. I know very well, I know Maureen knows that HCFA can be confusing, as well. Certainly, you should feel free to contact me directly if you have questions or concerns. As I said, I will be here most of today. Other people from my division will be here later in the week. I encourage you to continue the dialogue, which I think will be very productive. I look forward to working with all of you. Thank you. DR. GORDON: Thank you very much. Thank you for the clarity and directness of the presentation. The next presenter will be Abby Block from the U.S. Office of Personnel Management. MS. BLOCK: Good morning. I'm Abby Block. I am the Assistant Director for Insurance Programs at the United States Office of Personnel Management. I thank you for inviting me here this morning to talk with you about the Federal Employees Health Benefits Program. You asked for some background information about the program. President Eisenhower in February of 1954 called for a health program for federal employees in line with the best practices of progressive private employers and indicated that a health insurance program should be part of a well-rounded personnel program. Public Law 86382, the Federal Employees Health Benefits Act of 1959 was enacted on September 28th of 1959. The program actually became up and running in July of 1960. So, it has been around for some time now, as you can see. There have been very few changes to that initial legislation over the years. Basically, what was enacted in 1959 is very much in place today, with very small changes. The reason that that is possible is that the statute was very much a framework statute, giving a lot of flexibility, so that we have been able to accommodate all of the changes in health care that have taken place over these many years and still operate within that initial enabling legislation. The legislation gave the Civil Service Commission, which is now OPM, the authority to contract with certain types of health benefits plans for a broad range of services, including hospital benefits, surgical benefits, ambulatory patient benefits, pharmaceuticals, other medical supplies and services. But the law is very, very general in terms of coverage. It really simply states that there has to be a comprehensive benefits package. It specified that those eligible for coverage are employees, and we cover 2.2 million active employees, retirees, and we cover 1.9 million retirees at this time. Of those, the retirees with Medicare, there is 1.3 million of those. Under our program, retirees who are Medicare-eligible continue to be eligible for FEHB coverage. They pay the same premium as active employees and receive the same benefit package, but the Medicare program is their primary payer. That is sort of an interesting construct, because Medicare, as you know, was enacted after the Federal Employees Health Benefits Program and no change was made to the program to date to try to integrate those two programs. So, we work through a coordination of benefits process, and it works reasonably well. We cover 4.6 million family members, and that includes spouses, children, and former spouses. The law also specifies the method of determining the government contribution for the program. The legislation did not specify benefit levels for that range of services. While it talks about a range of services, it makes no mention of the level at which coverage will be provided. OPM provides direction to the carriers through an annual call letter, through regular carrier letter mailings. We hold an annual health plan conference each year, and our health benefit specialists, our contract specialists, have day-to-day interaction with the carriers. There are several types of plans in the FEHB program. We have a group of open-fee-for-service plans. Those include plans like the Blue Cross Blue Shield Service Benefit Plan, the GEHA Plan, the Mail Handlers Plan. Those are open to all on a nationwide basis. They cover 5.7 million lives, 1.3 million employees and 1.5 million retirees, of which 1.1 million are Medicare enrollees, and family members, 2.9 million family members. We also have a group of so-called closed-fee-for-service plans. Those plans are limited to people who either work for a certain agency or belong to a certain association, such as the Secret Service, the Foreign Service. Those are open to specific groups nationwide. They cover 209,000 lives, of which 42,000 are employees, 59,000 are retirees, and 34,000 of those retirees are Medicare covered. They also cover 108,000 family members. The other type of plan that we have in the program are the HMOs, Kaiser, Pacific Care, Aetna, US Healthcare, those types of plans. As you know, they serve particular geographic areas. We have 2.7 million lives covered under the HMOs, 879,000 employees, 307,000 retirees, of which 161,000 are Medicare eligible, and 1.6 million family members. That breaks down, by the way, I don't know that we gave you the percentages here, but the breakdown is approximately 70 percent in the fee-for-service type plans, 30 percent in the health maintenance organizations. In terms of the number of plans available, wherever a federal employee or retiree happens to live, they have a minimum of seven plans available to them. Those would be those national open-to-all fee-for-service plans. In some geographic areas, because of the HMO penetration, a person could have as many as 31 health plans available to choose from. The definitions are very broad and flexible. As I said earlier, the law gave us a lot of flexibility, which is why we can still operate under it even though it was enacted in 1959. The government-wide plans and employer organization plans now have a very strong PPO component, so that we don't contract with PPOs, per se, all of those fee-for-service plans are in fact PPO organizations. In-network services are the services most often used by consumers. The reason for that really is the way we structured the PPO networks when they were introduced in the 80s, we did not have a penalty for going out of network, but we offered a real financial incentive for using network providers. That is, the in-network benefit is a richer benefit than the out-of-network benefit. The out-of-network benefit is the standard benefit, it is the benefit that was in place before the PPOs came into being, but when the PPOs were introduced, the carriers actually improved the benefits that were available if a person elected to use a PPO provider. We contract bilaterally with each plan on an annual basis. We are just getting to the point of beginning annual benefit and rate negotiations. Actually, the benefit rate proposals from the health plans are due to use by regulation on May 31st each year, so we are getting very close to that May 31st deadline. Then, bang, beginning June 1st, negotiations start, and I will talk a little later about the time frames for that process. Each plan must contain detailed statement of the benefits which it includes, including its maximums, its limitations, its exclusions, and other definitions of benefits as OPM deems necessary or desirable. For example, immunizations for children, mammography screenings, those kinds of things. Once contract negotiations are completed, consumers are given extensive benefits information. OPM publishes an FEHB guide each year. The individual health plans develop, in conjunction with us, plan brochures, which are distributed widely. And, finally, our website at this point is a very important source of information. It not only includes the guide and the plan brochures, but also links to a decision support tool and has access to all kinds of information that is useful in helping our consumers make an informed choice. In April of 2001, we issued our annual call letter, which gives policy guidance to the plans. We do this every year. That policy guidance tells the plans what we will be looking for in the negotiation cycle for the following contract year. In that call letter, we stated, "Where there is demonstrated medical effectiveness and consistent with your overall strategy for benefit design, we encourage you to consider services such as chiropractic, acupuncture, biofeedback, and others that are being used increasingly for pain management and as alternative treatments. We did that for a number of reasons. For one thing, we have been hearing from our customers that there is increased interest in coverage for alternative and complementary services. This program, the Federal Employees Health Benefits Program, it is considered the national model of a consumer choice program. So, we listen very carefully to what consumers tell us. To the degree that their requests are reasonable and that they make sense, that they are affordable, that they can be accommodated within the statutory and regulatory framework of the program, we encourage our carriers to listen, as well, to those consumer interests and frame their benefit proposals accordingly. So, that is what we did in our call letter this year. This was the first time that we specifically addressed the issue of alternative and complementary medicine. Rates are set by negotiation between OPM and the carriers. We have two different rating methodologies. The fee-for-service plans and a small number of the HMOs are what we call experience rated. The vast majority of the HMOs are community rated. Regardless of the rating methodology, all the enrollees within a plan pay the same premium. It varies by self only or self and family type of contract, and some plans have both a high and a standard option. But, wherever you live in the country, if you are enrolled in a fee-for-service plan and whether you are an active employee or a retiree, you will pay the same premium for that plan. The HMOs, of course, are geographically based. As I said earlier, the contribution formula is set in statute. We typically refer to it as the fair-share formula. It consists of the weighted average of all the plans in the program. We take the weighted average of all the plans and there is a cap so that the contribution to any given plan's premium cannot exceed 75 percent. The government share is then 72 percent of that weighted average premium. The balance is paid by the employee or retiree, and the agencies actually collect the premiums for us by payroll deduction and remit them to OPM. We, in turn, remit them to the carriers. Our contracting cycle goes like this: the annual time line of our activities, February, March, we review and accept or deny new plan applications, and the program, by law, is open at this time only to HMOs. The way the statute is written, we can't admit new fee-for-service plans. We can readmit plans that were once in the program and then dropped out. June to August, we negotiate benefits and rates for the next contract year. June to September, we collaborate with the carriers on plan brochure language. November to December, there is a four to five week annual open season period. OPM designs and contributes to the design of the guides and distributes the open-season guides. We provide agencies with open-season guidance through benefits administration letters. We provide plan information and links to comparative information and decision tools on the FEHB website. That website is www.opm.gov/insure. It has become a very significant way of communicating with our enrollees. I can tell you that during those opening weeks of the open season, even though we rent additional server capability, we are overwhelmed and typically the servers basically are at maximum capacity. The agencies make the guides and brochure information available to employees. They conduct health fairs. They counsel employees and process enrollment changes. Year-round, OPM monitors plan performance, responds to customer concerns, resolves disputed claims, monitors industry trends, consults with carriers, and develops guidelines for the next contract year. If I had to make an analogy in terms of how we operate, we consider ourselves and function very much like any other large employer health benefits plan, which means, and you probably noted in my presentation, that there are some fairly significant differences in the way we function as opposed to the way HCFA functions, HCFA being a national entitlement program. MS. CHANG: Excuse me, you have about three minutes. I just wanted to let you know. MS. BLOCK: So, basically, if you were to think of who we are and how we operate, we are very similar in many ways to, say, a large employer like GM. We are a major purchaser. We are the largest purchaser, really, in the health insurance market, but we are an employer-based health insurance plan, and our model is a market model, featuring consumer choice.Panel Discussion
DR. GORDON: Thank you very much. That was also extremely clear. I have a question first for Dr. Whyte while other people are formulating questions. One of the striking things about your presentation is the opening that has now been extended to Dean Ornish and Herb Benson's programs. How did that come about? How was the choice made to make it a study, rather than a covered benefit for everyone? And what lessons can you share with us? DR. WHYTE: Well, maybe I can provide some general information. Dr. Ornish might want to talk about his own experience. What I can tell you in terms of why it was decided to do under a demonstration authority, and I didn't talk much about demos, but basically our demo authority relates to when devices or services may not already exist in a benefit category or there are perhaps some statutory restrictions relating to scope of services or other issues relating to that, it was the feeling of the senior leadership at HCFA that Dr. Ornish's program did not fall into a specific benefit category. So, although there might have been some services that could have been covered, that the constellation of benefits that Dr. Ornish offered did not have a discrete benefit category. There was also the feeling on some people's part that additional data in the Medicare population was necessary. So, what was decided to do was a demonstration project so we would be able to provide for all these services that may not have been able to have been covered under the present structure. So, that is how Dr. Ornish's program got covered. Basically, it was determined through HCFA. Dr. Benson's program was actually mandated by congressional action under the Benefits Improvement Protection Act, known as BIPA. So, that is how those two programs were designed. One was more executive. One was more a congressional action. DR. GORDON: And did the congressional action mandate the demonstration, or was that a HCFA decision? DR. WHYTE: It mandated the demonstration with 1,800 patients, similar to Dr. Ornish's, as well as some other time frames and things of that nature. DR. GORDON: Thank you. Any general lessons, as we think about complementary and alternative medicine? DR. WHYTE: Sure. I think it is important to keep in mind that there is demonstration authority, but, as Steve, Maureen, and I talked about, there is not a lot of money to do demonstration projects, and most of the demos that we do, basically, are congressionally-mandated. I wouldn't necessarily discourage you from going that approach. I think it is something that you should carefully about. In the overall context of the coverage policy, you could look to see where there is the greatest data on a particular service and go through the national coverage process, is one route. Then you could think of things like the Dean Ornish program, similar types of services where there is a lot of data and that looks very encouraging, but perhaps may not be able to be covered under existing benefit categories and think of a demonstration authority and that approach. So, that would be my counsel, that you look at the spectrum of opportunities available, but I wouldn't put all your cards in a demonstration approach, because the options are very limited. DR. GORDON: So, Congress could have said, in talking about the Benson program, that they wanted national coverage? DR. WHYTE: Congress could have said that we want to create a benefit program for either the Dean Ornish program or something like the Dean Ornish program, and then that is scored by the Congressional Budget Office. I think that is an approach that people can take. Again, Dr. Ornish might want to talk about his experience, but I would think you all can appreciate that it is difficult to get Congress to create new benefit categories. Something that people might want to think about is how could the service be provided in already existing benefit categories. There is the issue of, perhaps, the incident two provision. I looked at today's time as an opportunity to speak broadly and I don't want to go into all the specifics of what is covered under an incident two provision, because I look at today as a dialogue that we can continue to have information. So, that is one approach to use, look at already existing benefit categories. But, certainly Congress can mandate the benefit and say, you are going to cover a lifestyle modification program. DR. GORDON: In looking at already existing benefit categories, are there some that are applicable to complementary and alternative medicine that you would see? DR. WHYTE: That is a hard question to answer, because there is a wide range of complementary and alternative medicine benefits. So, not knowing particularly what you are thinking about, it is hard to guess. But what I would imagine is that there probably are certain benefits that could be provided. Acupuncture is something that we don't cover, but we have had a lot of discussions at HCFA as to whether or not it could fall into a benefit category. Most things probably could fall into a benefit category, but what is going to get caught up in is who is eligible to provide those services. As some of the other speakers have talked to about, when the Medicare program was established, most of the services are provided by physicians. I believe that many of your services are provided both by physicians, as well as other types of providers. So, you need to think about that, because you may end up getting a service provided, but the type of person that you would want to be able to provide those services would not be able to be paid for under the Medicare program. I can provide the specific statutory language to Steve and Maureen about what Medicare defines as a physician. It is more than just an M.D. or a D.O. There are other people that fall into it, but I think most of the providers to which you would refer are not covered by that language. DR. GORDON: I have Tieraona and Joe Dean.I wondered if you wanted to add anything to this discussion, at this point? DR. ORNISH: No. I just wanted to say I thought the presentations were very clear, and I could add a lot some other time, but it would take much too long at this point. But, again, I wanted just to say how much I appreciate you both coming and how clear and useful. If I had heard your presentation six and a half years ago, my experiences with HCFA would have been much easier. [Laughter.] DR. GORDON: Thank you. Tieraona, and Joe, and Tom. DR. DOG: I think a lot of what we keep hearing is that the research needs to be there and that for some things it may be premature and for other things we have got adequate research. I think we would all agree with that. I had a question, though, that confused me just a little. If you had lobbyists and somebody got somebody in Congress to really say, gosh, we need to cover this, and it was mandated, if there is not the evidence there, do you have the right to veto Congress? Do you hear my question? Can something come in and we end up mandating it without the body of evidence there because we have got powerful lobbyists who have said we want to pay for it, we want to have it covered? DR. WHYTE: I thought of some flip things to say, so I'm glad we have a little delay. What I would say is that if Congress in its wisdom mandates that a benefit be provided by the Medicare program, it is provided. DR. DOG: It is mandated. DR. WHYTE: That us correct. DR. GORDON: Thank you. Joe? DR. FINS: That was sort of my question. I was wondering about any precedent, when there has been a national coverage decision, when Congress has then decided to cover a benefit. A related question that goes to your first response to the issue of a demonstration project. Does your office have, and your division more generally, have the resources not to fund projects, but to assess the new technologies, the new interventions? Do you folks need a more robust budget to accommodate this growing area in the health-care marketplace? DR. WHYTE: Perhaps I will answer the second question first. The Secretary has been very successful in getting greater resources and funding for HCFA to perform its numerous responsibilities that Congress mandates us to do. In terms of assessments, we are doing assessments continually, that is primarily what the coverage and analysis group does, primarily assess new technologies. So, the answer to your question would be that is typically what we do. DR. FINS: You said a therapy is a therapy is a therapy, so you are saying there is nothing new under the sun here with respect to the CAM interventions or the methodologies that would require additional coverage? DR. WHYTE: Sure. Now, what I will tell you, on our website, we list what the pending determinations are, as well as completed determinations. In general, presently of the 19 pending determinations, there aren't currently any what you would consider complementary and alternative medicine policies. In terms of our completed determinations, there is completed determination on acupuncture, which was request to review the non-coverage policy which was denied. Then there is a treatment on biofeedback, which is primarily used for urinary incontinence, and I'm not completely sure you would consider that complementary and alternative medicine, but we do have now a national coverage policy on that therapy, whereas before it was carrier discretion. Just quickly in reference to an intervention is an intervention is an intervention, what I can tell you is when we look at therapies in our division, I don't take the approach that this is complementary and alternative. I think that is something that would be productive for everyone to move away from and just focus on, what is the body of literature that supports this therapy. DR. FINS: Just to follow up the question about the national non-coverage decision that might have been overruled -- not overruled -- but funded by Congress. DR. WHYTE: Off the top of my head, I cannot think of one. What Congress usually does, is, when it creates the benefit categories, it is usually for preventive medicine benefits, or it is usually for some type of prescription drug benefit, such as an RLA [ph] in a cancer benefit, RLA in medics, things of that nature. DR. GORDON: Just a clarification. When you say Congress, you mean the House of Representatives? DR. WHYTE: No, I mean Congress, the House and the Senate. DR. GORDON: Both houses, okay. Tom? MR. CHAPPELL: Ms. Block, I would like to ask you more about your recent experience with the expansion of benefits into the complementary and alternative medicine field. It appears to me that your consumers are driving these benefits. Is that correct? MS. BLOCK: I would say that consumer interest is playing a very big role in our efforts to expand these benefits, yes. MR. CHAPPELL: And the employer-sponsored styled services are responding to that demand? MS. BLOCK: Well, yes, although I don't want to mislead you. The response so far has been fairly limited. What is offered under the packages that are currently available is fairly limited, with the same kinds of issues that Dr. Whyte spoke about. The health plans typically, and we are dealing primarily with traditional insurance companies, at least on the fee-for-service side, they do exactly the same kind of thing as you would see in the Medicare program, in that, they may elect to cover a service, but that service will only be covered by someone that they define as a covered provider. So there is the issue of, the service may be covered, but not all providers of that service would be covered.We have hoped to see some expansion of those definitions of coverage provider, but it is an iterative process. Some of our plans currently are not covering alternative or complementary services under their FEHB benefit package, but are covering them as an alternative benefit, which for the past 10 years we have enabled our plans to offer. We have in every plan brochure, we have what we call the non-FEHB page. In that process, plans can offer as a supplementary package to their enrollees other benefits which are not part of the FEHB program, they are not covered under the FEHB premium. There is an additional premium for those services, but people who enroll in the plan may then elect to enroll in that supplementary package. Blue Cross Blue Shield, for instance, our largest plan, has what they call their affinity benefit package, and that includes some of the alternative and complementary services. So it is a very gradual process. I don't know what we are going to see in the proposals for 2001, because we haven't gotten them yet. We will see when they come in, to what degree the insurance carriers have responded to our call letter guidance. I can tell you that I think this is going to happen. It is going to happen over time. I don't think it is going to happen terribly quickly. We are not going to see rapid transition. We are going to see a very gradual process as the insurance industry really responds to the consumer interest, because the way our program operates, we don't legislate benefits. We try to avoid mandating benefits, to the greatest degree possible. Speaking of process, and in my previous meetings this has been my suggestion, the best way to get things covered in the Federal Employees Health Benefits Program is to work directly with the insurance carriers. To the degree that they are hearing from their customers, they should respond within the context of their overall benefit package, their competitive position in terms of benefits and rates. So it is not a simple thing, because any changes that they make, they will consider very carefully in terms of how they look in their market, what their rate looks like as compared to their competitors, and what their benefit package looks like. To the degree that they can offer something in that benefit package that they think will be attractive to consumers, they are interested in doing that. So it is very much a competitive market orientation. MR. CHAPPELL: Thank you. That is a very helpful description. I am just wondering if you could identify the most obvious barriers to the insurers' process of change here. MS. BLOCK: I think the most obvious barrier is resistance to change. We really are dealing with traditional insurance companies that have a traditional perspective. I guess the second most significant barrier is the rate impact. We are looking, and it is no secret at this point, we are looking at very significant premium increases for 2002. We are very concerned about them. The President, in fact, in his budget, has talked about the premium increases in the Federal Employees program over the last several years. Our premium increases, by the way, are very much in keeping with the private sector. It is not that ours are our out of line. It is just an industry trend. Premiums are going up for everyone. We expect them to go up significantly in 2002. So, practically speaking, the insurance carriers are going to be looking at their benefit package in the context of those rate increases and how those rate increases are going to affect their market share. DR. GORDON: Joe Pizzorno, and then Wayne, and anyone else. Joe? MR. PIZZORNO: In Washington state, where we have chiropractors and acupuncturists licensed as primary care providers, and naturopathic doctors as primary care physicians, we have a state mandate requiring that every category of provider be included in all insurance programs. Does that include the federal employees? For example, somebody in Seattle who works for federal, can they go and see a naturopathic doctor or chiropractor for their primary care? And, if not, what has to be done to change that? MS. BLOCK: Well, this is the situation in terms of state mandates. We have language in our statute that enables us to preempt state mandates, and the reason for that is our national fee-for-service plans. We wanted to be sure, and the Congress wanted to be sure, going all the way back in time, that everybody who elected one of those national plans got the same benefit package and paid the same rate. If we didn't do that, we would have a situation where people would be paying the same premium, because we have a national premium, and getting a different benefit package, depending on the state that they lived in. So it has been our practice always to preempt state mandates for the national plans. On the other hand, for the HMOs, we do not preempt state mandates, although we could. Our philosophy there is we want our enrollees in a given geographic area to have the same benefits as anybody else living in that state. So the HMOs that are domiciled in Washington state have to follow the state mandates, which means that federal employees and retirees who enroll in those plans get the same benefits as any other resident of the state of Washington, but those people who enroll in a fee-for-service plan do not. DR. GORDON: Wayne? DR. JONAS: Thank you both for very nice presentations. Most of my questions have been answered. I have a question, really, for Dr. Whyte. My sense is that you are largely reactive, in the sense that individuals have to come forward and say, we would like to have this covered, and provide the documentation for it. Then you take it in through your process. Is that correct? DR. WHYTE: That is basically correct. We do have internal requests, but we are moving more towards being responsive. At the same time, we are also working with people before that request comes forward. So it is not truly reactive. In many ways, we are working with interested parties. DR. JONAS: Right, but you don't go out and say, here are some things that can improve quality of care, reduce costs, enhance quality of life; we are going to see if we can identify whether there is adequate evidence to provide this as a benefit. Is that correct? DR. WHYTE: I think the approach that we have used -- DR. JONAS: Both Benson's came to you, through different mechanisms, obviously. DR. WHYTE: That is correct, but I think what we have done over the past few years, and what we are continuing to try to do, really, is to outreach to interested parties. So what I would say is part of the coverage process, we are going to a lot of national meetings of beneficiaries, of device manufacturers, of physician and other groups to talk about our coverage process. So, in a sense, what we are saying is, here is our process and we know you all believe that there are certain things that should be covered, so, here is our process; work with us to try to bring that about. A good example is last Friday, several people from HCFA went to the American Medical Association to meet with various clinical specialty societies, but we also met with the National Health Leadership Council, which is a wide range of providers and beneficiaries and other groups to say, what are the top 10 coverage ideas that you have that you think HCFA should be doing. So we are not necessarily going out and telling people what they should request, but what we are saying is, as we would do here today, we know you are all interested in certain therapies to be covered under the Medicare program; here is our process, here is how we can work together, here is what we would look for, and then if you want to bring it about, this is how we do it. DR. JONAS: Are there individuals on either of your advisory committees that you would consider, or, would be considered, broad experts in a variety of complementary medicine approaches that sit on those committees at this time? DR. WHYTE: Well, we have a 100 members of our advisory committee, and I can't think off the top of my head what every one does, but I know we have a wide range of disciplines, including at least one chiropractor. Every one is not a physician. There are a lot of other providers. But I think it goes to your question, the point that I would make is, again, it goes to let's move away from the labels and let's talk about the field of health services research and how you look at data. So, I'm primarily interested in, when I help staff the committees, let's find people who are objective, who know how to analyze the literature. I still agree with you that we need to have these other interests just to sensitize people to the topics, but I wouldn't want to move to a field where we are kind of then counting, say, on our advisory committee and other groups how many of these people are alternative medicine or complementary medicine, because I think it takes away from what you are all trying to do. I think that something that Dr. Ornish has often talked about is let's not necessarily refer to this as alternative, this is a therapeutic intervention, and let's judge it on those merits. So, again, that is what I would encourage you to do. I would encourage you to apply to the advisory panel because you feel you can bring some other interests, but you are primarily going to be objective and look at the literature. DR. JONAS: I applaud you on your evidence-based approach to this. I think that in God we trust, but everyone else should show data, as the saying goes. And actually my question is specifically related to that issue, because, as you may or may not know, a number of complementary medicine practices, especially traditional medical practices, are not based on nor do they have the same assumptions of diagnosis and therapy that currently the evidence approach you take and the benefit categories that you have fall into. So it is more than simply sensitizing individuals to the topic, it is really understanding how do these alternative diagnostic and therapeutic categories fit into an evidence-based module, and how might evidence be collected on those. So I think it directly relates to making sure that we provide good evidence-based medicine. If you are going to make a decision about orthopedic surgery, hip replacement or something, you want to make sure that you have someone who has true expertise on that and not have your pediatricians doing it or something like that. I think a very similar idea falls into these. It really is directly related to making sure you provide good evidence. DR. WHYTE: Can I just make two comments on that? The two things that I would say on that is, one, people will often come to us and talk to us about that you cover this therapy and there is no evidence based on that, so why aren't you covering our service. I would caution you not to go down that route, because what we are saying is that this is a new process and there may be some things that do not have an evidence base that we cover, but we are going to go back at some point and look at those. We have a new process, and I would focus on, that every therapy that comes under review is going to have to have an evidence base. The part where I disagree with you a little, and I might not have heard you correctly, is what I would say again is, there are already established principles of health services research, and those should be applied universally. I wouldn't necessarily change those for alternative medicine strategies. I think an example is thermography used for detecting breast masses. Several people have come to talk to us about thermography. At the end of the day, what we are always going to say is, what is the evidence base, what does the literature say. We can't get into the argument, well, you already cover such and such, or, you are being discriminatory. I really would say that we have to apply the same standards universally and we really shouldn't make any exceptions. DR. GORDON: George? DR. BERNIER: I would like to ask Ms. Block, you had indicated that there was going to be probably a pretty dramatic increase in the cost of the Federal Employees program. If you assume that the budget isn't going to cover that, then the presumption would have to be that the new cost will be entirely undertaken by the employees? MS. BLOCK: No. The formula is consistent. The government will bear 72 percent of that increase. DR. BERNIER: So that is sort of guaranteed? MS. BLOCK: Yes. That is guaranteed, no matter what. The government share is 72 percent. The employee's share is approximately 28 percent. I just want to make clear that when I say we are anticipating a significant rate increase, this is not unique to the Federal Employee Health Benefits program. I think that all employers are going to be facing similar significant rate increases this year. It is where the industry trend is. DR. BERNIER: And they don't have the federal government behind them. MS. BLOCK: No. We go through cycles, apparently, in terms of health insurance premiums. What we are seeing again is a rise in premium costs. Various employers will deal with it in various ways. There is a lot of talk about defined benefit and so on. From our perspective, we have also been asked by the President to look at ways of controlling costs in the Federal Employee Health Benefits program, and we will be doing that in conjunction with the Office of Management and Budget, and the Administration. DR. BERNIER: Thank you. DR. GORDON: I have a brief question for you, Ms. Block. What has the response been to the call letter? MS. BLOCK: Well, we haven't gotten the formal proposals yet. They are due on May 31st. In terms of this particular issue, I have not heard a great deal. So we are kind of on a wait-and-see basis. As those proposals come in, we will get a better sense of what the various plans are going to do about it. What they do is, between April and May 31st, the carriers are working on designing their benefit proposal and their rate proposal, and they don't talk to us a great deal until those proposals come in. So on June 1st, I will have a better idea. DR. GORDON: I would certainly like to know. The other question relates to, you made a suggestion that local carriers were the ones who, to a significant degree, determine what is going to be covered. Do you have any thoughts about how to communicate with them, how both federal employees and we, as a commission, might communicate with them? MS. BLOCK: Well, federal employees do every day. They are very vocal. It is a very vocal group, I can tell you. So I know that federal employees are out there telling carriers what their interests are. In terms of the Commission, we will be happy to provide you with a list of carrier contacts. We have done that in the past. It is simply a one-to-one approach, contacting the carriers. They are usually receptive to talking with people. They certainly would be receptive to talking with you. It is an opportunity to present your views. So if you would like, we would be happy to provide such a list. We have about 240 plans participating in the program at this point. DR. GORDON: The question I have is, apparently the call letter doesn't allow the health plans to charge additional premiums for some of these services. Is that true? MS. BLOCK: We have required that benefit proposals be cost-neutral for many years now, and that is not just true this year, it has been true for some time. As premiums go up, we ask the carriers balance their benefits proposals so that they are cost-neutral. So yes, that is true. DR. GORDON: I see. So the issue is, in a sense, if you want to keep the premium the same and you want to add these CAM therapies, to formulate some way to add them, and either take away or reduce costs somewhere else. MS. BLOCK: Well, the rate-setting process is a pretty complicated process. The premiums are never going to be the same, because we are looking at ever-increasing costs, but in terms of the actuarial value of the benefits, we would ask that the proposal some how balance off actuarial value so that the added benefit, in and of itself, isn't adding to the premium cost. That is not a terribly difficult thing to do as you are developing a rate proposal and a benefit package. DR. GORDON: Joe, you had a quick question? Then we have to close. DR. FINS: Yes. I think it is an important point. The balancing that you are talking about, creating a global budget in a sense, even though premiums may creep up, is that there has to be a kind of balancing. I think it gets back to what Dr. Whyte was saying, it has to demonstrate efficacy that is comparable or better than what is there to replace. It is kind of like drug formulary in a sort of crude way. I think it was helpful to hear it from you, as well. DR. GORDON: Thank you both. I feel like my mind is clearer than it was before you began. Thank you for being very clear and succinct. MS. BLOCK: Thank you for having us. DR. GORDON: We are going to take a 15-minute break now. We will come back and hear about state and national perspectives. [Recess.]Panel Session III: State and National Perspectives
DR. GORDON: This panel is on state and national perspectives. The first speaker will be Joy Johnson Wilson.Presenter: Joy Johnson Wilson
MS. WILSON: Thank you, Mr. Chairman, and members of the Commission. It is a pleasure to be here today to talk to you about state legislative and regulatory initiatives related to complementary and alternative medicine. My name is Joy Johnson Wilson, and I am a Federal Affairs Counsel and Director of the Health Committee at the National Conference of State Legislatures. There isn't much written about what states are doing in this area. I think that history is yet to be written, but there is some activity. I think in many ways the state regulation of this area is something of a moving target, because what is complementary or alternative today is likely to be a traditional and standard treatment tomorrow. So, as the different providers and the treatments that they provide progress, oftentimes those become standard treatments and are treated like traditional providers. So, when you look at how states are treating complementary and alternative medicines, I would say that to the extent that they are on the radar screen of the state legislature, they are often treated like more traditional providers, in that the state legislation associated with them and regulations tend to focus on licensure, scope of practice, educational or accreditation requirements, reimbursement issues, insurance coverage, and disciplinary and malpractice concerns. One are that I thought was kind of interesting is the whole area of health freedom laws that have been enacted in 12 states. These laws, at least initially, started out as protections for providers that were providing alternative or non-traditional therapies. Oftentimes these mostly physicians were subject to disciplinary action by the governing board of their practice for providing treatments that were not recognized by the board. These laws were instituted to protect those providers from disciplinary actions by those boards. More recently, those laws have been also pointed to the patient, to provide the patient with access to alternative and complementary treatments. There has been an effort to balance the willingness to let providers and patients experiment a little and yet provide the protections that are necessary for the patient. So, the new laws have consent requirements, informed consent. They have documentation requirements. They oftentimes have the physician make an assessment of a patient's availability for treatments that are conventional and non-conventional, and then have a discussion about what might be the most appropriate treatment for that patient. So, there is a balancing act between allowing treatments that may not be recognized by the governing board for the physicians or other health care providers, providing patients with a full access, a full range of treatments, while at the same time trying to ensure that there is protection for those consumers, that they know what they are getting into when they participate. The most recent law actually became law I think last week. That was in Florida. It does have practice guidelines written within the law that speaks to informed consent and also speaks directly to the right of the patient to avail themselves of these alternative treatments. There are two states that have extensive regulations on health freedom. That is Texas and Nevada. One of the interesting things I found out when doing the research for this presentation is that Texas has a provision in its constitution that says that you cannot give preference to certain schools of medical thought. This has led to some case law, which has led to supporting statute and regulations that are very supportive of alternative treatments and therapies. But also the regulation in Texas has extensive guidelines regarding informed consent and patient assessment and documentation. I think that is the trend that you will see in the years coming, in terms of states looking at these kinds of laws. In terms of alternative providers, and I did not actually consider chiropractic an alternative provider, because I have seen quite a bit of activity in that area since I have been at NCSL, but chiropractic and acupuncture are two areas where they have moved almost from the alternative to the mainstream. You see that reflected in the kinds of legislation that is enacted in these two areas. Most of it has to do with scope of practice, reimbursement, and actually they get into the nitty-gritty of how many visits and how many visits will be reimbursed. So, I think these are treated more like traditional treatments in terms of legislation. Forty-five states have universal licensure and reimbursement equity for chiropractors and thirty-five states either have licensure, certification, or registration for acupuncture. So, clearly these are treatments and providers that are being treated more like mainstream, traditional health care providers. Massage therapy, I think, is well on its way to becoming treated more like chiropractic and acupuncture. We have 29 states and the District of Columbia that license or regulate massage therapists. Again, when you look at the legislation, most of it has to do with scope of practice, almost entirely scope of practice, and some of it is who would regulate them and credentialing. Finally, in terms of emerging alternative treatments and providers, homeopathy, we are seeing a little bit of legislation in that area, mostly regarding the establishments of boards to regulate the practice. Naturopathy, we have 11 states that license those health care providers. Very new, in my view, and there are others that might know more about this, nutritional providers came up a few times. I don't know, I suspect maybe this is renaming something, because most of it has to do with dieticians, maybe it is renaming some things that were being done before and giving it a new title and maybe expanding scope of practice. Most of the nutritional providers are linked to credentialing for dieticians and talk about various kinds of nutritional therapies that those individuals can provide. So, again, most of what you see in terms of introduced legislation, and there is certainly a lot more introduced legislation than there is enacted in this area, is pretty traditional stuff, regarding scope of practice, whether or not there is insurance coverage. For chiropractic and acupuncture, they are more mainstream, there is a lot more discussion about reimbursement issues and whether if you are not a physician whether you have to operate under the supervision of a physician, so the direct access issue comes up. But, certainly in the newer areas, it is more credentialing than anything else. I'm going to stop there. Thank you very much. I would be happy to answer questions. DR. GORDON: Great. Thank you very much. Merilyn Francis.Presenter: Merilyn Francis, R.N., M.P.P
MS. FRANCIS: Good morning. My name is Merilyn Francis, and I am the Director of Quality Management and Health Services Research for the American Association of Health Plans. AAHP is a member organization, representing over 1,000 HMOs, preferred provider organizations, and other similar network health care entities. We thank you for the opportunity to speak here today in front of this Commission. Let's start with some general comments. Over the past 20 years, consumer demand and the availability of complementary and alternative medicine have steadily increased. Health plans made decisions on benefit coverage based on the demand and availability of specific services and their clinical efficacy, safety, and potential cost effectiveness. The two critical challenges health plans face when deciding which CAM therapies to offer their benefit packages are the lack of licensing and practice standards for certain disciplines and a paucity of research on efficacy. Many health plans offer such CAM options as chiropractic medicine, acupuncture, massage therapy, and nutritional counseling in their core benefit offerings. These therapies have research evidence that demonstrates efficacy and there are standards for education, licensure, and practice. Chiropractic medicine, for example, has licensure requirements in all 50 states, while the other therapies mentioned have requirements in almost half the states. These standards, along with research evidence, allow health plans to set their credentialing, performance measurement, and quality improvement programs as they do for their allopathic medicine programs. These three factors are central to health plans' quality agendas. In other cases, health plans may offer optional riders for other CAM therapies, such as herbal therapy, reflexology, and yoga that do not have clearly defined standards or a body of research evidence, but the level of interest and demand by members and/or purchasers is high. In these instances, members may be offered discounts or services at a contracted rate without primary care referral if the member uses the health plan network of alternative practitioners. Health plans are committed to evidence-based care and selection of qualified providers, based on training, experience, and/or licensure and/or certification. While there are many issues of importance related to the integration of CAM therapies into health plan benefit packages, the issues I will focus on are evidence-based care, credentialing, and practice standards, as these are the three basic considerations for benefit decision-making. Evidence-based care. Health plans have supported the use of evidence-based care in allopathic medicine. The development and use of evidence to determine the most appropriate care has been advanced by the efforts of the Agency for Health Care Quality and Research and other research organizations. These efforts were further supported by the recent Institute of Medicine report, "Crossing the Quality Chasm," which offers that "Patients should receive care based on the best available scientific knowledge. Care should not vary illogically from clinician to clinician or from place to place." Before CAM therapies can become more integrated into allopathic health care systems, the evidence to support safety and efficacy must be developed. The body of scientific knowledge on effectiveness and appropriate standards of care is spare or absent from many of the centuries-old systems of CAM, such as Ayurvedic medicine, as well as newer therapies, such as light therapy. Current research efforts by the National Center for Complementary and Alternative Medicine and other research organizations are making headway in developing this body of knowledge. This is an important step in determining the effectiveness, efficacy, and safety in using CAM for specific medical conditions. Further, the knowledge gained from these research activities will support the development of practice standards that are essential for accountability and meaningful monitoring and evaluation of quality. The difference in philosophies between CAM and allopathic medicine makes it both difficult to fit CAM into the health care structure that is dominant in the United States and yet attractive to patients and professionals desiring a holistic approach to care. Where alternative practitioners view health as a balance between mind, body, and spirit, the allopathic practitioner views health as the absence of disease. The rigorous evaluation of balance between mind, body, and spirit for evidence-based care is difficult at best. For this reason, supportive research on CAM therapies is crucial. Evidence-based care is a steady theme in the health care quality improvement agenda for health plans, as well as other health care entities. In light of the IOM report on the need for quality improvement throughout the health care system and its inclusion of evidence-based care as an aim for realizing this improvement, an open exchange for dialogue, such as what we have here today, is important, and then to have a platform for developing strategies for integrating this theme into CAM practices is a valuable effort. Evidence-based care is only part of the picture. Professionals delivering that care should have the appropriate skills and training, as documented through education, licensure and/or other types of certification. The credentialing process is used to verify that health care professionals have the necessary skills and ability to provide safe, high-quality care. Further, the process is used to determine if the provider has had any quality problems, such as malpractice suits, legal actions, or professional sanctions against him. Accreditation programs developed by organizations, such as the National Committee for Quality Assurance, NCQA, the Joint Commission for Accreditation of Health Care Organizations, JCAHCO, have been beneficial in standardizing and increasing the effectiveness of the credentialing process. While the credentialing process used by health plans and other health care entities is not foolproof, it is the best tool health plans and consumers have to determine the baseline ability of a health care professional to practice their discipline. The education and licensing requirement for physicians, nurses, and other mainstream health care professionals practicing conventional medicine are well known and clear. Requirements for certain CAM professionals, such as chiropractors, acupuncturists, and massage therapists are also well defined. However, there are many complementary and alternative medicine disciplines that do not have clear standards for defining a qualified practitioner. This is an obstacle for determining the options of CAM providers and therapies to be included in health plan benefit packages. Education and training to become a practitioner of CAM therapies vary widely from a few weekends of training to several years of education plus a fellowship, leading to certification and/or licensure. If there is no state licensing or other certification process, what methodology should be used to assess the practitioner's baseline qualifications for performing their therapies. Some health plans use advisory boards to facilitate the process for defining qualifications necessary where there is little guidance found in the form of certification or licensing standards from the profession or through state regulation. In general, health plans offering complementary and alternative medicine to their enrollees use methods that parallel those that are used for their allopathic providers where possible. These include review of practitioner databanks and other types of data to determine if there are sanctions or legal actions documented, the number of years the practitioner has been in practice, education, fellowships, and residencies, and the extent of the program attended, and a site visit to assess and make sure that the office is appropriate and equipped for the type of therapies that the practitioner has said they were going to provide. These are important actions taken by health plans for determining the basic level of preparedness for a CAM practitioner, especially for those in a discipline that does not require any form of licensing or certification or secondary vetting. Strategies for developing consistent national standards for education, training, and possibly licensure that are appropriate for the various CAM therapies are needed. Additionally, ensuring that these standards are publicly available to health plans, consumers, and other health care entities is important for the support of benefit decision making. Standards of Practice. Defined standards for the level of education and training, combined with scientific evidence of care, provide a framework for developing standards of practice. Health plans are held accountable by governments, purchasers, and other accrediting organizations for ensuring that their systems and processes of support practice standards. Health plans hold their providers accountable for using accepted standards of practice. The baseline thing I would like to say, though, is that in order for health plans to make their benefit decisions and also meet their quality agendas, it is important for there to be a good a system of credentialing, evidence that services provided are efficacious and also safe, and the third is standards of practice so they measure quality. DR. GORDON: Thank you. Thank you very much. We appreciate that. The rest of the testimony is there in the written testimony. Alan Korn.Presenter: Alan Korn, M.D.
DR. KORN: Mr. Chairman and members of the Commission, I am Alan Korn, the Senior Vice President for Clinical Fairs and Chief Medical Officer for the Blue Cross and Blue Shield Association. I sincerely appreciate the opportunity to speak today on behalf of the Blues about health insurance perspectives on complementary and alternative medicine. The Association is a national coordinating body of 45 independent Blue Cross and Blue Shield plans that provide health care coverage to one in four, or more than 80 million, Americans. All plans are members of the Association, which licenses the plans to use the Blue Cross and Blue Shield name and trademark. Blue Cross and Blue Shield plans constitute the largest, most experienced provider of health care coverage in the country, but each plan is an autonomous organization that operates independently in its own local service area, where it has the flexibility to respond to local market demands and health care needs. Over the past several years, health plans have become increasingly interested in complementary and alternative medicine due to strong public demand. Published studies, in fact, suggest that more than 600 million visits are made annually to such providers, more than the total number of visits to all primary care physicians. Recent surveys conducted by the Association indicate that about a third of responding Blue plans, especially HMOs and PPOs, accommodate member demand for acupuncture services, while 8 percent accommodate naturopathy and 7 percent homeopathy. PPOs are more likely to accommodate homeopathy and 18 percent reported doing so. I would like to clarify that the Association does not consider chiropractic services to be complementary or alternative for the purpose of this statement. I believe that chiropractic has become a stakeholder in the politically dominate health system of the United States. The NIH Office of Alternative Medicine defines complementary and alternative medicine as healing resources outside the politically dominant system. Why are Blue's plans offering these benefits at this time? Well, there are three main reasons for providing a discount network or contractual benefit for CAM services. The first and most prevalent reason is to respond to competitive pressures by visibly meeting consumer demand. Health plans my differentiate themselves in the competitive market and appeal to different segments of the population by offering these very popular programs. A second reason is compliance with state-mandated coverages. And a third reason for health plans to offer a program is the potential for the use of these services to theoretically reduce health care costs through emphasis on health maintenance, leading to improved health status and lower use of other services and/or serving as an alternative to higher cost services. CAM services typically have lower per-unit charges than conventional biomedical services, but existing data, however, suggests that these services are often adjunctive rather than substitutive for conventional care. Health plans interested in offering these programs must consider a number of important issues and design options. The Association has made no recommendations to Blue plans on providing benefits for these services. These can be integrated into insured benefits by being added to basic benefits or by being offered as a separate rider with an additional premium. Alternatively, improved access to these services can be achieved a value-added program that does not entail an additional premium. Value-added programs may provide access to a credentialed network of CAM providers at a discount. Members would self-refer and pay for the discounted services out of pocket. This is not news to you. Integrating CAM benefits into existing insured medical benefit coverage confronts several difficult obstacles. Integration would require applying the same contractual definitions and exclusions to complementary and alternative medicine that apply to conventional biomedical services. In our litigious environment, contract provisions and policy must be first clinically, then legally defensible, and applied consistently. Health plans use two contract provisions in adjudicating benefits included within the benefit contract. They determine first that the service in question is investigational. If not, the health plan would then determine the service to be medically necessary that is appropriate for the patient's conditions. Blue Cross and Blue Shield plans typically define investigational services as those that have not been shown through clinical evidence to improve health outcomes when compared to alternatives. Health plans have made great strides in applying evidence-based standards to coverage determinations. Health plans try to make decisions based on scientific evidence or, if necessary, on well-documented expert consensus, which is generally based on soon-to-be-published studies or published studies with small numbers of patients, but not by anecdotal evidence. My written statement refers to the TEC criteria used by some plans to define investigational. TEC being the Technology Evaluation Center, which is housed in the Blue Cross and Blue Shield Association building. Can CAM services meet investigational and medical necessity criteria? Most complementary and alternative therapies would fail an evidence-based definition of non-investigational. The effectiveness of most services at improving health outcomes has not been evaluated in scientifically valid clinical trials. Clinical trials for most CAM therapies would be difficult to validate because therapies are often individualized to subjective complaints. Elimination of bias from protocols and outcome measures could be difficult, if not impossible, due to the customization of therapy and the subjectivity of results. At this time adequate, non-anecdotal outcomes data for many CAM therapies are unavailable. Such evidence would be welcomed by those who would consistently apply them in adjudication processes. The next step in the benefits adjudication process evaluates the medical necessity and appropriateness of the service for an individual patient's condition. To make medical assessment and determinations, health plans refer to criteria that delineate indications for particular services and modalities. These criteria may be developed by professional organizations, government bodies, such as NIH or AHRQ, academic centers, or even consulting organizations, but clinical evidence, expert consensus, and utilization data are the foundations of medical necessity criteria. Developing patient selection and appropriateness criteria for CAM services may prove difficult due to the disparate philosophies of such disciplines that are involved in CAM therapy and the disparity of practitioners and to whether specific categories of services will be intended for preventive, which is often included in contracts, or for the treatment of diagnosis and specific conditions or disorders. If health plans opt to integrate these services into basic health care benefits, they may need to employ different standards for medical necessity determinations than they employ for traditional biomedical services, undermining the plan's coverage adjudication process. For example, the program completed 17 different independent clinical effectiveness analyses of positron emission tomography, or PET scans, since 1989, involving central nervous system cancers and various cardiac indications. Based on those analyses, only seven indications met the criteria. To conduct a comparable analysis of indications for acupuncture, for example, it would be necessary to evaluate the location and number of each needle and degree of patient-reported pain relief for each placement. The issues, remember, for a health plan will always be how many do we pay for and for how long and for each condition. This analysis for multiple different massage therapy modalities would be even more difficult. Reliance on a separate rider with a separate premium component could eliminate this potential conflict. A separate rider could specify a designated number of visits, an annual dollar limit, and/or a selected provider network. Separate riders that will carry a separate premium are also much easier to price, since the number of visits, et cetera, are controlled by the definition. Health plans currently lack the data on the local use of such providers and how these services either substitute or add to traditional types of care. Discount networks do not require benefit adjudication, as well, and I think you will understand how they work. I would also like, parenthetically, to address one further issue before concluding my remarks, and that is coding. Coding poses a potential issue for reimbursement of these services. Under HIPAA, only nationally-recognized code sets may be submitted and processed electronically. CPT codes for medical and surgical services are one of the recognized code sets for HIPAA. Certain CAM services, specifically acupuncture and massage, do have CPT codes. It is unclear, however, whether CPT would recognize additional CAM services for code development. Under HIPAA, unlike the past, health plans can no longer develop local codes for identifying and reimbursing such services. The coding issue for CAM service requires further analysis. To conclude, I would like to say that health plans are exploring these programs due to strong member interest, including in the basic benefits may undermine health plan evidence-based kinds of adjudication processes. More research is urgently needed to evaluate the effectiveness of these services in improving health outcomes. It will also be important to study how CAM care relates and supports conventional biomedical services. Can CAM substitute appropriately for some biomedical services or will they always be additive? The impact of CAM services on improving health and moderating health care costs must be studied and proven to be of value based on clinical evidence. Such studies must use metrics that will withstand the legal and professional scrutiny to which plans are subject prior to their inclusion of CAM in actuarial-driven health care products. Thank you for your attention.Panel Discussion
DR. GORDON: Thank you very much. Thank you all three. That gives us a very nice overview. Questions from the Commissioners? George? MR. DEVRIES: Dr. Korn, thank you very much for your overview of how Blue Cross Blue Shield is approaching CAM benefits. In particular, you described the possibility of supplemental benefit riders, and in particular, I want to touch on one issue related to a Blue Cross Blue Shield plan covering CAM as a benefit, even as a supplemental benefit rider. Really, it is the issue of licensure of providers, in that the access to providers is critical and yet we have, as we have also heard from American Association of Health Plans and from other organizations presenting this morning, that there is a disparity, shall we say, in licensure in states across the country. In particular, you take something like acupuncture where it may not be licensed in all states, or naturopathy, for example, where doctors of naturopathy are licensed in only 11 states. I guess my question would be, what would be the Blue Cross Blue Shield Association's position on covering as a benefit, CAM as a benefit, supplemental benefit rider working with covering services from licensed providers versus non-licensed providers in the importance that those providers have a licensing statute in that state and are able to be licensed. DR. KORN: Thank you. That is an outstanding question. I deferred discussion of licensure to my colleague, because we had to talk fast to get our little piece in. First of all, the Association, we independently license 45 plan, who structure their own benefit plans within their individual markets. We don't disseminate a model. I would venture a guess, however, that given the legal environment in which health plans exist today, the risk of sanctioning a group of providers that aren't licensed would be very high, because any harm would obviously be focused right on the health plan for steering or directing a patient to a preferred provider of services that we really have no metric to measure either competence or outcomes. So although that decision will be made 45 times, I think 45 legal departments, having reviewed it, would probably be very cautious about offering unlicensed networks to members on any preferred basis. MR. DEVRIES: Thank you. DR. GORDON: Other questions or comments? Charlotte, go ahead. MS. KERR: I didn't quite say yes, but there was something I wanted to say in my eyes. Dr. Korn, I thought all the presentations were excellent. I wanted to say there were particular insights into your presentation I was curious about. One, in terms of the trials for CAM therapies, that the traditional research models may not apply, you also seemed to identify this whole difficulty on a conceptual level of the biomedical model and complementary and alternative therapies. How is it that the Blues kind of have evolved to this knowing? Have you had input on your advisory levels and decision-making levels by complementary and alternative therapy practitioners? DR. KORN: We do. We have discussions regularly with both state and national organizations about such therapies. Our issue isn't whether there is a demand or even fairly good word of mouth on some of these. We are in a spotlight. We are in many spotlights. We are in, obviously, the media spotlight, physicians obviously are very interested in what we are doing, and non-physicians as well, as are trial lawyers. So the one thing we have to do is maintain a set of business practices which are consistent, defensible, and quite open, and increasingly we are doing that. It is a challenge. I think the creative responses are to say, well, we would offer the chiro here, we won't warrant that we know much about some of these individuals, but for a set premium there is this set of services that are reimbursed that we will not warrant that there is anything that we can judge as being better or less good than something else. And so, I think it is a very creative way of dealing with it, given the tough environment we are in, or all together these value-added networks where discounts are offered and it is out-of-pocket. The evidence is what we really, really want, peer-reviewed evidence that stands up to the kind of scrutiny that we are held to all the time. That sort of cuts both ways. Just a bit of anecdote here. You are all aware of the very terrible problems we face here in this country with respect to autologous bone marrow transplantation for victims of breast cancer, over a decade. Without the evidence, we eventually began paying the claims for all of the reasons that I am sure you understand and appreciate. Having done so, we are now being sued by patients who thought we should have known better and not allowed them to have unproven treatment. So, given the environment, we have got to be extraordinarily cautious about all such matters. My plea is, show me the evidence, please. DR. GORDON: I have a follow-up question to that. The example about acupuncture having to justify each point as an analogy to using scans, diagnostic techniques, it seems to me that one could also just simply do outcome studies in which the choice of points was optional. It is really the method that is being used, rather than the specific points. Does that make sense? DR. KORN: Yes. Yes, it would. As we get into the details, we would want to be certain that unlike certain other disciplines, there is not a fee associated with each needle. DR. GORDON: There is not, what, I'm sorry? DR. KORN: There is not a fee associated with each needle, because other disciplines have done that. DR. GORDON: Are some people charging a fee for each needle? DR. KORN: Well, not necessarily the needle, but people bill very creatively, and that is a question we would absolutely have to deal with before very long. DR. GORDON: I think what you are saying, though, is that outcome studies are regarded as good evidence by you. DR. KORN: Yes, that's right. If we don't, in every circumstance, have an ideal randomized, clinical trial, good observational studies are a pretty good substitute, if we can get them well done. DR. GORDON: I had a more general question, and maybe all three of you might respond to it. This relates to one of the perspectives of complementary and alternative medicine. Many of these traditional systems of healing that we are talking about are very much focused on health promotion as well as disease prevention. I am wondering what you are thinking about in the health plans or at the state level for including this kind of approach, which potentially has tremendous cost savings. Some of them have already been demonstrated in some papers, Dr. David Sobel's work, for example, on mind-body therapies and cost savings. I am wondering where you are in considering some of these, really, more global or more holistic approaches for coverage and consideration? MS. WILSON: That is hard to say, because I think that in each state exactly how a legislature comes to address any given therapy varies. Sometimes it is because the school that certifies or educates that particular provider is located in that state. Sometimes it is because a key member of the legislature has availed him- or herself of the treatment that they have found effective, and it was not reimbursed under their plan. So there could be any number of reasons why a legislature considers a treatment or a provider. Sometimes it is because the providers are organized in a way that they have made an effective presentation to the legislature and, on a demonstration basis or operating under the supervision of an already licensed practitioner, get an opportunity to show whether or not their therapy is effective or not. So it is kind of hard to say. In general, legislatures are very interested in effective treatment. One example I can give is acupuncture for detoxification for chemical dependency. This is an area that seems to have a fairly high degree of interest in the state legislatures because of the lack of effectiveness, or certainly the challenges that have been found in other treatment modes for chemical dependency. So, in some respects, it is, well, these other things haven't worked, this seems to have worked in some cases, let's give it a try. So I think it is eclectic, and it really depends, on a state-by-state basis, what is going on in that state and how it comes to the legislature. MS. FRANCIS: Yes. I think that from health plan to health plan it would vary on how it may be incorporated into their benefit packages. Health plans, managed care, one of their basic themes is prevention and health promotion, but yet we still, as I said before, looking at the evidence and looking at qualified providers, some health plans do offer at discounts wellness and prevention therapies such as yoga and membership to health clubs, stress and relaxation, those types of therapies that do help with prevention and health promotion. But it would vary from plan to plan. DR. GORDON: I'm sorry, it is very what? MS. FRANCIS: I said it would vary from plan to plan and state to state, though. DR. KORN: It is a complicated world, Mr. Chairman. I would agree with Merilyn with respect to large health plans, large employers, and HMOs. And 18 percent of our 80 million are enrolled in HMOs. Half of our enrolled lives at Blue Cross and Blue Shield are small businesses, beauty shops, print stores, mom-and-pop operations, and individual families. And to make health insurance affordable, they often pick and choose benefits, including only those that protect their members from catastrophic events. Generally, the kinds of things that we would call lifestyle or wellness are thought to be individual responsibilities, not collective responsibilities. That is an important market. The risk of putting too much into the benefit plan is that we make them uninsured. That is the Blues. That is a good part of what we still do. The other issue in some large accounts is, even the with double-digit prescription drug costs, every emerging new technology, they have to draw the line somewhere. Nobody would argue that these kinds of services are important. We all ought to. I guess the argument has to be is it something that we want our friends and neighbors to pay for through premiums or is it something that we should assume is personal responsibility. The easy answer is let someone else pay. The truth is probably somewhere in the middle. So, although I would agree that these are important considerations and down the road may be associated with long-term savings, the insurance market is an annual by decision that we have to live in year in and year out, and we are faced with a great number of upward cost pressures right now that you are all aware of, reading the newspapers, et cetera. So it is a very complex world. DR. GORDON: Thank you. Joe? MR. PIZZORNO: Dr. Korn, you made a very provocative statement that I would like you to address further. You said you do not consider chiropractic part of CAM anymore, that is part of the dominant health care system at this point. Why do you think that and what was the transition that chiropractic went through? DR. KORN: The chiropractors have gone through a very painful transition and one that I would wish none of you would have to do. It is obviously a very complex topic that I will try to summarize at a very, very high level. What we have observed over the past many years, four or five really, and we have really actually come to understand quite clearly through some direct discussions with the American Chiropractic Association, is the profession has evolved in a way that we find to be quite intriguing. They have now adopted in large measure a collaborative model of care, in which what the chiropractic community offers is merged with what the allopathic and osteopathic communities offer. And you have a unique opportunity we see here in blending all of the science often rendered by physicians, who sort of stand behind a medical record, it gets between them and the patient, and another body of physicians, and that is how chiropractors are defined in most states, who really are very expert in hands-on care, nutritional counseling, lifestyle things. What we have observed, the data would suggest that with that kind of an approach, patients are far more likely to change their behavior, to not smoke, to lose weight, to exercise, to eat properly than being told to do so by someone sitting on the other side of the desk, writing a progress note in a allopathic office. So, we could talk a great deal more about it, but we have become impressed with the contribution that that model of care has in the global picture. Again, that is overlaid on a long history and many other things, but that is why, at this point, it probably makes sense to put them outside of the CAM circle. DR. GORDON: Okay. I have Wayne, George Bernier, Bill, and Tom. DR. JONAS: I would like to ask you all to reflect on what impact the current IOM report on crossing the quality chasm, that I think at least two of you mentioned, is going to have, if any, on health care benefits, payment, associations, et cetera. What I heard you just describe, Dr. Korn, is that chiropractors appear to have developed a relationship with their patients that is more motivational, perhaps more continuous, customizes the care, perhaps more individually than what we currently have, and puts the individual kind of in control of the situation. Of the 10 rules that IOM listed, the first three, and I assume these are in some kind of priority order, is that care is based on a continuous healing relationship, not just office visits; care is customized and individualized according to patient needs and values; and the patient is the source of the control. I think evidence-based medicine is number five on that issue. I couldn't think of any better first three principles in terms of what I would like to see in health care, and I'm wondering if many complementary practitioners aren't, in their own little world, providing these kinds of characteristics, and part of the public response is that they like that better and they are willing to pay for it and do it even outside the health care system? How is this going to impact on our current system and reimbursement? Are any of these principles going to be able to be implemented? Is payment going to be able to be aligned with some of these principles in some way? Will it require restructuring of how we think of health and disease? The first one, is about healing relationships. That is the first time I have ever heard that, really, as the top priority. I am just wondering if any of you could reflect on if and how this might impact the reimbursement payment system?