Health care costs going up by 9.6%

An article in today's Wall Street Journal (click here - link should be good for about a week) reports that "Americans should expect to pay more for medical costs whether they are employed or retired, according to two new studies. The reports, by Milliman Inc. and Watson Wyatt Worldwide, show that health-care costs are still rising at a fast pace -- despite slowing from double-digit rates in recent years -- and that businesses expect to curtail or limit retiree medical benefits."

Here's a little more detail:

The average annual medical cost for a family of four participating in a preferred provider organization, or PPO, program is up 9.6% from 2005 to $13,382 in 2006, according to Milliman, a consulting and actuarial firm that released its second annual study Thursday. Unlike other major health-care cost studies, which look at costs in terms of annual premiums or just the employer's share, the Milliman study also factors in employees' costs, including out-of-pocket expenses.

By my reckoning, even though the reported rate of increase is down a bit compared to reent years, it is still about 2.5-3 times the overall rate of inflation. The outlook for retirees is gloomier than for workers:

The vast majority of businesses are planning to curtail medical plans for current and future retirees, according to the Watson Wyatt study. The survey of 164 companies found that 14% plan to eliminate the benefit for future retirees over age 65, and 6% plan to eliminate it for their current retirees over age 65.

While most employers who still provide the coverage plan to continue it, retirees should expect to pay more for their coverage. "The good news is that they're all not jumping out. The majority are still going to provide it," says Cara Jareb, director of retiree medical consulting at Watson Wyatt. "The bad news is they will be paying more for this coverage."

Nearly two-thirds of employers expect to increase the financial contribution for future retirees, and half expect to change the design of their plans. Twenty-four percent plan to tighten eligibility for future retirees. Fidelity Investments has estimated that a 65-year-old couple retiring without employer-provided health benefits will need $200,000 for out-of-pocket health-care expenses during retirement.

Bottom line: more cost pressures on consumers of health-care services. Depending on your politics, this is either a good thing (because it provides an incentive for us to be better, savvier purchasers of health care goods and services) or not (because it pushes increasing numbers of us -- especially those in the worst position to protect themselves (low-income earners and retirees on a fixed income) -- to make tragic choices (drugs vs. food, or Drug A vs. Drug B).

Happy 4th of July

There's something really stirring about listening to the news-readers and commentators on NPR read the Declaration of Independence every 4th of July. If you missed it this morning, click here.
For some Independence Day fun, check out the National Archives' Charter of Freedom exhibit, where you'll find some interesting information about the signers (for example, 24 of the 56 signers were lawyers) [biographical overview], and you can add your signature to the Declaration, remembering that as we do so, "we mutually pledge to each other our Lives, our Fortunes and our sacred Honor." Heady stuff. (Thanks to Rob Robinson for the link to the Stark County Law Library Blog, which got me to the Moritz School of Law's legal information blog site and the National Archives.)

Garry Trudeau on creationism

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Senate to take up stem cell bills

Sen. Majority Leader Bill Frist announced yesterday that he intends to bring up a three-bill package that would provide federal funding for stem-cell research for a vote before the Senate takes a break for the mid-term elections in October (according to the AP) or July (according to CNN, the Washington Post, and the Wall Street Journal).

• AP (LA Times)
• CNN
• Washington Post
• Wall Street Journal (subscription)

Here's the summary of the Senate's unanimous-consent agreement on Frist's plan (from the Congressional Record's Daily Digest for June 29):

Stem Cell Research Legislation--Agreement: A unanimous-consent agreement was reached providing that at a time determined by the Majority Leader, after consultation with the Democratic Leader, Senate begin consideration en bloc of H.R. 810, to amend the Public Health Service Act to provide for human embryonic stem cell research, and S. 2754, to derive human pluripotent stem cell lines using techniques that do not knowingly harm embryos, and S. 3504, to amend the Public Health Service Act to prohibit the solicitation or acceptance of tissue from fetuses gestated for research purposes, that both bills be discharged from the Committee on Health, Education, Labor, and Pensions; that there be 12 hours of debate equally divided between the Majority and Democratic Leaders, or their designees; that no amendments be in order to any of the bills; that following the use, or yielding back of time, the bills be read a third time, respectively, and the Senate begin three consecutive votes on final passage of the bills in the following order: S. 3504, S. 2754, and H.R. 810; provided further, that any bill that does not receive 60 votes in the affirmative have its votes on passage be vitiated, and that those bills be returned to the calendar or to the Committee on Health, Education, Labor, and Pensions; and that it not be in order for the Senate to consider any bill or amendment relating to stem cell research during the remainder of the 109th Congress.

The action is set out at pp. S7169-S7173 of the Congressional Record for June 29.

Is it legal to buy off manufacturers of generic equivalents?

The FTC thinks it's unlawful for the manufacturer of a patented drug or device to include in the settlement of its suit against the manufacturer of a generic equivalent a cash payment in return for the generic manufacturer's pledge to withhold its product from market. [In the Matter of Schering-Plough Corporation, Upsher-Smith Laboratories, and American Home Products Corporation, Docket No 9297] The 11th Circuit disagreed. [Schering-Plough Corp. v. FTC, No. 04-10688, March 8, 2005] On Monday, the Supreme Court denied cert. [order list; Docket No. 05-273], at least in part because the Solicitor General told the Court that this wasn't a particularly good case to tee up the issue (according to observers like SCOTUSBlog and the AP), in part because a similar case is cooking over in the Second Circuit [from the SG's brief at 16: "Indeed, only a district court thus far has examined, and rejected, the view that a patent gives the holder merely a potential right to exclude infringing competitors from the market. In re Ciprofloxacin Hydrochloride Antitrust Litig. (Cipro-floxacin), 363 F. Supp. 2d 514, 531-533 (E.D.N.Y. 2005), appeal docketed, No. 05-2851 (2d Cir. June 7, 2005). The Second Circuit may address the validity of that theory in its consideration of that case. That prospect further counsels against plenary review at this juncture."]

Meanwhile, as reported by Modern Healthcare, four members of the Senate Judiciary Committee (Republican Chuck Grassley (press release) and Democrats Leahy (press release), Kohl (press release), and Schumer) have introduced "[a] bill to prohibit brand name drug companies from compensating generic drug companies to delay the entry of a generic drug into the market." See Cong. Rec. S6560 (June 27, 2006); see also S.3582 (referred to the Committee on Commerce, Science, and Transportation).

This issue bears close watching. It is a terrific combination of cost-quality-access issues, as well as a good introduction to the tactics of the drug and device industries.

Words of One Syllable Department

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Drug & device manufacturers and docs: a new twist on an old tale

Drug and medical device manufacturers have long struggled to devise ways to get tight with physicians who can promote, recommend, prescribe, or use their products. In recent years, PhRMA and the FDA have published guidelines to rein in marketing abuses. All that effort, and the reams of adverse news stories and other publicity, seems only to have intensified the industry's efforts to continue the remuneration to doctors, albeit in a manner that might escape detection or, once discovered, provide the industry with a better cover story than was possible when the emoluments took the form of all-expenses-paid trips to Hawaii.

Judging from an article in today's N.Y. Times ("Charities Tied to Doctors Get Drug Industry Gifts," by Reed Abelson), the latest ploy seems not to have worked exactly as planned:

The Midwest Heart Foundation, and the way it has become quietly interwoven into its doctors' professional lives, is far from unique. Around the country, doctors in private practice have set up tax-exempt charities into which drug companies and medical device makers are, with little fanfare, pouring donations — money that adds up to millions of dollars a year. And some medical experts see that as a big problem.

The charities are typically set up to engage in medical research or education, and the doctors involved defend those efforts as legitimate charitable activities that benefit the public. But because they operate mainly under the radar, the tax-exempt organizations represent what some other doctors, as well as regulators and industry consultants, say is a growing conduit for industry money. The payments, they say, can bias the treatment decisions of physicians, may lead to suspect research findings and at times may even risk running afoul of anti-kickback laws.

Federal officials are starting to take notice of such tax-exempt charities, which critics say are becoming increasingly popular as other forms of industry support to physicians — like lucrative consulting agreements that involve little actual work — have come under scrutiny from regulators and others worried about the potential conflicts.

HealthLawBlog is back

It's been an interesting, fun, and rewarding trip along the HealthLawProf superhighway, but it's time to return to the meandering blogpath I started down almost exactly three years ago. I wish über-blogger Paul Caron and my HLP co-blogger Betsy Malloy nothing but success. For my part, I will probably blog a little less often than every day, will focus on matters of interest to me without worrying over-much about the relevance to teachers who teach health law or practitioners who practice health law, and will try to have some fun along the way.

HealthLawBlog has moved.

Back from vacation, I've decided to migrate my blog over to http://lawprofessors.typepad.com/healthlawprof_blog/. This is part of Prof. Paul Caron's ambitious multi-subject blog project for law professors (and all others who are looking for quick updates on breaking stories in the health law field). I am hoping for more exposure over there, and I also welcome the help I will get from co-blogger Betsy Malloy at the University of Cincinnati.

I hope you will add this new site to your list of favorites, or add it to your news aggregator, and keep visiting HealthLawBlog in its new incarnation: HealthLawProf Blog.

HealthLawBlog is on vacation.

While I am on vacation in New England (Nov. 4-14), I will not be posting to HealthLawBlog.

Back to the future?

The NY Times has a piece today on Kaiser Permanente, the pioneer among HMOs, suggesting that much that ails the U.S. health care system could be improved if we could learn from Kaiser:

Obviously, there is no single model for revamping the nation's costly,
disjointed health care system, and Kaiser certainly has its share of problems.
But according to economists and medical experts, Kaiser is a leader in the drive
both to increase the quality of care and to spend health dollars more wisely,
using technology and incentives tailored to those goals. " Quality health
care in America will never be cheap, but Kaiser probably does it better than
anywhere else," said Uwe E. Reinhardt, an economist at Princeton who specializes
in health issues.

As one-paragraph summaries go, this one does a nice job of describing our "system" of providing health care:

Health care systems in most industrialized countries are in crises of one form
or another. But the American system is characterized by both feast and famine:
it leads the world in delivering high-tech medical miracles but leaves 45
million people uninsured. The United States spends more on health care than any
other country - $6,167 a person a year - yet it is a laggard among wealthy
nations under basic health measures like life expectancy. In a nutshell,
America's health care system, according to many experts, is a nonsystem. "It's
like the worst market system you could devise, just a mess," said Neelam Sekhri,
a health policy specialist at the World Health Organization in Geneva.

Kaiser manages quality and costs with a set of incentives for providers and patients that set it apart from the (almost) late and (completely) unlamented managed care experiment of the 1990s. It's not a cure-all, but it's impressing lots of health care professionals, as well as regulators and legislators from both major parties.

Medicines Without Borders.

Nice play on words (the French name of the Nobel Peace Prize-winning medical group, Doctors Without Borders is Les Médecins Sans Frontières) for a totally stunning op-ed piece by a physician/marketing director for Pfizer, Peter Rost:

I am a drug company executive who believes we should legalize the reimportation of prescription drugs. I know that I have a different opinion from that of my employer on this matter, but to me, importation of drugs is about much more than money; it is about saving American lives. . . .

Drugs won't help save millions of lives if people can't afford to take them. I know that some people do not agree with me. Among them is President Bush. Senator John Kerry noted in the second presidential debate that Mr. Bush in 2000 had said that importation of drugs approved in the United States "makes sense," but that Mr. Bush had blocked legislation allowing it. Mr. Bush countered: "When a drug comes in from Canada, I want to make sure it cures you and doesn't kill you,'' and added, "What my worry is, is that, you know, it looks like it's from Canada, and it might be from a third world."

What Mr. Bush didn't say is that regulated importation of drugs would take away that risk, a risk Americans now face every day when they go surfing on the Internet for cheaper drugs. In fairness, Mr. Bush did say that he hoped to revisit the issue soon.

What I know about importation of drugs is based upon my experience in marketing pharmaceuticals in the United States and Europe for two decades. Importation or parallel trade of drugs has been done safely within Europe for over 20 years. . . .

In Europe, importers supply only authorized wholesalers or registered pharmacies; they do not sell to the public. So the chain remains closed. Authorized drugs are purchased from authorized wholesalers in one European Union country and sold to authorized distributors in another union country. This is the kind of system we should put in place in the United States.

Until that happens, to ensure safety, a good intermediate step is for states and cities to step in and provide access to lower-priced drugs. Boston and Springfield, Mass., have already established import programs for low-cost, Canadian drugs, while states like Minnesota and Wisconsin have established Web sites linking residents to Canadian pharmacies approved by state health officials.

Make no mistake about it, they are the real heroes in this battle. Every day Americans die because they can't afford life-saving drugs. Every day Americans die because Congress wants to protect the profits of giant drug corporations, half of the top 10 of which are French, British and Swiss conglomerates.

I have another confession to make. Americans are dying without the appropriate drugs because my industry and Congress are more concerned about protecting astronomical profits for conglomerates than they are about protecting the health of Americans.

Finally, some straight talk from an industry insider who knows what he's talking about, instead of the half-truths and distortions that have been coming out of the FDA and DHHS (and the White House) for years. So far, Pfizer and PhRMA haven't replied to the essay, and it's not at all clear how much longer Dr. Rost will have his job.

Jesse Koochin update.

The Salt Lake Tribune reports that the court battle over Jesse Koochin's care ended on the 27th with the hospital's promise that it wouldn't file a death certificate on the 6-year-old, whom two neurologists examined and declared to be dead according the neurological criteria on October 11th and 12th. That clears the way for insurance payments for the home ventilator support that presumably would have stopped upon the filing of a death certificate. (I am not sure why the insurance coverage couldn't end on the basis of the two neurologists' findings, but perhaps the insurance company doesn't want to go there.)

Ethics panel for CDC: a first.

As reported today in The New York Times, the CDC has appointed an ethics panel to decide which groups should be given priority in the allocation of scarce supplies of flu vaccine:

The panel began deliberating Monday. One member, John D. Arras, a professor of bioethics at the University of Virginia, said the group might eventually tackle the question of whether babies should have priority over the elderly in receiving the flu vaccine, or vice versa. Another question the panel might have to decide is whether, in the event of a pandemic, members of crucial professions - perhaps even undertakers - should receive priority. . . .

The disease control agency has already decided that broadly speaking, only the very young, the very old and the chronically ill should receive this season's limited supply of flu vaccine. But state and local health officials have complained that shortages of the vaccine are so dire that they do not have enough to inoculate everyone in those categories. While they have been making decisions themselves about who should receive priority, these officials say they want better guidance from the agency as to who is the highest of the high-risk. . . .

So far, the agency has declined to narrow its list, but Dr. Gerberding said that might change. And because choosing among high-risk groups involves ethical as well as medical issues, she said, she decided that she needed the help of ethicists.

Arras points out that Americans aren't terribly comfortable with the "R"-word, but extreme shortages in the vaccine (worse, in all likelihood, than HHS officials first let on) will require explicit rationing. This apparently is the first time the CDC has empaneled a group of ethicists to guide public health decision making.

Some of the choices presented to the panel by state and local public health authorities aren't going to be easy:

Dr. Arras said one health official at the meeting was grappling with the question of whether to vaccinate all residents of his state's nursing homes.

"Some of those people in nursing homes will be extremely old, extremely debilitated and also demented," Dr. Arras said. "The question arises, Where is the vaccine better deployed?''

Public health officers in North Dakota were able to agree that chronically ill patients in the state's nursing homes should be vaccinated first. The decision was reached for medical and practical reasons, said Larry Shireley, the state epidemiologist: such people not only are at great risk of contracting the disease, Mr. Shireley said, but also are easy to reach.

But state health officers could not agree, he said, on whether babies or the healthy elderly should be next on the list.

Babies are more susceptible to the disease, but the elderly are more likely to die of it. On the other hand, most babies, unlike most of the very old, have decades of life ahead.

A standard ethical argument is that "people are supposed to get a certain number of fair innings in a lifetime," Dr. Arras said.

"That would incline you to treat the young rather than the old,'' he said, "since the old have already had their innings."

But since the old are more likely to die of the disease, another way to decide the issue is to determine the number of years that would be saved by inoculating them first rather than the young.

The committee will examine all those issues, Dr. Arras said.

The creation of the ethics committee is part of the C.D.C.'s effort to ensure that vaccines are distributed fairly. News last week that flu vaccine was being freely offered to lawmakers and aides in Congress set off a furor, and candidates for office are being peppered with questions about whether they have received shots.

The decision to bring in ethicists is probably wise, though not for the reasons publicly expressed by the CDC. The idea that public health decisions are being made for political reasons -- hardly a shocking development for students of public health -- isn't going down well with the public whose health is implicated by these decisions. The creation of an ethics panel to help make allocation decisions will at least provide some political cover for the CDC, which can ill afford the taint of politics in this very political year.

As usual the cartoonists have their finger on the pulse of this story. For example:

Physician-hospital joint venture: commentary on IRS' PLR

On June 9, the IRS issued Private Letter Ruling 200436002, which generally approved of a proposed physician-hospital joint venture. The ruling is described and analyzed by Don Stuart in a commentary in the Oct. 18 on-line issue of HealthLeaders. Stuart's description of the deal is more succinct than the Service's:

[A] nonprofit, tax-exempt hospital proposed to form a new joint venture
structured as a limited partnership to own and operate a freestanding diagnostic
imaging center. Units in the limited partnership will be offered to physician
investors and related physician groups. If the offering becomes fully
subscribed, the joint venture will be structured so that a LLC wholly owned by
the nonprofit hospital will serve as general partner and own 1 percent, the
nonprofit hospital as a limited partner will own 54 percent, the physician
investors will own 40 percent and an independent management company will own 5
percent of the limited partnership.

Key factors in securing the IRS' blessings track the considerations set forth in Revenue Ruling 98-15 (courtesy of TaxLinks), including the following:

• The hospital's wholly owned LLC, acting as general partner, will have effective control over major decisions of the joint venture which will ensure that the imaging center will be operated in a charitable manner (i.e., promoting health for a broad cross section of the community) regardless of ability to pay. (The LLC's board members are elected by the hospital. No management rights were given to any other parties.)
  
• The partnership agreement specifically provides that the duty of the general partner is to operate the partnership in a manner that furthers charitable purposes and overrides any duty to operate the partnership for the financial benefit of anyone else. (The general partner LLC could only be removed by the limited partners holding more than 80 percent of the sharing ratios of all partners.)
  
• The imaging center will have an open medical staff and utilize the charity care policy of the hospital. (Physician privileges were not dependent on owning an interest in the joint venture. The charity care policy will be advertised to patients and the center's radiologists are required to treat all members of the community, including Medicare, Medicaid and indigent patients.)
  
• The LLC's board members will be representative of the community. (The board was made up of community leaders with experience in health care matters, including officers and board members of hospital.)
  
• Contributions to the partnership and allocations of profits, losses, and distributions from it will be in proportion to the interests of the partners. (No special allocations of income or loss were permitted.)
  
• The management agreement will require the manager to operate the center for charitable purposes, with charitable purposes taking precedence over any profit motive. All fees paid are subject to a ceiling amount that will not exceed fair market value. (The IRS did not have any objection to the management fee that was based on a percentage of funds collected in payment of patient services. The term of the management agreement was for two years and renewable for one additional two year term. A "for cause" termination provision was also included.)

Pain control and the criminal law.

The New York Times has an essay by Sally Satel, M.D., in today's issue: "Doctors Behind Bars: Treating Pain Is Now Risky Business." Actually, it's been a legally perilous business for many years, although I thought that the adoption of intractable-pain legislation and regulations in many states signaled the arrival of some regulatory and prosecutorial sanity on the subject. This essay is some evidence that the war has not yet been won.

Dr. Satel does a good job of describing the public-health and law-enforcement conundrum that is created by intractable pain:

The red flags that rightly alert regulators to potential misconduct by doctors are, paradoxically, the very features that can also mark responsible care for intractable pain. These include prescribing high volumes of narcotic painkillers for extended periods, prescribing potentially lethal doses or prescribing several different drugs. In some regions, patients use several different pharmacies, at their doctor's instruction, because some pharmacists are reluctant to dispense large quantities of the medications.

To complicate matters further, doctor shopping can also be a sign of what is called pseudo-addiction: the efforts to obtain drugs look on the surface like drug addiction, but in fact represent the patient's attempt to attain an adequate level of pain control. Once that is achieved, the patient no longer presses for more narcotics.

All of this makes responsible law enforcement tricky, even difficult, but not impossible. It means that traditional red flags should not be ignored, nor should they be relied upon entirely when deciding whether to bring a case. Only careful, detailed, and expert analysis of the facts of each case can reveal whether the red flags are red herrings.

Update on brain-dead patient in Salt Lake City.

Today's Salt Lake Tribune has a story about Jesse Koochin, who was transferred from the hospital to home hospice at the end of last week. The parents report that he is moving his feet and are encouraged by their ability to feel his pulse and to see that his cheek is pink and warm to the touch. All of this, of course, is consistent with a determination of death according to neurological criteria. As long as his body remains hooked up to a ventilator, his heart will continue to beat, at least until his blood chemistry gets so messed up that he can't generate a pulse on his own. (Reports that putrefaction has begun is evidence that this process is well under way.) As for his feet moving, there may be some random muscle movement or even spinal-cord reflexes at work, but a definitive diagnosis of "brain death" is a diagnosis of death. Unfortunately for this family, which seems to so profoundly distrust the medical experts, Jesse is not going to recover, and their efforts to try to get him to recover are sad, grotesque, and doomed.

States cut more services for illegal aliens.

The Wall Street Journal has a front-page story in today's edition (requires subscription) detailing Colorado's recent cut-backs in state-sponsored health care benefits available to illegal aliens.

Colorado has "cut off prenatal care for thousands of illegal immigrants. . . . At least one nonprofit program providing health care to legal and illegal patients faces a big cut in funding. . . . Last month, the state tightened its Medicaid rules another notch, scrapping a practice called presumptive eligibility that allowed any pregnant woman to receive prenatal care while the state determined whether she qualified for Medicaid. The process allowed many illegal immigrants to obtain prenatal care for up to four months, when abnormalities in the mother and the fetus usually are detected."

The article provides good background on this decision, as well as the dual critiques that this cutback is penny wise and pound foolish (an ounce of prevention being worth a pound of cure) and sets a dubious public-health precedent of cutting out a large segment of the population from the health care system.

By contrast, the article reports that, "[c]onsidering the greater potential for postdelivery expense, many states have created alternative programs for pregnant undocumented women. California, New York and Illinois are among states that by law guarantee prenatal care to all women. Other states, such as Texas, make prenatal care available to undocumented women through a combination of locally funded programs and federal money."

More on brain-dead patient in Salt Lake City.

There were two follow-up articles in the Salt Lake Tribune today about Jesse Koochin, the 6-year-old patient whose parents, Gayle and Steve, reject his physicians' diagnosis of death. The ethics of treating brain-dead patients are discussed here, and the factual developments in the case are described here.

According to the article, "on Thursday, Gayle and Steve Koochin were frantically trying to make arrangements to take Jesse to the family's temporary Salt Lake City home, where his care will be supervised by Gary Holland, Hospice for Utah's medical director, and a hospice nurse. He could be moved as soon as today."

Not to appear insensitive to the suffering of these parents, but this is as much a perversion of hospice care as continued ventilation is a perversion of intensive care. The poor kid died earlier this week, and his body has started to decompose, even as ventilator support has been continued. (See article below.) He doesn't deserve (mis)treatment. He deserves the respect of a decent burial. To continue to treat him under these circumstances gives his parents false hope and mistreats Jesse's remains.

State Medicaid expenditures eclipse education.

According to the 2003 State Expenditure Report of the National Association of State Budget Officers, state Medicaid expenditures exceed those for education, for the first time ever:

Total Medicaid spending in fiscal 2003 excluding administrative costs was $243.6 billion, or 8 percent more than fiscal 2002. Based on those amounts, Medicaid accounted for 21.4 percent of total state spending in fiscal 2003. [p. 46]

Elementary and secondary education is the largest functional category of state spending—21.7 percent of the total—amounting to $247 billion in fiscal 2003. Total elementary and secondary education spending increased by 6.4 percent between fiscal 2002 and 2003, and accounts for 35.1 percent of state general fund
spending. [p. 15]

In fiscal 2004, Medicaid expenditures are expected to hit 21.9% of state totals [p. 50], compared to 21.5% for primary and secondary education [p.17].