Posted December 17, 2003

1) Major Medicare prescription drug legislation is enacted
A much-debated bill signed into law Dec. 8 provided the largest expansion of Medicare benefits since the program started in 1965, offering significant prescription drug assistance to 14 million low-income Medicare beneficiaries with incomes below 150 percent of the federal poverty level, and catastrophic drug protection for all 40 million beneficiaries. The voluntary outpatient prescription drug benefit starts in 2006, with an estimated $420 annual premium and $250 deductible. Beneficiaries pay 25% of drug expenses up to $2,250, the entire bill between $2,250 and about $5,100, and 5% of any remaining drug expenses. Low-income beneficiaries get subsidies for premiums and out-of-pocket expenses. The measure also established a series of private, regional demonstration plans that will compete with traditional Medicare.

See Medicare Prescription Drug Legislation: How Would It Affect Beneficiaries? Marilyn Moon, October 2003.

2) The number of Americans lacking health insurance increases-again
With a weak economy, high unemployment, and deteriorating employer-based coverage for low-wage workers, data released this past year showed that the numbers of uninsured jumped to 43.6 million in 2002-up 9.5 percent from 2000. Employment-based coverage declined from 63.6 percent of the population in 2000 to 61.3 percent in 2002. New studies from the Institute of Medicine documented the economic and health toll this growing national problem inflicts, including 18,000 preventable deaths annually and $65 billion to $130 billion lost economic value. High charges for uninsured or underinsured patients contribute to medical debt, which all too often results in financial bankruptcy.

See Churn, Churn, Churn: How Instability of Health Insurance Shapes America's Uninsured Problem. Pamela Farley Short et al., November 2003.

3) Overall health care costs continue to rise, with patients bearing more of the burden
Rising health insurance premiums dominated the business story on health coverage. Employer-sponsored health insurance premiums rose 13.9 percent in the spring of 2003 over the prior year. Higher cost to workers-higher premiums, higher deductibles, and higher cost-sharing-was the major consequence, putting low-wage workers and chronically ill adults particularly at risk. Total health care spending, however, did not increase as fast as insurance premiums, suggesting that premiums may slow as insurers recover from losses in earlier years and build up reserves. Preliminary data for the first half of 2003 indicate that health care spending is rising at an 8 percent annual rate.

See American Health Care: Why So Costly? Testimony for the Senate Appropriations Subcommittee. Karen Davis, June 2003.

4) Presidential candidates embrace issue of covering the uninsured
With the 2004 presidential election less than a year away, national health reform emerged as a major campaign issue for the first time in a decade. As of this month, eight candidates, including President Bush, have offered proposals to extend health coverage to millions of uninsured Americans. Most proposals would build on the existing U.S. system of health insurance rather than fundamentally reform the health care system, and include many similar features within varied designs. The Democratic candidates' plans generally build on group health insurance options, while President Bush's plan is structured around the individual insurance market. With the exception of the Kucinich single-payer plan, the proposals leave the employer-sponsored health insurance system intact, but vary in the degree to which they seek to strengthen it. The plans would cover between 4 million and all of those now uninsured. Costs to the federal budget over a 10-year period are estimated to range from $89 billion to $2.5 trillion. Many of the candidates propose to finance the cost of their health plans by repealing some or all of the Bush Administration's tax cuts.

See Health Care Reform Returns to the National Agenda: 2004 Presidential Candidates' Proposals. Sara R. Collins, Karen Davis, and Jeanne M. Lambrew, Updated November 2003.

5) Maine and California take the lead in enacting state-level expansions of health coverage
Despite fiscal stresses on states, new initiatives from Maine to California led the way in practical strategies for improving health insurance coverage. Maine created the Dirigo Health Plan to make insurance more affordable. Dirigo would contract with insurers to group small firms and individuals together and to provide premium assistance to low-wage workers and individuals with incomes below 300 percent of poverty. California enacted legislation to ensure that all firms with 200 or more employees share in the cost of health insurance coverage for working families, and in doing so help to reduce the cost of public health insurance programs.

Ongoing Fund work is helping to implement the Dirigo Health Plan and to assess its viability as a model for the rest of the country.

6) States band together to battle rising prescription drug costs
Intent on reducing spending on prescription drugs, some Medicaid and CHIP programs, state employee benefit plans, and private companies are banding together within and between states to see whether consolidating purchasing power and collaborating on drug formularies can affect spending. Most of these efforts are still in the early stages, but a few states say pooling covered lives has given them greater negotiating power, resulting in lower drug prices. The purchasing initiatives rely on two main strategies: using a common organization to manage pharmacy benefits, including negotiating prices on their behalf, and creating a shared, evidence-based preferred drug list/formulary. So far, 24 states have joined a multi-state or multi-agency purchasing initiative, with Massachusetts, Michigan, Oregon, Texas, and Vermont, being among the early innovators.

7) Research shows only 55% of Americans get indicated care
A study by the RAND Corporation, The Quality of Health Care Delivered to Adults in the United States, published in June in the New England Journal of Medicine and available through the Fund's website, underscored concerns that clinicians are not providing many patients with the most clinically appropriate care, despite ongoing efforts to develop evidence-based guidelines designed to help them do so. The results held across preventive care, care for acute conditions, and care for chronic conditions. Quality and efficiency are both less than optimal, as patients fail to obtain services that would help control chronic conditions such as diabetes or prevent disease, or as money is wasted on unnecessary care such as antibiotics for colds.

8) Clinical IT standards gain traction thanks to government efforts
The U.S. Department of Health and Human Services adopted several standards for clinical information technology that are expected to increase the interoperability of clinical information systems and improve exchange of clinical information. In the future, IT systems sold to the federal government will have to adhere to these standards. In addition, the new Medicare prescription drug bill included a provision that called for the HHS Secretary to promulgate final standards within a year for electronic transmission of prescription drug information and authorized HHS to make grants to physicians to assist them in implementing electronic prescription drug programs.

Read about public and private sector efforts to establish IT standards for health care.

9) Quality improvement efforts really start to make strides
Within the last year, medical journals have reported on the significant efforts to improve quality of care and efficiency in the Veteran's Health Administration and on the quality and efficiency of care in the Kaiser-Permanente health system. In addition, more employers and public payers are starting to reward those who provide higher-quality care. There are now more than 50 "pay-for-performance" trials, demonstrations, or plans across the country. The Robert Wood Johnson Foundation's Rewarding Results program, administered by the Leapfrog Group, includes seven large demonstrations of pay-for-performance, and the Centers for Medicare and Medicaid Services has launched its Doctor's Office Quality project and Premier Hospital Quality Incentive demonstration, both of which include a projected pay-for-performance component.

See How Does Quality Enter into Health Care Purchasing Decisions? Neil I. Goldfarb, et al., May 2003.

10) Disparities in health care get renewed attention
The stark findings of the Institute of Medicine's Unequal Treatment report—that racial and ethnic minorities receive lower-quality health care, even when they have the same income and access to care as whites—continue to spur action. Two legislative proposals have been introduced to eliminate disparities. The "Healthcare Equality and Accountability Act" seeks to improve minority health through insurance expansions, culturally and linguistically appropriate care, and workforce diversity; the "Closing the Health Care Gap Act" would, among other efforts, formalize and expand the role of the Office of Minority Health. After creating the first comprehensive bibliography of key articles on racial and ethnic disparities, Physicians for Human Rights issued policy and research recommendations to eliminate such problems, emphasizing the need for federal leadership. In the private sector, Aetna began collecting data on members' and participating physicians' race, ethnicity, and language preference in order to understand differences in how patients obtain care and to create targeted prevention, education, and treatment efforts.