Don't Restrict Mail Order Drugs

Today’s Managing Health Care Costs Indicator is 5.2%

Local pharmacies were probably overjoyed at an article in last week’s New York Times  about their efforts to make mandatory mail order prescriptions illegal.  Legislative efforts are underway in NY and PA to require that health plans offer consumers a choice of mail order or local pharmacy for maintenance medications.   

There have been enormous changes over the last two decades in local pharmacies.  In the late 1980s when I started in clinical practice, there were over a dozen sole-proprietor independent pharmacists within a few miles of my office in Belmont, Massachusetts.    They did well by their communities – they knew their patients who had chronic diseases, they advocated to be sure their patients wouldn’t miss any doses of medicine, and they supported local high school sports teams and helped build local town pride.

Two of these pharmacies are still in business; one also sells durable medical equipment, and I’m not sure how the other has overcome the wave of consolidation in the local pharmacy business.

If you had asked me in 1987, I would have told you that these local pharmacists were the foundation of health care in our community.  I’ll always remember the day the pharmacist in Waverly Square opened his pharmacy up for me on a Sunday when a terminally ill patient had run out of sustained release morphine.   Without his intervention, my patient would have had to be ambulanced to the hospital.

But times have changed. There are now two 24-hour CVS stores within 3 miles of my old office.  The old, cottage-industry, highly-personalized independent drug stores provided exceptional care – but they did it exceptionally.   They were there for the rare situations where they had to come in during off hours – but that wasn’t advertised as available to everyone – even those who were not well-connected to the health care system.

Now, even the CVS on the corner is being disrupted.  Giant robotic warehouses can dispense medicines for less – and they do it with a higher level of reliability than pharmacists at a local store who are being pulled in many directions at the same time.   

The Times article focuses on the convenience of local pharmacies. But it’s hard to remember to go to the pharmacy –even the 24 hour pharmacy – every thirty days.   Ninety day mail order prescriptions are associated with a higher medication possession ratio, and thus higher patient adherence.

The scale advantages to mail order that are compelling.  Medco, one of the large pharmacy benefit management companies, reports that the annual cost increase for employers with under 50% mail order was 5.3% in 2009, compared to an annual trend of 0.1% for those employers with over a 50% mail order rate.  There were other differences between the employers – but the cost savings from mail order are real.

Local pharmacies, mostly the national chains, aren’t going away. Many patients need a medicine today, many drugs are prescribed for a limited course, and adjustments of even maintenance drugs are often better made with small numbers of pills dispensed.   But I hope that legislatures will not stand in the way of moving maintenance prescriptions to mail order houses, which can improve adherence and save money.

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Narrow Networks Lower Costs

Today’s Managing Health Care Costs Indicator is 2.4%

The Group Insurance Commission (GIC), which procures health care for Massachusetts state and other governmental employees, announced next year’s health care rates, and the average increase in overall premiums will be 2.4%.  That compares to most actuarial estimates of rate increases between 7-9%.

How is the GIC offering such low rates?

In some instances, high rate increases in previous years allow for a rate increase “holiday.” That’s not the case here – the GIC has had lower rate increases than other governmental agencies for years. 

Dolores Mitchell, the long-time Executive Director of the Group Insurance Commission, says that the GIC will save $31 million when 10,000 members move into limited network health plans, which have far lower premiums.   The limited network health plans, being offered by each health plan with a GIC contract, don’t offer members the ability to go to certain hospitals and providers who have higher prices.   Each of the health plans also use some quality standards to determine their networks.

Limited networks can lower costs by:

• Eliminating the most expensive providers from their network, or asking patients to pay the difference in cost.
• Making it more attractive for ‘must-have’ hospitals to negotiate lower rates with health plans, which can threaten to put them in higher cost tiers, or eliminate them from the network

The GIC has offered limited networks for a few years – but there has been very low enrollment in these plans. The GIC will increase enrollment in the limited networks through:

• Active enrollment -  all employees will have to sign up this spring for health insurance, not just those who are changing plans
• Default option, for those who do not sign up for health insurance during the open enrollment, will be the lowest cost limited network plans
• Those enrolling in the limited network plans will get a three month ‘holiday’ from premiums

This is a bold move.  If the GIC is able to achieve this low a rate of inflation through use of limited networks, it will increase the pressure for Massachusetts municipalities to join the GIC.

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Don Berwick’s Impossible Job

Today’s Managing Health Care Costs Indicator is $509 billion

The General Accounting Office offered testimony today to Congress about why Medicare is a government program at “High Risk.”  They’re right – Medicare costs the government (us)  $509 billion annually, and doesn’t have the infrastructure or the regulatory latitude to do a superb job of improving health care.  CMS Administrator Don Berwick doesn’t have the tools to change this.

The GAO observed

·        10.5% rate of improper payment on the fee for service business (and 14.1% rate of improper payment to Medicare Advantage plans)

·        Large-scale fraud in home health care

·        Overspending on oxygen therapy

·        Inadequately vigorous oversight of nursing homes

Here are the GAO’s recommendations:

1. Implement an effective physician profiling system
2. Better manage payment for imaging (such as radiology)
3. Reduce fees when appropriate as technology lowers provider resource costs
4. Readjust the GPCIs – the geographic payment adjustments for rural providers
5. Improve contract oversight (including better review of claims at high risk of fraud and better nursing home oversight)

This is all sensible.  Fraud is certainly a problem in Medicare, and the feds have been late to move to predictive modeling and automated approaches to ascertain potential fraud. There is huge variability of care.  Imaging costs too much.   Payment differentials among areas don’t make economic or clinical sense, and while specialty societies go to the RUC (Relative Value Scale Update Committee) to complain about under-reimbursed procedures, but no external party keeps eyes out for over-reimbursed procedures.

But how realistic is this? Can CMS Administrator Don Berwick effectively follow the GAOs gameplan to make Medicare more effective?

Medicare can profile physicians, and has a large enough penetration of most adult practices that the profiling would be better than most.   BUT – legislation requires that Medicare offer participation to any willing provider. Physicians can be removed for the program for fraud – but not for inefficient resource use.  There is no ability to change benefit design to encourage Medicare members to go to higher value providers.  So it’s not clear that Medicare has the leverage to make profiling meaningful.   It’s also a huge job that ideally requires substantial engagement of practicing physicians – and Medicare isn’t resourced for this.

Medicare has lowered radiology professional fees substantially – but of course radiologists and hospitals oppose any fee concessions.   Reducing fees to account for efficiencies in technology means there will be losers. Those who get a financial haircut are almost always vocal. 

The GPCIs, and even local fee schedules, have long been micromanaged by members of Congress.  I’ve noted before that Ted Stevens obtained a permanent 35% rate increase for Alaska Medicare providersbo just before he left the Senate.     

CMS has been improving the oversight of contracts, but doesn’t have the staff to do more nursing home site visits. Separately, the GAO noted that bundled payments (such as for transplants) are administered by private health plans, but CMS doesn’t have the case management infrastructure to do this for Medicare beneficiaries.

A few ideas:

·        We should acknowledge that as much as we hate to see dollars spent on administration, Medicare’s administrative budget is too small for a program of its size. 

·        Congress needs to back off – and leave determination of prices to bureaucrats who can implement rules

·        We need to resource the RUC to do independent evaluations, as opposed to relying on testimony from specialty societies.

We need to be patient.  For its size, Medicare is remarkably effective at procuring care for our elderly and disabled. Its inflation rate has been consistently lower than the overall market (although to some extent this represents cost shifting to the private market).   Medicare has been run by able folks – both in Republican and Democratic administrations.  But they need a little more leeway, and some time to get the Medicare house in order. 

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