House Majority Caucus Room
State Capitol, Boise, Idaho
Monday, February 23, 2004
4:30 p.m.
MINUTES
The meeting was called to order at 4:58 p.m. by Co-Chairman Bill Deal. Other
Task Force members present were: Senator Fred Kennedy, Representatives
Kathie Garrett, Gary Collins, Margaret Henbest, and Max Black. Co-Chairman
Dean Cameron, Senators Joe Stegner, Sheila Sorensen and John Goedde were
absent and excused. Staff member present was Lisa Lalliss-Skogsberg.
Others present included: Jeffrey Lewis and Ynez Cross, Heinz Family
Philanthropies; Christine Pickford Ph.D. and Melanie Decker, Employers Health
Coalition of Idaho (EHCI); JoAn Condie, Idaho State Pharmacy Association;
Kathleen Allyn, Medicaid Division, Idaho Department of Health and Welfare; Joe
Gallagos, AARP; Jack E. Jones, AARP and Area 3 Advanced Council on Aging;
Ken McClure, Idaho Medical Association (IMA); Julie Taylor, Blue Cross of
Idaho; Woody Richards, Moffatt Thomas; Shad Priest, Department of Insurance;
Pam Eaton, Idaho Retailers Association; Lyn Darrington and Norm Varin,
Regence BlueShield of Idaho; Molly Steckel, Idaho Psychological Association;
Melanie Decker, DirecTV, and Colleen Brenton, Micron.
Representative Margaret Henbest made a unanimous consent request to
approve the minutes of January 15, 2004. There was no objection.
Mr. Jeffrey Lewis, President of Heinz Family Philanthropies (Heinz), distributed to the
Task Force a Medicaid Pharmacy Report, State of Idaho, dated November 21, 2003. A
copy is available in the Legislative Services Office. This is a summary of a full report
which can be obtained from Mr. Lewis. Mr. Lewis stated that "over the past few years,
Heinz has undertaken a number of groundbreaking studies assisting Governors and state
legislators in addressing the problem of skyrocketing prescription drug costs. At the
request of Governor Kempthorne and the state legislature, the foundation provided the
State of Idaho with a grant to hire Mercer Government Human Services Consulting to
perform a comprehensive analysis incorporating both a detailed examination of the state
Medicaid pharmacy program and a concurrent study of the efficiency of provider
practices within the state. This report exclusively presents the findings from the detailed
analysis of the state's Medicaid pharmacy program completed by members of Mercer's
Government Pharmaceutical Practice."
Mr. Lewis commended the Idaho Department of Health and Welfare (IDHW) and the
Medicaid Division for their work. There are things in the report Mr. Lewis might take
exception to, but he complimented IDHW for clearly trying to be aggressive, and doing
the best job possible. Mr. Lewis said that Idaho is looking for every way to figure out
drug-related issues and how Idaho can get the best value for its dollar. Mr. Lewis
commented that Idaho is one of the few states that is not political, swaying to one side or
the other, but rather staying focused on the substance and the client, which is a credit to
the work Medicaid does.
Mr. Lewis continued by stating that Heinz did an exhaustive analysis of pharmacy
spending under Medicaid; every state in the country has problems and are looking at a
trend line on prescription drug spending that is anywhere from 18% to 40%. Idaho
averages about 15% in a good year. Prescription drug issues are very complicated; Idaho
has implemented a series of steps (some while Heinz was writing the report) and is ahead
of the curve on these issues. Heinz consultants looked at these issues in totality; that was
good news. The better news was that there are other opportunities that Idaho can still
consider. There are some things that the legislators have to decide, for example, how
aggressive a state wants to be in the marketplace (in terms of operating the state Medicaid
program.) Medicaid is going forward in a positive way with the preferred drug list the
state has implemented; the question is how aggressive Idaho wants to be in terms of
greater savings and how quickly they want these savings. Some states have been very
aggressive, getting bigger savings more quickly; Idaho has been very methodical. It was a
state decision to maintain a balance between Medicaid and the state legislature; this was
also up to the Governor. Mr. Lewis gave numbers on how Idaho could achieve better
savings, but as long as Idaho's legislature is comfortable with the approach they are
taking, it's a solid road to continue to follow. There are things Idaho needs to think about
differently that don't necessarily impact Medicaid directly.
Mr. Lewis reported that Florida has been one of the most aggressive states in the country
with regard to preferred drug lists. Florida did this because they have superb staff there
who decided to take on the pharmaceutical industry in a very aggressive way. Florida
negotiated with Pfizer, as an example, and Pfizer said they would guarantee Florida a
savings of $14 million to stay on Florida's preferred drug list and to avoid prior
authorization. Prior authorization means that before a prescription can be filled, a
physician has to be called by the pharmacist, causing a delay and additional paperwork.
In Florida's effort to achieve greater savings in this current fiscal year, Florida plans to
save $62 million through an aggressive preferred drug list and aggressive negotiations
with pharmaceutical manufacturers. Florida has a huge elderly population and a growing
Medicaid population as well. California in fiscal year 2001 saved an additional $106
million through an aggressive preferred drug list and supplemental rebates. These
illustrations were raised to show that states who aggressively go after the pharmaceutical
industry reap benefits.
Fiscally, Idaho should be more aggressive in terms of dollars and cents, but Mr. Lewis
could not fault what Idaho is doing because Idaho is looking at drug costs from the best
perspective of good policy and what is in the best interest of the people served, which is
to their credit. Mr. Lewis introduced Ms. Ynez Cross who is a pharmacy consultant
with Heinz. Ms. Cross addressed the Maximum Allowable Cost (MAC) comparison,
stating that it is a program that reimburses pharmacists for a reasonable profit margin on
generic drugs. There were abnormalities in the marketplace in generic drug pricing due to
competition; in Idaho in the Medicaid program, they utilize the greater of the Health Care
Financing Administration (HCVA) federal limit or the state MAC program. When Heinz
looked at the state MAC program as it stands today, it included 740 basic drugs, not a bad
MAC program; however, there is still opportunity for savings. The Medicaid program
has secured a vendor and they are finalizing the contracting; they have proactively moved
forward in expanding the number of generic drugs that are covered under that
reimbursement program. That will be between 2%-4% of annual drug expenditures, so
it's a very material savings, second only to the preferred drug list. The program is also
the most widely accepted, it is commonly used in the commercial marketplace, and there
would be a seamless transition to the pharmacists. Mr. Lewis commended Medicaid for
moving forward, and Heinz encourages the state to review this program in a year to see if
Medicaid has been as aggressive as they can be, depending on their fiscal savings.
Another important thing to address, due to a systems enhancement from the vendor
Electronic Data Systems (EDS), is that there are many things that Medicaid can now do to
enhance what happens behind the scenes in real time using technology that will provide
savings to the state and efficiently utilize manpower. Because this system upgrade has
taken place, some manual intervention has shifted and some labor can now do new prior
authorizations which expands efficiency without increasing staffing. The system that has
been operating (which had not been as competitive to the commercial marketplace) is
now getting much closer as a standard without additional expense to the state; that is
affecting Medicaid positively, as well as pharmacies.
Mr. Lewis mentioned that the pharmaceutical analysis done by Heinz looks at the role of
pharmacists in the whole process when a prescription is being filled. The Heinz report
gives dollar values of changing one thing versus changing another. Mr. Lewis asked the
Task Force to think about how the world of pharmacy has changed, emphasizing that the
pharmacists become the one personal contact that people see and talk with, as compared
to their very busy doctors. In the Medicaid field and non-Medicaid field, there are states,
Iowa for example, who pay pharmacists what is called an enhanced dispensing fee for the
work they do for cognitive therapy. Pharmacists spend time talking with patients, both
Medicaid and private, looking at possible drug interactions for their customers, advise
them accordingly, and give them advice on brand name versus generic drugs. There is a
point in the Medicaid program that Heinz will fund programs where pharmacists are
being rewarded for enhanced cognitive therapy. When a pharmacist helps a patient to
prevent them from entering a hospital emergency room unnecessarily, that pharmacist
will receive an enhanced reimbursement. The role of pharmacy needs to be reevaluated.
The pharmacist really is the one person in the medical world who spends a great deal of
time with Medicaid patients in the private sector and they should be rewarded for that as
opposed to penalized. Mr. Lewis has advised legislators on mail order programs and to
more aggressively seek changes; he sees a value for mail order up to a point. When
quality pharmacists deliver good value, particularly in community pharmacies which are
rapidly disappearing, Mr. Lewis hopes there will be a way to keep these small businesses
open. One of the things Mr. Lewis recommended to the Task Force was how to build an
enhanced reimbursement rate for pharmacies actively involved in enhanced cognitive
therapy. Mr. Lewis volunteered to set this up in Idaho, and will give the Task Force
more information on that since he believes that pharmacists do far more today than what
they are paid to do, which is dispense prescriptions.
Mr. Lewis emphasized that the state's RegenceBlueshield health insurance plan for state
employees needs to be looked at by Idaho legislators. Is Idaho getting the most for their
money through that "blue plan" and is Idaho receiving rebate dollars that may come
through from a pharmacy benefit manager to an insurer, and if so, how many dollars are
being passed to the state as an employer? Unless the state performs an audit on that
"blue plan or insurer," an audit of both the relationship between the insurer, the Pharmacy
Benefits Manager (PBM) and the rebates that accrue to the insurer that are passed on to
the PBM, a state does not know how much is in its coffers. Mr. Lewis advised the
legislators to look at Idaho's insurance plan for state employees and to have that plan
audited by an outside auditor to look at the rebate contracts that exist between the PBM
and the insurer to determine what is being delivered and what is not, what is in Idaho's
contract and if it's not being delivered, find out why. An audit is the only way Idaho will
get an answer to these questions. When a state's employee health insurance plan is being
looked at, with a prescription drug benefit, a separate audit in terms of compliance is
important to do as well. When a state looks at a formulary, is that state allowing drugs
not in the formulary to be filled, how often does that happen? The audit needs to check
under the surface to determine what drugs are on the formulary. To give an example,
cosmetic drugs such as Viagra and Retin-A, that may be important to individuals for
personal reasons, are questionable in terms of their value with regard to insurance costs.
Look at Idaho's insurance plan to find out how much money is being spent on these
particular drugs. When a state does not have extra dollars to work with, every dollar
counts. In the event a state is spending $40-$50,000 on Retin-A, which is often used by
older people for their skin, that drug may be important to someone individually, but in
terms of real medicine, if it's not for real dermatology, a state needs to ask why they pay
for it. The same would apply to life-enhancing drugs like Viagra, or Propecia for
baldness. When the focus is on Medicaid programs, sometimes what exists in the state
insurance programs for state employees is forgotten; this is important because a state
wants to apply the same microscope to both programs to get the best value for the state's
dollar. An audit would reveal what has been promised versus what has actually been
delivered.
Mr. Lewis addressed the Federal Program 340-B through the Department of Public
Health. He said some states have gotten creative, i.e. the Texas Department of
Corrections used federal dollars instead of Texas state dollars for prescription drugs for
certain populations of inmates. Rhode Island's state legislature has found, on a
preliminary basis, that 340-B funding has the potential of saving between $5-$13 million
for certain groups that are eligible for 340-B funding. Mr. Lewis offered to send one of
the Heinz specialists to Idaho to look at Idaho's data to confirm whether Idaho could
benefit from enhanced 340-B funding.
Mr. Lewis expressed two concerns as Medicare goes forward in terms of the prescription
drug benefit that takes place in 2006 at some juncture and, in the interim the prescription
drug benefit card; the real issue is, will it stand in its current form or be changed? Mr.
Lewis is also concerned about uninsured Idaho citizens who can work, for example, for
Wal-Mart but not qualify for health insurance or small businesses who cannot afford to
offer benefits. Heinz designed a program in Ohio that became law with an unusual
alliance between AFL-CIO, pharmaceutical manufacturers, AARP, the Council of
Churches and others to put together what they called "Ohio's Best Rx." The focus is on
the elderly and the uninsured, and Ohio is the first state in the nation where the uninsured
will be able to buy prescription drugs at the state price. The legislation was designed to
look at the weighted average of what a state plan is paying; in Ohio they have about seven
different state programs providing prescription drug benefits to some population,
excluding Medicaid from this discussion, looking only at non-Medicaid based programs,
based on this weighted average, on a drug by drug basis. A 30-day supply of Lipitor costs
$100 at a retail counter cash price but the state price for that same drug is $60, and an
uninsured person in Ohio's Best Rx Program would have access to Lipitor at the $60
price. It's a tremendous savings for any person paying full price at a retail counter. That
is the good part; the bad part is that the pharmacy who has been filling these prescriptions
at the full cash price won't like this. At some point in the balance of these issues of how
to deal with the uninsured problem, if a state cannot afford to put them under an enhanced
Medicaid program, like Maine did, or if the federal government is not offering more
waivers under Medicaid in terms of allowing states to lift their Medicaid ceilings of 300%
of the federal poverty level, a state has limited options with which to work. Trying to
help an uninsured population, an employed population as well as unemployed, Heinz
designed this alliance in Ohio as the one response that is fiscally realistic for a state.
There is an up-front cost to a state in implementing the program, but in terms of
delivering real value in real time to real people, it's an immediate assistance and very
helpful.
Mr. Lewis continued that the other program opportunity is what Heinz calls the
physician/patient assisted program (PAPS), which often involves private entities that
operate in states taking responsibility for a fee of $25-$30, to sign up an elderly and
uninsured person with chronic illness for a program that pharmaceutical manufacturers
offer, if that person is income-qualified. Patient-assisted programs guide a person
through the red tape and, if that becomes an interest of Idaho's legislature, Heinz will be
happy to help. Heinz is soon going to be doing a pilot project in four different cities
across America and could include Idaho in that project. Looking at the problem of health
care costs and health insurance costs, Heinz has looked at different opportunities with
minimal cost to a state. Heinz, at the same time, looks for savings opportunities where
programs deliver great value and allow state legislators to demonstrate to the public the
kinds of positive things legislators are elected to do and want to do, but are often not able
to do because of limited revenue.
Representative Margaret Henbest asked about Mr. Lewis' Medicaid Pharmacy Report
on page 6 under "Opportunity for Consideration," and the recommendation to go to a
reimbursement AWP (average wholesale price) of 13%-14% instead of 12% which Idaho
has now, or to drop the dispensing fee. In the presentation, enhanced reimbursement for
pharmacists was suggested, and Representative Henbest asked whether Mr. Lewis was
leaning toward rewarding pharmacists or would he drop the AWP? Mr. Lewis answered
that he thought Idaho should look at a combination, maintaining a balance, and protecting
the pharmacists as much as possible. Mr. Lewis wanted to give Idaho a series of options
and fiscal numbers with those options, allowing Idaho current data showing what Idaho
has to work with. The reality is that it is easy to lower a dispensing fee, but there are
other ways to look at this. In the pharmacy world, the pharmacies need to be protected,
particularly community pharmacies (independents), allowing them to survive by
rewarding pharmacists for doing more to help keep Medicaid patients out of hospitals,
emergency rooms and nursing homes. The Ohio model is a great example and Mr. Lewis
will provide that information to the Task Force.
Ms. Cross added that Heinz does provide benchmarks and the report shows that Idaho
does pay more in a dispensing fee as well provide a reimbursement honoring an AWP
discount; there are obviously many factors a state looks at when they balance looking at
additional services. Heinz has seen states that said they want to be sure they get
additional services rather than reducing a cost, and they want enhanced reimbursement;
many states have looked at chains versus independents differently because they have
differences in how they do business, so some states have chain versus independent
reimbursement, and it's a balancing act. Ms. Cross would argue that for Idaho to keep at
this high a dispensing fee, at this high a reimbursement and to add more fees, there is
some concern at the federal level. Centers for Medicare and Medicaid Services (CMS)
have pointed out there are some disparities.
Representative Henbest inquired about getting drugs at discounted rates for certain
populations, and stated that one of the challenges has been the cost up front and asked if
there were any expertise that Heinz could give to Idaho in terms of streamlining this. Mr.
Lewis answered that Maine is unique, having a federal waiver, so Maine was able to draw
on some additional pharmaceutical money and probably will not be replicated in the near
future by CMS. Heinz recommended that "Ohio's Best Rx" charge a transaction fee
between 25 cents and one dollar each time a prescription is filled, and that money goes
directly back to the state. Ultimately a pool of revenue is generated that is paying for the
administration of the program, in a short term rather than long term, and more
importantly it allows a state, as this program grows, to reduce the transaction fee and
reach a balance at some point. If there is an up-front expense, the transaction fee allows a
state to protect itself. If the dispensing fee paid to a pharmacist is $5, it would then be $6,
the one dollar going to the state. If you use Lipitor as an example, $100 versus $60 (plus
$6 dispensing fee) the $34 savings is significant. Ms. Cross added that Ohio is
developing a partnership, although not everyone is thrilled about it, but everyone is
coming to the table with give and take. The other extreme example is California, where
they basically said that if a person wants to fill Medicaid prescriptions, an uninsured
person's prescription must be filled at the same price. California put severe risk on their
Medicaid reimbursement; also California is not drawing on any pharmaceutical
manufacturer money through rebates or transaction fee money and that puts all the burden
on the pharmacist. Ms. Cross suggested that Idaho try to find a balance between the
pharmacists taking some loss, but there would be some money coming from the drug
companies on the back end, such as in Ohio.
Representative Henbest asked about Idaho's state health plan for employees and the
pharmacy benefit managers. Ms. Henbest understands that across the nation some
savings dollars have not been appropriately dispensed to the states, or to whomever has
contracted with a state, and asked if there were any recommendations from Heinz
regarding who they would suggest to do these audits. Mr. Lewis answered that Heinz
could provide a list of recommended firms for those audits.
Representative Max Black inquired about providing drugs to the uninsured at a state
price and asked if Idaho had a program to do that, what type of legislation or programs
have to be initiated to look into the possibility of that? How does a state appease these
pharmacists if you take away that profit? Mr. Lewis pointed out that the pharmacist is
not the issue, unless the pharmacist owns the drug store. There is no way to satisfy an
individual who owns a community pharmacy today who is getting full cash price for
prescriptions. If the state declares they want to protect the uninsured, an individual who
owns a community pharmacy is not going to be happy. Chain drug stores are in the same
situation, but the way to protect them is to become a voluntary program; if the pharmacy
does not wish to participate, they don't have to since it is not mandatory. Making it a
voluntary program creates an interesting situation in the marketplace; a state may find that
some pharmacies are going to have to participate because if one chain drug store does this
and a community pharmacy doesn't, then customers are going to go where there is
volume and it's a question of doing business. In terms of profits, there is no way to
satisfy a pharmacist who owns the drug store.
Representative Black asked what states were doing that and Mr. Lewis responded that
Ohio is the first state and is in the rule-making process right now.
Mr. Lewis summarized by saying that a state must look at the people behind the program
and the struggles they deal with in terms of fiscal issues. Mr. Lewis pushes Medicaid
programs very hard, but is very familiar with what Idaho is trying to do and the balance
between what they want to do and what they need to do in their relationship with the
legislature, and that is a delicate balance. Idaho's Medicaid Division is going that extra
mile and this is a time to commend them for doing a great job and encourage them to
continue getting the best value for Idaho's dollar. Ms. Cross added that Medicaid in
Idaho has taken care to methodically do their job well; there are changes that, in theory,
might occur more rapidly, but Medicaid took the time to make sure they had the staff to
do the job well, both with physicians as well as pharmacists.
Representative Kathie Garrett expressed her appreciation on behalf of the
representatives who have worked with Medicaid; the next step that the Task Force will be
looking at, with JFAC's help, is evaluating the figures next year to see how Idaho has
progressed.
Ms. Chris Pickford, Employers' Health Coalition of Idaho (EHCI), passed out a
pamphlet with that same title, a copy of which is available in the Legislative Services
Office. Ms. Pickford stated that EHCI has provided high quality, appropriate, cost-effective health care for 154,000 Idaho people since 1981. EHCI has had employee cost
increases of 52% on average over the years from 1998 to 2002. During that same period,
medical costs went up 42%, hospital fees rose 33%, x-rays and lab fees rose 66%, and
prescription costs rose 72%. Once a group reaches about 5,000 covered lives, then it
resembles other groups, but with different demographics, so what EHCI experiences
applies to Medicaid and the state health plan.
Ms. Pickford asked two speakers to answer questions posed by the Task Force on
October 8, 2003, to address surgery costs that DirecTV experienced in its Boise group
versus surgery costs in other parts of the country, and secondly what EHCI companies are
finding out about Idaho medical costs versus medical costs in other states.
Ms. Melanie Decker, DirecTV, spoke with regard to the October 8, 2003 Task Force
meeting when DirecTV presented results of a company-wide analysis which analyzed
health care costs for 2002. Senator Fred Kennedy had asked for clarification on a
specific statistic quoted which stated that in 2002 the average per surgery cost in
DirecTV's total population for the Hughes Medical Plan, which DirecTV is part of, was
$236; however, in Boise this cost was $628. To further clarify that statistic, Ms. Decker
explained that this figure does not represent a single specific procedure, but rather the
$236 average was calculated taking the total cost of surgeries for the total population for
that year and dividing it by the total number of members for that year; total Boise surgery
costs divided by the total number of members in the Idaho plan reflected the $628
average. Information was recently gathered by DirecTV for the 2003 population, and
DirecTV is very committed to finding solutions to the rising health care costs in Idaho. In
the coming months, DirecTV will be analyzing this information and will share their
findings with the Task Force in the future.
Co-Chairman Deal asked how the frequency of surgeries in Idaho compared to the entire
population of their company. Ms. Decker said she is analyzing this and will report back
to the Task Force in the future. Representative Henbest expressed curiosity whether the
Boise population had more surgeries or if the surgeries were more expensive, or a
combination of the two which resulted in the surgery costs in Idaho being almost three
times higher than the company's national average in other locations. Ms. Decker agreed
to gather current 2003 data and report back to the Task Force with those figures.
Ms. Colleen Brenton, Micron Technology, provided a handout for the Task Force
members entitled "EHCI, CPT Code Allowed Rates - State Comparison" in response to
Senator Dean Cameron's question at the October 8th Task Force meeting about Idaho
information being compared to findings based on cost. Member companies submitted
their most frequently utilized current procedural technology (CPT) codes that identify
specific procedures in treating plan enrollees and their dependents. Micron identified ten
medical procedures that companies had in common, keeping in mind these are not
necessarily the most expensive costs per company, but ten medical procedures that they
had in common with the different demographics involved. The spreadsheet shows the
procedure performed and is extremely clinical, the average reimbursement rate for the
member companies, and the average rate for other states in the West, both individually
and as an average. The states have been bound to privacy by requests from the entity
from which Micron obtained this cost information, but Ms. Brenton revealed that the
states involved are Washington, Utah and Oregon, in no particular order. The
spreadsheet is a proprietary document provided only to the Task Force members.
Representative Black asked about the demographic information where it states the
median household income for 1999 and asked if this was the employers being referenced.
Ms. Pickford responded that the figure was from the most recent federal census data,
population at large, and that information was included because on the cost compared to
other state averages, Idaho has ten medical procedures listed, and in six of those the cost
was greater than the average of the other states. However, if you look at those other three
states compared to Idaho, with the demographic data, Idaho has lower median household
income of the four states, Idaho has the largest percent of individuals in those four states
below the poverty level, and Idaho has the lowest median value of homes, so if Idaho has
lower labor costs and lower housing costs, you might expect that the medical costs would
look somewhat similar, so that is a question that EHCI is presenting with this
information. Are the costs per procedure perhaps more expensive?
Ms. Pickford handed out a document entitled "A Dartmouth Atlas Quick Report for
Idaho, Montana, Nevada, Utah and Wyoming." A copy is available in the Legislative
Services Office. She said the Dartmouth Atlas is familiar to those who discuss Medicare
costs. It pertains to elective surgeries. Idaho ranked highest for joint replacement for
degeneration of the knee joint and surgery for back pain. The charts address cost, and if
the cost is more, Ms. Pickford queried whether that was because the surgery costs more
per procedure or because there are a higher number of procedures being done.
Representative Henbest stated that she was somewhat familiar with this information,
having to do with frequency rate and not cost per procedure. Ms. Pickford answered this
data was based on physician cost codes bringing together total surgery costs.
Co-Chairman Deal thanked the attendees for compiling the information presented at the
Task Force meeting. The meeting was adjourned at 5:54 p.m.