State Health Policy Networking Session Summary

State Issues Probed at 2005 State Health Policy Networking Session in San Francisco

Approximately 40 representatives from 22 chapters attended the 2005 ACP State Health Policy Networking Session on April 13 in San Francisco. Attendees participated in discussions on: liability reform in Georgia, Maryland and at the federal level; status of the Racketeer Influence and Corrupt Organizations (RICO) lawsuits; Medicaid; and public health issues. Highlights of the panel presentations follow:

Massachusetts Chapter Electronic Health Infrastructure

Allan H. Goroll, MD, FACP, Governor of the Massachusetts Chapter discussed the chapter's role in starting an electronic health record (EHR) initiative in Massachusetts. He described how a decision by the chapter council in 2002 to endorse patient safety was the impetus for the EHR initiative. The notion was if they were going to be effective at increasing patient safety they would have to "take on EHR and the connection with clinicians." He described how at a June 2003 chapter retreat the council decided to endorse going ahead with an EHR initiative, despite a lot of skepticism. The chapter then commissioned a business plan to invite every CEO stakeholder in healthcare to a "stakeholders' summit" to try to reach a consensus on how to collaborate. Everyone who was invited came to the summit, including representatives from government, insurers, payers, liability carriers, and other professional organizations. A consensus was reached by all attendees on several key elements: the need for CEOs or the people in positions to make decisions to attend the meetings; the need for collaborative strategies to pool resources to overcome barriers; and the need to empower a working group to sit down to work toward the previous mentioned items.

Dr. Goroll said that, thus far, funding for the initiative has come from Blue Cross and Blue Shields (BC/BS) which met with the Massachusetts Secretary for Health and Human Services (a summit participant) regarding the possibility of funding an EHR initiative like the one the chapter was promoting. The Secretary then informed the chapter of BC/BS interest in donating $50 million to the EHR initiative. Dr. Goroll noted that recommendation has since been made by the committee(s) regarding the structure of the group, the Board, and working groups. He said that the total cost to the Massachusetts chapter had been approximately $100,000 ($50,000 for the business plan and $50,000 for staff time and retreats). The chapter is also looking to change the way physicians are being reimbursed in Massachusetts to encourage the use of EHRs. There are three pilot programs currently in process in Massachusetts that are being funded by the $50 million grant from BC/BS. Dr. Goroll informed us that the groups plan to reconvene for the endorsement of the plan to structure the organization. The final set of purposes that went into the bylaws were: to work collectively and collaboratively to develop, implement and sustain EHR for the purpose of safety, efficacy of practice, and to save money; the commitment to improving care; and transparency.

Medical Liability Reform: National Update

Patrick Hope, Esq, ACP Legislative Counsel, gave an overview of the federal liability reform landscape. He said that ACP's position at the federal level is for plaintiffs to receive 100% of economic damages; caps on non-economic damages; collateral source rule (i.e., the rule lets the jury know that other payments were received or what income came from other settlements); joint and several liability (the individual will be charged the exact percentage that they are liable for); periodic payment for future damages instead of lump sum payment; and sliding scale for attorney fees. He said that the House of Representatives in May of 2004 passed comprehensive liability reform (H.R. 4280) primarily along party lines by a vote of 229-197 and can pass reform any time they want. The problem lies in the Senate, where the filibuster (unlimited debate) has been key for the minority party. However, if the majority party gets 60 votes they could invoke cloture to cut off debate. He said that since 2003 there have been three attempts to pass liability reform in the Senate (S.11, S.2061 and S.2207) and all failed to pass cloture. The closest vote (49-48), was 11 votes shy of the 60 needed. Mr. Hope said that the 2004 election brought us closer to our goal. The Senate was able to pick up four Republicans who are likely to vote for cloture, which still leaves seven to eight votes shy of the 60 needed. He said that although the Senate looks like an uphill battle, progress is being made at the state level. He said that the longer we keep medical liability reform in the forefront at the federal level, the easier it is to make a case for it in the States.

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Georgia Malpractice Legislation Update

Jacqueline Fincher, MD, FACP, HPPC Chair of the Georgia chapter described "Operation Tort Reform: The Road to Civil Justice Reform in Georgia," the campaign that led to the historical passing of one of the strongest malpractice reform bills in the country. She said the impetus for reform was the dramatic increase in million dollar settlements and the decline in the number of insurers in Georgia, from twenty five to two, leaving little competition between 1998 and 2002. Polling was done by the Medical Association of Georgia (MAG) to gauge public sentiments toward physicians, lawyers, and healthcare. The key findings of the original polls were: physicians were seen more favorably than lawyers; patients' rights and costs were the top health care issues for voters; tort reform was not on their radar screen; and Georgians were more focused on cost rather than access to health care. Dr. Fincher said the campaign's initial focus was to put the issue of tort reform on physicians' radar screen. One goal was to collect $500,000 from physicians. She noted in Georgia, internists are sued more than any other specialists, followed by family physicians. This point helped to persuade Georgia ACP members to get on board. The Good Medicine Campaign was launched by the Medical Association of Georgia (MAG) to take the issue to the public, apply constituent pressure on the legislature, and provide educational information to patients through in-office fliers and direct mail to specific legislative districts in order to make the link between the cost of health care and tort reform.

According to Dr. Fincher, follow-up polling revealed that: health care was in the top tier of election issues; cost was the most important issue; protecting physicians from lawsuits is in the second tier of concerns. Other findings were:

  • Nearly three-quarters of the state's voters agreed that the General Assembly should take action to reduce excessive lawsuits;

  • More than four-fifths of the state's voters said it was important to pass a bill; and

  • Two-thirds of Georgia voters would be more likely to support a candidate who supported a cap on non-economic damages.

As a result of the direct campaign, Georgia voters supporting a $250,000 cap on non-economic damages jumped from 30% in 2002 to 71% in 2004. She said that MAG made tort reform its top legislative priority, and along with the Georgia Hospital Association and the Georgia Chamber of Commerce formed a coalition for "Civil Justice Reform." She said that three major political events presented an opportunity for reform: 1) the first Republican Governor, Sonny Purdue, since reconstruction was elected; 2) Democratic Senator Don Cheeks changed parties - giving control of the Senate to the Republicans; and 3) redistricting presented an opportunity for changing the landscape with new legislators for tort reform in the 2005 legislative session.

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Maryland's New Malpractice Law

Mary Newman, MD, FACP, Governor-elect of the Maryland Chapter of ACP, discussed the recently passed medical malpractice reform. She said that the crisis began in fall 2003 when the largest insurer announced that it was going to increase it rates an average of 28% for 2004 and 40% to 60% for high risk specialties. On January 21, 2004, approximately 3,000 physicians and supporters went to the State House in Annapolis on a very cold day to rally for reform. The rally was covered by most of the networks for most of the day, but received poor newspaper coverage. She said that neurosurgeons and obstetricians were hit the worst by the increasing premiums and that primary care doctors were under extreme stress due to their fragile economics. Fortunately, a Senate bill proposing "rate compression," where the primary care physicians would pay more in premiums to lower premiums for high risk specialties failed to pass in 2004. Dr. Newman said that although nothing was passed in the 2004 session, the Governor's support of liability reform and the Maryland State Medical Society (MedChi) efforts to seek reform kept the issue out front so that by fall 2004, 83% of Marylanders believed that there was a crisis.

She said that a task force created by the Governor met all summer and winter to find a solution to the problem. Because of the looming crisis, the Governor, with the support of the legislature and its leaders, called a special session (the first in 17 years) for the week after Christmas. From the special session came a bill (H.B. 2) that created a $40.7 million rate stabilization fund to be paid for by a 2% tax premium on HMOs; increased Medicaid reimbursement to high risk specialties; and established some tort reform. She said that MedChi and the Maryland Hospital Association endorsed the bill, citing the economic benefits to physicians and stating that it was a start, not a finished product.

H.B. 2 was passed by the House and the Senate and submitted to the Governor for his signature. The Governor vetoed the bill because he viewed the 2% tax on premiums to be paid for by HMO as anti-business, preferring the rate stabilization fund to come out of the general fund of the state. Dr. Newman explained that the proposed tax was not a new tax, but a repeal of an exemption of a tax that HMOs enjoyed for years while other insurers paid the tax. Other medical groups opposed the bill due to the weakness of the tort reforms. The bill was passed by the House and Senate, overriding the Governor's veto. She said that since the passage of H.B.2 there were a number of clean up legislative bills introduced that failed to pass the Senate. She said that what she learned from the whole ordeal is that you can get rate relief without tort reform; that physicians don't agree on what is good tort reform; that the public is the most powerful asset in the debate; and that there needs to be more physicians in the legislature.

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Securing Tobacco Settlement Funds for Health Care

Dona Upson, MD, President of the New Mexico Chapter discussed why there should be a dedicated trust fund for tobacco settlement funds. She said that the goals of the 1998 state tobacco settlement funding for public health and tobacco prevention have been disrupted by several factors: an increase in spending by tobacco companies on marketing and promotion from $5.7 to $12.7 billion; reductions or cuts in anti-tobacco media campaigns due to declining states economies; decreased funding for the "Legacy Foundation" (sponsor of the truth campaign); and youth smoking rates, which had been declining since the settlement, but recently began to stabilize. She said the problem is that the agreement is a settlement and not law, so that only the states and the tobacco companies have legal standings to enforce the terms.

She noted that annual healthcare costs from smoking will exceed $75 billion nationally in fiscal year (FY) 2005 and spending for prevention will be $538 million, a third of the CDC minimum recommendation of $1.6 billion. Total state revenue from tobacco is approximately $20 billion and prevention spending is only 2.7% of tobacco revenue, ranging from 0% in the District of Columbia to 10.1% in Maine.

Dr. Upson said that New Mexico (NM) gets $37 million a year from the tobacco settlement from which 5 million goes to tobacco control. This is less than half of the CDC minimum recommendation of $14 million annually for NM. The tobacco industry spends $60 million in advertising while annual tobacco-caused Medicaid costs are $144 million in NM. She noted that the economic impact of smoking on NM in 2002 was $853 million ($425 million in direct medical costs and $428 million in lost productivity), approximately $460 per person. Smoking- attributed deaths in NM for diseases such as cancer, cardiovascular and respiratory diseases are a little less than national average. The retail price per pack of cigarettes in NM is $3.35 in contrast to medical costs and lost productivity attributed to smoking, which costs $8.94 per pack, and Medicaid costs attributed to smoking, which are $1.78 per pack. Meanwhile, tobacco industry marketing expenditures have been $12.7 billion nationally ($57 million in NM). Estimated annual tobacco industry marketing expenditures are $30.77 per New Mexican vs. $3.25 annual expenditures on tobacco prevention and control per New Mexican.

Dr. Upson said that the New Mexico tobacco control program, Tobacco Use Prevention and Control (TUPAC), targets schools and includes cessation, evaluation, media, and community programs using best practices. Its goals is to prevent youth smoking, promote cessation among adults and youth, eliminate exposure to secondhand smoke, and identify and eliminate tobacco-related health disparities.

She said that the key to getting funding each year, although difficult, has been TUPAC partnership with oversight groups and involvement with voluntary health organizations (American Lung Association, American Cancer Association, and American Heart Association). Strategies include identifying key legislative champions on key committees and fostering relationships with the Department of Health, health care professionals, and grassroots advocates. The successes of the NM program include: over 2,700 adults received cessation services; there are youth and school programs; the number of smokers that received cessation advice from healthcare providers has increased from 49% in 2001 to 68% in 2003; and over half of the state's smokers try to quit every year.

She said that states had been selling future tobacco settlement receipts for smaller lump sum payments now, yielding 40 cents on the dollar. Because the market has become saturated with states wanting to sell future tobacco settlement receipts, the yield is down to 25 to 30 cents on the dollar. Some states have seen their credit or bond ratings downgraded due to lower future revenue streams.

She said that the benefits of having a dedicated trust fund for tobacco settlement money is that it will improve health; it is a moral obligation to use funds as dedicated; it increases political capital because it is a very popular use of the fund; it will reduce future state expenditures; and it strengthens bond and credit ratings.

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Innovations and Reform Proposals in Florida's Medicaid Program

Kay Mitchell, MD, FACP, Governor for the Florida Chapter, gave an overview of Governor Jeb Bush's proposal to reform the Florida Medicaid program and how it will affect physicians and patients. The proposal, entitled "Empowered Care," is expected to reduce the state's Medicaid spending by creating new benefit packages and a "Medicaid marketplace." She said that the proposal may change significantly by the time it gets to the floor. The Florida Medicaid system, created in 1970, has not undergone systemic reform since its inception, which is part of the reason for the dysfunctional system. She said that the current Medicaid program has the patients at the bottom of the heap without any choice of coverage, formulary, or doctors. The providers in the middle had bad/rigid regulations to work with, as well as low payments. Fraud and abuse is common, with south Florida ranked the highest in the US for money loss from Medicaid fraud and abuse. The government, conversely, has complex and conflicting programs, centralized programs, and spiraling cost. Currently, Florida Medicaid serves 2.2 million patients. The program expenses have increased by 13% per year and include 47 different fee-for-services plans and 11 contractual HMOs, which include primary care case management programs, mental health and dental services (making it a large complex system that is hard to navigate and more difficult for the state to manage). She said that the Medicaid share of the 2005 state budget is 24% ($14 billion of a $67.3 billion dollar budget). It is predicted that the Medicaid share of the budget in 10 years will be approximately 60 percent of the state budget.

Dr. Mitchell said that the plan, as proposed, will recognize the patient role in planning and purchasing their health care services by assuring access to quality services and providing stability to the state budget. Fraud, which is almost exclusively in fee-for-service, will be lowered by a new premium-based service. Unlike the current hierarchy, where the patient is at the bottom and the government on top, the new Medicaid plan will give patients new choices and better access, which will empower participation. Providers will have flexibility, more opportunity for innovation, and be rewarded for quality. The government will provide financing and participant protection.

Dr. Mitchell said that the plan embraces risk-adjusted premiums for Medicaid eligibles with comprehensive care, catastrophic care, and enhanced benefit accounts. Employer-sponsored insurance will allow individuals to use premiums to "opt out" of Medicaid; a Safety Net Fund will be established and maintained by the network providers who meet certain requirements. Delivery systems will include: managed care organizations, including HMOs and EPOs (Exclusive Provider Organizations); licensed insurers, including PPOs and POS entities; state certified contractors; and employer-sponsored insurance.

She said that to begin the reform, Florida will submit a 1115 Research and Demonstration Medicaid waiver. Eligibility and enrollment will use existing processes. The state will establish premiums based on historical utilization of the mandatory and optional services. Implementation will be in four phases over five years. The state will procure the final plans, create evaluation teams (allied health professionals, who have a role in the care of the patients, will have a place on the team) to review and approve the plan applications, evaluate the eligibility and enrollment processes, create an outreach and education team to focus on development of strategies, and create a payment team to develop premiums.

Dr. Mitchell said that if the plan is implemented the entire state should be covered by 2011. The Florida Agency for Healthcare Administration (ACHA) will be responsible for monitoring and other accountability related activities.

She said that it is a huge project. The reform proposal stems from the growing Medicaid population in the state that is due in part to a growing elderly population, many of which are in nursing homes.

She said that the principles of the Medicaid reform proposal are: patient responsibility and empowerment; market place decision; bridging public and private coverage; and creating a growth rate that is sustainable.

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Third Party Relations Update

RICO Lawsuits

Special guest speaker, Catherine I. Hanson, Esq., Vice President and General Counsel for the California Medical Association, discussed recent developments in the federal Racketeer Influence and Corrupt Organizations (RICO) lawsuits against the managed care industry (primarily the large for-profit managed care organizations in the country, including Humana, Aetna, Anthem, CIGNA, Coventry, HealthNet, PacifiCare, Prudential, United and WellPoint). She began by saying that the cases are still all pending in Florida. She emphasized that the case is a civil RICO case, not a criminal case. The theory is that the health plans engaged in fraud and extortion in a common scheme to wrongfully deny payments to physicians. She said if it weren't for the conspiracy allegation in the case it wouldn't have gotten anywhere because every physician has signed managed care contracts that all have arbitration clauses that say that they have to arbitrate any disputes. It is only because of the conspiracy allegations that the courts have let this case go forward because none of these doctors when they contracted to arbitrate their disputes could have meant to contract to arbitrate if there was a conspiracy among the plans. These cases were originally brought around the country in various courts. They were all consolidated in Florida as a national class action case in 2002. On September 1, 2004 the 11th Circuit upheld the class action certificate and the trial is now scheduled to begin in September 2005. So far, the courts that have looked at this case have been persuaded that there is real merit to the complaints that have been brought. She said that every physician in the country is a member of this case but individuals will have an opportunity to opt out of any of the settlements (you are in until you opt out). The case applies to any doctors that submitted claims to any one of the defendants. The class action extends from 1990 to 2003.

Ms. Hanson said that both Aetna and Cigna have settled. The main goal of this lawsuit was to change the actions of the industry in the future. She said that there isn't enough money in the industry to pay for all the past harms but that there is the opportunity to take advantage of the things managed care could do better for patients and physicians and to stop the abuses. There were three components of the settlements: retrospective relief, prospective relief and enforcement. In terms of retrospective relief, there was past damage money of $100 million from Aetna which amounts to $53 per physician. She emphasized that the purpose of the lawsuits from the standpoint of the plaintiff was to change the way the system works. The value of the prospective relief is value anywhere between $300 and $500 million and the $53 was a token payment. Since most doctors did not claim the $53, the unclaimed money went to a foundation called the Physicians Foundation for Health System Excellence, Inc. The Foundation has about $100 million in funds. One of the major focuses of the foundation is to help physicians, particularly those in smaller practices, enter the electronic age and move on with electronic health records.

Ms. Hanson said that the CIGNA settlement had two different claim pools - a $30 million claim pool for those who want to file and sign their name and be done (the $30 million should be paid out in the near future) and an uncapped claim distribution fund for those who have documented records that they have been improperly paid by CIGNA. She said that there was dramatically more money filed here than CIGNA had predicted so there has been a delay in getting the money out. She said that the main value of the settlement is the prospective relief - Aetna prospective relief is in excess of $300 million and CIGNA prospective relief is in excess of $400 million. Since more money is expected in the future, there is a need to hold health plans responsible or they will walk away without paying for their wrongdoing. She said that the changes under the Aetna and CIGNA settlement affect their business practices, include a better medical necessity definition, and ensure that better or stronger state laws supersede the agreements. The settlements establish three dispute resolution mechanisms - billing, medical necessity, and compliance disputes that physicians have with CIGNA and Aetna.

She said that the status of the RICO litigation against other defendants is that the case is still pending against the eight remaining defendants and there are additional cases against Blue Cross/Blue Shield entities also pending. Mediations are ongoing under the supervision of the judge. It is the position of the plaintiff that the Aetna/CIGNA Settlement is the floor and that all later settlements have to be better than that. The discovery and trial preparation are also ongoing.

Ms. Hanson said that when the settlements end in four years, she hopes that the health plans continue to respect physicians and that she intends to work with the plans to demonstrate that it is better to work with the physicians. Ms. Hanson emphasized that the medical societies retain the right to pursue legislative and regulatory relief - such as the case in California; and that future litigation remains an option, even though, the health plans have all amended their agreements in an effort to make that impossible.

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Medicare "Error" Denial Rates

Susan Sprau, MD, FACP, Chair of the Southern California Health and Public Policy Committee, discussed Medicare claim denials rates. She said that Medicare claim denials are a growing problem that will affect "our pocket books and how we care for patients."

Dr. Sprau said that in 2003 the Centers for Medicare and Medicaid Services (CMS) introduced the Comprehensive Error Rate Testing Program (CERT) to detect "errors" made by Medicare carriers in payment to providers but in practice, some of the data collected from CERT is being used to interpret physician practice patterns and make implied suggestions for changes that may be needed.

She said that CERT only looks at Medicare paid claims, auditing approximately 160,000 claims out of about 1 billion claims a year that it pays out through its intermediaries (i.e., carriers). She said that in the first year CERT collected data (in 2003), auditors found that there was about a 10.8% error rate - some "errors" were attributable to paperwork issues, such as a missing signature. She said that CMS did make an effort to decrease the incomplete documentation problem by eliminating it from the error rate and adjusting the statistics. After the 2003 data was in, the CMS goal was to get the error rate down to 5.6%. The 2004 data indicated that the targeted rate was not met. She said that CMS continues to be very aggressive on this issue and is trying to get the rate down to 4.7% in 2008.

Dr. Sprau said that although most of the payments made to physicians are proper payments by the Medicare carriers, 10.8% are improperly paid; this is an area that CMS feels that it can focus on and tries to recoup some money. The improper payments are due in many cases to technical issues. She said that another focus of CMS is the rate of medically unnecessary care which CMS believes increased in 2003-04.

Dr. Sprau said that internal medicine has the highest error rate (19.1%) by specialty. Even though ACP has challenged some of the findings, these numbers are quoted by the press, and are the focus of CMS quality improvements efforts. This focus may lead to increased denials by Medicare carriers. She noted that CERT only tracks provider services that are paid; it does not regulate the carriers. She said that when she contacted the California Medicare Director for information, she was told that he is not required to share this data. She said that he showed little interest when asked to provide data to help educate members such as the top five codes that internists are being denied.

Dr. Sprau said that Medicare denials increase practice overheads and reduce net revenues for work performed, result in increased work for Medicare carriers, reduce total Medicare expenditures, and contribute to increased audits.

She said that the cost of Medicare denials for internists could average $16,000/year. Without a SGR fix the cost could increase by $8,200 in 2006. The cost to appeal a denial is also burdensome and may be more costly than the amount appealed.

Dr. Sprau thinks that:

  1. ACP should pay attention to CMS's CERT data and how it is interpreted by CMS and presented to the press because this could pressure Medicare carriers to increase denials to providers;

  2. ACP needs to be active on this issue because there is a good chance that internal medicine is going to be disproportionately affected;

  3. ACP and state chapters should work to get the data published and examine patterns that are developing. Then the data can be challenged or used to inform the work of CMS to reduce the number of denials or errors by ACP members; and

  4. ACP needs to work with the CMS and Medicare intermediaries to reform the burdensome appeals process.

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