Director of the Center for Medicare/Medicaid Services Mark McClellan was up on Capitol Hill yesterday testifying on Part D, conveying the message that all was going better, improvements were being made, and the cost of the program was lower than anticipated.
When one remembers that McClellan is the brother of White House press secretary Scott, his facile comments and ability to re-interpret reality are more understandable.
I’m reminded of the comments whispered to me by the mother of the young lad named “most improved” at a youth football dinner: “he was so bad at the start of the season that just running without falling down was a huge improvement”. While the Part D program is nowhere near running, and has yet to even advance beyond the crawling stage, it is likely to improve. That’s the good news. The bad news is the fatal flaw of adverse selection, discussed here ad nauseum, but still eluding the denizens of Capitol Hill.
One highly contentious issue continues to be the law preventing HHS from negotiating directly with pharmaceutical companies on drug prices. According to ABC News; Sen. Snowe (R ME) and what a great name for a senator from Maine…
“questioned the way the program was working and pushed for legislation that would allow the government to negotiate for better drug prices. The initial legislation included no such provision, an omission that at the time was seen as a boon to drug companies.
Snowe and Sen. Ron Wyden, D-Ore., have drafted bipartisan legislation that would give government the power to negotiate prices.
“I can’t imagine why we’d spend $700 billion on this benefit and not allow the secretary to maximize the taxpayers’ money,” Snowe said.
Me neither.

A June 2005 CMS Office of the Actuary report estimated there would be a total of 36.8 million enrolled in Part D in fiscal year 2006. Thus HHS Sec. Leavitt’s stated goal of 28-30 million enrolled in Part D by the end of 2006 either reflects an updated guesstimate or indicates the previous goal is now viewed as unreachable, or perhaps both. (remember almost 22 million seniors were automatically enrolled in Part D on 1/1/06) Especially when one recalls that the calendar year has three more months than the fiscal one.
As Bob Laszewski points out, historically the big enrollment date for employee benefits and health plans has been January 1. With all the hype, publicity, politicians-on-the-road-show circuit and marketing leading up to that date, and with that date well behind us, it looks very doubtful that enrollment numbers will even come close.
The well-publicized enrollment mess surely has not encouraged seniors to jump into a plan that had already confused them.
So, despite the taxpayer funding 75% of the costs of the program, millions of dollars in advertising and strong support from elected leaders (sell, some of them at least) and six weeks into the program, we have enrolled a grand total of less than 4 million into the voluntary program.
Not exactly a ringing endorsement of a privatized health care plan based on competition in the private sector.
What does this mean for you?
Bad news for advocates of national health insurance provided by private payers. That was me too, but I’m not nearly as convinced today as I was this time last year…

There is an excellent objective review of the role of PBMs in managing Part D costs at California HealthLine. While I hesitate to summarize what is already a summary, here are the main points.
1. The absence of any “transparency” requirements in the Part D enabling legislation makes it impossible to determine without legal investigation how PBMs may benefit from rebates and other confidential financial transactions.
2. There was an amendment proposed that would have addressed this but it was shot down due to the administrative expense ($40 billion over ten years).
3. Self-dealing, namely the direction of patients to a PBM-owned pharmacy, is not illegal, and is a likely fallout from Part D. This is not bad per se, as mail order costs are significantly cheaper, and the home delivery service means folks do not have to get out of the house to get their scripts (which may actually be a good or bad thing).
4. Not noted is the failure of the legislation to allow CMS to negotiate drug prices, not even as a last resort. I don’t get this.
PBMs Medco, Express Scripts, and Caremark have been besieged by allegations of impropriety, civil complaints, and customer action. While this PBM-pharmacy manufacturer-pharmacy-CMS-employer-patient thing is enough to make your head spin, this will confuse you even more –
If PBMs screw up really badly and lose a lot of money during the next two years, the taxpayers will bail them out .
What does this mean for you?
less faith in “free-market” capitalism?

Health policy expert (and good friend) Bob Laszewski was interviewed on NPR this morning about the Part D program, bringing a little much-needed perspective to this over-spun topic. The net – if enrollment among “voluntaries” (those without present coverage) does not increase 500% the program is a disaster.
Here are the quotes from Judy Rovner’s piece:
“

A reader asked why I’m in favor of allowing the Feds to negotiate prices with pharmaceutical manufacturers. The reader’s colleagues had the idea that since the PBMs and health plans in Part D are already negotiating, why have the Feds involved?
Here’s my response.
First, the whole Part D mess is a great example of how overcomplicated programs generate huge problems. Medicaid claimants were getting their drugs just fine before Part D went into effect, and are now having all kinds of problems. While those problems will likely go away in the near future, the problems did occur when the claimants were switched from a governmental to a private program. A little ammunition for the single payer advocates, if nothing else…
1. “price” is an elusive concept in pharma. The AWP and most other pricing mechanisms are based on the price but do not factor in rebates or any other funds transfer mechanisms that effectively reduce the actual, real “price”. So, while PBMs are in fact negotiating for “price”, we do not know in most cases what the actual real price is.
2. PBMs by definition have much less purchasing power than governments. As an example, the Veterans Administration is the only federal entity that is allowed under the law to negotiate drug prices. The VA is entitled under the law to receive either the minimum 24% discount off the non-federal average manufacturer price or the “best price” the manufacturer gives anyone, whichever is lower. These rates are much more favorable than any PBM gets.
3. The PBMs make money on the delta between what they buy the drugs for and what they charge CMS. So, while the PBM is incented to get the lowest possible price, they are more concerned w maximizing the price to CMS.

More on the adverse selection problems with Part D from a research study by DSS Research. The study indicates more than half of eligible seniors have no plans to enroll in a Part D program. And, their characteristics should set alarm bells ringing at every Part D sponsor:
“Disinterested, non-buyers are lowest users of medical services. Those who said they had not chosen a plan and had no plans to do so take fewer prescriptions; spend less on prescriptions; go to the doctor less often; and make fewer ER, inpatient hospital and outpatient clinic / surgery center visits.”
In other words, they are healthy, aren’t likely to need the coverage any time soon, and aren’t interested in subsidizing the costs of their less-healthy fellow seniors. This is exactly why Part D is a really bad idea, poorly executed too.