Highlight on Louisiana: Treasurer Kennedy Gives the Lowdown on Health Care Spending in the Bayou

Louisiana Treasurer John Kennedy recently discussed the state employee health insurance program, state budgetary practices, state healthcare costs and what some consider “the lack of a healthcare funding plan and the state’s dependency upon the Obama administration to approve hospital privatization funding.” The entire  interview was conducted in a Google Hangout session. According to Kennedy, healthcare spending is the number one issue, and Louisiana needs to do some “wholesale reform in our healthcare delivery system.” Although the state has adjusted its spending, Kennedy believes those adjustments haven’t really solved the problem.

Louisiana has been using taxpayer money in the state savings accounts to fund the state’s health insurance program. It’s self-insured for health insurance, with retirees and employees paying in, with a state match. Approximately a year ago, the fund had five hundred million in it, but Kennedy predicts that if spending continues the way it is now, “in short order, it will be down to zero.” The state has spent” more than its taking in and trying to fill the hole by cutting higher education and spending all of the money.”

Currently, Louisiana is waiting for CMS to approve the state’s Medicaid plan, and its that plan or no plan. Kennedy indicated that negotiations between Louisiana’s Department of Health and Hospitals and the federal government over the plan. A recent Associated Press article reports that the Medicaid proposal, which analyzed the current performance of private managed-care networks handling Medicaid services, may have included “mathematical errors and inconsistencies” and used primarily self-reported data from the managed-care organizations that “the department didn’t appear to verify.” According to the auditors, “The report included global assertions about Bayou Health cost savings and improved outcomes … but support was not provided for these assertions.”

Louisiana Governor Bobby Jindal privatized much of the state Medicaid program in 2012, by shifting two-thirds of its patients to the insurance model. CMS wanted “details of whether the privatization delivered the improved health outcomes and cost savings that the Jindal administration promised for the multibillion-dollar Medicaid program.”

Louisiana’s other plan to save money on health care was to privatize charity hospitals. Kennedy believes that the quality of care is better now, but that Louisiana hasn’t yet realized the savings it had hoped for. So far, Kennedy said, “we haven’t saved any money, in fact, we’ve spend more than we were spending.”

Highlight on Maine: Maine Tightens TANF Benefits with Drug Test Enforcement

By Lisa A. Weder

In a push to make Maine’s residents more self-sufficient, Governor Paul R. LePage (R-Me.) says it’s time to enforce a drug testing law on convicted drug felons who receive or apply for welfare benefits. On Wednesday, August 6, 2014, the former businessman turned governor announced that the Maine Department of Health and Human Services (Maine HHS) will carry out its plans to drug test those felons who receive Temporary Assistance for Needy Families (TANF) benefits.

TANF benefits are funded under Part A of Title IV of the Social Security Act (SSA), as amended by sec. 5507 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), which awards states grant funding to provide health services and education and job training to low-income individuals. TANF benefits are designed to:

  • Assist needy families in ways that children can be cared for in their own homes;
  • Promote job preparation, work, and marriage to foster independence in needy parents;
  • Prevent and reduce out-of-wedlock pregnancies; and
  • Encourage the formation and maintenance of two-parent families.

Welfare reform was a large part of Maine’s 2012-2013 budget, which implemented a new five-year limit on welfare benefits. The governor’s reasoning for instituting the drug-testing policy revolves around spending tax dollars wisely. “Maine people expect their tax dollars to be spent supporting our most vulnerable citizens—children, the elderly and the disabled,” said LePage. “We must ensure that our tax dollars do not enable the continuation of a drug addiction.” The thought is that someone using drugs will misspend TANF assistance funding and put their family’s needs on the back burner. The governor asserts that being drug-free enables welfare beneficiaries to move away from poverty and toward financial independence.

Maine HHS has implemented its drug-testing procedures and program with best practices, privacy, fairness, and accountability in mind, according to Maine HHS Commissioner, Mary Mayhew. When a person applies for TANF benefits, the individual must indicate whether he or she has a prior drug-related felony conviction. If that is the case, the state will schedule a drug test and notify the person 24 hours prior to the actual test. A person testing positive the first time can take the test one more time. According to Maine’s state website, a first offense results in the termination of adult benefits, and a second offense may result in the family’s loss of benefits. The tests are funded by the state.

To avoid termination of welfare benefits, an afflicted individual may enroll in an HHS-approved substance abuse program. Persons failing to disclose that they are convicted drug felons violate the program rules and face immediate termination of TANF benefits.

Maine’s new rule was originally introduced in 2011, but becomes effective October 1, 2014. Some question why the governor is enforcing the policy now in light of the fact that Maine is ranked 47th in terms of job creation. Portland, Maine’s local news channel, WCSH6, interviewed Democratic political analyst Ethan Strimling who said that “ … in terms of getting people off welfare, it’s not going to do us much good.” The policy will be published in August 2014 and will be subject to a public hearing and final approval by the Attorney General’s office.

The question yet to be answered is whether Maine’s drug testing policy will help or hinder families receiving TANF benefits.

Refuse to Buy Subsidized Coverage? No Charity Care for You.

Some hospitals are toying with the idea of scaling back their charity programs in response to worries that providing free or discounted care to patients with low incomes and no insurance may dissuade them from purchasing government-subsidized health insurance through the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) Health Insurance Exchanges, according to a report by Kaiser Health News (KHN).

Charity Care Policies

While the ACA requires that hospitals make their written charity care policies widely available, it does not impose any specific requirements as to eligibility for such programs.

According to the charity care policy posted online by Southern New Hampshire Medical Center, “[A]pplicants who refuse to purchase federally-mandated health insurance when they are eligible to do so will not be awarded charity care.” The policy also cuts off charity care for those who choose not to apply for the state’s Medicaid expansion program.

Alternatives to Limiting Charity Care

While some hospitals are enacting restrictions like this one, others are choosing simply to require patients to make a contribution toward the services received, such as $100 for emergency care.

“Patients will continue to receive needed medical care regardless of their ability to make payment at the time of service,” Kim Kitson, spokeswoman for Barnes Jewish Hospital in St. Louis told KHN. The hospital provides discounts for patients with incomes up to three times the federal poverty level.

Considerations for Hospitals

In evaluating possible changes to their charity policies, hospital executives must also weigh whether patients are unwilling to pay or if they could not afford purchasing coverage even with a government subsidy. Ultimately, though, KHN reports that hospitals have a strong interest in having more insured patients, especially since the ACA cuts government payments to providers for uncompensated care.

Todd Nelson of the Healthcare Financial Management Association told KHN, “Hospitals have always encouraged patients to apply for coverage they are entitled to receive, whether commercial insurance through employer or through programs like Medicaid.”

How Should Prices for Prescription Drugs Be Set?

Last year, the FDA approved a new drug for treatment of hepatitis C, Sovaldi®, made by Gilead Sciences, Inc (Gilead). It entered the market in 2014. According to reports,  Sovaldi is highly effective. A 12-week course of treatment cures hepatitis C in most patients. Gilead’s price: $1,000 per pill, $84,000 to complete a course of treatment. Announcement of the price sparked outrage and a Senate Finance Committee investigation. On July 11, 2014, Senators Charles Grassley (R-Iowa) and Ron Wyden (D-Ore.), the committee chair, sent a letter to Gilead demanding documentation of its pricing methodology and copies of financial statements, filings with the Securities and Exchange Commission (SEC) and all aspects of Gilead’s 2012 acquisition of the original developer, Pharmasset, Inc.

Senators Grassley and Wyden noted several facts that caused concern:

  • Pharmasset’s final filing with the SEC reported total research and development costs of $176.7 million from 2009 through 2011 and attributed $62.4 million directly to Sovaldi.
  • Gilead’s advertising and expenses grew from $116.6 million in 2011 to $216.2 million in 2013.
  • Gilead is seeking approval to market Sovaldi in combination with other drugs, which will increase the cost of treatment.
  • Gilead is allegedly planning to sell the drug overseas at highly discounted prices; for example, a course of treatment in Egypt will reportedly cost $900, a 99 percent discount from the list price in the United States.
  • Of the 27 physicians who developed the treatment guidelines issued by the American Association for the Study of Liver Disease and the Infectious Disease Society of America, 18 disclosed either a direct or an institutional financial relationship with Gilead. Gilead also provided funding to both organizations and a collaborating partner, the International Antiviral Society USA.
  • 30,000 patients in the U.S. underwent treatment with Sovaldi in the first quarter of 2014.
  • About 3.2 million residents of the United States have hepatitis C, of whom 1.8 million are incarcerated and more than 100,000 with the diagnosis are enrolled in Medicare Part D. If 25,000 of the Medicare beneficiaries were treated, Medicare Part D spending would increase by $2 billion.

One commentator noted that the total cost of treating hepatitis C with Sovaldi is far less than the lifetime cost of treating a patient with AIDS. She suggested that the objections to the price are the result of pent-up demand and the need to pay the entire cost over a short period of time.

Extraordinary Income

For the three months ending June 30, 2014, Gilead reported income from sales of Sovaldi alone at $3.48 billion. The National Coalition on Health Care (NCHC), which called the price “unsustainable and abusive” before the earnings report was released, suggested that Gilead has “some room” to drop the price. Both the NCHC and the Pacific Business Group on Health called for stakeholders to work together to arrive at fair, sustainable prices that reward innovation.  Gilead has not acted on the suggestion, however.