[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



 
      ELIMINATING BARRIERS TO CHRONIC CARE MANAGEMENT IN MEDICARE
=======================================================================



                                HEARING

                               before the

                         SUBCOMMITTEE ON HEALTH

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                           FEBRUARY 25, 2003

                               __________

                            Serial No. 108-6

                               __________

         Printed for the use of the Committee on Ways and Means














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                      COMMITTEE ON WAYS AND MEANS

                   BILL THOMAS, California, Chairman

PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
E. CLAY SHAW, Jr., Florida           FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut        ROBERT T. MATSUI, California
AMO HOUGHTON, New York               WILLIAM J. COYNE, Pennsylvania
WALLY HERGER, California             SANDER M. LEVIN, Michigan
JIM McCRERY, Louisiana               BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan                  JIM McDERMOTT, Washington
JIM RAMSTAD, Minnesota               GERALD D. KLECZKA, Wisconsin
JIM NUSSLE, Iowa                     JOHN LEWIS, Georgia
SAM JOHNSON, Texas                   RICHARD E. NEAL, Massachusetts
JENNIFER DUNN, Washington            MICHAEL R. McNULTY, New York
MAC COLLINS, Georgia                 WILLIAM J. JEFFERSON, Louisiana
ROB PORTMAN, Ohio                    JOHN S. TANNER, Tennessee
PHIL ENGLISH, Pennsylvania           XAVIER BECERRA, California
J.D. HAYWORTH, Arizona               KAREN L. THURMAN, Florida
JERRY WELLER, Illinois               LLOYD DOGGETT, Texas
KENNY C. HULSHOF, Missouri           EARL POMEROY, North Dakota
SCOTT McINNIS, Colorado              MAX SANDLIN, Texas
RON LEWIS, Kentucky                  STEPHANIE TUBBS JONES, Ohio
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
ERIC CANTOR, Virginia

                    Allison H. Giles, Chief of Staff
                  Janice Mays, Minority Chief Counsel

                                 ______

                         Subcommittee on Health

                NANCY L. JOHNSON, Connecticut, Chairman

JIM McCRERY, Louisiana               FORTNEY PETE STARK, California
PHILIP M. CRANE, Illinois            GERALD D. KLECZKA, Wisconsin
SAM JOHNSON, Texas                   JOHN LEWIS, Georgia
DAVE CAMP, Michigan                  JIM McDERMOTT, Washington
JIM RAMSTAD, Minnesota               LLOYD DOGGETT, Texas
PHIL ENGLISH, Pennsylvania
JENNIFER DUNN, Washington

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.















                            C O N T E N T S

                               __________

                                                                   Page
Advisory of February 19, 2003, announcing the hearing............     2

                               WITNESSES

Centers for Medicare & Medicaid Services, Stuart Guterman, 
  Director, Office of Research, Development and Information......     6

                                 ______

American Geriatrics Society, and Washington Hospital Center, 
  George A. Taler, M.D...........................................    24
Caremark Rx, Incorporated, Jan Berger, M.D.......................    29
Group Health Cooperative, Ed Wagner, M.D.........................    17
Progressive Policy Institute, Jeff Lemieux.......................    12

                       SUBMISSIONS FOR THE RECORD

AdvancePCS, letter and attachment................................    44
American Association of Health Plans, statement..................    49
American Association for Homecare, Alexandria, VA, statement.....    51
American Healthways, Nashville, TN, statement....................    56
American Heart Association, statement............................    57
American Pharmaceutical Association, statement...................    59
American Society of Health-System Pharmacists, Bethesda, MD, 
  statement......................................................    61
Central Virginia Health Network, L.C., Richmond, VA, Michael 
  Matthews, statement............................................    63
Disease Management Association of America, Christobel Selecky, 
  statement......................................................    66
Geisinger Health System, and Geisinger Health Plan, Danville, PA, 
  Jaan Sidorov, M.D., statement..................................    73
Medical Care Development Inc/Maine Cares, Augusta, ME, Richard M. 
  Wexler, M.D., statement........................................    76
Pharmacist Provider Coalition, Bethesda, MD......................    77












      ELIMINATING BARRIERS TO CHRONIC CARE MANAGEMENT IN MEDICARE

                              ----------                              


                      THURSDAY, FEBRUARY 25, 2003

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                    Subcommittee on Health,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 4:10 p.m., in 
room 1100, Longworth House Office Building, Hon. Nancy L. 
Johnson (Chairman of the Subcommittee) presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                         SUBCOMMITTEE ON HEALTH

                                                CONTACT: (202) 225-3943
FOR IMMEDIATE RELEASE
February 19, 2003
No. HL-2

                      Johnson Announces Hearing on

                        Eliminating Barriers to

                  Chronic Care Management in Medicare

    Congresswoman Nancy L. Johnson (R-CT), Chairman, Subcommittee on 
Health of the Committee on Ways and Means, today announced that the 
Subcommittee will hold a hearing on eliminating barriers to chronic 
care management in Medicare. The hearing will take place on Tuesday, 
February 25, 2003, in the main Committee hearing room, 1100 Longworth 
House Office Building, beginning at 4:00 p.m.
      
    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from invited witnesses only. 
Witnesses will include academics, health providers, and representatives 
from health plans with experience in disease management. However, any 
individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Committee and for 
inclusion in the printed record of the hearing.
      

BACKGROUND:

      
    Americans are living longer due in part to advances in medical 
procedures and technologies. However, many Americans are living with 
serious, chronic illnesses, such as hypertension, asthma, diabetes, and 
heart disease. The Robert Wood Johnson Foundation estimates nearly half 
of all Americans are living with a chronic disease.
      
    According to a January 22, 2003, Health Affairs article 
``Confronting the Barriers to Chronic Care Management in Medicare,'' 
approximately 78 percent of beneficiaries have at least one chronic 
disease, while 32 percent have four or more chronic conditions. 
Individuals with multiple chronic conditions are more likely to be 
hospitalized, have more physician and home health visits, and fill more 
prescriptions for drugs. Nearly two-thirds of all Medicare spending is 
for beneficiaries with five or more chronic conditions.
      
    Such increases in spending often do not translate to better quality 
care. Medicare is payer of bills when seniors get sick. Medicare does 
not help them manage their chronic diseases to stay well. Some 
beneficiaries receive conflicting advice on their conditions, receive 
duplicate tests or are given conflicting prescriptions, or experience 
unnecessary hospitalizations or unnecessary pain.
      
    Most integrated plans utilize disease management specialists to 
focus on enrollees with chronic diseases. Health care policy experts 
advocate early identification of patients at risk, treatment planning 
with a clear understanding of provider and patient roles, and patient 
self-monitoring and follow-up to improve health outcomes. Without a 
change in the law, however, traditional fee-for-service Medicare cannot 
evolve with these advances in the health delivery system.
      
    For more than a decade, the Centers for Medicare and Medicaid 
Services (CMS) has run demonstration programs in the Medicare program, 
particularly for high cost or especially frail seniors. The CMS is 
currently managing more than a dozen demonstration programs on disease 
and case management.
      
    In announcing the hearing, Chairman Johnson stated, ``Medicare 
beneficiaries with chronic disease should benefit from advances in care 
management and advances in the science of medicine. It is 
unconscionable Medicare cannot incorporate these changes automatically. 
We need to explore and implement alternatives that provide the best 
care to seniors and disabled beneficiaries who are the most ill.''
      

FOCUS OF THE HEARING:

      
    The hearing will focus on the health benefits and cost saving 
potential of case and disease management programs.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Due to the change in House mail policy, any person or 
organization wishing to submit a written statement for the printed 
record of the hearing should send it electronically to 
[email protected], along with a fax copy to 
(202) 225-2610, by the close of business, Tuesday, March 11, 2003. 
Those filing written statements that wish to have their statements 
distributed to the press and interested public at the hearing should 
deliver their 200 copies to the Subcommittee on Health in room 1136 
Longworth House Office Building, in an open and searchable package 48 
hours before the hearing. The U.S. Capitol Police will refuse sealed-
packaged deliveries to all House Office Buildings.
      

FORMATTING REQUIREMENTS:

      
    Each statement presented for printing to the Committee by a 
witness, any written statement or exhibit submitted for the printed 
record or any written comments in response to a request for written 
comments must conform to the guidelines listed below. Any statement or 
exhibit not in compliance with these guidelines will not be printed, 
but will be maintained in the Committee files for review and use by the 
Committee.
      
    1. Due to the change in House mail policy, all statements and any 
accompanying exhibits for printing must be submitted electronically to 
[email protected], along with a fax copy to 
(202) 225-2610, in Word Perfect or MS Word format and MUST NOT exceed a 
total of 10 pages including attachments. Witnesses are advised that the 
Committee will rely on electronic submissions for printing the official 
hearing record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. Any statements must include a list of all clients, persons, or 
organizations on whose behalf the witness appears. A supplemental sheet 
must accompany each statement listing the name, company, address, 
telephone and fax numbers of each witness.
      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://waysandmeans.house.gov.
      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.

                                 

    Chairman JOHNSON. Good afternoon. The hearing will come to 
order. I apologize for the slightly late start, but it is 
unusual to hold hearings on a Tuesday afternoon for just this 
reason. There is so much business before the Committee, we did 
need to have this on a Tuesday. I understand Mr. Stark is 
literally on his way, and since he does not need to hear my 
opening statement, I am going to go ahead and start. He will 
make some comments when he arrives.
    Today's hearing focuses on the important subject of chronic 
care management and its potential to improve healthcare and 
reduce costs in the Medicare program. This is not rocket 
science. I mean, it is incredible that this is the first 
hearing that we have really held on this issue. We held one on 
disease management a year ago, but that is kind of a subset. It 
is true that things have to develop to a certain point in the 
real world before government can actually see and deal with 
them. This is a very important hearing, because we will pass a 
Medicare bill, and we must prepare Medicare to serve our 
seniors in the future and provide them with the quality care as 
well as affordable care that they desperately need. They are 
living longer. They are living with multiple chronic illnesses, 
and some of you would attest to that in your testimony, so I am 
just going to skip over that.
    I do want to remind us all of the very sobering fact that 
the Medicare population will double in the next 27 years. From 
35 million to 71 million seniors by 2030. Of our current 
adults, 84 percent have 1 or more chronic conditions, and 62 
percent have 2 or more chronic conditions. Bottom line, we all 
know this impending crisis is rushing toward us. This 
burgeoning senior population is living longer with more chronic 
illnesses, and we simply must begin to think about how to 
change Medicare to meet this future.
    Most integrated plans utilize care and disease management 
specialists to focus on enrollees with chronic diseases. Health 
care policy experts advocate early identification of patients 
at risk, treatment planning with a clear understanding of 
provider and patient roles and patient self-monitoring and 
follow-up to improve health outcomes. However, without a change 
in law, traditional fee-for-service Medicare cannot adopt these 
advances.
    For more than a decade the Centers for Medicare & Medicaid 
Services (CMS) has run demonstration programs in the Medicare 
program, particularly for high cost or especially frail 
seniors. The CMS is currently managing more than a dozen 
demonstration programs in disease and case management. Stuart 
Guterman from CMS is here today to update us on the status of 
these programs. Hopefully it will give us some insight into 
what can work on a broader basis.
    As the baby boom generation retires, the number of 
chronically ill beneficiaries will increase, and costs to 
Medicare will explode. Disease management programs, more 
integrated care across the board should help to defray some of 
these costs and improve health care outcomes at the same time.
    We are pleased to welcome Jeff Lemieux, Senior Economist 
from the Progressive Policy Institute (PPI), who will discuss 
proposals to modernize Medicare, and integrate care and disease 
management into the program.
    Dr. Ed Wagner, one of the country's top experts in his 
field, is the director of the MacColl Institute; and the senior 
investigator, Group Health Cooperative. As I mentioned, Stuart 
Guterman is here from CMS. Dr. Jan Berger is the Senior Vice 
President of Clinical Quality and Support and the Medical 
Director of Caremark. She'll discuss her company's practical 
experience in implementing chronic care management and whether 
it has improved health outcomes and saved money.
    This will be a very important hearing for us, and we thank 
you all for participating.
    Mr. Stark.
    Mr. STARK. Thank you, Madam Chairman. We were talking about 
this last April, it seems, and I don't suppose much has 
changed, but maybe we will have some new traction to deal with 
chronic illnesses.
    As I suppose we will hear today, us Medicare beneficiaries 
are more likely than a few youngsters or nondisabled 
individuals to have chronic conditions; and some of us, even, 
many chronic conditions.
    I suppose two-thirds of the Medicare spending goes toward 
items and services for beneficiaries with five or more, and I 
guess we could do a better job at encouraging the providers and 
patients to improve coordinating their care for patients.
    I proposed legislation in the last Congress to create a new 
benefit to pay for coordination services for certain 
beneficiaries and near as I could tell, nobody paid any 
attention to it, at least in the Committee or our Subcommittee.
    I submit it would be a good starting point if there is a 
genuine interest in addressing these issues, but we should 
consider this, I guess, in context.
    The challenges related to the lack of well coordinated care 
that were identified by the Institute of Medicine (IOM) and 
others are endemic in our current health care system.
    Virtually all of the problems identified, I suspect, by 
today's witnesses, are not limited to Medicare. They are 
present in most private plans and other government programs, 
including the Federal Employee Benefit Program.
    So, attempts to use this issue is justification for a 
fundamental restructuring of Medicare I would view with some 
suspicion. There is talk in some areas about increasing the 
presence of private plans in Medicare, but one of the fatal 
flaws in the managed care industry and private plans in general 
is that there is no incentive for those plans to invest in the 
long-term health of their enrollees. Any plan that makes a 
serious investment in high quality, well coordinated care will 
inevitably attract sicker patients, drive up their costs and 
lose money.
    So, when people switch plans, especially if there is an 
opportunity to do so, they will switch to those plans which 
offer better care and cost them more money. It is kind of a 
losing proposition.
    The traditional Medicare program is in the unique position 
to avoid that quandary, and compared to the vast majority of 
private health plans, Medicare covers people for a very long 
time. The traditional Medicare program is thus poised to 
benefit financially from investing in beneficiaries to maintain 
and improve their health over the long term.
    So, it is long past the time to make these improvements. We 
should improve the coverage of preventative benefits. As my 
Committee colleagues, Mr. Levin and Mr. Foley suggest, we 
should ensure that the program incorporates better management 
techniques, as I believe the Chairman and I agree.
    Too many Members consistently refuse to make common sense 
improvements to the Medicare program, and then they inevitably 
suggest it must be privatized so it will be run properly, and 
those who follow this path have only themselves to blame for 
the current state of affairs. So, I look forward to our panel 
of experts to tell us how to reap the best results for our 
beneficiaries in the Medicare program. Thank you.
    Chairman JOHNSON. Congresswoman Dunn, would you like to 
comment?
    Ms. DUNN. Thank you very much, Madam Chairman, and I 
specifically want to spend a moment introducing Dr. Ed Wagner, 
who is from my district in Washington State and has come back 
here to share some of his experiences as he has used their 
chronic care model in treating illness. He is, as you said, 
Madam Chairman, the director of the MacColl Institute for 
Health Care Innovation at Group Health's Cooperative Center for 
Health Studies, and is also a professor at the School of Public 
Health and Community Medicine at the University of Washington. 
He has been a leader researcher in developing interventions 
that prevent disability and improve the health care and the 
health in general of older adults.
    He developed a model for primary care patients that has 
been integrated into the practice of care at Group Health 
Cooperative, and it is one that we have been so impressed by 
and has been, if you don't mind my giving a plug to a potential 
piece of legislation, the basis for some work that I am doing 
right now, to put together a bill that would increase 
reimbursements to Medicare+Choice programs, and to provide a 
bonus payment for health care plans that implement programs to 
improve quality of care to patients.
    Health plans like Group Health are improving the quality of 
care to patients through disease management, and I believe they 
should be rewarded for doing so. You will find in his testimony 
a really clear example of a woman who has run into problems 
through her--not necessarily the independent quality of her 
care, but the lack of integration of her care, and I am 
hopeful, Dr. Wagner, that you will address this. We are 
delighted that you are here today, and on behalf of the people 
I represent in Seattle, I want to thank you for good work you 
have done and welcome you to the panel.
    Chairman JOHNSON. Thank you, Congresswoman.
    Mr. Guterman, we will start with you and go right down the 
line and we will hear from everyone. Remember, you have 5 
minutes. Your entire statement will be included in the record, 
but that way then we will have a chance for questions and some 
comments amongst you.
    Mr. Guterman from CMS. Thank you.

  STATEMENT OF STUART GUTERMAN, DIRECTOR, OFFICE OF RESEARCH, 
 DEVELOPMENT AND INFORMATION, CENTERS FOR MEDICARE & MEDICAID 
                            SERVICES

    Mr. GUTERMAN. Thank you, Chairman Johnson, Congressman 
Stark, and distinguished Subcommittee Members. I am Stuart 
Guterman. I am director of the Office of Research Development 
and Information at the Centers for Medicare & Medicaid 
Services, and I want to thank you for inviting me to discuss 
Medicare's efforts to improve the care provided to its 
beneficiaries through disease management.
    Chronically ill beneficiaries are heavily burdened by their 
illnesses, and we feel that they are not as well served by the 
program, either in the fee-for-service or the Medicare+Choice 
systems as they could be.
    In fee-for-service, the emphasis is on provision of 
services by individual providers providing no incentive, and, 
in fact, discouraging the coordinated care that chronically ill 
beneficiaries need.
    Medicare+Choice should be an appropriate environment for 
providing coordinated care, but the current payment system and 
some of the rules that Medicare+Choice organizations operate 
under penalize them for enrolling beneficiaries who are 
chronically ill, and therefore, much more expensive than 
average.
    Chronic diseases play a large role in generating both the 
growing level of utilization under Medicare and the finances of 
the program. As you have pointed out, researchers at Johns 
Hopkins University found that 78 percent of Medicare 
beneficiaries have at least 1 chronic condition, and counting 
for 99 percent of Medicare spending each year. Twenty percent 
of beneficiaries have at least 5 chronic conditions, accounting 
for 66 percent of all program's spending.
    Clearly, there is a lot of money on the table here to 
improve the care that these beneficiaries receive. We need to 
find better ways to coordinate care for these beneficiaries, 
and disease management approaches have been developed to 
combine adherence to evidence-based medical practice with 
better coordination of care across provider, and I am looking 
forward to hearing what the rest of the panel members have to 
say about their experiences as well.
    We are developing an array of demonstration projects to 
test our ability to apply these approaches in the context of 
the Medicare program. Both fee-for-service and the 
Medicare+Choice environment.
    To that end, we will continue to pay in these demonstration 
projects many of the same providers that we pay now. What is 
new in these demonstrations is explicit additional payment for 
disease management services such as the nurse call lines, e-
mail and patient education to forestall more costly covered 
services such as hospitalizations and emergency room visits. 
These services are not now covered as such under Medicare. For 
example, in our coordinated care demo, which I will talk about 
more in a minute, other services that are currently covered by 
Medicare are paid just as they are in the traditional Medicare 
program. We would also pay a monthly fee per member per month 
for disease management services on top of those.
    Our objectives in these demonstrations are to improve 
access, to improve coordination of care, to improve the 
performance of physicians by making them more involved and 
responsive to patient needs, to improve the ability of patients 
to be involved and participate in their own care.
    These demonstrations will need to test and evaluate what 
needs to be done to get disease management programs up and 
running, how best to provide these disease management services, 
which of these services work and which don't in the Medicare 
context, which conditions lend themselves best to disease 
management initiatives and the impact of different approaches. 
This involves answering several sets of questions: What should 
be the focus of disease management programs, what are the data 
requirements, and how can they be achieved, and here, by this 
issue, I am referring to really two things: One is the use of 
data to identify potential enrollees, and the other is the use 
of data to monitor their needs as the projects go on.
    What organizational structures work best? That is, how do 
you establish networks to provide these services and involve 
physicians in the process? How do you enroll beneficiaries once 
they are identified? How do you provide the services 
effectively? Which disease management approaches work best? 
That is, who contacts the enrollees? What do they do once they 
contact them and how do they make sure there is follow-up with 
these chronically ill patients? How can payment be designed to 
be compatible with these approaches? This is a major issue, 
both in the fee-for-service and the capitated payment and we 
think we are trying to develop approaches to deal with these.
    Then how can all these issues be appropriately evaluated in 
terms of outcomes, costs and generalized ability to the program 
as a whole?
    Where are we today on this issue? We have a number of 
demonstration projects currently underway, and a number that 
are still in development and in the pipeline. One that is 
currently in operation is the coordinated care demonstration 
that was mandated by the Balanced Budget Act 1997 which informs 
15 sites and focuses on patients with congestive heart failure, 
hurt liver and lung diseases, Alzheimer's and other dementia, 
cancer and HIV/AIDS. The sites involved are in both urban and 
rural areas in a number of States, and it operates under fee-
for-service payment system. Currently we have 7,600 enrollees, 
and these demonstrations will continue if they are cost-
effective and if the quality and satisfaction are improved.
    There is also a disease management demonstration that was 
mandated in the Benefits Improvement and Protection Act in 
2000. We are working with three sites, but they are subject to 
Office of Management and Budget approval, so the decision isn't 
final.
    The plan is to pay a disease management fee per member per 
month, which includes prescription drugs, and this is not only 
prescription drugs that are used to manage the particular 
chronic diseases that these beneficiaries suffer from, but also 
all of the prescription drugs that these patients need for all 
of their medical care. The hope is here that prescription drugs 
can be brought to bear on these conditions and help manage them 
more effectively. We are hoping to enroll up to 30,000 
enrollees, and we are hoping to get this demonstration rolling 
in the summer of 2003.
    We also have a physician group practice demonstration. The 
timeframe for applicants--the applications were received by the 
day after Christmas, and the applications have been panelled. 
We are planning on making at least six awards, and the 
interesting thing about this demonstration project is that we 
will share the savings with the physician group practices if 
outcomes are improved under those practices.
    In the future, we are going to work on other demonstrations 
that apply alternative approaches and involve other groups of 
beneficiaries, and we can maybe talk about the kinds of things 
we are looking for in the question and answer period.
    I want to thank you again for allowing me to describe what 
we are doing, and I will be happy to answer questions at the 
appropriate time.
    [The prepared statement of Mr. Guterman follows:]
Statement of Stuart Guterman, Director, Office of Research, Development 
       and Information, Centers for Medicare & Medicaid Services
    Chairman Johnson, Congressman Stark, distinguished Subcommittee 
Members--first, thank you for inviting me to discuss Medicare's 
attempts to use disease management to improve the care provided to its 
beneficiaries. As the delivery of health care has evolved, individual 
health care providers routinely plan and coordinate services within the 
realm of their own specialties or types of services. However, rarely 
does one particular provider have the resources or the ability to meet 
all of the needs of a chronically ill patient. Ideally, as part of a 
fully integrated disease management program, a provider or disease 
management organization is dedicated to coordinating all health care 
services to meet a patient's needs fully and in the most cost-effective 
manner. I want to discuss with you in greater detail the challenges and 
opportunities we face in integrating disease management concepts into 
Medicare. The lack of disease management services in traditional 
Medicare is an indication of how outdated Medicare's benefit package 
has become. The demonstration projects being developed and implemented 
by the Centers for Medicare & Medicaid Services (CMS) can help ensure 
that America's seniors and disabled beneficiaries receive high quality 
care efficiently.
    CMS is determined to work constructively with Congress to achieve 
these goals. We are currently undertaking a series of disease 
management demonstration projects designed to explore a variety of ways 
to improve beneficiary care in traditional Medicare. We are looking to 
these programs to bring Medicare into the 21st century and provide 
beneficiaries with greater choices, enhance the quality of their care, 
and offer better value for the dollars spent by beneficiaries and the 
government on health care. We appreciate your efforts to strengthen and 
improve Medicare, and we look forward to working with you on efforts to 
make disease management services more widely available, in Medicare--
and across the health care system.
Background
    Medicare beneficiaries with certain chronic diseases account for a 
disproportionate share of Medicare fee-for-service expenditures. These 
chronic conditions include, but are not limited to: asthma, diabetes, 
congestive heart failure and related cardiac conditions, hypertension, 
coronary artery disease, cardiovascular and cerebrovascular conditions, 
and chronic lung disease. Moreover, patients with these conditions 
typically receive fragmented health care from multiple providers and 
multiple sites of care. We need to find better ways to coordinate care 
for these patients and to do so more efficiently. Not only is such 
disjointed care confusing and ultimately ineffective, it can present 
difficulties for patients, including an increased risk of medical 
errors. Additionally, the repeated hospitalizations that frequently 
accompany such care are extremely costly to the patients, government, 
and private insurers, and are often an inefficient way to provide 
quality care. As the nation's population ages, the number of 
chronically ill Medicare beneficiaries is expected to grow 
dramatically, with serious implications for Medicare program costs. In 
the private sector, managed care entities such as health maintenance 
organizations, as well as private insurers, disease management 
organizations, and academic medical centers have developed a wide array 
of programs that combine adherence to evidence-based medical practices 
with better coordination of care across providers.
    Several studies have suggested that disease management programs can 
improve medical treatment plans, reduce avoidable hospital admissions, 
and promote other desirable outcomes without increasing program costs. 
There is little research on the overall benefits of disease management 
programs for seniors and thus, the CMS demonstration projects afford us 
the opportunity to test the value of these programs.
    In the largest sense, both disease management and case management 
organizations provide services aimed at achieving one or more of the 
following goals:

     LImproving access to services, including prevention 
services and necessary prescription drugs.
     LImproving communication and coordination of services 
between patient, physician, disease management organization, and other 
providers.
     LImproving physician performance through feedback and/or 
reports on the patient's progress in compliance with protocols.
     LImproving patient self-care through such means as patient 
education, monitoring, and communication.

    We are exploring a number of ways to pursue these goals even 
further in the Medicare program.
Where We Are Today
    In order to identify innovative ways to incorporate disease 
management services into the Medicare program, we have a number of 
demonstrations underway.
Coordinated Care Demonstration
    We are currently implementing a demonstration in 16 sites--
including commercial disease management vendors, academic medical 
centers, and other provider based programs--to provide case management 
and disease management services to certain Medicare fee-for-service 
beneficiaries with complex chronic conditions. These conditions 
include: congestive heart failure; heart, liver and lung diseases; 
diabetes; psychiatric disorders; Alzheimer's disease or other dementia; 
and cancer. This demonstration was authorized by the Balanced Budget 
Act (BBA) of 1997 to examine whether private sector case management 
tools adopted by health maintenance organizations, insurers, and 
academic medical centers to promote the use of evidence-based medical 
practices could be applied to fee-for-service beneficiaries. Also, 
Lovelace Health Systems in Albuquerque, New Mexico, is providing 
coordinated care services to Medicare beneficiaries with congestive 
heart failure or diabetes. All of these programs were designed to 
address important implications for the future of the Medicare program 
as the beneficiary population ages, and the number of beneficiaries 
with chronic illnesses increases. We are testing whether coordinated 
care programs can improve medical treatment plans, reduce avoidable 
hospital admissions, and promote other desirable outcomes among 
Medicare beneficiaries with chronic diseases.
    To date, the 16 coordinated care demonstration sites have enrolled 
more than 7,600 Medicare beneficiaries in both intervention and control 
groups in care coordination and disease management programs. The BBA 
allowed for effective projects under a demonstration to continue and 
the number of projects to be expanded based on positive evaluation 
results--if the projects are found to be cost-effective and quality of 
care and satisfaction are improved.
    These initial projects are varied in their scope, include both 
provider organizations as well as commercial companies, utilize both 
case and disease management approaches, are located in urban and rural 
areas, and provide a range of services from conventional case 
management to high-tech patient monitoring. In addition to Lovelace 
Health Systems, some of the sites we have selected include: Carle 
Foundation Hospital in Eastern Illinois; CenVaNet in Richmond, 
Virginia; Mercy Health Network in North Iowa; QMed in Northern 
California; and Washington University/Status One in St. Louis, 
Missouri.
BIPA Disease Management Demonstration
    An integral part of our overall strategy for testing disease 
management, this demonstration, required by the Medicare, Medicaid, and 
SCHIP Benefits Improvement and Protection Act (BIPA) of 2000, was 
designed to determine whether providing disease management services to 
Medicare beneficiaries with advanced-stage congestive heart failure, 
diabetes, or coronary heart disease can yield better patient outcomes 
without increasing program costs. As required by BIPA under this 
demonstration, disease management organizations will not only receive a 
fee for their services, but they will also receive payment for the cost 
of all the prescription drugs their patients are taking, whether or not 
the drugs are related to their patients' targeted, chronic 
condition(s). Coverage of prescription drugs is a unique aspect of this 
demonstration. Moreover, this demonstration was designed to determine 
not only the impact on costs and health outcomes of offering disease 
management services, but also the impact of prescription drug coverage 
on Medicare beneficiaries. Enrollment is expected to begin this summer 
and up to 30,000 beneficiaries can be covered at a time under this 
demonstration.
Telemedicine
    Another demonstration authorized by the BBA is our Informatics, 
Telemedicine, and Education Demonstration Project. Currently, we have a 
4-year telemedicine cooperative agreement aimed at evaluating the 
feasibility, acceptability, effectiveness, and cost-effectiveness of 
advanced computer and telecommunications technology to manage the care 
of Medicare beneficiaries with diabetes.
Physician Group Practice Demonstration
    Additionally, as required by BIPA, we are developing a physician 
group practice demonstration which will seek to encourage coordination 
of Part A and Part B services, reward physicians for improving 
beneficiary health outcomes, and promote efficiency through investment 
in administrative structure and process. Under the 3-year 
demonstration, physician groups will be paid on a fee-for-service basis 
and may earn a bonus from savings derived from improvements in patient 
management. At least six physician group practices will be selected to 
participate in the demonstration.
Building for the Future
    We are also considering future demonstration projects that will 
build on our past experiences, enhance the clinical management of the 
patients, provide for more effective coordination of services, and 
improve clinical outcomes. We are investigating how disease management 
projects could work with a diverse group of organizations, such as 
Provider Sponsored Organizations (PSO), integrated healthcare systems, 
disease management organizations, and Medicare+Choice plans. Such 
projects could test a variety of payment methodologies, including 
capitation and risk-sharing arrangements. We also want to develop 
specific health plan options for those beneficiaries with chronic 
illnesses. We want to enhance the clinical management of care to better 
serve the patients, provide for more effective coordination of 
services, and improve beneficiaries' clinical outcomes without 
increasing costs to the Medicare program.
    Another potential area of investigation could be beneficiaries with 
end-stage renal disease (ESRD), potentially building on lessons learned 
from an ESRD demonstration program created under Social Health 
Maintenance Organization (SHMO) legislation. This demonstration created 
an integrated system of care for ESRD beneficiaries and tested its 
operational feasibility, its efficiency, and most importantly, whether 
such a system would produce health outcomes at least as good as the 
fee-for-service system. Our experience taught us that this approach can 
maintain or improve the quality of care for ESRD beneficiaries, and can 
result in high patient satisfaction and quality of life.
    Additionally, we are investigating the feasibility of a 
demonstration in traditional fee-for-service Medicare that focuses on 
specific chronic diseases and is targeted at underserved areas in 
selected geographic regions. Our emphasis would be on early detection, 
patient outreach, patient education, and lifestyle modification.
Evaluation
    The objective of our evaluations is to assess the effectiveness of 
these programs for chronic medical conditions. In particular, we are 
evaluating health outcomes and beneficiary satisfaction, the cost-
effectiveness of the projects for the Medicare program, provider 
satisfaction, and other quality and outcomes measures. Using a 
combination of surveys, administrative claims and enrollment data, and 
site visits, we will focus on the impact of the demonstrations on 
quality of care, outcomes, and costs. We will pay particular attention 
to the impact of the demonstrations on the following types of measures: 
mortality, hospitalization rates, emergency room use, satisfaction with 
care, changes in health status and functioning, and program 
expenditures. We will examine whether the disease management 
interventions result in less fragmentation in care for the given 
chronic conditions. Finally, we will examine which characteristics of 
disease management programs appear to be most effective in reducing 
morbidity and improving quality of life for chronically ill Medicare 
beneficiaries. In each of these approaches, we expect that the costs to 
Medicare will be the same or lower through the efficiencies that will 
result in providing the most appropriate care. Through these 
demonstrations, we will continue testing and exploring new strategies 
for improving care and efficiency.
Conclusion
    Disease management is a critical element for improving the nation's 
health care and its delivery system. Along with the Secretary, the 
Administrator and I want to take full advantage of all of the 
opportunities for increased quality and efficiency that disease 
management offers. Unfortunately, seniors are far less likely than 
other Americans with reliable access to modern, integrated health care 
plans to have access to disease management services. Through our 
disease management demonstrations, we are working to give seniors the 
same access to modern disease management services that other Americans 
enjoy. We look forward to continuing to work cooperatively with you, 
Chairman Johnson, Congressman Stark, this Subcommittee, and the 
Congress, to find innovative and flexible ways to improve and 
strengthen the Medicare program while making sure that beneficiaries, 
particularly those with chronic conditions, have access to the care 
they deserve. I thank you for the opportunity to discuss this important 
topic today, and I am happy to answer your questions.

                                 

    Chairman JOHNSON. Thank you very much, Mr. Guterman.
    Mr. Lemieux.

STATEMENT OF JEFF LEMIEUX, SENIOR ECONOMIST, PROGRESSIVE POLICY 
                           INSTITUTE

    Mr. LEMIEUX. Thank you, Madam Chairman, and Mr. Stark, 
Subcommittee Members. I am Jeff Lemieux from the Progressive 
Policy Institute, and we have recently published a couple of 
papers arguing that Medicare is not well suited to provide 
disease management or care coordination services in its current 
structure, and we believe the next great challenge for Medicare 
will be addressing these shortcomings and shifting the 
program's emphasis toward chronic care.
    Rather than talking about the need for chronic care and 
disease management that we already know about, and the various 
trials and tribulations in Medicare's current structure in 
providing those services, let me suggest a couple of things 
that I think might help steer the debate on prescription drugs 
and Medicare reform that we are likely to have this year toward 
chronic care.
    First, let me suggest a couple things I think that wouldn't 
help. The first thing would be if we created a new Medicare 
drug benefit in another separated silo, a separated benefit in 
Medicare that wasn't linked to the other benefits in the 
program. We already have a fair amount of benefits in Medicare 
that aren't very well linked. We have part A and part B, and 
sometimes that can be an impediment to coordinated care. I 
think that Congress should essentially just scrap the idea of a 
stand-alone, premium-based drug benefit, precisely because it 
would create a new silo without a lot of work.
    In general, health benefits should be integrated under one 
administrative structure, so that the insurer or the carrier 
has the ability and the incentive to evaluate tradeoffs. For 
example, adding additional drug benefits that are known to 
prevent hospitalizations or the extra costs of 
hospitalizations. Even if benefits can't be fully integrated, 
it is nice to try and find linkages where possible so that 
policy makers can evaluate those tradeoffs.
    Second, I think it would be helpful to remember to try and 
provide more accountability and assessment of new benefits in 
Medicare as we add them. The PPI believes that all new benefits 
should help reorient the Medicare program toward more optimal 
care of chronic illness, and that they should be accompanied by 
new processes to spur systematic improvements in health quality 
and outcomes.
    Our proposal, as I said, has been detailed in a couple of 
reports in my prepared remarks. Let me just mention a couple of 
things about it in brief.
    The plan is similar to a Medicare proposal that was put 
forward last summer by several of your colleagues in the House, 
Representatives Dooley, Tauscher, Jim Davis, Ron Kind, Charlie 
Stenholm and Adam Smith, and I encourage you to consider their 
plans in your deliberations in this Subcommittee and in the 
full Committee. Let me briefly describe what they were 
attempting to do and what we propose.
    First, we propose to try and achieve far greater 
accountability in Medicare through a systematic 
decentralization of the program's administration, so that local 
Medicare administrators and medical directors are directly 
empowered to create disease management and health improvement 
programs targeted to the needs of beneficiaries in their area.
    Second, on benefits, we believe a universal zero premium 
catastrophic drug benefit structure would help link, not 
further fragment, Medicare benefits, and would provide the sort 
of information that Medicare administrators and medical 
directors would need to target disease management programs.
    Third, on choices we would like to see a much expanded menu 
of private comprehensive insurance plans like health 
maintenance organizations (HMO) and preferred provider 
organizations (PPO) in Medicare which, in theory, have the 
strongest incentives to provide disease management and care 
coordination services. We would also like to see a new type of 
Medigap coverage and several other things that are mentioned in 
my prepared remarks.
    Let me talk just a little bit more about the first element 
of our proposal, which is the accountability element. This is 
somewhat different from the sort of thing we have seen in 
Congress before. We are proposing to try and create in Medicare 
a health care version of the CompStat system which has helped 
New York City dramatically reduce violent crime rates. What 
CompStat does is it holds local precinct commanders responsible 
for reporting and reducing crime in their sectors.
    We propose to divide the country into approximately 150 or 
so health care catchment areas, establish a local Medicare 
office in each area with a Medicare medical director and a 
local administrator, empower those officials with the authority 
to initiate new programs for disease management, education and 
other items that would be budget neutral over a 10-year period, 
and that would help the seniors and workers with disabilities 
on Medicare in their districts with the most important problems 
that they are facing.
    We believe that those local officials should be required to 
collect information on the outcomes of treatment and of the 
most frequently occurring chronic diseases, morbidity and 
mortality rates, emergency room admissions, access to and use 
of preventive care, patient satisfaction, availability of 
private plan options like HMOs and PPOs, availability of 
comprehensive disease or care management programs that would be 
available to fee-for-service beneficiaries, and other measures 
of performance of the Medicare program within their 
jurisdiction.
    The local Medicare officials should be ranked annually on 
their ability to foster improvements in health quality and 
outcomes in their regions, and Congress, under our proposal, 
would establish a new Congressional agency patterned after the 
Joint Committee on Taxation, to oversee the local official's 
actions, their proposals, their programs and their rankings. 
Ideally local administrators with poor performance results 
would be replaced, and Medicare's central bureaucracy could be 
reduced as the local officials were put in place.
    What we are trying to set up here is local experimentation 
based on local needs. If telemedicine is important in one area 
and diabetes control is important in another, the local 
administrator should be best equipped to know that that is the 
case and how to address the problem, and then we want to assess 
their performance so that if the administrators of Medicare are 
doing a very good job in Arkansas but Tennessee is not doing so 
well, we should find out why, evaluate the trends and encourage 
the administrators in Tennessee to pick up the slack or perhaps 
even replace them.
    In conclusion, Medicare modernization probably at its very 
deepest level means establishing a fundamental basis of 
accountability for improving Medicare's performance and 
senior's health quality and outcomes. I believe that no 
budgetary shortfall should stop us from making the structural 
reforms necessary. It is wrong to say that because we no longer 
have enough money for a generous add-on drug benefit, we should 
therefore do nothing. On the contrary, we should reform 
Medicare and create a new results-based management structure, 
which in turn will accommodate the introduction of new benefits 
when the budget permits. Thank you.
    [The prepared statement of Mr. Lemieux follows:]
    Statement of Jeff Lemieux, Senior Economist, Progressive Policy 
                               Institute
    Thank you Madam Chairman, Representative Stark, Committee Members, 
for inviting me. The Progressive Policy Institute (PPI) believes that 
the next great challenge for Medicare will be shifting the program's 
emphasis toward chronic care. Medicare has always been a reliable bill 
payer when beneficiaries suffered an acute health care crisis requiring 
hospitalization or extensive medical procedures. Now, Medicare must 
learn how to better help the increasing number of seniors with chronic 
illnesses stay out of the hospital and maintain the best possible 
health and quality of life. This, we believe, is key to improved health 
outcomes, higher quality health care, and greater value for every 
health dollar spent.
    PPI explains the need for a dramatic shift toward chronic care in a 
recent policy report: Healthy Aging vs. Chronic Illness, Preparing 
Medicare for the Next Health Care Challenge, by David B. Kendall, Kerry 
Tremain, Jeff Lemieux, and S. Robert Levine, M.D. I have brought copies 
of that report; if possible, I recommend it be added to the record of 
this hearing.
    Because Medicare covers seniors and workers with long-term 
disabilities--precisely the people most likely to have chronic or 
ongoing health problems--Medicare beneficiaries have the most to gain 
from continuity of care and comprehensive, coordinated care management 
systems.
    In the broadest use of the term, ``disease management'' can range 
from simple educational programs to specialized programs tailored to 
help people manage a particular disease, such as diabetes, to 
comprehensive case management systems for patients with multiple 
chronic conditions.
    However, Medicare is not well suited to provide disease management 
services at any level, for four reasons:

    1. LMedicare's fee-for-service program cannot pay for performance. 
Medicare's fee-for-service program pays for health services rendered, 
regardless of quality, provider, or likely outcome. The program has 
effectively become an entitlement program for health providers: If a 
licensed health provider treats a Medicare beneficiary, payment will 
follow. Such a system cannot steer patients with particular needs to 
health providers best able to provide the most appropriate assistance 
and care.
    2. LMedicare's benefits are inadequate. Comprehensive, integrated 
benefits are a vital part of disease management programs. The most 
obvious inadequacy in Medicare's fee-for-service benefit package is the 
absence of an outpatient prescription drug benefit. Other inadequacies 
can include lack of reimbursement for home monitoring devices and 
services, and difficulties reimbursing health providers for the extra 
time, planning, and communication services that patients with chronic 
conditions need to avoid acute health crises.
    3. LMedicare's benefits are poorly structured and hard to change. 
Medicare benefits reflect health insurance standards from the mid-
1960s. However, because it literally takes an act of Congress to change 
them, Medicare's benefit structure has not changed very much since 
then. In the 1960s, health insurance couldn't do much more than pay 
bills for a hospitalization or an episode of care. Now, with our 
success in saving the lives of patients in crisis, we have more and 
more seniors living with chronic illness. As a result, health care 
needs have changed. However, Medicare's benefits have not adapted. As 
currently structured, the Medicare program's disjointed Part A and Part 
B benefits inherently impede coordination of care for beneficiaries 
with chronic illness.
    4. LMedicare's HMO program is a mess. In theory, private 
comprehensive health plans like HMOs have the greatest incentives to 
provide comprehensive disease management programs, and, in fact some 
Medicare HMOs do a very good job. However, many have dropped out of the 
Medicare program or slashed their benefits. Medicare's HMO program is a 
take-it-or-leave-it affair: HMOs enter the program when reimbursements 
are high and exit the program when reimbursements are low. Medicare's 
new PPO demonstration program, which includes risk sharing and a more 
long-term partnership between plans and the government, holds promise 
for restoring private plan options for seniors.

    To foster improved chronic care and disease management in Medicare, 
PPI encourages Congress to consider two simple tests for any 
legislative proposal:

     LNo new silos. Separated, unlinked, or uncoordinated 
benefits can thwart disease management efforts. Congress should scrap 
the idea of a premium-based stand-alone drug benefit. In general, 
health benefits should be integrated under one administrative 
structure, so that the insurer has the ability and the incentive to 
evaluate tradeoffs--for example, adding drug benefits known to reduce 
the incidence or cost of hospitalizations. Even if benefits cannot be 
fully integrated under one insurance carrier, at the very least they 
should be linked, so that information can be shared between primary and 
supplemental insurers. Adding another separate, add-on benefit to 
Medicare's current, outdated structure would work against disease 
management and comprehensive, coordinated care for people with chronic 
illnesses.
     LNo new benefits without accountability. It doesn't make 
sense to add benefits without making fundamental changes to Medicare's 
processes, so that we can learn whether or not the benefits improved 
seniors' health. Even preventive and screening benefits should be 
accompanied by permanent evaluation systems designed to identify and 
help people who are at risk for particular problems or are coping with 
multiple ailments. All new benefits must help reorient the Medicare 
program toward more optimal care of chronic illness and be accompanied 
by new processes to spur systematic improvements in health care quality 
and outcomes.
PPI's `ABC' Proposal to Modernize Medicare
    CMS needs the flexibility to create disease and care management 
programs for Medicare beneficiaries. However, Congress is not going to 
give the CMS bureaucracy vast new powers without greatly enhanced 
accountability and oversight systems. Moreover, disease management is 
inherently a local system, requiring cooperation between local health 
providers, community institutions, consumer and seniors' groups, and, 
in some cases, local government agencies. CMS cannot run effective 
localized disease management and health improvement programs from its 
headquarters in Baltimore.
    PPI proposes a package of Medicare reforms that would achieve three 
basic ends:

     La radical decentralization of Medicare's administration, 
so that local Medicare administrators and medical directors are 
directly empowered to create disease management and health improvement 
programs targeted to the needs of beneficiaries in their area;
     La drug benefit structure that helps link, not fragment, 
Medicare benefits and provides information to target disease management 
programs; and
     La much expanded menu of private insurance plans in 
Medicare, along with locally-run comprehensive disease and care 
management programs for fee-for-service beneficiaries with specific or 
multiple chronic conditions.

    PPI's proposal is explained in greater detail in the report An 
`ABC' Proposal to Modernize Medicare, and it is very similar to the 
Medicare proposal announced last year by several House Members, 
including Representatives Cal Dooley (D-Calif.), Ellen Tauscher (D-
Calif.), Jim Davis (D-Fla.), Ron Kind (D-Wisc.), Charles Stenholm (D-
Texas), and Adam Smith (D-Wash.). Here are some basics:

    Accountability. Medicare officials should be held accountable for 
measuring and improving the health of older Americans. They should be 
given the freedom to make improvements at the local level, in 
accordance with local needs, with clear public disclosure of results 
and Congressional oversight. The model for the PPI's proposal is the 
``CompStat'' system developed in New York City to help fight crime. In 
that system, crime trends were tracked in real-time, and local police 
commanders were given flexibility to deploy resources as needed in 
their precincts in exchange for real accountability for their crime-
fighting plans and success. Unsuccessful commanders who did not have a 
credible plan for performance improvement were replaced.
    We propose that Congress create approximately 150 local Medicare 
administrative regions and staff each local area with a Medicare 
medical director and Medicare local administrator. We believe those 
officials should be given flexibility to create new programs to improve 
health in their areas, with budget authority to create local programs 
that are budget-neutral within a 10-year period. Local officials would 
be ranked annually on their ability to foster improvements in health 
quality and outcomes in their regions, and Congress would establish a 
new congressional agency, patterned after the Joint Committee on 
Taxation, to oversee the local officials' actions, proposals, programs, 
and ratings. Local administrators with poorer performance results would 
be replaced. Medicare's central bureaucracy would be reduced as the 
local officials were put in place.

    Benefits. PPI believes the most realistic and workable Medicare 
drug benefit would be a universal, zero-premium catastrophic benefit, 
provided mostly through the supplemental insurers that already serve 
Medicare beneficiaries, including employment-based plans, Medigap 
plans, and state programs. (Seniors without any supplemental benefits 
would choose a discount card that also provided the catastrophic drug 
benefit.) The catastrophic benefit would be based on total drug 
spending; PPI proposes that the catastrophic benefit explicitly allow 
seniors to have additional coverage under the catastrophic 
``deductible'' without forfeiting their catastrophic benefits. By 
contrast, Congressional proposals that base a catastrophic drug benefit 
only on ``out-of-pocket'' drug spending would be unfair to 
beneficiaries who have and want additional drug coverage, and could 
disrupt the employment-based retiree coverage many seniors receive. 
PPI's preferred approach is more expensive for the government, but it 
is more practical and workable. Under PPI's proposal, low-income 
seniors would be eligible for additional drug benefits, including ``up-
front'' benefits that started at much lower levels of drug spending.
    We believe that universal catastrophic drug coverage would create 
tremendous side benefits by building an information-based 
infrastructure for disease and care management programs. CMS would 
obtain real-time data from the supplemental insurers and other plans 
and discount cards administering the benefit, so that Medicare would 
know when a patient hit the catastrophic deductible, and Medicare's 
liability was triggered. Therefore, Medicare would have a nearly real-
time database of all beneficiary drug expenditures, which would help 
local Medicare administrators target quality improvement and disease 
management programs to particular demographic groups or regions. The 
new data could also dramatically improve risk adjustment methods, which 
would help private comprehensive plans stay in Medicare.

    Choices. PPI proposes to revitalize Medicare's HMO program and 
expand the PPO demonstration program nationwide. We would establish a 
new type of Medigap coverage that included some up-front drug benefits; 
however, to keep the cost down, the ``New Medigap'' plan would not have 
absolute first-dollar coverage of beneficiaries' coinsurance for 
Medicare's other benefits. Beneficiaries could enroll annually in 
private plans, New Medigap options, and new comprehensive disease 
management programs, and have premiums deducted from their Social 
Security checks.
Practicality and Scalability
    PPI's proposed drug benefit could be scaled up or down based on 
budgetary constraints. In our model, the generosity of the benefit--
literally the level of the catastrophic drug deductible--would not 
affect the proposal's workability. There would be no adverse selection, 
since the benefit would be free and universal. There would be no need 
for late enrollment penalties, and employer-based retiree coverage and 
state pharmaceutical assistance programs would be encouraged, not 
disrupted. In many cases, seniors would automatically receive the new 
benefit through their current supplemental coverage--they would not 
have to adjust their coverage at all.
Conclusion--A New Approach to Medicare Reform
    PPI believes we must switch the Medicare debate from arguments 
about how much to spend on a stand-alone, add-on drug benefit to a 
discussion of what sort of benefits would create the most value in 
improved health per additional dollar of health spending, and how can 
we create measurement and accountability systems to assess that value.
    At its deepest level, Medicare modernization means establishing a 
fundamental basis of accountability for improving Medicare's 
performance, and seniors' health quality and outcomes. No budgetary 
shortfall should stop us from making the structural reforms necessary. 
It is wrong to say that because we no longer have enough money for a 
generous add-on drug benefit, we should therefore do nothing. On the 
contrary, we must reform Medicare and create a new results-based 
management structure, which, in turn, will be able to accommodate the 
introduction of new benefits designed to improve health outcomes, when 
the budget permits.

                                 

    Chairman JOHNSON. Thank you.
    Dr. Wagner.

 STATEMENT OF ED WAGNER, M.D., DIRECTOR, MACCOLL INSTITUTE FOR 
HEALTHCARE INNOVATION, CENTER FOR HEALTH STUDIES, GROUP HEALTH 
                COOPERATIVE, SEATTLE, WASHINGTON

    Dr. WAGNER. Thank you, Madam Chairman. I am Ed Wagner. I 
appreciate very much Congresswoman Dunn's generous 
introduction. My interest is in the quality of the care 
received by the 100-plus million Americans with 1 or more 
chronic illnesses. We hear much about the growing numbers of 
people. We hear much about the growing costs. What underlies 
this concern is that the evidence is that probably less than 
half of those people are receiving optimal chronic illness 
care.
    In my written testimony, I describe a composite Medicare 
recipient drawn from work across the country that we have been 
doing trying to improve the quality of chronic illness care. 
This woman suffered needless morbidity and two preventable 
hospitalizations because of breakdowns in the continuity of her 
care, in the quality of the information and support she was 
given to care for her illness, and because of confusion around 
the management of differing physicians.
    The evidence is that these problems are built into our 
system, unfortunately. Although finances are certainly a 
barrier, as previous speakers have testified to, there is, in 
the words of the Institute of Medicine, perhaps, a larger 
problem. In the ``Crossing the Quality Chasm'' report, the IOM 
Committee says current care systems cannot do the job. Trying 
harder will not work. Changing care systems will.
    Our work has been to try to identify the specific aspects 
of practice systems, that if enhanced and improved, will lead 
to better care and better outcomes for patients like the one 
described in my written testimony.
    We have tried to summarize this evidence and experience in 
a form that is useful for medical practices, health plans and 
other organizations that want to do a better job. That is the 
chronic care model mentioned by Congresswoman Dunn.
    The chronic care model is simply a summary of evidence as 
to what works in the management of patients with one or more 
chronic diseases. It emphasizes the interconnectedness of 
information systems, of educational support, of different 
organizational structures of practice, the use of things like 
e-mail that was mentioned in previous testimony.
    The question is, can busy, now somewhat underfinanced 
medical systems make these changes? Our work under a grant from 
the Robert Wood Johnson Foundation has given us an opportunity 
to try to use the chronic care model and other modern quality 
improvement approaches to help a large number of health 
systems, most in the fee-for-service, not the Medicare+Choice 
sector, improve their care.
    Using the Breakthrough Series model pioneered by Don 
Berwick's Institute for Health Care Improvement, we have now 
worked with almost 1,000 health care systems, the largest group 
of which are the Bureau of Primary Health Care's Community and 
Migrant Health Centers (Bureau).
    About two-thirds of the organizations involved have been 
able to make these changes and report measurable improvements 
in the care of their patients. So, I think there is hope and 
there is some experience that we can draw on.
    The next question is, will these changes lead to reductions 
in the cost of care? We think so. In the Journal of the 
American Medical Association article that was distributed to 
the Subcommittee, we examined the literature looking for 
rigorously done interventions that used approaches like the 
chronic care model and also assessed the impact on costs. We 
found 27 such studies, involving people with asthma, congestive 
heart failure, and diabetes. Eighteen of the studies reported, 
in a reasonably short period of time, reductions in health care 
utilization and costs. So, we believe that cost reduction is 
possible.
    Additional barriers are, as I indicated the deficiencies in 
the information technology available to most medical care 
systems, and the lack of non-physician personnel in offices to 
provide the coordination, education and support for patients.
    We recommend, whatever the Medicare legislation, however it 
evolves, that it invests in improving our basic medical care 
system. How might that happen? One approach would be to 
disseminate in the public sector the best and most cost-
effective patient information software such as disease 
registries that would help practices overcome some of the 
information technology deficits that they have.
    Second, develop a system of quality measurement that is 
dependable, that is comprehensive and that could be linked to 
reward structures as some of the previous speakers have 
mentioned.
    Third, support regional and national chronic disease 
improvement efforts, such as the Breakthrough Series that I 
described earlier and in more detail in the written testimony.
    Last, I do believe that fee-for-service is a significant 
barrier to integrated, coordinated care. So, anything that can 
be done to stabilize Medicare+Choice and reward those health 
plans that are doing a better job would be in, I think, the 
patients' best interest. Thank you very much.
    [The prepared statement of Dr. Wagner follows:]
     Statement of Ed Wagner, M.D., Director, MacColl Institute for 
    Healthcare Innovation, Center for Health Studies, Group Health 
                    Cooperative, Seattle, Washington
I. Introduction
    Madam Chairwoman, and Members of the Subcommittee, I appreciate the 
opportunity to share with you some experiences and insights from my 
research aimed at improving the quality of care received by people with 
chronic illnesses. I am Ed Wagner, Director of the MacColl Institute 
for Healthcare Innovation at the Center for Health Studies, Group 
Health Cooperative in Seattle. Group Health Cooperative is a consumer-
governed, nonprofit health care system that coordinates care and 
coverage. The Cooperative includes medical centers, an associated 
physician group practice, a research center, and a charitable 
foundation. At present, Group Health serves 588,000 members.
    Group Health was founded more than 50 years ago with the mission to 
``transform health care.'' Research has been an integral part of 
fulfilling that mission. In establishing the Center for Health Studies 
twenty years ago, Group Health's Board of Trustees further solidified 
the Cooperative's commitment to research. The Center's work focuses on 
promoting prevention and effective treatment of major health problems--
benefiting Group Health members and the general public. The MacColl 
Institute for Healthcare Innovation serves to bridge the worlds of 
research and delivery-system change, both nationally and within Group 
Health.
    The MacColl Institute is also the national program office for the 
Robert Wood Johnson Foundation's (RWJF) program on Improving Chronic 
Illness Care, which supports health care organizations in their efforts 
to improve care delivered to people with chronic illness. The following 
experiences and opinions stem from both Group Health's quality 
improvement and research work, and my work with hundreds of medical 
practices and health plans across the country committed to improving 
care.
II. Prevalence of Chronic Illness in America
    Recent estimates suggest that well over one hundred million 
Americans suffer from one or more chronic illnesses, including almost 
90 percent of Medicare beneficiaries. Chronic illness afflicts nearly 
half of our population and affects essentially every American family. 
In our conversations with people who live with a chronic illness or who 
care for close family members with chronic illness, we repeatedly hear 
about their difficult experiences in receiving care. Survey data 
suggest that these are not isolated anecdotes. A recent RWJF poll found 
that over one-half of middle-age and older Americans disagreed with the 
statement that one could receive high quality chronic illness care in 
America. To give life to the problem, I'd like to share with you a 
composite case history based on real patients around the country that 
we've encountered in our work.
III. Case History: Ms. G.
    Ms. G., a 69-year-old widowed grandmother, has had diabetes for ten 
years and high blood pressure and heart disease for the past two years. 
She has a primary care physician whom she likes, but sees only when she 
is having trouble. She is moderately obese. With her childcare 
responsibilities for her grandchildren, she finds it difficult to eat 
properly or exercise. She attended a class to help learn more about 
controlling her diabetes when she was first diagnosed with diabetes, 
but has received only intermittent and occasionally conflicting 
information since. Her kitchen drawer is full of different diet sheets. 
She's not sure which one is the best and has stopped using them. As a 
result, Ms. G.'s diabetes is not well controlled. Her doctor visits are 
brief, focused on the problem at hand, and often don't leave time to 
address issues she faces in trying to manage her chronic conditions in 
her busy life.
    Ms. G.'s heart disease progressed to congestive heart failure and 
she began accumulating fluid and becoming short of breath. One night, 
her shortness of breath became so severe that she called 911. She was 
taken to the emergency room and admitted to the hospital under the care 
of a cardiologist. During hospitalization, she was started on new 
medications, improved rapidly, and was discharged a couple of days 
later. The hospital nurses were nice, but busy and could only give Ms. 
G. limited instruction on what she was to do at home. She left the 
hospital with new diet plans, and six different prescriptions drugs, 
three of which were new or changes from her original drug regimen. 
Tests performed during her hospitalization indicated impaired kidney 
function and she was referred to a nephrologist.
    Upon discharge, Ms. G. was urged to make appointments with the 
cardiologist, the nephrologist, and her primary care internist. 
Although feeling much better, she was confused about her medications, 
diet, and the need for additional doctor visits. A phone call to her 
internist's office revealed that the doctor wasn't aware of her 
hospitalization or new medications. She filled the prescriptions and 
tried to figure out how each of the six drugs was to be taken. Given 
their expense, she thought that some of the drugs could be taken only 
if she didn't feel well. Over the next few weeks, she returned to her 
usual responsibilities, began again to experience trouble breathing, 
and tried to decide which physician she should see first. Two weeks 
later while chasing after her three-year-old grandson, she became 
acutely short of breath, called her daughter and was returned to the 
ER, where she was found to have relatively severe congestive heart 
failure and was readmitted to the hospital.
    Although she receives care from competent providers and 
institutions, Ms. G. is clearly not doing well. Repeated surveys reveal 
that Ms. G. represents the majority of Americans with chronic illness, 
who--without optimal treatment--are experiencing morbidity and high 
health care costs that could be prevented. In the remainder of my 
testimony, I'd like to discuss some of factors that contribute to Ms. 
G's poor outcomes and high costs, what research and experience indicate 
can be done to improve care, and the role that Medicare may play in 
accelerating improvement for people like Ms. G.
IV. The Barriers to High Quality Chronic Illness Care
    The major problem facing Ms. G., and the nearly 35 million Medicare 
beneficiaries like her, is that she is receiving care from a system 
that was not designed to meet her needs. High quality chronic illness 
care would help assure that: (1) she receives the most effective 
clinical treatments based on scientific evidence, and (2) she has the 
information, skills, and confidence to make good decisions and choices 
in managing her health and illness. The general structure and practice 
of medical care makes it difficult for chronically ill patients to 
receive these two critical elements in their care. This is a central 
message of the recent Institute of Medicine (IOM) report, Crossing the 
Quality Chasm. Simply stated, our care systems are not designed for Ms. 
G.; they are also unfortunately not rewarded for doing better by Ms. G.
    Fee-for-service payment presents the biggest single barrier to 
improving chronic illness care and reducing costs. It rewards high tech 
providers and treatments when people with major chronic illnesses want 
and need low tech information, comfort, and guidance. Additional 
disincentives within fee-for-service Medicare to improving chronic 
illness care have been elucidated in Dr. Robert Berenson's recent, 
excellent Health Affairs paper, and in the recent National Academy of 
Social Insurance report, Building a Better Chronic Care System. Current 
regulations and practices limit Medicare's ability to support the types 
of services proven to be effective in managing chronic illnesses. For 
example, current Medicare policies make it extremely difficult to 
obtain reimbursement for the activities of non-physician members of a 
practice team who, in the most effective practices and programs, play 
critical roles in providing education, emotional support, care 
coordination, and follow-up with the chronically ill. As a result, many 
practices no longer can afford nurses and other staff, compounding 
difficulties in caring for patients with complex illnesses, like Ms. G. 
Also, current Medicare reimbursement emphasizes brief physician visits 
and discourages other important and less costly forms of patient 
interaction that are important to successful chronic disease 
management, such as telephone care and group visits. From the 
provider's perspective, Medicare policies reward and reinforce the 
status quo.
V. What Can Be Done to Address Barriers? The Chronic Care Model
    Over the past couple of decades, accumulating experience and 
evidence are clarifying how medical care systems should be changed to 
meet Ms. G's needs. A growing number of studies have shown that 
patients like Ms. G. with diabetes, with heart failure, with 
depression, with stroke are much more likely to receive effective care 
and experience less morbidity when cared for in systems redesigned, at 
least in part, for them. What are the characteristics of these systems 
that do better for patients with chronic illness? They begin with the 
assurance of a ``continuous, healing relationship'' as articulated in 
the IOM's, Crossing the Quality Chasm. Given the complexity of Ms. G's 
interlocking chronic conditions and her confusing, costly, and 
potentially conflicting treatments, one care team must bear 
responsibility for collaborating with her in developing and executing a 
coherent plan of care. This care team, whether led by a generalist 
physician, a nurse practitioner, or specialist, must have the systems 
in place to assure that she receives effective clinical treatment and 
self-management support, and that her care from other doctors and 
settings is understandable and coordinated. These assurances and 
routine performance of these essential tasks are very difficult to 
achieve in typical American medical practices unless practice systems 
are substantially overhauled.
    A growing body of scientific evidence strongly suggests that a 
multi-faceted, interconnected set of structural and functional changes 
to medical practice can substantially improve care. For example, in the 
paper provided to the Subcommittee members by Bodenheimer, Wagner, and 
Grumbach published in JAMA, we examined 39 rigorous studies that tested 
diabetes improvement programs in outpatient settings. While 32 improved 
at least one aspect of care, the five most successful programs included 
the most comprehensive set of practice changes. Each of the five had 
components directed at increasing patients' self-management competence, 
providers' expertise, care organization, and clinical information 
availability and utility. Over the past decade, we have tried to 
translate this evidence into action to improve the quality of care 
received by Group Health enrollees with diabetes, heart disease, and 
other conditions. Experience at Group Health confirms that the quality 
of chronic illness care--as measured by the Health Plan and Employer 
Data and Information Set (HEDIS) and other performance 
indicators--can be substantially improved through systematic 
application of a coordinated set of system changes. We also found that 
improvements in care for our large population of patients with diabetes 
were associated with a ten to twelve percent reduction in the total 
costs of their care.
    Based on Group Health's experience and the science, we tried to 
synthesize and organize evidence about health system change into a 
framework or model to help health care organizations translate it into 
action--the Chronic Care Model. The Model recognizes that health care 
organizations operate as part of a larger care community. Important 
community resources and influences can impact care of their chronically 
ill patients. The Model incorporates elements of successful 
interventions and programs such as in the diabetes improvement programs 
described above.

[GRAPHIC] [TIFF OMITTED] T87412A.000


    Practices need guidelines and protocols to guide care, and practice 
systems organized to assure adherence to those protocols. For patients 
to be competent self-managers, they need ongoing information and 
support to set goals, solve problems, and develop skills in managing 
their life, their illness, and its treatment. Effective practices look 
to community resources like peer support groups or exercise programs 
that promote better self-management. Instead of rushed, problem-
oriented doctor visits, high quality practices use planned, structured 
interactions with patients and families to assure appropriate treatment 
and that information systems that remind, provide feedback to patients 
and providers on their performance, and prevent patients from falling 
between the cracks in our care system can guide and support these 
planned interactions. Finally, these practice enhancements are unlikely 
to occur without the organization and leadership that makes chronic 
illness care a priority, that routinely monitors the performance of the 
system, and provides incentives to its staff to do better.

Is the Chronic Care Model Pie in the Sky?

    With generous support from RWJF, the MacColl Institute and our 
partner organizations are using the Chronic Care Model and modern 
quality improvement methods to assist large numbers of medical 
practices and health systems to improve care. The Breakthrough Series 
approach, developed by the Boston-based Institute for Healthcare 
Improvement led by Dr. Donald Berwick, brings together large numbers 
(10-120) of health care organizations to work with faculty on improving 
care for one or more chronic conditions. To date, approximately one 
thousand different health care organizations ranging from small (one or 
two doctor offices) to large medical groups or health plans have 
participated in a Breakthrough Series. The Health Resources and 
Services Administration's (HRSA) Bureau of Primary Health Care is the 
largest single sponsor of the Series as a central strategy in its 
Health Disparities Initiative. This landmark effort has involved nearly 
one half of the Bureau's seven hundred community health centers. Other 
Breakthrough Series partners include quality improvement organizations, 
purchaser coalitions, state health departments, and professional 
organizations with activities underway or planned in Washington, 
Oregon, New Mexico, Arizona, Alaska, Indiana, Illinois, Wisconsin, 
Vermont, Maine, and North Carolina.
    We and our partners have been trying to carefully evaluate the 
impact of these activities. Results suggest that approximately two-
thirds of participating practice organizations implement system changes 
and enhancements that have measurable positive impacts on their 
patients. Many have extended these changes throughout their system. 
Breakthrough Series have addressed care for people with diabetes, 
congestive heart failure, depression, other heart disease and 
hypertension, arthritis, HIV/AIDS, and other major illnesses. The RAND 
Corporation is conducting a major evaluation of the quality and cost 
impacts of the early Breakthrough Series and the results should be 
available later this year.
    Our experience in the Breakthrough Series and related quality 
improvement activities suggests that medical practices of all types, 
large and small, fee-for-service and capitated, suburban and inner 
city, can--with motivated leadership--improve care for their 
chronically ill patients. Our experience also indicates that these 
organizations, and the countless others that don't participate in the 
Breakthrough Series, face major environmental barriers to improving 
their systems of care. These include financial disincentives such as 
those listed above, computer systems designed to send out bills but not 
take care of patients, and increasingly lean practice staffing.

Will Improving Chronic Illness Care Save Money?

    In the JAMA paper discussed previously, we looked for rigorous 
studies of programs to improve congestive heart failure, asthma, or 
diabetes that also analyzed the program's impacts on health care costs. 
We found 27 articles that met our criteria. Of these, 18 found 
reductions in health care utilization and costs. I believe that we can 
say with some confidence that, for most chronic diseases, activities 
that improve patient health (better blood sugar, less fluid retention, 
fewer symptoms, and better function) will reduce expensive health care 
utilization.
VI. How Might Medicare Reform Improve Chronic Illness Care?
    Major chronic illnesses such as suffered by Ms. G. require high 
quality, coordinated medical care. Although disease management vendors 
may have staff and tools that can complement medical care, they are not 
a substitute for it. It is my strong view that we will not achieve 
major improvements in health or reductions in cost for our Medicare 
beneficiaries unless we take steps to improve the quality of the basic 
care they receive, unrealizable as that may seem. Below I offer a 
series of recommendations followed by another recommendation--the 
development and implementation of a system to recognize providers who 
deliver high-quality care--presented in more detail for the 
Subcommittee's consideration.

    L1. CMS should support the dissemination of, and provide technical 
assistance for low cost electronic information systems shown to be 
important adjuncts in care improvement. This should begin with 
dissemination of an electronic patient registry that stores key, but 
not all, clinical information about the chronically ill, and uses it to 
provide reminders of needed services, facilitates planning care, 
prevents patients from getting lost between the cracks, provides 
performance feedback to the practice, and provides quality measures for 
Medicare. As reliable, more comprehensive electronic medical record 
systems become more available and affordable, these should be 
disseminated.

    L2. CMS should extend and improve measures of the quality of 
chronic illness care, and require their routine reporting. The measures 
should include, to the extent possible, indicators of disease control 
and severity, and not just processes of care (e.g. doing recommended 
tests or prescribing recommended drugs). These measures could and 
should be collected as part of the data systems mentioned above.

    L3. CMS should encourage and support regional quality improvement 
activities directed at improving basic care for the chronically ill 
through its contracts with Quality Improvement Organizations and other 
mechanisms. The Bureau of Primary Health Care's Health Disparities 
Initiative provides a relevant model as it supports its program of the 
Breakthrough Series with a national infrastructure that provides 
quality improvement and information system support to any Community 
Health Center involved in quality improvement.

    L4. Congress and CMS must continue their efforts to stabilize the 
Medicare+Choice program by addressing payment and other issues that 
have hindered its success. More than 25 years ago, Group Health 
Cooperative was among the first organizations in the nation to serve 
Medicare beneficiaries through a pre-paid model of care. Today, nearly 
60,000 Washington state Medicare beneficiaries have chosen Group 
Health's Medicare+Choice plan for their coverage.
    LPre-payment has enabled Group Health and other organizations to 
direct resources to areas of greatest need and to be creative and 
innovative in designing programs. Simply stated, when you are not paid 
on an encounter-by-encounter or procedure-by-procedure basis, you have 
incentives to shift your focus to include longer-term improvement in 
health outcomes. The pre-paid model of care also has enabled Group 
Health and other plans to develop highly integrated and coordinated 
care delivery systems by creating opportunities for physicians, 
hospitals, other health providers, and facilities to associate with 
each other. This type of integration makes it easier for providers to 
communicate with one another. Communication among providers, as 
presented in the case study of Ms. G., is crucial to successfully 
caring for chronically ill patients.

    L5. Congress should establish a program that recognizes providers 
for delivering high quality care to chronically ill beneficiaries. 
Medicare is in a unique position to provide leadership in changing the 
patterns of medical care that have led to inadequate chronic care. 
Encouraging what we know to be the best medical care and treatment of 
chronic conditions should be a leading objective of Medicare. Group 
Health Cooperative has been working with the Alliance of Community 
Health Plans to develop a two-pronged approach to paying for better 
care in Medicare. Undertaking changes will certainly be gradual. 
Medicare will need to implement policies that encourage providers to 
adopt new strategies. Rewarding health plans and providers who deliver 
excellent chronic care is one of the best ways to accomplish this.
    LTo do this, though, you need to have measures against which 
providers can be assessed; you need to collect comparable and reliable 
data and analyze it; and then you need to establish a method for 
ranking or scoring performance, allocating rewards accordingly. Some 
modest steps can be undertaken quickly, but a more expansive effort 
that encompasses all of Medicare will require a long-term commitment to 
this approach in the Congress.
    LUnfortunately, common measures and data collection don't exist for 
many of Medicare's providers. Moreover, as I have pointed out above, 
the payment system within fee-for-service Medicare sets up 
disincentives to improved chronic care. Beginning to make these changes 
as part of reforms in Medicare should be a high priority. In the 
meantime, however, Medicare could begin to test the concept of 
rewarding quality care in Medicare managed care plans--where, thanks to 
the capitated payment method and the National Committee for Quality 
Assurance's (NCQA) performance measures that have been used for health 
plans for many years--the capability to measure and begin to pay for 
performance already exists.
    LOn a yearly basis, Medicare collects data from every Medicare 
health plan on the effectiveness of clinical care and on beneficiary 
satisfaction, through the HEDIS and CAHPS measures. 
Based on this data--which looks at both process and outcome measures, 
including such things as use of beta blocker treatment after a heart 
attack, and comprehensive diabetes care--and the ranking methodology 
that NCQA has already developed, CMS and the Congress could develop a 
parallel program in Medicare that would pay a little more per capita to 
those plans that perform very well.
    LI would hasten to add, though, that while we could learn a lot 
through this modest effort, it should be only a bridge to a longer-term 
and more robust initiative in Medicare to improve quality across all 
types of providers and delivery systems. As I noted above, payment 
disincentives are one of the major barriers to providing good chronic 
care in the fee-for-service side of Medicare.
    LThe Institute of Medicine (IOM) could help to address some of the 
clinical issues that would need to be part of a broader payment for 
quality initiative. Through one of its authoritative studies, the IOM 
could identify the appropriate clinically-based measures, and the 
strategies needed to implement and refresh them over time. Such a study 
could provide Congress with recommendations, based on clinical 
evidence, an evaluation of the strategies for rewarding and encouraging 
quality and better chronic care that are already beginning to be used 
in the private and public sectors, and new ideas that are just now on 
the drawing board.
VII. Conclusion: Ms. G. Revisited
    If her doctor's practice followed the Chronic Care Model, Ms. G.'s 
care may have proceeded in the following manner. Ms. G.'s doctor's 
staff checks its electronic patient registry and finds that Ms. G.'s 
diabetes is not well controlled, and that she hasn't had a preventive 
check-up in several months. She is scheduled for a structured visit 
with her doctor and a nurse educator. At the visit, Ms. G. receives her 
flu shot and recommended tests for monitoring her diabetes. The doctor 
finds that Ms. G. has mild heart failure, schedules her for a 
cardiologist evaluation, and advises her to reduce the salt in her 
diet. Ms. G. discusses her diet and exercise regimen with the nurse 
educator who helps her set new goals for reducing salt and calories, 
and a modest exercise program. The nurse educator telephones Ms. G. a 
week later to see how she is doing with her new goals, and with any new 
medicines prescribed by the cardiologist. Further phone calls reveal 
that Ms. G. feels better, her diabetes is better controlled, and the 
heart failure is causing no symptoms. She is scheduled in two months 
for another structured visit.
    I thank the Members of the Subcommittee for the opportunity to 
discuss this important issue with you and would be happy to answer any 
questions you may have.

                                 

    Chairman JOHNSON. Thank you very much, Dr. Wagner.
    Dr. Taler.

 STATEMENT OF GEORGE A. TALER, M.D., DIRECTOR, LONG TERM CARE, 
 DEPARTMENT OF MEDICINE, WASHINGTON HOSPITAL CENTER, ON BEHALF 
     OF THE AMERICAN GERIATRICS SOCIETY, NEW YORK, NEW YORK

    Dr. TALER. Congresswoman Dunn----
    Chairman JOHNSON. Excuse me. You have to turn your mike on 
and speak right into it.
    Dr. TALER. Congresswoman Dunn and Members of the 
Subcommittee, thank you for allowing me to testify today on an 
important issue, advancing the management of chronic care under 
Medicare. I am George Taler, board certified geriatrician and 
director of long-term care at the Washington Hospital Center, 
and I appreciate the opportunity to participate today on behalf 
of the American Geriatric Society.
    Before I begin to discuss chronic care and disease 
management-related issues, it is necessary to place geriatrics 
in context. Geriatricians are primary care-oriented physicians 
who complete at least an additional year of fellowship training 
in geriatrics, following training and certification in family 
medicine or internal medicine, and who are experts in caring 
for older persons.
    Geriatric medicine emphasizes care coordination that helps 
frail elderly patients maintain functional independence and 
perform the activities of daily living and improves their 
overall quality of life.
    Using an interdisciplinary approach to medicine, the 
geriatric team cares for the most complex and frail of the 
elderly population, often in special settings such as nursing 
homes, hospice and as in my practice, in the patient's home.
    We are actively engaged in pursuing system innovations in 
the care of the elderly, especially those with advanced or 
multiple chronic illnesses.
    Today, chronic diseases are the major cause of illness, 
disability and death in this country, and the Partnership for 
Solutions, a Robert Wood Johnson Foundation-funded initiative, 
of which we are a partner, has found that 78 percent of the 
Medicare population has at least 1 chronic condition; 20 
percent of the Medicare population has 5 or more chronic 
conditions or comorbidities. In general, the prevalence of 
chronic conditions increases with age. Twenty-eight percent of 
those 85 and older have 5 or more chronic conditions. That is 
about average for my practice.
    There is a strong pattern of increased utilization as the 
numbers of conditions increase. Using data again from the 
Partnership for Solutions, the average beneficiary has over 15 
physician visits annually and sees over 6 unique physicians a 
year. There is almost a fourfold increase in visits by patients 
with five or more conditions, compared with visits by patients 
with one chronic condition.
    Individuals with five or more chronic conditions are a 
large portion of my patient base, and geriatrics tends to 
provide care coordination services to those patients based on 
their need for extensive family and patient consultation, heavy 
use of pharmaceuticals and high need for transitional care as 
these patients move through the health care system.
    We are not reimbursed for providing these services, and in 
fact, most geriatricians are unable to sustain private 
practices because of their commitment to care for this patient 
base.
    At this time, I would like to discuss disease management 
and care coordination services in this context. A portion of 
today's hearing focuses on disease management. We believe that 
disease management is an appropriate practice for certain 
Medicare beneficiaries who do not have multiple chronic 
conditions.
    However, disease management does not address the real key 
issues involved with frail elderly patients that have multiple 
chronic conditions. First, disease management does not always 
address the needs of persons with more than one condition. 
Imagine putting one of my patients with diabetes, hypertension, 
heart failure and dementia into a disease management program 
for each of these conditions. Most of the people who are most 
costly to Medicare have multiple conditions, and care for these 
patients cannot be segmented into different disease management 
programs.
    Second, a major component of disease management involves 
self-management in patient education. These simply do not work 
for patients with Alzheimer's disease or related dementia, 60 
percent of my practice.
    Diabetes self-management often involves patient education 
or patient self-management, which is inappropriate for such 
beneficiaries; and likewise, disease management for asthma and 
hypertension depends on patient compliance with treatment 
recommendations, and this would simply not be effective.
    Third, when used for patients with multiple comorbidities, 
disease management can disrupt a patient's critical 
relationships with their primary care physician. Some disease 
management programs use specialists that focus on only specific 
interventions tailored to one condition. The nature of chronic 
illness requires a comprehensive, coordinated approach, that 
uses a variety of interventions, which change over time, and 
which contain both clinical and nonclinical components, such as 
coordination with community-based services and environmental 
changes to support functional independence.
    Finally, disease management does not always address 
functional issues brought on by old age or the complications 
that arise from multiple conditions.
    We must go beyond disease management for our Medicare 
population with multiple chronic conditions and consider other 
options that will improve their care, such as the Medicare care 
coordination benefit. For this reason, we strongly support the 
Geriatric Care Act, H.R. 102, and Senate bill 387. This bill 
would authorize Medicare coverage of geriatric assessment and 
care coordination for eligible Medicare beneficiaries.
    Eligible persons are those with at least two activities of 
daily living limitations, a complex medical condition or severe 
cognitive impairment. Some examples of appropriate care 
coordination services include coordination with other 
providers, including telephone consultations; monitoring and 
management of medications, especially those with polypharmacy; 
and patient and family caregiver education and counseling 
through both office visits and telephone consultations; and 
finally, helping patients through the transition from chronic 
to terminal care.
    One other option has to do with physician training and 
physician ability to care appropriately for people with chronic 
conditions. The Geriatric Care Act would also provide for a 
limited Medicare Graduate Medical Education (GME) exception to 
hospitals' specific caps to train additional geriatricians who 
specialize in providing care coordination services and who are 
also in shortage across the Nation.
    Changes such as these should be strongly considered by 
Congress as it debates how to modernize the Medicare system. We 
would like to work with you to enact these changes, and we 
thank you for including us in today's hearings.
    [The prepared statement of Dr. Taler follows:]
     Statement of George A. Taler, M.D., Director, Long Term Care, 
 Department of Medicine, Washington Hospital Center, on behalf of the 
            American Geriatrics Society, New York, New York
    Madame Chair and Members of the Subcommittee:
    Thank you for allowing me to testify today on an important issue--
eliminating barriers to chronic care management in Medicare.
    I am Dr. George A. Taler, a Board certified geriatrician and 
Director of Long Term Care in the Department of Medicine at the 
Washington Hospital Center. I appreciate the opportunity to participate 
today on behalf of the American Geriatrics Society (AGS), an 
organization of over 6,000 geriatricians and other health care 
professionals dedicated to the care of older adults.
    Today I will discuss the needs of the chronically ill Medicare 
beneficiary, particularly those individuals with multiple chronic 
conditions who are in need of care coordination services as well as 
some aspects of disease management that relate to this population.
Brief History of Geriatrics
    Before I begin to discuss chronic care issues, it is necessary to 
place geriatrics in context. Geriatricians are physicians who are 
experts in caring for older persons. Geriatric medicine promotes 
preventive care, with emphasis on care management and coordination that 
helps patients maintain functional independence in performing daily 
activities and improves their overall quality of life. With an 
interdisciplinary approach to medicine, geriatricians commonly work 
with a coordinated team of other providers such as nurses, pharmacists, 
social workers, and others. The geriatric team cares for the most 
complex and frail of the elderly population.
    Geriatricians are primary-care-oriented physicians who are 
initially trained in family practice or internal medicine, and who, 
since 1994, are required to complete at least one additional year of 
fellowship training in geriatrics. Following their training, a 
geriatrician must pass an exam to be certified and then pass a 
recertifying exam every 10 years.
The Frail Elderly/Chronically Ill Population
    Americans are not dying typically from acute diseases as they did 
in previous generations. Now chronic diseases are the major cause of 
illness, disability and death in this country, accounting currently for 
75% of all deaths and 80% of all health resources use. The Partnership 
for Solutions, a Robert Wood Johnson founded initiative of which we are 
a partner has found that about 78% of the Medicare population has at 
least one chronic condition while almost 63% have two or more. Of this 
group with two or more conditions, almost one-third (20% of the total 
Medicare population) has five or more chronic conditions, or co-
morbidities.
    In general, the prevalence of chronic conditions increases with 
age--74% of the 65 to 69 year old group have at least one chronic 
condition, while 86% of the 85 years and older group have at least one 
chronic condition. Similarly, just 14% of the 65-69 year olds have five 
or more chronic conditions, but 28% of the 85 years and older group 
have five or more.
Utilization Patterns
    There is a strong pattern of increasing utilization as the number 
of conditions increase. Using data again from the Partnership for 
Solutions, 55% of beneficiaries with five or more conditions 
experienced an inpatient hospital stay compared to 5% for those with 
one condition or 9% for those with two conditions. 19% of Medicare 
beneficiaries have an inpatient stay.
    In terms of physician visits, the average beneficiary has just over 
15 physician visits annually and sees 6.4 unique physicians in a year. 
There is almost a fourfold increase in visits by people with five 
chronic conditions compared to visits by people with one chronic 
condition. The number of unique physicians seen increases almost two 
and half times for people with five or more chronic conditions relative 
to those with just one chronic condition.
    The average Medicare beneficiary fills almost 20 prescriptions. 
Within this average, the under 65 year old population fills on average 
6.3 prescriptions and those 65 years and older fill 19.1 on average. We 
found that beneficiaries with no chronic conditions fill an average of 
3.7 prescriptions per year while those with any chronic conditions fill 
an average of 22.7.
    The Partnership for Solutions found that there is a strong trend in 
utilization of prescriptions when examined by number of chronic 
conditions.

     LAverage annual prescriptions filled jumps from 3.7 for 
all people studied with no chronic condition to 49.2 for people with 
five or more chronic conditions.
     LGrowth in usage between those with no chronic conditions 
and those with one chronic condition is over 180 percent--from 3.7 to 
10.4 prescriptions filled.
     LUsage grows 72% between one and two chronic conditions, 
from 10.4 to 17.9 prescriptions filled.
     LThere is a 48% growth in average annual usage between 
four and five chronic conditions (33.3 to 49.2).
Policy Implications
    Individuals with 5 or more chronic conditions are a large portion 
of my patient base. Geriatricians tend to provide care coordination 
services to these patients based on their need for extensive family and 
patient telephone consultation, heavy pharmacological usage, and high 
need for transitional care as these patients move from different 
settings in the health care system. We are not reimbursed for providing 
these services and, in fact, most geriatricians are unable to sustain 
private practice because of their commitment to care for this patient 
base. At this time, I would like to discuss disease management and care 
coordination services in this context.
    A portion of today's hearing focuses on disease management. We 
believe disease management is an appropriate practice for certain 
Medicare beneficiaries who do not have multiple chronic conditions, 
such as those with only diabetes, asthma or hypertension. However, 
disease management does not address several key issues involved with 
frail elderly patients that have multiple chronic illnesses and/or 
dementia.
    First, disease management does not always address the needs of 
persons with more than one chronic condition. Imagine putting my 
patient with diabetes, hypertension, dementia, asthma, and COPD into a 
disease management program for each of these conditions. Most of the 
people who are most costly to Medicare have multiple conditions and the 
care for these people can not be segmented into different disease 
management programs. In fact, many of these individuals with one or 
more chronic conditions also have Alzheimer's disease or another 
dementia. Disease management focusing on diabetes without taking 
dementia into account wouldn't be successful.
    Second, a major component of disease management involves self-
management and patient education. These simply do not work for persons 
with Alzheimer's disease or a related dementia. Diabetes self 
management often involves patient education or patient self management 
which is inappropriate for a beneficiary with Alzheimer's disease or 
related dementia. Likewise, disease management for asthma and 
hypertension depends on patient compliance with treatment 
recommendations; this would not be effective for persons with 
Alzheimer's disease or related dementia.
    Third, disease management does not always address functional issues 
brought on by old age or the complications that arise from multiple 
chronic illnesses.
    Finally, when used for patients with multiple comorbidities, 
disease management can disrupt a patient's critical relationship with a 
primary care physician. Some disease management programs utilize 
specialists that focus only on specific interventions tailored to one 
condition. The nature of chronic illness requires a comprehensive, care 
coordination based approach that utilizes a variety of interventions 
which change over time and which contain both a clinical and a non-
clinical component.
    There are indications in the data that there is a lot of care 
provided to beneficiaries with chronic conditions--particularly those 
with multiple chronic conditions. There are also indications that the 
care may not be well-coordinated and that for beneficiaries with 
multiple chronic conditions there are adverse outcomes. We believe the 
lack of a care coordination benefit is a major reason for this outcome.
    For instance, the Partnership for Solutions has found that as the 
number of chronic conditions increase, so too do the number of 
inappropriate hospitalizations for illnesses that could have received 
effective outpatient treatment. These poor outcomes are likely a result 
of poor care coordination among the many services used and providers 
seen. It may be that different providers are recommending conflicting 
treatments that result in poor outcomes including adverse drug events. 
It could be that one condition is receiving treatment, while other 
chronic conditions go unattended and then become acute episodes.
    There is other data to support this theory. A recent national 
survey of people with serious chronic conditions completed by Gallup 
for the Partnership for Solutions found that:

     L26 percent report receiving contradictory advice from 
different doctors in the past year;
     L20 percent report they were often or sometimes sent for 
unnecessary or duplicate tests or procedures;
     L23 percent report that they often or sometimes received 
conflicting information from different health care providers; and
     L25 percent report that they were often or sometimes 
diagnosed with different medical problems for the same set of symptoms 
from different providers.

    Other Partnership for Solutions data shows that physicians think 
that care coordination is both important and difficult to do. A 
national survey of physicians who provide more than 20 hours of direct 
patient care during the week demonstrated that almost two-thirds of 
these physicians reported that their medical education training was not 
adequate to the task of caring for people with chronic conditions and 
17 percent reported that they had problems coordinating care with other 
physicians. Most importantly, physicians in our survey think that poor 
care coordination leads to poor outcomes.
    This data suggests that we must go beyond disease management for 
our Medicare population with multiple chronic conditions and consider 
other options worth exploring that will improve their care. These 
options would be modest, but important, steps to improve care for 
beneficiaries and modernize the Medicare fee-for-service program. As 
you can see, we know a great deal about Medicare beneficiaries and 
their conditions, as well as the lack of coordination within the system 
that affects them.
    Thus, we believe that chronically ill Medicare beneficiaries will 
receive better care and have better outcomes if a new care coordination 
benefit is created. The AGS believes it is critically important to 
create this new benefit under the fee for service Medicare program. 
Doing so could make significant progress toward a more integrated 
system for all beneficiaries. For these reasons, we strongly support 
the Geriatric Care Act (H.R. 102/S. 387).
    This bill would authorize Medicare coverage of geriatric assessment 
and care coordination for eligible Medicare beneficiaries. Eligible 
persons are categorized as those who: (1) have at least 2 activities of 
daily living limitations; (2) have a complex medical condition, as 
defined by the Secretary of Health and Human Services (HHS); or (3) 
have a severe cognitive impairment.
    Eligible individuals will have a designated care coordinator who 
must enter into a care coordination agreement with the HHS Secretary. 
The coordinator may include physicians, physician group practices, or 
other non-physician health care professionals in collaboration with a 
physician.
    Examples of appropriate care coordination services include: (1) 
multidisciplinary care conferences; (2) coordination with other 
providers, including telephone consultations with relevant providers; 
(3) monitoring and management of medications, with special emphasis on 
clients using multiple prescriptions (including coordination with the 
entity managing benefits for the individual; and (4) patient and family 
caregiver education and counseling (through office visits or telephone 
consultation), including self-management services.
    Another modest change to Medicare would be to provide incentives to 
physicians and other providers to provide care coordination services to 
frail elderly beneficiaries. Unlike the traditional method of disease 
management, which targets enrollees with particularly high cost 
conditions, it may be useful to look at some of the people who are 
having the most difficult time with multiple medical conditions 
(whatever those conditions may be). We could focus on people with four 
or five chronic conditions who, for whatever reason, have difficulty 
self-managing one or more of their conditions. These are people who 
typically see many physicians, who fill a large number of 
prescriptions, who need an array of health care services, and who are 
at risk of poor outcomes if the clinical care and other care are not 
well-coordinated.
    For this group of target beneficiaries, there could conceivably be 
a physician payment adjustment that compensates physicians for the 
additional visit and other office time necessary to work with these 
patients. This type of adjustment could be available to all physicians 
treating any Medicare patient who meets the criteria.
    One other option that is not mutually exclusive with anything else 
discussed here has to do with physician training and physician ability 
to care appropriately for people with chronic conditions. One other 
component of the Geriatric Care Act would provide for limited changes 
to the Medicare graduate medical education (GME) program to train 
additional geriatricians who specialize in providing care coordination 
services and who also are in shortage across the nation. This would 
allow for a limited exception to the per hospital cap on GME for small 
numbers of geriatricians.
    We would like to work with this Committee and the Congress to 
legislate these important changes and we thank you for including us in 
today's important hearing. Changes such as these should be strongly 
considered as the Congress debates how to modernize the Medicare 
system.

                                 

    Chairman JOHNSON. Thank you very much.
    Dr. Berger.

STATEMENT OF JAN BERGER, M.D., SENIOR VICE PRESIDENT, CLINICAL 
  QUALITY AND SUPPORT, CAREMARK RX, INCORPORATED, BIRMINGHAM, 
                            ALABAMA

    Dr. BERGER. Thank you, Madam Chairman and distinguished 
Members of the Subcommittee. My name is Dr. Jan Berger, and I 
am the senior vice president for clinical quality and support 
for Caremark. I am also a practicing physician. I am here today 
representing Caremark Rx, Incorporated. It is an honor to be 
here to discuss an issue that is important to Medicare, 
essential to Caremark's health management strategy and an issue 
which I have been personally involved for almost 20 years, that 
being disease management. As requested by the Subcommittee, a 
full copy of my testimony has been submitted for the record.
    Let me start by providing you with some information on 
Caremark. Caremark employs over 4,000 people throughout the 
United States. We provide pharmacy and health management 
services through our three lines of business that include 
pharmacy benefit services, biotech and injectable therapy 
service and CarePatterns disease management services. Caremark 
is the only pharmacy benefit provider that has received full 
patient and practitioner disease management accreditation by 
the National Committee of Quality Assurance (NCQA).
    Caremark's clients are confronted with some of the same 
challenges facing the Committee as it looks to ways to 
integrate chronic care management into the Medicare program. 
First, as you have heard, there is a lack of coordination of 
care among all care givers and the patient. The effects of this 
lack of coordination are especially apparent in the chronic 
condition population. For Medicare, as noted in the Chairman's 
announcement of these hearings, 32 percent of beneficiaries 
have 4 or more chronic conditions. These individuals account 
for a disproportional share of total Medicare spending.
    Second, there is a lack of consistency of treatment 
according to evidence-based guidelines. For example, according 
to NCQA, only 32 percent of individuals with diabetes and 
hyperlipidemia are being appropriately treated with diet, 
exercise or medication.
    Studies have demonstrated the clinical and financial 
benefits associated with getting individuals with chronic 
conditions treated to guidelines. A final challenge to our 
clients was to manage their total medical expenditures and not 
only focus on the pharmacy component of spending. For the 
Medicare program, we believe a disease management program by 
itself may yield some benefits, but without an accompanying 
pharmacy benefit, would have limited impact.
    Our CarePatterns programs were built to meet these 
challenges, utilizing nationally recognized clinical guidelines 
and protocols to educate both patients and providers. 
CarePatterns participants receive regularly scheduled calls 
from nurse educators. They also receive customized educational 
mailings and reminders regarding key clinical tests, diet, 
lifestyle and comorbidity management. Collaboration with the 
treating physician is a necessary and key component of our 
program.
    I would like to give you an example of the success we have 
seen with our program in an over-65 population. One of 
Caremark's clients, the National Association of Letter Carriers 
(NALC), has a large over-65 population with a high prevalence 
of chronic conditions whose expenditures were rising at a rate 
higher than that of their overall population. The leadership at 
NALC came to Caremark to help them find solutions to address 
these challenges. Along with their already interesting pharmacy 
benefit, disease management programs for diabetes, asthma, 
ulcer and arthritis were offered to the beneficiaries starting 
in 1998. Participation in the disease management programs were 
both voluntary and confidential.
    I would now like to discuss the outcomes of the diabetes 
disease management program for NALC. The average age of the 
diabetes program participant was 75; 2,745 individuals 
participated in this program. The average age of the 
nonparticipant control group was 73. This group included 
approximately 9,000 participants. The full details of the 
study, which were published in Disease Management Journal, 
volume 4, number 2, 2001, are attached for your review.
    Through an agreement with the client's benefit plan, 
Caremark received the medical claims data to perform an 
analysis of this program. By any measure, the program was 
successful. Program participants experienced a decrease in 
medical spending of 9 percent from baseline and 17 percent from 
the projected trend. When pharmacy costs are included in the 
analysis, total health care spending, which included both 
medical and pharmacy, still decreased by 3 percent.
    Conversely, the nonparticipant control group saw an 
increase in total medical spending of 5 percent in the program 
year. Together they generated a total savings of nearly $4 
million, or 4.7 percent of the total spending for individuals 
with diabetes in the first year of this program.
    This translates to approximately $1,400 in saving per 
participant. Participants also reported a significant increase 
in their quality of life and high satisfaction with this 
program.
    The leadership at NALC has subsequently added additional 
programs. A disease management program by itself may yield some 
benefits, but without an accompanying pharmacy benefit will 
have limited impact. Studies have demonstrated the importance 
of appropriate pharmacy utilization in managing chronic 
conditions such as diabetes, heart disease and asthma, but the 
results from our study demonstrate a pharmacy benefit alone is 
not enough.
    The individuals in the study that did not participate in 
the care pattern disease management programs had access to the 
same medical and pharmacy benefits as those that did 
participate, yet their total medical spending continued to rise 
while that of the participants decreased. It is only through a 
program of total health management that includes coordinated 
interventions in behavior, treatment protocols, and pharmacy 
regimens that a plan sponsor such as Medicare and an individual 
will see an improved clinical, quality of life, and financial 
outcomes.
    Thank you very much for this opportunity to address the 
Subcommittee, and I will be happy to take any questions.
    [The prepared statement of Dr. Berger follows:]
Statement of Jan Berger, M.D., Senior Vice President, Clinical Quality 
      and Support, Caremark Rx, Incorporated, Birmingham, Alabanm
    Thank you Madam Chairman and distinguished Members of the 
Committee. My name is Dr. Jan Berger. I am the Senior Vice President 
for Clinical Quality and Support for Caremark. I am also a practicing 
physician. I am here today representing Caremark Rx, Incorporated. It 
is an honor to be here to discuss an issue that is important to 
Medicare, is central to Caremark's health management strategy, and is 
an issue with which I have been personally involved for almost twenty 
years, that being disease management. As requested by the Committee, a 
full copy of my testimony has been submitted for the record.
    Let me start by providing you with some information on Caremark. 
Caremark is headquartered in Birmingham, Alabama, with most of our 
operations centered in Northbrook, IL. Caremark employs over 4,000 
people in over 30 facilities throughout the United States and provides 
pharmacy and health management services through our three lines of 
business. First, Caremark provides pharmacy benefit services to over 23 
million people in all fifty States and Puerto Rico. Second, we provide 
biotech and injectable therapies to physicians and patients. Third, 
Caremark provides disease management services through our CarePatterns 
disease management programs. Our commitment to this area is 
demonstrated by the fact that Caremark is the only pharmacy benefits 
provider that has received full patient and practitioner disease 
management accreditation by the National Committee for Quality 
Assurance.
    Caremark's clients are confronting some of the same challenges 
facing the committee as it looks at ways to integrate chronic care 
management into the Medicare program. First, there is a lack of 
coordination of care among all caregivers and the patient. The effects 
of this lack of coordination are especially apparent in the chronic 
condition population. For Medicare, as noted in the Chairman's 
announcement of these hearings, 78 percent of Medicare beneficiaries 
have one chronic condition. 32 percent have four or more chronic 
conditions. These individuals account for a disproportionate share of 
total spending. Secondly, there is a lack of consistency of treatment 
according to evidence-based guidelines. For example, according to NCQA, 
only 32 percent of individuals with diabetes and hyperlipidemia are 
being appropriately treated with diet, exercise or medication. Studies 
have demonstrated the clinical and financial benefits associated with 
getting individuals with chronic conditions treated to guidelines. A 
final challenge to our clients was to manage their total medical 
expenditures and not only focus on the pharmacy component of spending. 
For the Medicare program, we believe that a disease management program 
by itself may yield some benefits, but without an accompanying pharmacy 
benefit would have had a very limited impact.
    Our CarePatterns programs were built to meet these challenges, 
utilizing nationally recognized clinical guidelines and protocols to 
educate both patients and providers. The focus is on the participant as 
a whole rather than on acute episodes, and provides an integrated 
systems-based approach that facilitates communication among different 
providers. CarePatterns participants receive regularly scheduled calls 
from nurse educators. They also receive customized educational mailings 
and reminders regarding key clinical tests, diet, lifestyle, and co-
morbidity management. Collaboration with and intervening on the 
treating physician where appropriate are necessary and key components 
of the program.
    I would like to give you an example of the success we have seen 
with our program in an over-65 population. One of Caremark's clients, 
the National Association of Letter Carriers (NALC), has a large, over-
65 population with a high prevalence of chronic conditions whose 
expenditures were rising at a rate higher than that of their overall 
population. The leadership at NALC came to Caremark to help them find 
solutions to address these challenges. Along with their already-
existing pharmacy benefit, disease management programs for diabetes, 
asthma, ulcer and arthritis were offered to beneficiaries starting in 
1998. Individuals were identified through pharmacy claims data and 
invited to enroll in the program.
    Participation in the disease management programs was both voluntary 
and confidential. Through an agreement with the NALC benefit plan, 
Caremark received the medical claims data to perform an analysis of the 
program. The data allowed us to compare the outcomes of the program 
participants to their projected trend, and to those individuals with 
the same conditions that did not enroll in the plan. The average age of 
the diabetes program participants was 75. The average age of the non-
participant control group was 73. Due to high levels of co-morbidities 
among both participants and non-participants and to avoid counting the 
same savings in more than one program, our published study focused on 
the diabetes population. The full details of the study may be found in 
the Disease Management Journal, Volume 4, Number 2, 2001.
    By any measure the program was successful. Program participants 
experienced a decrease in medical spending of 9 percent from baseline, 
and of 17 percent from the projected trend. When pharmacy costs are 
included in the analysis, total health care spending, which includes 
both medical and pharmacy, still decreased by 3 percent. Conversely, 
the non-participant control group saw an increase in total medical 
spending of 5 percent in the program year when overall plan spending on 
a per person basis remained stable. 2,745 individuals participated in 
the diabetes program. Together they generated a total savings of nearly 
$4 million, or 4.7 percent of total spending for individuals with 
diabetes in the first year of the program. Participants reported a 
significant increase in their Quality of Life (QOL) and high 
satisfaction with the program.
    Since the initial implementation, the leadership at NALC has 
subsequently added additional programs that target coronary artery 
disease, chronic obstructive pulmonary disease, and heart failure.
    A disease management program by itself may yield some benefits, but 
without an accompanying pharmacy benefit will have a limited impact. 
Studies have demonstrated the importance of appropriate pharmacy 
utilization in managing chronic conditions such as diabetes, heart 
disease and asthma. But the results from our study demonstrate that a 
pharmacy benefit alone is not enough. The individuals in the study that 
did not participate in the CarePatterns disease management programs had 
access to the same medical and pharmacy benefits as those that did 
participate, yet their total medical spending continued to rise while 
that of the participants decreased. It is only through a program of 
total health management (such as that outlined by Slezak and Stine in 
Benefits Quarterly, First Quarter, 2003 edition, ``The Role of the PBM 
in Total Health Management Strategies for Individuals with Chronic 
Conditions'') that includes coordinated interventions on behavior, 
treatment protocols and pharmacy regimens that a plan sponsor such as 
Medicare and an individual will see improved clinical, quality-of-life, 
and financial outcomes.
    Thank you very much for this opportunity to address the Committee, 
and I would be happy to take any questions you may have.

                                 

    Chairman JOHNSON. I thank the panel. There really is no 
controversy about the fact that seniors are aging and there is 
more of them and that they live with chronic illnesses. I also 
think there is broad agreement that management works. One of 
the most difficult issues is whether or not one can develop a 
payment to coordinate care, or whether you have to change the 
system so that the coordination is inherent in the structure. I 
want each of you to express your opinion on this issue of a 
payment for coordination versus other changes that creates 
structural coordination.
    Now, I am coming to this from an experience in a system 
that has not been able to define the difference between a 
comprehensive physical and a detailed physical for payment 
purposes. I am also coming as a Member who spent a year and a 
half trying to help Washington figure out what partial 
hospitalization meant so that it could pay its providers who 
were caring for our elderly. I am currently getting the 
government up to my district so that they can determine how 
they will define an intensivist, because they have defined it 
in the law, they have a payment code, but all requests for 
payment are rejected. This is not new. This code has been 
there.
    On the other hand, the intensivist in the intensive care 
unit is saving Medicare money hand over fist by coordinating 
intensive care.
    So, even in the narrow focus of specific care categories, 
where we actually have payment capability for some integrated 
care, we often are unable to accept documentation of that fact, 
and we leave our providers exposed to the Inspector General. If 
you think a payment structure is the answer, then I need for 
you to be able to document to me that the definitions will be 
clear enough so the Inspector General will not be down the 
provider's back. Also, that they will be broad enough so 
something resembling management can occur.
    We are now, as you may know, looking at the average 
wholesale price. The big controversy here is that we care 
manage oncology services. We pay for it through the drug 
benefit, but we care manage. When you get in to look at what 
the practice expense factor should be, we pay for a lot of 
things in oncology service delivery that we don't pay for under 
Medicare. So, we are having trouble developing a code that will 
make a lot of new activities eligible that are actually care 
management in the delivery of cancer treatment.
    So, rather than letting this big issue hold us back about 
whether there should be a care coordination payment or there 
should be systems changes, I want to hear you discuss this 
issue. That is my only question, so that is all my time. So, I 
just want to hear you comment, and then we will move on to 
Pete.
    Mr. GUTERMAN. Madam Chairman, I would address that by 
saying that we recognize that there are certainly problems 
built into both parts of the Medicare program. One of the 
objectives of our demonstration projects is to be able to test 
out different potential solutions, and we have tried to design 
different forms of management fees that can be applied sort of 
to cover disease management services explicitly, and we have 
also in the demonstration projects that are up and running and 
the ones that we hope to do in the future will be soliciting 
innovative ideas for ways to structure both the services and 
the payment for those services so that we can provide the best 
services for our beneficiaries.
    Mr. LEMIEUX. Mrs. Johnson, I think that the answer from our 
point of view would be that we should have a payment for care 
coordination services, and we should have structural processes 
in place to make sure that it is done under controlled 
conditions and that we can tell that it is working and that it 
is improving seniors health. Stu mentioned the nationally 
administered disease management demonstrations, which are great 
ideas. Our only value added to that would be to try to 
decentralize those demonstrations and make them local, and then 
also beef up Congress' ability to keep an eye on how well they 
are doing.
    Dr. WAGNER. Well, I would be contradicting myself if I 
didn't say structural changes. I do believe that a care 
coordination reimbursement or package on top of unchanged 
practice will probably be money down the drain. On the other 
hand, there is no question that such a payment, if combined 
with structural changes, could both reward and contribute to 
further investment in those system changes would be a good 
idea.
    Dr. TALER. I think that structural change is absolutely 
necessary, and that care coordination payments should emanate 
from how we wish to see that structural change occur. From my 
perspective, I think in some ways we are looking at the wrong 
issue. I would like to see structural change based around 
patient-centered care, rather than around their illness. I 
think most of the demonstration programs and most of the ideas 
that we have been seeing are focused around diseases and not 
patient needs. People want to stay at home as long as they can. 
They want to be as independent as they can be. They wish to 
avoid the health care system as much as possible. When that 
time comes, they wish to die at home and not in a nursing home 
and not in a hospital. I think we need to look at systems that 
provide that level of care to individuals so that they can 
maintain their independence at home as long as possible and 
feasible.
    As we create those new structures, I think we can then look 
at what kind of payments make sense to entice health care 
providers to develop new systems of care along those lines.
    Chairman JOHNSON. Thank you.
    Dr. BERGER. I think the care coordination payments can be 
structured in several different ways because we know that there 
are a variety of models and approaches for care coordination, 
as you have heard today. It can be either on the active 
enrollee that we are participating with in their care 
coordination, or it can be across a population basis if you can 
specify and identify those populations that are in need of this 
care coordination.
    You asked about the issue of how do we define what these 
activities should be. In light of disease management and how we 
are working with it, we have used the Disease Management 
Association of America's definition of disease management to 
help us delineate those necessary activities in order to have a 
positive outcome for all that are participating.
    Chairman JOHNSON. Thank you. There are many thoughts in 
what each of you said as succinctly as you could. I recognize 
Mr. Stark.
    Mr. STARK. Thank you, Madam Chairman. Let me just see if I 
can get to all in focus, and please excuse any damnation by 
comparison here. I am just trying to get you in focus with my 
own experience. Dr. Wagner, you are a staff model, group model 
similar to Kaiser? Okay. That is so I can focus there.
    Dr. Taler, you practice in a group or practice in what I 
would call a solo practitioner? I am just trying to----
    Dr. TALER. I am in a geriatrics group, and we are totally 
fee-for-service.
    Mr. STARK. Okay. Well, there you go. Now, between the two 
of you, the management of chronic care would be just part of 
your program in Washington State, right? I mean, that is just--
and as I suspect it is at Kaiser. I mean, it is just part of 
the system. If you have a campus system, exposure to Kaiser is 
you just bled right across the hallway or the lawn or whatever 
it is to go over and see somebody else or get your 
prescription, and it is all coordinated and the patient's 
records are all swapped. Probably you sit around and talk about 
patients with some multi-discipline; if you have got a sticky 
one you sit and talk with other specialists about what is 
going. Is that? Okay. How do you, Dr. Taler, in a fee-for-
service, what I would call a primary care family doctor for old 
folks like me, right? How do you provide the services that Dr. 
Wagner's organization would provide? You have to coordinate. 
You have to--do you do it through your hospital? I mean, what 
is the practical--how do you do it?
    Dr. TALER. Our program is a hospital-based house call 
practice.
    Mr. STARK. Okay.
    Dr. TALER. So, we provide primary care in the patient's 
home.
    Mr. STARK. Keep going.
    Dr. TALER. The care coordination is done through regular 
team meetings and on the fly communications through cell 
phones.
    Mr. STARK. Now, you mean teams within your group practice?
    Dr. TALER. Correct.
    Mr. STARK. Okay.
    Dr. TALER. Our coordination with the community providers, 
with housing support, with other specialists who are involved 
in the care is currently unfunded.
    Mr. STARK. So, let me see if I can say that a different 
way. You are doing it.
    Dr. TALER. Yes.
    Mr. STARK. As part of your physician/patient relationship. 
Your, at least as far as Medicare is concerned, if somebody has 
got diabetes and they have an office visit, and if there is a 
code for that, it doesn't make any difference if you have got 
to call six other people to arrange appointments, you get the 
same fee?
    Dr. TALER. Correct.
    Mr. STARK. You don't get anything extra if a 40-year-old 
employed individual happened to come in to a family 
practitioner and had diabetes; they would get the same rate or 
they get a regular fee--if they were disabled, let us say, so 
they were still under Medicare--the same rate that you would 
charge? I mean, there is nothing--there is no difference if you 
are managing care or if just come in for one office visit. Is 
that what you are suggesting?
    Dr. TALER. Under the current system, that is the way it is. 
Yes.
    Mr. STARK. Okay. Well, do you--Dr. Wagner would like to get 
paid more, but so would Kaiser and so would all the managed 
care operators for their services. I understand that. You would 
like to get paid for what I would call a more intensive service 
to a physician because you are not capitated so you are not 
expected to do all these other services. It seems to me that we 
would have no trouble paying you, but you guys have to come up 
with the--and define what that service is. I mean, it is sort 
of like me suggesting that I should dream up a new kind of 
operation and how much to pay for it. I mean, you dream up the 
operation and I suppose there is staff at CMS that can tell you 
how much we ought to pay you for it if it is not new and 
unusual, we don't use it yet. I think we are trying to do two 
things here, and I don't think we are--I think we are all 
right, with the help of CMS, but I think those of you who are 
professionals have a--should in fact come up with, as you did, 
I guess, in the resource-based relative value scale. I mean, 
you guys got together--I am not sure your folks did, Dr. 
Wagner, but Dr. Taler's group did--and decided in some 
agreement what they ought to get paid on an index basis. Well, 
I would urge you to come to us.
    Dr. Wagner, do you sell any of the information that you get 
from your patients or your studies or your operation? Do you 
make that commercially available to pharmaceutical companies?
    Dr. WAGNER. Absolutely not.
    Mr. STARK. Now, you do, Dr. Berger?
    Dr. BERGER. No, we do not.
    Mr. STARK. What is this item then in your U.S. Securities 
and Exchange Commission (SEC) report, the source of revenue 
resulting from data access?
    Dr. BERGER. The information that we----
    Mr. STARK. It says it is the sale of participant blinded 
pharmaceutical claim data.
    Dr. BERGER. That is correct. The information that we get 
for our disease management programs is separate from the 
information that we receive from our pharmacy benefits 
services. They are totally independent.
    Mr. STARK. You sell some of that data?
    Dr. BERGER. No. The data we received from disease 
management is not----
    Mr. STARK. What about the data you get from pharmaceutical 
data, or your pharmaceutical management?
    Dr. BERGER. From our pharmaceutical management?
    Mr. STARK. Yeah.
    Dr. BERGER. I would have to have the people who utilize 
that data and work with that data daily come and speak to you 
and respond to that.
    Mr. STARK. I am just curious. I mean, it is listed in your 
SEC filing as a substantial source of data, and I just wondered 
who you sold it to. Thank you, Madam Chairman.
    Chairman JOHNSON. Representative Dunn.
    Ms. DUNN. Dr. Wagner, from your research, you developed the 
chronic care model that integrates six core elements into the 
practice of care, Group Health. How does an organization like 
Group Health decide which parts of its research on chronic care 
can be applied in practice to patient care? What factors do you 
take into consideration?
    Dr. WAGNER. Group Health has had for years a very 
deliberative process managed by a multi-disciplinary committee 
that reviews all suggested changes to our clinical programs as 
well as benefits. The single most important criterion is the 
scientific evidence as to whether it works or not. That is 
overwhelmingly what most of the discussion revolves around. 
Once the conclusion is reached that something has a solid base 
of scientific evidence proving that it works better than 
anything else, then the discussion gets to the logistics and 
the cost of how we try to put it into the system. That is 
really the way it works.
    Ms. DUNN. In order to add benefits to the Medicare program 
Congress has to pass legislation. You know that can be a very 
long and a very slow process. As a researcher and as a 
practitioner, do you believe that we need to create a process 
at CMS to determine coverage of preventative or chronic care 
management benefits?
    Dr. WAGNER. I am not one to comment on whether Congress or 
CMS should determine benefits, it would certainly help if there 
were a speedier and a more scientifically driven process. That 
to me is more critical than perhaps whether the responsibility 
or accountability for decisionmaking should shift.
    Ms. DUNN. What are the barriers to implementing a chronic 
care model or disease management program in the private sector 
and in the Medicare system? What are the unique challenges that 
you face in either of these, in both of these systems?
    Dr. WAGNER. Well, I think the major challenges that we have 
encountered in working with these some thousand systems, most 
fee-for-service, are the leadership's commitment to improvement 
in this era of financial strain for most of the health system. 
Information technology and the absence of sufficient patient 
information to support modern chronic disease management is 
also a barrier. One of the adverse effects of the financial 
stress on all medical systems right now is the loss of non-
physician staff to support the physicians. Those non-physician 
staff, nurses, et cetera, are absolutely critical to modern 
chronic disease care. Number four is finance, no question.
    Ms. DUNN. Thank you very much. Thank you, Doctor.
    Chairman JOHNSON. Thank you.
    Mr. Doggett.
    Mr. DOGGETT. Mr. Guterman, you indicated in your testimony 
that the demonstration projects would continue if they were 
cost effective, I believe was your testimony.
    Mr. GUTERMAN. In the coordinated care area.
    Mr. DOGGETT. The coordinated care area. So, I gather from 
that testimony that it is premature to determine whether these 
programs are saving or are likely to save any money in the 
immediate future.
    Mr. GUTERMAN. We haven't completed that. We haven't 
completed that analysis.
    Mr. DOGGETT. They may be a good idea; they may not, from a 
cost savings standpoint?
    Mr. GUTERMAN. From a cost savings standpoint.
    Mr. DOGGETT. It may actually cost us more, because the data 
is not in yet?
    Mr. GUTERMAN. Right.
    Mr. DOGGETT. The same with reference to quality of care. 
There is not any evidence, is there, that providing--that these 
Medicare+Choice plans provide a higher quality of care than 
traditional Medicare beneficiaries receive? Is there?
    Mr. GUTERMAN. The results I think are mixed on that in the 
literature. Our aim in these demonstration projects is to 
improve the coordination of care in both. As I said in my oral 
testimony, there are problems in both the fee-for-service and 
Medicare+Choice arenas in terms of encouraging the appropriate 
coordination of care for chronically ill beneficiaries.
    Mr. DOGGETT. Did you hear the President's State of the 
Union Address?
    Mr. GUTERMAN. Yes, sir.
    Mr. DOGGETT. My recollection was that he was pretty firm 
about saying that he didn't want to turn health care over to 
HMOs; he wanted to turn it over to physicians and to nurses and 
to other health care providers. I gather if we ever see his 
Medicare plan, it is going to rely on turning over much more of 
the care to HMOs.
    Mr. GUTERMAN. I couldn't speak to that.
    Mr. DOGGETT. Is your part of the department involved in 
providing any information for that plan?
    Mr. GUTERMAN. I haven't seen that, and I believe it is 
still being worked on.
    Mr. DOGGETT. Thank you. Dr. Taler, we of course are now in 
year three of this Administration, and they have yet to come 
forward with any specific legislation on prescription drug 
benefits, and I gather after the strong reaction against what 
were the leaked out portions of their plan, they have kind of 
backed off doing it this time. What is it that you find 
superior in the Geriatric Care Act that you mentioned to the 
approach that some of the other witnesses have suggested today?
    Dr. TALER. I think that there are two specific elements. 
One is the comprehensive geriatric assessment. Within that, we 
need to look very carefully at what makes good sense for the 
management of a disease but also what makes sense within the 
preferences and goals of that individual. Another domain that 
we need to look at are what kind of social supports would 
augment the medical care plan and support the caregiver in 
continuing their independence at home. Third, what kind of 
environmental changes are necessary to support that individual 
given their functional limitations. So, a payment for a more 
comprehensive evaluation that looks beyond medicine but looks 
at the whole patient and looks at what they want the most, 
which is to maintain their independence.
    The second is the clinical care coordination that emanates 
from that comprehensive assessment to keep those programs in 
place, and as the patient's condition continues along its 
natural trajectory that things change. I think one of the most 
difficult parts of medicine is that transition from chronic 
care to terminal care, and that also as people move from one 
setting of care to the next, that there is continuity across 
those settings.
    So, care coordination helps to support physicians in 
maintaining the relationship rather than focusing on the 
disease or focusing on the small business of your office; it is 
really focused around providing patient care over the remainder 
of their life.
    Mr. DOGGETT. I know you don't have any demonstrations like 
Mr. Guterman has been working on, but do you have any opinion 
as to whether there would be any cost savings associated with 
that? Is this all likely to be a cost addition to the Medicare 
program?
    Dr. TALER. We don't have any studies per se. I can only 
tell you from my own experience in my own practice. When we 
have looked at patients who have the same demographics and the 
same illnesses, and also comparing our own patients prior to 
entry into our program versus afterward, we are able to show a 
reduction in hospitalizations of about 10 percent, reduction of 
emergency room visits of about 15 percent, reduction in length 
of stay of about 2 days per hospitalization. I think one of the 
most dramatic differences--and you have to put that into the 
context of Washington, DC--71 percent of people in the District 
die in hospitals; 66 percent of the patients in our practice 
die at home.
    Mr. DOGGETT. Thank you.
    Chairman JOHNSON. Very interesting.
    Mr. Johnson of Texas.
    Mr. JOHNSON. Thank you, Madam Chairman. Dr. Taler, one of 
the provisions in the bill that is out there, 101, lifts the 
graduate medical education cap for geriatric students. As you 
know, Congress set limits on the number of GME resident slots 
it would pay for in the Balanced Budget Act. Overall those 
programs are unable to fill their current number of slots, so 
many hospitals have fewer residents than the number of 
positions Medicare is willing to pay to hospitals. So, what is 
the purpose of lifting the cap for geriatric residents if these 
hospitals can't fill the current slots? Tell me, if you agree 
that they should be lifted, what specific hospitals benefit 
from that?
    Dr. TALER. I think that part of the problem in filling 
slots is the difficulty of geriatric practice as it is 
currently funded and currently structured, and I think that 
what we are looking at providing is actually an overall change 
in the way in which geriatrics is practiced and funded; if 
there were additional funds for comprehensive geriatric 
assessment and if there were funds for coordination of care, 
that those would support geriatric practice and make it more 
attractive financially as well as professionally. We then 
anticipate that there would be a greater demand for those 
positions. If there is a greater demand, then we anticipate 
that we would also like to have broader representation 
throughout academic hospitals. There is one other thing that we 
are doing.
    Mr. JOHNSON. So, are you telling me the academic hospitals 
are the ones that would benefit from that?
    Dr. TALER. Actually, all teaching hospitals would. If you 
were to look at what are the spin-off dollars for geriatric 
practices, currently most practices in academics are losing 
money and, when looked at in a silo fashion, are under attack. 
If you look at the spinoff dollars that come from those 
geriatric practices, they provide a substantial amount of 
support for the overall hospital enterprise. In Arkansas, there 
is a geriatric health care center. It probably just about 
breaks even, but they were able to demonstrate that they spin 
off approximately $17 for every dollar that they generate. That 
kind of information will get out to other health care centers, 
and they will recognize the value of providing services for 
geriatric patients. Without geriatric staff and without 
geriatric fellows, it is very difficult to get those 
enterprises up and running.
    Mr. JOHNSON. Okay.
    Mr. Lemieux, I agree with you that CMS isn't doing a very 
good job, and I think all of us probably would agree. Your 
testimony states that Medicare's fee-for-service program cannot 
pay for performance. Programs become an entitlement program for 
health care providers. If a licensed health provider treats a 
Medicare beneficiary, payment will follow. Since Medicare's 
structure is set by statute and governed by CMS coverage in 
coding process, you are saying often seniors don't have access 
to the latest and best health products and services. How would 
you fix that?
    Mr. LEMIEUX. Well, I didn't mean to imply that I thought 
that CMS was doing a bad job, just that the nature of fee-for-
service in a public----
    Mr. JOHNSON. Well, I will imply it if you won't. Go ahead.
    Mr. LEMIEUX. Our idea is that it is very difficult for the 
fee-for-service program sometimes to pay for these sorts of 
care coordination programs or services that we have been 
talking about, also for remote monitoring devices and other 
things just by the nature of the program. Our only insight into 
how to fix that is to--we all agree that CMS needs the 
flexibility to design disease management programs, care 
coordination protocols. However, I don't think that Congress is 
very likely to give CMS vast new power to go off and do 
whatever it wants unless there is a tremendous amount of new 
oversight over that process. I also think that disease 
management tends to be something that is best organized at a 
local level rather than at a national basis, especially 
comprehensive care management services as opposed to simple 
education.
    So, the idea of trying to send CMS out into the field and 
have local medical directors working with providers and seniors 
group and consumer organizations and other institutions at the 
local level seems like the place where they need to be to make 
these sorts of demonstration programs the most effective.
    Mr. JOHNSON. Will they believe the statistics or the 
results? It seems to me they are always about 2 or 3 years 
behind.
    Mr. LEMIEUX. Yes. It is difficult in our current program to 
evaluate trends especially in costs because the data come in so 
slowly. One thing that we are very hopeful on is in the context 
of a universal catastrophic drug benefit every Medicare 
beneficiary would have a drug card from Medicare, probably 
provided from one of their supplemental coverage sources. 
Medicare would get the data because Medicare would have to know 
when its liability began. With a real-time data base of 
seniors' drug utilization patterns, we might be better able to 
target disease management for particular things to particular 
regions of the country or particular demographic groups.
    Mr. JOHNSON. Thank you. Thank you, Madam Chairman.
    Chairman JOHNSON. Mr. Cardin.
    Mr. CARDIN. Thank you, Madam Chairman.
    Mr. Guterman, I want you to know that I think CMS is doing 
a good job, particularly in light of the budget restrictions 
that we impose and the parameters in which we ask you to work. 
I really want to congratulate our Chairman, because I think she 
has really been looking at ways in which we can streamline the 
system to make it easier for CMS to do its work. That is what 
we should be looking at, ways to facilitate the adoption of new 
technology accompanied by rational reimbursement levels. We can 
obviously do a better job, and that is one of the reasons we 
are having this hearing and to see whether we can't determine 
ways to provide disease management.
    Madam Chairman, there are two things that I have taken out 
of this hearing: First is that there is a need for disease 
management to be better handled under the Medicare 
reimbursement structure. Whether we make structural changes or 
provide direct reimbursement, there is a need for us to examine 
better ways to deal with disease management.
    The second thing I noticed, Mr. Guterman, in the 
demonstration program, is that you are covering prescription 
medicines for the diseases affecting the individuals. So, as we 
look at covered services it seems to me that if we are going to 
have disease management we need to cover the prescription 
medicine costs of those ailments.
    The Chair is aware that I have been interested in moving 
forward on this issue, I believe we should cover prescription 
medicines within Medicare; but if we can't cover all 
prescription medicines at a reasonable level, then we at least 
should cover those illnesses for which disease management is 
necessary, whether it is diabetes or high blood pressure or 
rheumatoid arthritis or severe depression or other types of 
diseases where we know that medicines are absolutely essential 
to disease management. We should at least cover those 
medicines. I think we should cover all, but if we don't have 
the money to do it, let us set a priority and cover those that 
are most critical for disease management.
    Dr. Wagner, I see you shaking your head in the affirmative, 
so I will call you then to respond to that, because maybe I 
will get a----
    Dr. WAGNER. Oh, good. I agree with you. I would add one 
addition, that we should certainly cover the critical medicines 
that are essential to improving health of patients with these 
conditions. What would make it more affordable is if we picked 
and chose in some scientific way the more cost effective among 
the options, because there are options in the treatment of most 
of these conditions.
    Mr. CARDIN. That is part of good disease management and 
practices. I would very much encourage that; most of the 
proposals here have been aimed at encouraging individuals to 
use the most cost effective way.
    Mr. Guterman, I take it this was a conscientious decision 
that you couldn't have good disease management without covering 
the prescription medicines of the people in the program?
    Mr. GUTERMAN. Well, actually it was Congress that mandated 
the coverage of prescription drugs under the Beneficiary 
Improvement Protection Act (BIPA) in this project. One of the 
things we hope to learn is how drugs can be used best in 
disease management activities from this demonstration, and we 
will be paying careful attention to that, and I think that is 
one of the critical aspects of this project.
    Mr. CARDIN. Let me make another observation that Mr. 
Doggett made, and that is if we are going to expand covered 
services for better disease management, I expect that the 
Congressional Budget Office will score it as additional cost, 
even though we all know that it will reduce hospital days, it 
will save in all the areas that Dr. Taler raised: Clearly we 
are going to see significant cost savings. We have to be 
prepared to understand that this effort will require us to 
cover the extra initial costs in order to effect a more cost-
effective system in the long run, and we should be prepared to 
do that. Thank you, Madam Chairman.
    Chairman JOHNSON. I would like to ask the panel if you 
would all agree if we are going to really provide coordinated 
care we are going to have to cover some things we don't now 
cover, both in services and in people services?
    Mr. GUTERMAN. Yes. I think that is one of the things we are 
doing.
    Chairman JOHNSON. In addition to prescription drugs. I 
mean, in all of your plans there is a social service management 
component where there is a lot of telephone calls, there is 
remote monitoring. There are all kinds of things that you are 
going to have to cover that Medicare does not cover now. Right? 
So, it is important to recognize that it isn't just about 
prescription drugs. There are services that Medicare doesn't 
provide that you can't manage care without.
    The second thing I want to be sure is that we notice for us 
to pay for those softer services the payments are not going to 
the doctor's office. Even there we have trouble. Remember, we 
have five levels. People would be appalled if they knew the 
amount of private information we know about them that the 
auditors get to know about them in order to determine what 
level of service. Are you comfortable that you can actually 
define the soft services necessary for care management and that 
we could have an auditing system that wouldn't drive your 
offices absolutely nuts and leave you exposed to fraud and 
abuse charges? Anyone can comment.
    Dr. TALER. Let me weigh in on that one. There is currently 
a code for care plan oversight. It is limited to recipients of 
skilled nursing services through the home care benefit. 
Physicians or nurse practitioners often provide services for 
these patients that include either consultation with other 
health care providers, the home care nurse, physical therapist, 
or other consultants, as they have team meetings, as they 
review records in order to have a better grasp of the overall 
care, and as you document time spent in those endeavors. If 
these services consume at least 30 minutes in a calendar month 
you are allowed to bill a Current Procedural Terminology code 
and are reimbursed at about $120 to $125, depending on your 
region.
    Chairman JOHNSON. You have used that, and it works 
satisfactorily?
    Dr. TALER. Yes. There are physicians around the country, 
especially those who are involved more with homebound patients, 
who have recognized that that is a mechanism for supporting 
their services while those patients are receiving the home care 
benefit.
    Chairman JOHNSON. I just got a note that Dr. Wagner is 
going to have to leave. The second question I want to ask, and 
I will put it on the table and anyone can comment, is that the 
breakthrough series demonstrations--and I am particularly 
interested on Mr. Guterman commenting on this after Dr. Wagner. 
The breakthrough series is almost entirely--I believe it is 
entirely--in either community health centers or staff model 
groups?
    Dr. WAGNER. No. Not at all. Of the 1,000 organizations we 
work with, over 500 are----
    Chairman JOHNSON. Oh, good. All right.
    Dr. WAGNER. Are private.
    Chairman JOHNSON. The ones I have heard about are all 
community health centers. So, I want to be sure that we are 
thinking about how do we do this where there is not a staff 
model or a community health center, because they are just not 
around.
    Dr. WAGNER. Oh, no. That is the biggest single program, but 
it is still a minority of the systems that have been involved.
    Chairman JOHNSON. The management component can function 
just as well?
    Dr. WAGNER. It sure helps having an organized system like 
the Bureau does. Yes. The answer is yes. I would like to, if I 
might, address your previous question. I agree with you that if 
we try to define disease management or care coordination as a 
set of specific services, they will be subject to abuse. I 
suspect they will be abused, and that is why I would prefer not 
to view it as a set of services, but as a demonstrated system 
of care that can meet the needs of patients with chronic 
illness. There are some measures now to try to identify----
    Chairman JOHNSON. So, in other words, we should focus on 
holding the system accountable rather than defining all the 
little parts because the parts are going to change. In 10 years 
they are going to be different. I would think that 
accountability you pointed to earlier, some of you in your 
testimony----
    Dr. WAGNER. Parts can be gamed.
    Chairman JOHNSON. Oh, very much. I mean, I don't know who 
decides appropriateness of this team meeting. Okay, thanks. 
Thanks, Dr. Wagner, for being with us. We appreciate it.
    Mr. GUTERMAN. Madam Chairman, if I may address your 
question as well. I think at CMS our approach is rather than 
specifying individual services, also to just have a bundle for 
disease management. All of our demonstrations involve either--
involve some sort of payment on a per member, per month basis, 
and that we feel that that rather than prescribing which exact 
services are provided that we have the entity that is managing 
these patients be at some risk for the effectiveness for the 
package that they decide to put together and apply to this.
    Chairman JOHNSON. So, even though you are doing this within 
the fee-for-service system, you are using a capitated payment 
for this function?
    Mr. GUTERMAN. There are--we are trying different 
approaches, but that is certainly the approach in the BIPA 
demonstration, and we are using accountability in the 
coordinated care demonstration to accomplish the same goal. We 
will of course be collecting information on which services 
actually seem to work best, and when we get the information on 
that we will know better, you know, what works and what 
doesn't. We think that in the interest of flexibility, that it 
is better to define the bundle and let the practitioners define 
what they do.
    Chairman JOHNSON. I think if we do this without preserving 
flexibility, we defeat ourselves.
    Any other comments from the panel? Thank you very much for 
your time, for your written testimony, and for your involvement 
in this process, and we look forward to working with you.
    [Whereupon, at 5:44 p.m., the hearing was adjourned.]
    [Submissions for the record follow:]

                                                         AdvancePCS
                                               Washington, DC 20005
                                                      March 4, 2003

The Honorable Nancy Johnson
Chairwoman, Subcommittee on Health
Committee on Ways and Means
1136 Longworth House Office Building
Washington, DC 20515

Dear Chairwoman Johnson:

    On behalf of AdvancePCS, I would like to formally request the 
inclusion of our statement into your hearing record for your hearing 
entitled ``Confronting the Barriers to Chronic Care Management in 
Medicare,'' on Tuesday, February 25, 2003.
    AdvancePCS is the nation's largest independent provider of health 
improvement services, touching the lives of more than 75 million health 
plan members and managing more than $21 billion annually in 
prescription drug spending--totaling over 525 million pharmacy claims.
    Our statement was submitted last year to the Senate Special 
Committee on Aging for their hearing entitled ``Disease Management and 
Coordinating Care: What Role Can They Play in Improving the Quality of 
Life for Medicare's Most Vulnerable?'' At that hearing, on September 
19, 2002, our Chief Science Office, Alan Wright, focused on AdvancePCS' 
commitment to pursuing research in and implementation of disease 
management programs, the current status of and future plans for 
AdvancePCS' disease management programs, and lastly the potential value 
of disease management to the Medicare program.
    We are very interested in the work of your committee on this issue 
and would like to be of assistance in any way. Please feel free to 
contact me with any questions regarding this statement.

            Regards,
                                                    Wendy C. Parker
                                                AVP Federal Affairs

                               __________

   Statement of Alan Wright, M.D., Chief Science Officer, AdvancePCS
    Thank you, Senators Breaux and Craig. I would like to thank the 
Committee for calling this hearing today on disease management. Our 
company, AdvancePCS, has been creating and implementing disease 
management programs to improve the delivery of healthcare in this 
country for many years. We are pleased that the Congress is interested 
in integrating disease management into the Medicare program and look 
forward to working with you as you begin to examine this important 
opportunity.
    My name is Alan Wright and I am a physician and the Chief Science 
Officer for AdvancePCS. I have worked for AdvancePCS for ten years. 
During my tenure here, I have been responsible for the development and 
oversight of disease management products and I am currently focused on 
integrating new and emerging technologies into our programs.
    AdvancePCS is the nation's largest independent provider of health 
improvement and pharmacy benefit management services, touching the 
lives of more than 75 million health plan beneficiaries. Our clients 
include a broad range of health plan sponsors, such as Blue Cross and 
Blue Shield plans, self-insured employers and other employer groups, 
labor unions and government agencies--including the Federal Employees 
Health Benefit Program (FEHBP). On behalf of our clients, we administer 
and monitor over 550 million prescription claims each year representing 
over $28 billion in annual prescription drug spending.
    AdvancePCS is committed first and foremost to health improvement; 
we offer our clients a wide range of health improvement products and 
services designed to enhance the quality of care delivered to 
beneficiaries, and manage their costs. The company's core capabilities 
include prescription benefit plan design consultation, home 
prescription delivery, and formulary development and management. Within 
these programs, we also set up retail pharmacy networks, negotiate drug 
discounts, and administer claims.
    The delivery of these services is in part facilitated by 
AdvancePCS' contractual relationships with retail pharmacies and 
prescription drug manufacturers. The company's pharmacy relationships 
extend to over 59,000 pharmacies, virtually all retail pharmacies in 
the United States.
    AdvancePCS' more advanced health improvement capabilities include 
clinical programs, disease management and specialty pharmacy services. 
We believe these services are critical components to helping our 
clients balance their cost containment and quality improvement goals.
    AdvancePCS is an independent, publicly traded company. We employ 
approximately six thousand employees and have operations in 18 States, 
Washington, DC and Puerto Rico. We provide services to beneficiaries in 
every State of the Union, Washington, DC and in Puerto Rico.
    My testimony today is divided into three parts:

     LThe first section will describe disease management and 
highlight AdvancePCS' commitment to pursuing research in and 
implementation of disease management programs. It will also address the 
company's internal structures as well as the external partnerships we 
pursue to facilitate continuous improvement of our disease management 
interventions.
     LThe second section will highlight the current status of 
and future plans for AdvancePCS' disease management programs--how we 
launched into this area, how our programs work, and how they will 
evolve in the future.
     LThe final section will focus on the potential value of 
disease management to the Medicare program and discuss our support for 
continuing efforts in this arena.
AdvancePCS' Focus on Disease Management
    Providing care for the chronically ill is a constant challenge for 
our healthcare system and one that we strive to address day after day. 
We have been developing and delivering disease management interventions 
to a broad range of population groups since the early 1990s. These 
programs all seek to optimize the healthcare of, and maximize the 
health and quality of life for people with chronic illnesses. While 
change in disease progress is often incremental, the results our 
programs achieve in terms of quality of life, self-esteem, and cost 
efficiencies, are significant.
    Disease management programs apply managed care approaches to 
address the healthcare system's challenge of caring for the chronically 
ill. Relying on a wide range of models, including case management and 
interdisciplinary teams, disease management programs improve the 
overall health of targeted populations. AdvancePCS' client population-
based approach enables us to offer everyone with a given disease 
services tailored to individuals' disease severity. We work closely 
with individual patients to minimize the pace of their health 
deterioration.
    The benefits of our disease management programs are numerous. 
Aggressively managing chronic illness typically enables individuals to 
require less invasive care, which enhances their quality of life and 
reduces medical costs. In addition to providing health and financial 
benefits, disease management also reinforces care standards and 
strengthens the physician-patient relationship.
    Program Development
    AdvancePCS develops disease management programs internally using 
established national guidelines from such sources as the Joint National 
Committee on Hypertension sponsored by the American Medical 
Association, the National Institutes of Health, the American Heart 
Association, and the American Diabetes Association. We select programs 
for development based on the potential quality of life and cost impacts 
for a population.
    We rely on a team of internal and external clinical experts to 
develop leading programs. The range of clinical expertise used includes 
physicians, nurses, pharmacists, patient educators, and health 
economists. When a health improvement program has a pharmaceutical care 
component, pharmaceutical companies may be enlisted to provide 
supporting materials.
    The qualitative and quantitative effectiveness of AdvancePCS' 
disease management programs are measured using specific indicators that 
compare results to clinical benchmarks and/or goals. We enhance 
programs periodically based on changes in clinical guidelines, feedback 
from practitioners, patient experiences and/or program effectiveness.
    Using the principles of continuous quality improvement, AdvancePCS' 
programs, in collaboration with and on behalf of our client sponsors, 
are executed in compliance with the National Committee for Quality 
Assurance (NCQA) criteria. When possible, the programs also incorporate 
the Health Plan Employer Data Information Set (HEDIS) indicators. All 
of AdvancePCS' programs advocate appropriate care through the effective 
application of data and scientific evidence. In 2002, we achieved the 
new NCQA Disease Management Accreditation.
    Health Care Research Division
    Effective disease management depends on a firm foundation in 
quality improvement and medical research. Our disease management 
programs are based on proven outcomes. With Innovative Medical 
Research, Inc.'s (IMR, an AdvancePCS subsidiary) research methodology, 
we explore intervention alternatives, measure outcomes, and then 
implement the most effective interventions through our disease 
management programs.
    Our research is organized in centers focused on population-based 
issues. For example, our Center for Healthier Aging is dedicated to the 
development of programs targeting the specific needs of older 
individuals, while our Center for Priority Populations focuses on 
interventions for the Medicaid population.
    Partnerships
    AdvancePCS also partners with a range of government entities to 
ensure we remain on the cutting edge of research; in turn, we hope that 
our expertise can be helpful to Federal agencies looking to address 
healthcare quality and outcomes. One example is our longstanding 
collaboration with the Agency for Healthcare Research and Quality 
(AHRQ) in their Centers for Education and Research on Therapeutics 
(CERTs). We were one of the first private-sector companies to partner 
with the CERTs to focus on community-based research programs to improve 
patient safety through reduced drug-drug interactions.
    Another mutually beneficial AdvancePCS and government partnership 
we have developed is with the Food and Drug Administration (FDA). 
Working with the FDA, we help to facilitate post-marketing drug 
surveillance, and assess and moderate the risk of adverse drug 
outcomes.
    Another example of our continuous improvement efforts includes past 
work with a leading healthcare foundation. We have participated in 
Robert Wood Johnson funded research to study a group of Medicaid 
patients with asthma. The study purpose was to understand patient and 
physician knowledge levels, beliefs, and views on asthma care. As 
expected, the research showed that there is a significant knowledge gap 
between best practices and actual practices among both patients and 
physicians. A knowledgeable patient is key to achieving the desired 
health outcomes.
Disease Management Programs--Yesterday, Today and Tomorrow
    Acting on behalf of our plan sponsors, we initiated our disease 
management programs in the early nineties with targeted mailings to 
patients and expansion of traditional managed care case management 
programs. Initially, we emphasized implementation and action, focusing 
less on results. Although these programs laid the groundwork for 
today's disease management methodologies, we had no way of measuring 
whether or not they were effective or successful.
    Our programs have evolved over time. They now emphasize efficiency 
of interventions and quantifiable results. We have a built-in total 
quality improvement feedback loop to help us identify which program 
components are most effective. Our disease management programs are now 
tailored to specific conditions with interventions that extend from 
Internet publication of information to personal nurse counseling. (See 
Chart A).
Chart A: Examples of Disease Management Services
[GRAPHIC] [TIFF OMITTED] T87412A.001


    Our existing disease management programs use targeted interventions 
to educate and support our plan sponsors' beneficiaries and their 
caregivers. We maximize the number of methods available to communicate 
and educate patients, recognizing that compliance, and ultimately 
program success, result from informed, knowledgeable patients. Today's 
state of the art programs primarily rely on three forms of patient and 
physician communication.

     LFirst, we use telephonic outreach to assess and educate 
patients, and to evaluate self-care. Through direct telephone 
conversations, we communicate with our patients about the value of 
appropriate care management and encourage positive health-seeking 
behavior.
     LSecond, we use mail-based interventions to disseminate 
disease-specific member education material and invite individuals to 
join our programs. The mail also allows us to conduct patient and 
physician profiling to measure program success as well as evaluate 
patient/pharmacy utilization patterns and compliance with recommended 
regimens.
     LFinally, our web-based communication provides yet another 
opportunity for us to share relevant educational materials and 
interface with patients.

    A good disease management program begins with the development of 
plan-sponsored, defined program goals and quantifiable outcome 
objectives. Using industry standard HEDIS measures, AdvancePCS closely 
tracks health outcomes to monitor the impact of our programs. We 
recognize that progress can be slow in disease management and that 
results are incremental--while we aim for 100 percent compliance, we 
recognize that incremental achievements are often what are achievable 
in the short run.
    Results from one of our diabetes programs illustrate our focus on 
outcomes. In this program, we saw a 6 percent improvement in the rate 
of eye exams for diabetic patients over a 3-year period, a significant 
step in preventing blindness among these patients. While this was only 
one of our outcomes measures in this program, it is representative of 
the type of outcomes that may be possible and that help to reduce the 
costs associated with disease.
    AdvancePCS is continuously working to enhance the company's 
existing disease management interventions, integrating new technologies 
and research as it becomes available. For example, our researchers 
currently are using proven behavioral models, as well as remote patient 
monitoring devices, to understand interventions that result in 
behavioral change. Regular program review enables us to determine how 
we as a company can have the greatest impact on our patients.
    Finally, patient privacy is a priority in all of our disease 
management programs. We work closely, in collaboration, with our plan 
sponsors to ensure the protection of patient confidentiality in 
consideration of all applicable state and Federal regulations.
Disease Management and the Medicare Program
    Progress to Date
    Congress and the Administration have already made some progress in 
bringing disease management approaches into the Medicare program. The 
coordinated care demonstrations that were part of the Balanced Budget 
Act have begun to test fee for service approaches and disease 
management. The Beneficiary Improvement and Protection Act 
demonstration that was announced this year will go a step further in 
testing innovative fee for service approaches.
    There is more that can be done. We look forward to the future 
demonstration projects that CMS is contemplating. Models that are 
consistent with the approach we successfully employ in the private 
sector, structured around performance risk and targeted across a 
population, would provide another testing ground for CMS.
    Looking Forward
    The Medicare program could greatly benefit from appropriately 
designed and tailored disease management programs. As we all know, 
chronic conditions are most prevalent in the senior population and are 
a major contributor to high Medicare costs. According to the Kaiser 
Family Foundation, 57 percent of Medicare beneficiaries have arthritis, 
55 percent have hypertension, 37 percent have heart disease, 19 percent 
have cancer, and the list continues. (See Chart B). Some of these more 
common diseases that afflict the Medicare population are particularly 
amenable to disease management interventions.
Chart B: Most Common Conditions Among Medicare Beneficiaries
[GRAPHIC] [TIFF OMITTED] T87412A.002

    Source: Kaiser Family Foundation Medicare Chartbook. Non-
institutionalized Medicare Beneficiaries, 1999.

    The health benefits of disease management that we have seen in the 
commercial population could likely be replicated within the Medicare 
population, potentially producing even greater improvements in health 
outcomes. However, given the complexity of care needs for the Medicare 
population, our expertise leads us to believe that one would need to 
refine such disease management programs based upon on-going experience 
in order to realize the significant improvement and savings opportunity 
potential.
    Even so, there are a number of disease management programs that 
could be adopted within Medicare today, by focusing on the 
pharmaceuticals already covered by Medicare. Medicare Part B covers 
drugs for chronic conditions such as arthritis (e.g., HylanG-F20, 
Remicade), cancer (e.g., Taxol, Gemzar, Paraplatin, Taxotere), and 
emphysema (e.g., Albuterol). Given the high cost of these drugs and 
established treatment protocols for these conditions, disease 
management programs would be an ideal way to help manage the care of 
these beneficiaries while also addressing the high Medicare costs.
    AdvancePCS is working to adapt the company's existing disease 
management programs and develop new interventions that incorporate the 
therapies already covered by Medicare Part B. We only expect this focus 
to increase in the future as more biotechnology drugs focused on 
chronic diseases are approved.
    Ultimately, implementation of disease management into the Medicare 
program on a large scale will require Medicare payment reform. We look 
forward to working with Congress on achieving payment flexibility 
wherever necessary and giving CMS the tools it needs to effectively 
integrate disease management into Medicare. Congress can also support 
CMS by ensuring that the agency has broad authority and latitude within 
the Medicare program to test new models.
    As we face the challenges of the future, growing drug costs, an 
aging population, the growing biotech industry--the compounding effect 
will be a Medicare program with spiraling costs. Disease management 
interventions directly address these challenges by delivering cost-
effective, high quality care to the chronically ill populations.
    Thank you for the opportunity to testify before the Committee 
today. I would be happy to answer your questions.

                                 
         Statement of the American Association of Health Plans
    Madam Chair and Members of the Subcommittee, the American 
Association of Health Plans (AAHP) appreciates the opportunity to 
provide a written statement on the important topic of health benefits 
and cost saving potential of chronic care management programs. AAHP 
represents more than 1,000 HMOs, PPOs, and similar network plans 
providing coverage to more than 170 million Americans. AAHP member 
plans are dedicated to a philosophy of care that puts patients first by 
providing coordinated, comprehensive health care.
    Over 100 million Americans of all ages have one or more chronic 
conditions. With aging, the chances of developing a chronic condition 
such as arthritis, heart disease, diabetes, depression, or a 
respiratory ailment increase. In recent years, a growing body of 
scientific evidence has underscored the efficacy of proactive 
management of physical and mental health, as well as the social issues 
related to these conditions.
    Health plans have long understood that formal programs of disease 
management can be extremely effective in helping members to maintain or 
improve their quality of life despite having a chronic condition. These 
programs are built on the knowledge of what interventions can improve 
patient outcomes and scientific evidence that outreach to those with 
chronic conditions, coupled with educational programs and consistent 
monitoring, can effectively manage many conditions. In order to have 
the best outcomes, patients need to be active participants in their 
care, monitoring their blood sugars, checking their weights, and 
exercising on a regular basis. While empowering patients for self-
management is a key goal, health plans understand that caregivers must 
also be supported through access to programs specifically designed to 
meet their needs, and health care providers benefit from health plan 
reminders and support of patient care. Disease management programs have 
many of these components: patient education and support, active 
outreach to remind patients of the care they need, support and 
education for caregivers, and reports and reminders to the patients' 
physicians.
Medicare+Choice Plans Offer Innovative Disease Management Programs
    Medicare+Choice has been on the cutting edge of developing 
innovative health care coordination programs. In fact, nearly every 
health plan that participates in the Medicare+Choice program has at 
least one disease management program today, and the average health plan 
has four such programs. A recent AAHP survey, based on responses from 
131 health plans, also found that 97 percent had implemented disease 
management program or chronic care programs for diabetes, 86 percent 
had programs for asthma, and 83 percent had programs for congestive 
heart failure. Health plans are also developing programs for end-stage 
renal disease, depression, and cancer.
    A recent AAHP report about innovations by Medicare+Choice plans 
outlines dozens of examples of the many programs health plans are 
implementing on behalf of Medicare+Choice enrollees:

     LPacifiCare is improving health care for patients with 
congestive heart failure through a program that makes sure they are on 
the correct medications and helps enrollees make lifestyle changes 
involving weight management, diet, exercise, and smoking cessation. 
This program also helps physicians provide care consistent with 
evidence-based guidelines by sharing information such as a list of 
congestive heart failure patients who may not be asking for ACE 
inhibitors that could stabilize their cardiac conditions.
     LHarvard Pilgrim Health Care has implemented a disease 
management program that uses a combination of strategies--patient 
education, intensive interventions for high-risk enrollees that 
includes phone calls from nurse practitioners and mailings to 
beneficiaries, sharing of best practices, and community outreach--to 
improve clinical outcomes of care for Medicare+Choice enrollees who 
have diabetes.
     LA disease management program developed by Geisinger 
Health Plan is lowering blood pressure readings for Medicare+Choice 
enrollees by distributing quarterly newsletters on blood pressure 
control and by involving nurses in educating seniors who have 
hypertension, in one-on-one and group sessions, and lifestyle 
modifications and medication management.
     LAnother Geisinger Health Plan program, recently featured 
on National Public Radio, provides reminders to patients with diabetes 
to visit their primary care physicians and interventions from nurse 
practitioners that help them maintain healthy blood sugar readings.
     LA Care CoordinationSM program implemented by 
UnitedHealthcare allows members to work directly with their physician 
to determine the best way to coordinate their own health care needs. 
Care Coordination is designed to make it easier to get care while 
identifying and addressing gaps in care. It encompasses hospital 
admission counseling, health education, prevention and reminder 
programs, inpatient care advocacy, phone calls to high-risk members 
post-hospitalization, identification and support programs for members 
with complex and chronic illnesses and long-term assessment and 
education programs to support members with asthma, cardiovascular 
disease and diabetes.
     LFallon Community Health Plan is improving the clinical 
and functional status of Medicare+Choice enrollees who have congestive 
heart failure through a program that includes educational seminars led 
by pharmacists and nutritionists and one-on-one discussion between care 
managers and patients. Chronic conditions require patients to take 
medication even when they are feeling well. One important aspect of 
disease management programs is the reinforcing of the need to stay on 
these medications and to ask about side effects that could cause 
patients to stop taking them.
     LIn the early 1980's, Group Health partnered with the 
University of Washington to examine key determinants of seniors' health 
and found that regular exercise and social interaction were the two 
most important factors. Since then, other studies have validated their 
findings. There is no segment of the population for whom exercise is 
not important. Whether an individual is 65 or 95, whether they are 
already physically active or restricted to wheelchairs, whether they 
are healthy or have painful crippling conditions, exercise can make a 
difference. With this in mind, Group Health set out to bring the 
benefits of exercise to individuals who have disabilities or serious, 
chronic medical conditions such as heart disease, chronic obstructive 
pulmonary disease (COPD), arthritis, diabetes, and depression.
     LAetna U.S. Healthcare has launched a program to educate 
Medicare+Choice enrollees and their doctors about the potential for 
dangerous drug interactions and adverse events relating to the use of 
multiple medications.
     LKaiser Permanente Northwest has implemented a program to 
improve the healing process and the quality of life for immobile, frail 
elderly Medicare+Choice enrollees who are at high risk for developing 
chronic wounds such as pressure ulcers.

    In recognition of the value of disease management programs for 
congestive heart failure (CHF), CMS has implemented a program that 
provides ``Extra payment in Recognition of the Costs of Successful 
Outpatient CHF Care.'' Under this program, qualifying Medicare+Choice 
organizations that meet CMS performance criteria could receive extra 
payments for enrollees with CHF who were not hospitalized due to 
effective management of their disease. AAHP supports this program and 
recommends that CMS consider similar programs for other disease states.
Conclusion
    AAHP appreciates this opportunity to submit written testimony and 
thanks the Subcommittee for considering this important issue. The main 
goal of organized disease management is to help patients continue or 
improve their current level of functioning and reduce the risk of 
preventable disability. For Medicare+Choice beneficiaries, these 
patient-centered programs offer efficient and supportive ways to learn 
more about their illnesses, understand treatment options, and access 
services. These programs have also demonstrated effectiveness in 
helping enrollees with behavioral health conditions such as depressive 
disorders that are often overlooked in the older adult population. In 
general, the management of chronic disease requires the knowledge of 
what needs to be done and means of identifying when there are gaps. 
Since the Medicare benefit is designed to pay for services delivered, 
not monitoring for services that are missed, the programs include many 
activities that are not covered under the traditional Medicare benefit. 
These services include patient education, calls from nurse case 
managers to remind patients of optimal care, phone calls from the 
health plan to remind patients to keep their appointments and to have 
the screening necessary to avoid complications, education of 
caregivers, and reminders and reports to physicians about the status of 
their patients and the services they have received or missed.
    Ideally, all Medicare beneficiaries should have access to these 
services. However, in the current Medicare FFS system, coverage for 
benefits to help those with chronic conditions, such as prescription 
drugs, extended nursing home or home health services, are not provided. 
In addition, the traditional Medicare FFS program does not adequately 
address the needs of those with chronic conditions. In fact, the 
traditional Medicare FFS system does not historically promote disease 
management but instead is based on treatment goals to improve or cure a 
condition. These aims are in contrast to the treatment goals for those 
individuals with chronic conditions, which are to maintain the ability 
to function and/or to prevent additional deterioration. Medicare+Choice 
programs have demonstrated that disease state management programs are 
an important component of a comprehensive, integrated health care 
benefit.
    The future success of these innovative disease management programs 
offered by Medicare+Choice plans depends on the long-term stability of 
the Medicare+Choice program. As effective as Medicare+Choice plans are 
at using disease management strategies to improve health care quality 
for Medicare beneficiaries, we cannot succeed without adequate funding 
and a sensible regulatory environment. The current system has forced 
many plans to make difficult decisions regarding their participation in 
the Medicare+Choice program. Regrettably, this loss of choices means 
that fewer Medicare beneficiaries have access to the high quality 
health care services that are delivered through the disease management 
programs that Medicare+Choice plans are implementing.

                                 
    Statement of the American Association for Homecare, Alexandria, 
                                Virginia
    The American Association for Homecare (AAHomecare) would like to 
take this opportunity to thank the Ways and Means Health Subcommittee, 
Chairwoman Johnson, and Ranking Member Stark for their continued 
involvement in Medicare Regulatory Reform. AAHomecare is a national 
association whose members represents a continuum of home healthcare 
including suppliers of durable medical equipment (DME), orthotics and 
prosthetics, home health agencies (HHAs) and suppliers of re/hab and 
assistive technology. As a representative of both DME suppliers and 
HHAs, AAHomecare supports the Subcommittee's effort to improve the 
regulatory, appeals and contracting processes under the Medicare 
program. However, we would like to take this opportunity to express 
some of our concerns regarding specific provisions in H.R. 3391, which 
we believe may affect a provider's or supplier's due process rights.
CORRECTION OF MINOR ERRORS AND OMISSIONS
    H.R. 3391 establishes a process for correcting minor errors and 
omissions on claims without requiring the provider or supplier to go 
through the expense of an appeals process. Currently, most claims are 
denied because the claims failed to comply with one or two technical 
requirements. For instance, a provider or supplier may have failed to 
secure the physician's signature on all verbal orders prior to billing, 
or may have failed to include any minor treatment changes. These 
omissions or errors are easily correctible, but because supplier or 
provider are required to appeal claims, payment can be delayed for up 
to a year. This can put a substantial amount of financial stress on a 
provider or supplier and can severely interfere with their capacity to 
continue their business operation.
    AAHomecare strongly supports the Subcommittee's position that 
providers and suppliers should not have to undergo an appeal simply 
because of a minor error or omission. By allowing them to correct 
discrepancies in claims submitted to a carrier, without an appeal, the 
Subcommittee is ensuring a more efficient and cost-effective Medicare 
system. Furthermore, this provision is a useful tool in ensuring, not 
only that a provider or supplier will not undergo economic hardship, 
but also that a beneficiary will have continued access to services. We 
urge that any regulatory reform should include a provision such as this 
for correction of minor errors and omission.
NEW EVIDENCE AND ALJ HEARINGS
    While we are supportive of the general intent behind the regulatory 
reform provisions of H.R. 3391, we are extremely concerned by Section 
403(a)(3). Under Section 403(a)(3) a supplier or provider may not 
introduce evidence in an appeal that was not presented at the 
reconsideration hearing conducted by the Qualified Independent 
Contractor (QIC), unless there is good cause which precluded the 
admittance of such evidence before or during reconsideration.
    The Centers for Medicare and Medicaid Services (CMS) are adopting a 
similar stance to the one potentially created by Section 403(a)(3). On 
November 15, 2002, CMS issued its proposal for the implementation of 
BIPA, which included a provision that would severely curtail evidence 
presented by a supplier or provider during an ALJ hearing. 
Specifically, the proposed rule 405.1019 states submission of any new 
evidence that was not presented to the QIC must be accompanied by a 
written statement. Under this proposed rule the statement must explain 
why the evidence was not previously submitted to the QIC, and the ALJ 
can only admit the evidence if good cause exists.
    Both Section 403(a)(3) and the CMS proposed Section 405.1019 
significantly restrict the opportunity a provider or supplier has to 
offer additional and new evidence during an ALJ hearing, in effect 
requiring a full and early presentation of evidence at the QIC level. 
CMS has based this proposed regulation, on its long held belief that a 
high reversal rate on appeals is due to the presentation of new 
evidence at the ALJ level. While it is true that many claims have been 
reversed at the ALJ level, the decisions to reverse denials are not 
arbitrary but rather are founded on the new evidence substantiating a 
provider's contention that the overpayments are unfounded.
    Furthermore, a provider's and supplier's right to introduce new 
evidence should be safeguarded by any regulatory reform. Often, the ALJ 
will reverse a denial based on evidence that was unavailable to the 
interest party during the QIC review.
    For example, the probe sample data and methodology used by the 
carrier is not available to a supplier or provider before the ALJ 
hearing. A supplier or provider will have to request the probe sampling 
methodology from the carrier after the reconsideration decisions have 
been rendered. Therefore, the interested party does not have immediate 
access to this information from the carrier, but must wait for the 
information to be turned over. Once the interested party received the 
information, he or she would need to consult with experts and expend a 
significant amount of resources to review the sample methodology after 
receiving it, so as to determine whether the contractor's sample lacks 
statistical weight or whether the methodology used was erroneous.
    We strongly urge this Committee to make sure that any regulatory 
reform allows providers and suppliers to introduce evidence of 
erroneous sampling techniques during an ALJ hearing. Many cases that 
reaches the ALJ have been reversed after the interested party presented 
evidence showing that the sampling methodology was biased or that a 
sample was incorrectly taken. In order to maintain due process and 
ensure fairness, a provider or supplier should be allowed to introduce 
this type of evidence.
    Currently, providers and suppliers can provide live testimony and 
may introduce new evidence during an ALJ hearing. They are not required 
to provide good cause or submit a statement by explaining why the 
information was not included. In fact, the ALJs have come to rely on 
provider and supplier testimony as an aid when deciding whether the 
interested party did have a reasonable basis to believe that the claim 
would be covered. This has helped to ensure fairness and due process 
during appeals. Both H.R. 3391 and 67 CFR 405.1019 would prohibit live 
testimony that has repeatedly helped exemplify why the contractors 
denial was incorrect.
    In one case, the fiscal intermediary denied $20,000 in home health 
claims representing an entire year of services for a patient who 
suffered from Multiple Sclerosis (MS). The reason given for the denial 
was that the patient's physician had not prescribed the commonly used 
medicine for MS. The denial stated that the drug Athcar was not 
identified by the Physicians Desk Reference for treatment of MS, 
despite other references that list it as an alternative. In this case 
the physician had prescribed it as an alterative because the patient 
could not afford the commonly prescribed Interferon. At the ALJ level, 
the HHA introduced evidence from the treating physician and relied on 
other authoritative reference to show why the Athcar had been used 
instead of Interferon. The physician was also able to show how the 
alternate medication had been effective. Based on this testimony, the 
ALJ was able to reverse the denial.
    Conversely, H.R. 3391 and 67 CFR 405.1012 would allow contractors 
to present any additional evidence, change the basis of their denial of 
the claims and present additional testimony that they believe is 
pertinent. Under both H.R. 3391 and CMS' proposed rule, contractors 
would be required to provide the ALJ with any additional information 
requested by the ALJ, so as to aid it in understanding the contractor's 
position and helping it formulate its decision. Allowing contractors to 
testify and present new evidence during the appeals process while 
denying the same opportunity to an interested party would severely go 
against due process and fairness. In essence, this would severely 
undermine the position of suppliers and providers because they would 
not be allowed to present evidence to contradict the contractor's new 
arguments, and would not be allowed to adapt their position to reflect 
contractor changes in arguments during an appeal.
    AAHomecare urges the Subcommittee to establish a standard that does 
not limit the type of information presented during an ALJ hearing. We 
recommend that any regulatory reform should allow suppliers and 
providers to present testimony of a treating physician opinions, expert 
opinions, and provider and supplier testimony, as necessary, to the 
ALJ. Furthermore, a supplier or provider should be allowed to present 
evidence which was previously not available, or which at the time was 
not relevant to the claim set forth by the contractor. It is important 
to ensure that regulatory reform legislation should distinguish between 
new evidence that involves readily available clinical documentation 
from the provider or supplier from other Medicare evidence such as 
expert opinion, clarifying treating physician opinions and documentary 
evidence from providers or suppliers that are not directly involved in 
a disputed claim, if due process is to be maintained.
LIMITED USE OF EXTRAPOLATION
    The use of extrapolation can often lead to significant problems for 
both DME suppliers and HHAs. Often the sampling methodology used during 
extrapolation lacks any semblance of statistical validity, which in 
turn can result in a significant expenditure of resources by providers 
and suppliers. Furthermore, the use of extrapolation often results in 
the drastically inflated overpayment. This large inflation will force 
many providers and suppliers to pay hundreds of thousands of dollars, 
and forces some into bankruptcy.
    In one instance, the ALJ ruled in favor of an HHA after throwing 
out the denials as well as finding the extrapolation and the sampling 
methodology used by the physical intermediary as erroneous. While the 
HHA received a favorable verdict, it had suffered irreparable harm, 
leading to its bankruptcy even before the decision was rendered. This 
case is of particular concern, given that the home health agency was 
the only provider in that area for medically complex home health 
patients.
    Currently, the Durable Medical Equipment Regional Carriers (DMERCs) 
also use extrapolation in determining overpayments. Not unlike HHAs, 
DMEs are faced with inflated overpayments that are based on erroneous 
sampling methodology. However, what is particularly disturbing is that 
the DMERCs use extrapolation and base their denials on rules that have 
not come into effect at the time the service was rendered. For these 
reasons, AAHomecare strongly urges that the use of extrapolation and 
sampling methodology should be curtailed.
    AAHomecare believes that H.R. 3391 addresses many of the concerns 
shared both by HHAs and DME suppliers. We support limiting the 
circumstances in which a Medicare contractor can request a provider or 
supplier to produce records or supporting documentations, to those two 
circumstances delineated in Section 405(f)(3):

    1. Lwhere either there is a sustained high level of payment error, 
or
    2. Lwhere documented education intervention has failed in 
correcting the payment error.

    Despite the limited use created by Section 405(f)(4), there is 
still a great room for Medicare contractors to interpret Section 405 
which may lead to unjustified use of extrapolation. Therefore, 
AAHomecare urges that the Subcommittee clearly define the phrase ``high 
level of payment error.'' The Subcommittee needs to provide contractors 
with guidance (preferably detailed written guidelines within this bill) 
as to what constitutes a high payment error. If this term is not 
defined, the contractor could apply his own subjective definition of 
``high level of payment error.'' By clearly defining what constitutes a 
``high level of payment error'' the Subcommittee can prevent the 
inconsistent application of extrapolation by different Medicare 
contractors, as well as by the same contractor when reviewing different 
health supplier or provider claims.
    We would further urge the Subcommittee to add a provision that 
would state that any payment errors will not be deemed to exist where 
the provider can show that there exists some basis in the law to 
support the claim as submitted. In this instance, we feel that it is 
important to create a sense of security amongst providers and 
suppliers, that they can in fact rely on existing laws and regulations 
when submitting a claim. We strongly believe that a supplier or 
provider should not be required to second guess the law, nor be 
penalized for submitting claims based on a reasonable interpretation of 
law. Under such a provision, the Medicare contractor would be allowed 
to deny individual claims, but the provider or supplier could rely on 
law relied on when appealing.
REGULATORY REFORM SHOULD NOT INCLUDE CONSENT SETTLEMENTS
    Section 405(f)(5) of H.R. 3391 grants to the Secretary the power to 
settle a projected payment with a provider or supplier by the use of a 
consent settlement. Before offering a consent settlement, the Secretary 
is required to inform the suppliers or providers of the contractors 
finding of overpayment. The supplier or provider is then given the 
opportunity to either accept the consent settlement or undergo 
statistical valid random sampling.
    Routinely, Medicare contractors have used consent settlement 
agreements to strong-arm a provider into waiving their right to appeal, 
despite their honest and usually well-founded belief that the denial 
was an error. Often, a home health provider will settle its claims with 
the contractor, not because it supports the contractor's finding, but 
rather because of the costs they will incur if they fail to accept. 
Providers and suppliers who do not settle will be forced to incur 
greater costs associated with appealing the decision as illustrated in 
the example below.
    In one post payment audit, the fiscal intermediary denied 56% of a 
sample of claims submitted by one small HHA. This percentage was 
extrapolated to a $65,000 overpayment. In this case, the provider 
refused to accept a consent settlement agreement and appealed all 
claims to the ALJ. The ALJ in turn reversed over 95% of the denials. 
Although, the HHA did receive a favorable outcome, it incurred 
substantial costs associated with the appeal over the four years that 
it took from the time of denial to the time of reversal.
    If a provider or supplier chooses not to accept a proffered 
settlement, then the contractor may apply the Statistically Valid 
Random Sample (SVRS). An SVRS examines a larger number of claims, 
usually consisting of 200-400 claims. Such an investigation by its very 
nature is largely disruptive to the operation of home health agencies 
and DME providers, and may force the business to cease all business 
activity. Therefore, it is not surprising that many providers and 
suppliers feel the need to settle, despite their honest belief that the 
initial probe sample findings where inaccurate because of the 
exorbitant costs associated with SVRS.
    AAHomecare urges the Subcommittee to reconsider including consent 
settlements in H.R. 3391 or any other regulatory reform legislation. 
While the Subcommittee has addressed at least one problem associated 
with consent settlements, i.e. limiting the use of extrapolation, we 
believe that the detrimental effects associated with consent agreements 
outweigh any potential benefits. If the Subcommittee allows the use of 
consent settlements, it will unwittingly provide contractors with a 
tool by which it may strong-arm service providers into settling, even 
if consent settlements are used only in a fraction of reviewed claims. 
Those providers who challenge the sampling methodology may be forced 
into economic hardship associated with a SVRS or a lengthy appeal. The 
Subcommittee may unwittingly place the provider or supplier in a 
position in which it can no longer provider any services. This is of 
particular concern where the home health provider or DME supplier 
provide a specialized type of service in an area.
    AAHomecare further recommends that if the Subcommittee decides to 
include consent settlements in H.R 3391, it should create a provision 
that allows a provider to settle, while still maintaining the right to 
appeal the sample probe methodology used by the provider. A provider or 
supplier should be allowed to appeal the probe method without 
undergoing an SVRS, otherwise they may be subjected to unjust financial 
burdens.
 DEFERRING RECOUPMENT DURING APPEAL
    H.R. 3391 prohibits any recoupment of overpayment until the 
conclusion of the reconsideration hearing. We applaud this 
Subcommittee's continued effort to create an insulating mechanism to 
protect providers from wrongful payment recoveries. Currently, 
providers and suppliers are required to make payment before going forth 
in their appeals process, causing many of these companies to undergo 
substantial financial hardship for a claim where an error exists in the 
overpayment determination.
    While AAHomecare agrees that the Secretary should not be allowed to 
recoup overpayments until the conclusion of a reconsideration hearing, 
we believe that this Subcommittee should further extend this provision 
by limiting recovery until the claim has run its full course throughout 
the appeals process and a final and binding decision has been rendered. 
As Tom Scully testified last year, physicians, providers and suppliers 
should have the same rights taxpayers enjoy. A taxpayer who is audited 
has the right to withhold payment, as long as interest accrues, while 
an appeal is pending. Both suppliers and providers should be entitled 
to the same right throughout their entire appeal process. Instead, HHAs 
and DME suppliers are required to pay the amount after the 
reconsideration hearing, not allowing the party to avail himself of the 
benefits of an ALJ hearing.
    AAHomecare fully appreciates that a substantial controversy exists 
concerning further delaying recoupment beyond reconsideration. However, 
we base this recommendation on two well-founded premises. First, 
recoupment of an extrapolated amount often results in eliminating an 
opportunity for a provider or supplier to seek an appeal. If a provider 
or supplier is forced to make payment of potentially hundreds of 
thousands of dollars, they will undergo a severe financial burden if 
they continue to incur the cost associated with an appeal. Second, it 
is administratively difficult to recompute the amount of the 
extrapolated overpayment after each level of appeal where some of the 
sample claims are usually reversed.
    We also recommend that any extrapolation should be dropped if the 
provider or supplier obtains a reversal of 10% or more of the sample 
claim denial on appeal. In such a case, the sample denials would seem 
to not be a statistically valid representation of denied claims in the 
universe of claims. If the overpayment represents more than 10% of the 
provider or supplier revenue, we believe that the interested party 
should be able to repay the amount during a three-year period. By this 
means, the Subcommittee could ensure that companies will not suffer 
financial hardship that will cause the HHA or DME supplier to either 
cut back on the services it provides or file for bankruptcy.
    AAHomecare would further recommend that an additional provision be 
added to H.R. 3391. We believe that the Subcommittee should establish a 
provision that would protect home health providers where overpayment 
relates to an error in the administration of benefits by Medicare 
itself. HHAs are susceptible to unknown amounts of liability due to 
Medicare's own inability to appropriately process Medicare home health 
PPS claim. A year ago, CMS determined that its system failed to make 
the payment adjustment when a patient was admitted to another home 
health agency or readmitted to the same agency within 60 days of 
discharge.
    AAHomecare recommends that the Subcommittee include legislation 
that would limit the ability of CMS to institute retroactive payment 
adjustments on any claims to more than one year previous. Financial 
integrity cannot be maintained by a provider or services who is 
required to carry on an indeterminate amount of financial liability 
from one year to the next.
OASIS:
    As of December 2002, CMS have instituted changes aimed at 
decreasing the burdens associated with the collection of information 
under the Outcome and Assessment Information Set (OASIS). CMS 
eliminated two OASIS collection time point and seventeen data items. 
Thirteen of the seventeen data items consist of demographic 
information, which have been moved to the tracking sheet and should be 
completed by agency office staff.
    AAHomecare supports the implication of OASIS and the reduction of 
paperwork. AAHomecare recommends that certain policy changes should be 
incorporated as soon as possible. We believe that the Subcommittee 
should also instruct the Secretary to request CMS to lengthen the 
definition of ``in patient stay'' from 24 hours to 72 hours. We also 
feel that it is important to instruct the CMS to widen the 
recertification window from 5 days to at least 10 days to ensure 
greater flexibility among for an agency to schedule assessment during 
the patient scheduled visits. Lastly, we urge the Subcommittee to 
instruct the Secretary to take steps to make OASIS electronic program 
specification and the risk adjustment methodology readily available to 
the public and allow the public to submit comments on any program 
specification changes.
GUIDANCE BY SECRETARY OR AGENT
    We strongly support limiting any sanctions on providers or 
suppliers if they reasonably rely on the guidance of Section 102(c) of 
H.R. 3391. Providers and suppliers should not be subject to repayment 
of amounts that they received in reasonable reliance on the guidance 
from the Secretary or an agent of the Secretary.
CONCLUSION
    We appreciate this opportunity to express our concerns and present 
our suggestions to the Subcommittee. We greatly value your continued 
effort on these matters. AAHomecare strongly believes that there is 
much at stake in regulatory reform, and recommend that any legislation 
adopted should maintain due process and fairness. H.R. 3391 is a good 
starting point for Medicare appeal and regulatory reform. We hope that 
these comments and suggestions are helpful and look forward to working 
with you to pass a regulatory reform legislation that will further the 
objective of efficiency and fairness.

                                 
         Statement of American Healthways, Nashville, Tennessee
    American Healthways applauds the Subcommittee for their leadership 
on the issue of disease management. We absolutely concur with Chairman 
Johnson's belief that, ``Medicare beneficiaries with chronic disease 
should benefit from advances in care management and advances in the 
science of medicine.''
    Without question, disease management programs are:

     LEffective in improving and managing patient health;
     LPromoting enhanced patient and physician satisfaction; 
and
     LReducing the costs of care, particularly for those 
suffering from chronic diseases such as diabetes, heart failure, 
cardiac disease, asthma and COPD.

    In fact, peer-reviewed results from American Healthways clearly 
demonstrate that well-conceived disease management programs can deliver 
these outcomes for commercial, Medicare+Choice and Medicare Fee-for-
Service (FFS) populations.
    As the leader in the industry, American Healthways has shown 
statistically significant improvements in patient outcomes while at the 
same time reducing aggregate costs of care--producing first year 
savings in a diabetes program for Medicare FFS patients of 
approximately $800 per patient.\1\ Since 1996, American Healthways' 
aggregate savings for all programs for all customers have been greater 
than $750 million.
---------------------------------------------------------------------------
    \1\ Cap Gemini Ernst & Young Study: Diabetes Care Coordination 
Program Performance Evaluation for FFS Medicare Members with Diabetes, 
2002.
---------------------------------------------------------------------------
    Yet despite this well-documented, empirical evidence, Federal law 
does not provide the majority of Medicare beneficiaries access to 
comprehensive, evidence-based disease management programs. Absent such 
legislation, care for the millions of beneficiaries suffering from 
chronic diseases will continue to be fragmented, and their costs to the 
Medicare Trust Fund will continue to be significantly higher than they 
would otherwise be.
    In the face of new budgetary demands for a comprehensive 
prescription drug benefit as well as much needed modernizations to the 
existing Medicare program, the continued loss of these proven savings 
adversely impacts patients, physicians, and taxpayers. With the onset 
of millions of Baby Boomers into the Medicare program in the near 
future, we must explore and implement responsible alternatives that 
provide the best and most cost-effective care to all our seniors and 
disabled Americans.
    We thank Chairmen Johnson and Thomas for holding today's hearing. 
We look forward to working with Members of Congress and interested 
parties to advance this issue for the benefit of beneficiaries.

                                 
              Statement of the American Heart Association
Heart Disease and Stroke Contribute Significantly to Chronic Illness
    The American Heart Association is dedicated to improving the 
quality of care available to patients suffering from or at risk for 
heart disease, stroke and other cardiovascular diseases. Heart disease 
is the nation's leading cause of death. Stroke is the number three 
killer. Both are leading causes of significant, long-term disability.
    Over 61 million Americans--about 1 in 5--suffer from some form of 
cardiovascular disease, ranging from high blood pressure to myocardial 
infarction, angina pectoris, stroke, congenital heart and vascular 
defects and congestive heart failure. It is expected that heart 
disease, stroke and other cardiovascular diseases will cost the nation 
$351.8 billion in 2003, including $209.3 billion in direct medical 
costs.\1\
---------------------------------------------------------------------------
    \1\ Statistics compiled from the American Heart Association Heart 
Disease and Stroke Statistics--2003 Update.
---------------------------------------------------------------------------
    As Congress considers reform of the Medicare program, the enormous 
burden that chronic diseases present to beneficiaries and to the 
Medicare program must be addressed. According to recent research, 78 
percent of Medicare beneficiaries have at least one chronic illness. 
Almost 32 percent of beneficiaries have four or more chronic diseases, 
and this group drives almost 79 percent of program spending.\2\
---------------------------------------------------------------------------
    \2\ Robert A. Berenson & Jane Horvath, Confronting Barriers to 
Chronic Care Management in Medicare, January 22, 2003, Health Affairs 
online (www.healthaffairs.org).
---------------------------------------------------------------------------
    The American Heart Association applauds the Committee on Ways and 
Means Subcommittee on Health for holding a hearing to examine the 
barriers to chronic care management. Effective ways to better manage 
Medicare beneficiaries with chronic illness must be explored and 
tested. While our testimony focuses on disease management as one 
approach for addressing chronic illness, the Association looks forward 
to continuing to work closely with Members of the Subcommittee to 
address this and other important strategies for managing chronic 
illness.
Disease Management as an Approach to Confronting Chronic Illness
    The growing desire by public and private payers to manage 
individuals with chronic conditions and to contain rising health care 
costs has resulted in a growing interest in disease management 
strategies. This interest is driven in part by the demographics of an 
aging population.
    Disease management has emerged as a potential strategy for 
enhancing the quality of care received by patients suffering from one 
or more chronic conditions. Cardiovascular disease, including 
congestive heart failure and hypertension, are often the focus of 
disease management programs. Given this growing interest in disease 
management, the American Heart Association recently convened a group of 
volunteer experts in cardiovascular disease and disease management to 
study the issue and prepare an in-depth report examining the trend and 
it's potential impact on the quality and cost of health care. The goal 
of the project was to develop core principles for disease management of 
patients with cardiovascular disease. We would be pleased to share 
additional information about our research with Members of the 
Subcommittee.
The American Heart Association Urges Policymakers to Focus on Quality
    After conducting extensive research, the American Heart Association 
established a set of principles to guide its work in disease 
management. We believe that these general principles should be applied 
to disease management programs in both the public and private sectors 
and consistently across disease states and patient populations. 
Although a number of existing disease management programs seek to 
balance cost containment and quality, quality and improved patient 
outcomes must always be the priority.
Principles for Disease Management
    The American Heart Association recommends the following guiding 
principles for disease management:
(1) The main goal of disease management should be to improve the 
        quality of care and patient outcomes.
    Evaluation of disease management programs should be based on more 
than just a reduction in health care expenditures. The emphasis should 
be on the ``value'' of disease management (i.e., the extent to which 
disease management efforts result in better quality for a given 
investment rather than on cost savings alone). Improvements in quality 
of care and patient outcomes should be the primary indicator of 
successful disease management. The use of performance standards in 
assessing quality of care and outcomes is critical in evaluating 
success.
(2) Scientifically derived, evidence-based, consensus-driven peer 
        reviewed guidelines should be the basis of all disease 
        management programs.
    Disease management strategies should be derived when available from 
scientifically-based guidelines such as those written by the American 
Heart Association/American Stroke Association and groups such as the 
American College of Cardiology and the American Academy of Neurology. 
These guidelines represent consensus in the cardiovascular disease and 
stroke communities regarding appropriate treatment and management of 
patients with cardiovascular disease and stroke. Careful attention must 
be given to the appropriate translation of these scientifically based 
guidelines into disease management practices.
(3) Disease management programs should increase adherence to treatment 
        plans based on best available evidence.
    An important focus of disease management should be to influence the 
behavior of providers, patients and other caregivers to better 
understand and adhere to treatment plans that will help improve patient 
outcomes. The targets of such efforts may include a broad community of 
caregivers, e.g., physicians, nurse practitioners, family members and 
community-based organizations. To be meaningful, it is essential that 
such treatment plans be derived from the best available clinical and 
scientific evidence. The evidence and resulting treatment plans should 
be revisited periodically to reflect evolving standards and scientific 
knowledge.
(4) Disease management programs should include consensus-driven 
        performance measures.
    Improved quality of care and outcomes for patients with 
cardiovascular disease and stroke should be the pivotal measurement 
upon which the success of a disease management program is evaluated. To 
measure improved quality of care and outcomes, consensus-based 
performance measures should be used to evaluate a disease management 
program's effectiveness. Performance measures used in evaluating 
disease management programs should be those measures that are developed 
by a broad consensus-driven process such as the National Quality Forum 
and/or others. Ideally, these performance measures should be evidence-
based.
(5) All disease management efforts must include ongoing and 
        scientifically based evaluations, including clinical outcomes.
    Disease management programs have not traditionally undergone 
rigorous scientific evaluation regarding their impact on patient 
outcomes. The true measure of any health intervention is whether 
patients are better off having received the service or care provided. 
This determination requires a meaningful examination of clinical 
outcomes. Frequent scientifically-based evaluations should be included 
as a critical component of any disease management program, and these 
evaluations should allow for continued improvement in the program to 
maximize benefit.
(6) Disease management programs should exist within an integrated and 
        comprehensive system of care, in which the patient-provider 
        relationship is central.
    Disease management services should not substitute for the patient-
provider relationship(s), particularly the physician-patient 
relationship that is critical to the delivery of effective care. 
Instead, disease management programs should be one of several 
strategies employed to support and enhance the patient-provider 
relationship, resulting in an overall improvement in the quality of 
care and coordination of care delivered to patients with cardiovascular 
disease and stroke.
(7) To ensure optimal patient outcomes, disease management programs 
        should address the complexities of medical co-morbidities.
    Many disease management programs are designed to treat single 
disease states. A significant population of patients with chronic 
disease suffers from multiple co-morbidities. Some of the greatest 
challenges in caring for these patients involve the complex 
interactions of these co-morbidities. Disease management programs and 
guideline committees should develop algorithms and management 
strategies to fully address patients with co-morbidities.
(8) Disease management programs should be developed to address members 
        of the under-served or vulnerable populations.
    Currently, most disease management programs arise from employer-
based, private health plans. Although a number of states have begun 
using disease management approaches within their Medicaid programs, in 
general, most disease management programs serve an employed, insured 
and healthier population. Disease management programs should be 
developed to incorporate or to specifically address the unique 
challenges of the under-served and vulnerable populations.
(9) Organizations involved in disease management should scrupulously 
        address and avoid potential conflicts of interest.
    Organizations that provide disease management services should act 
in the best interest of the patient and avoid conflicts of interest. 
The primary goal of disease management organizations should be to 
improve patient outcomes. Efforts to achieve secondary goals such as 
product marketing or product sales, should not adversely affect the 
primary goal of improving patient outcomes. To the extent any conflict 
of interest arises that may compromise the primary goal of improving 
patient outcomes, it should not be pursued.
The American Heart Association Provides Leadership and Consensus
    It is fitting that the American Heart Association adds its voice to 
the many that are currently speaking to the issue of disease 
management. The American Heart Association is at the forefront of 
investigating ways to improve the quality of care for patients with 
cardiovascular disease and stroke. We have developed and are currently 
operating a number of patient-centered programs. Our scientific and 
programmatic efforts have increased and evolved with the dynamic 
advances made in cardiovascular and stroke care. Importantly, the 
American Heart Association represents not just providers but all 
stakeholders in cardiovascular and stroke care--physicians, nurses, 
emergency medical support personnel and others. Most significantly, the 
American Heart Association represents the patient.
Conclusion
    It is critical to ensure that disease management programs are 
driven by the clinical needs of patients rather than by cost 
containment or financial profit alone. While we recognize the need for 
cost containment and careful allocation of health care resources, 
improving quality of care must be the primary goal of any disease 
management program. While disease management has the potential to have 
a profound affect on patients with chronic illness, additional study is 
needed to better document the impact on quality of care and cost 
containment. The Association recommends:

     LDisease management programs in the public and private 
sector adhere to the principles delineated above.
     LBefore adopting disease management for all Medicare and 
Medicaid beneficiaries, the Association recommends that Congress 
continue to evaluate disease management techniques until objective 
outcomes research has demonstated efficacy. Continued evaluation of 
disease management programs is critical.

    The American Heart Association appreciates the opportunity to 
provide these comments to the Committee on Ways & Means Subcommittee on 
Health on this timely and important issue, and we look forward to 
working with the Subcommittee as it continues to consider the 
appropriate integration of disease management into the Medicare 
program.

                                 
          Statement of the American Pharmaceutical Association
    The American Pharmaceutical Association (APhA) appreciates the 
opportunity to provide our perspective on the important topic of 
chronic disease management. APhA is the national professional society 
of pharmacists, representing approximately 50,000 pharmacists. Chronic 
care management, best provided through collaboration between 
physicians, pharmacists, and other health care providers is valuable 
for the most important person in the health care system: the patient. 
It is an appropriate step towards preventing the long-term human and 
financial costs associated with chronic disease.
    Considerable evidence demonstrates that improved patient health and 
cost savings are achieved when pharmacists play an integral role in the 
health care team. A 1990 study by the HHS Inspector General concludes, 
``there is strong evidence that clinical pharmacy services add value to 
patient care and reduce healthcare utilization costs. . . . Such value 
includes not only improvements in clinical outcomes and enhanced 
patient compliance, but also reductions in health care utilization 
costs associated with adverse drug reactions.'' Clearly, there is much 
to be gained with implementing chronic care management that includes 
pharmacist-provided medication therapy management services.
    Disease management represents the evolution of health care and its 
response to the onset of chronic diseases--which until pharmaceuticals 
became more prevalent were often deadly diseases. Little else provides 
as great a return on investment as disease management when dealing with 
the chronic care population. A recent analysis using 1999 Medicare 
claims data showed that approximately 78 percent of Medicare 
beneficiaries have at least one chronic disease; almost 32 percent have 
four or more, and these patients drive almost 79 percent of program 
spending.\1\ Clearly, it is necessary for us to address the situation 
before it becomes a crisis.
---------------------------------------------------------------------------
    \1\ R.A. Berenson and J. Horvath, ``The Clinical Characteristics of 
Medicare Beneficiaries and Implications for Medicare Reform.''
---------------------------------------------------------------------------
    We are encouraged by the Administration's attention to the issue, 
particularly the recent announcement of the Centers for Medicare & 
Medicaid (CMS) new demonstration projects. Clearly they have recognized 
that disease management allows health care practitioners to provide 
focused, coordinated care resulting in better patient outcomes while 
using our scarce health care resources more efficiently. Medication 
therapy management is a critical component of any successful chronic 
care management program and encourage the Committee to consider 
including authorization and payment for this pharmacist-provided care 
in any of their proposals.
An Evolution to ``Self-Care''
    Patients have become ``self-managers'' of their care, as they 
function in outpatient settings, including their homes. The greater 
number of diseases being treated with pharmaceuticals combined with the 
higher level of medication complexities demands that we partner with 
patients to manage their care. Assisting patients with managing their 
chronic diseases has been proven to result in a positive impact. 
Pharmacists--the medication experts--are the best equipped and most 
appropriate health care providers to manage the pharmacy component of 
chronic care management.
    Others support this concept of self-care and the need for non-
physician provider involvement, including the Journal of the American 
Medical Association which reported, ``Under a system designed for acute 
rather than chronic care, patients are not adequately taught to care 
for their own illnesses. Visits are brief and little planning takes 
place to ensure that acute and chronic needs are addressed. Lacking is 
a division of labor that would allow non-physician personnel to take 
greater responsibility in chronic care management. . . . For chronic 
conditions, patients themselves become the principal caregivers.'' \2\
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    \2\ JAMA, October 9, 2002--Vol. 288, No. 14.
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No Better ``ROI''
    Challenges in chronic care management include making the best use 
of medications, including helping patients to comply with medical 
regimens. The inclusion of pharmacists in chronic care management 
programs yields a significant return on investment. Studies showcase 
the positive impact pharmacists have on managing the chronic conditions 
associated with stroke, asthma, high cholesterol, and diabetes. The 
data calls for the inclusion of pharmacists as a participating member 
of the health care team when developing chronic disease management 
programs.
    One of the most successful chronic care management programs is 
Project ImPACT: Hyperlipidemia. Project ImPACT was a two-year, 
community-based demonstration project of the America Pharmaceutical 
Association Foundation \3\ documenting the contributions pharmacists 
make in reducing the risk of heart attack and stroke for patients with 
high cholesterol. Project ImPACT involved 397 patients, 26 pharmacy 
practice sites in 12 States, and over 60 pharmacists and 180 
physicians. Once patients were enrolled, the process of collaborative 
care included the pharmacist taking blood samples, conducting follow-up 
visits, and informing physicians about the patient's progress.
---------------------------------------------------------------------------
    \3\ Funded by Merck & Co. Inc.
---------------------------------------------------------------------------
    The study showed that the risk for heart attack is reduced by one-
third when patients, pharmacists, and physicians collaborate. 
Specifically, 90% of the patients stayed on their medications, a 
compliance rate of two to four times better than the average 40% 
reported in the literature for similar studies. Project ImPACT shows 
that pharmacists, working together with patients and their physicians, 
can save lives and make a significant contribution in reducing the 
annual expenditure of $100 billion spent on treating coronary artery 
disease.
Lack of Payment: A Barrier to Chronic Care Management in Medicare
    While there are several components to a good chronic care 
management program, management of the patient's drug regime is at the 
heart of any program. Pharmacists are the critical member of the health 
care team needed to manage this care. As non-physician providers, 
however, pharmacists face an uphill battle when trying to provide these 
services to the patients they serve. Currently, the Social Security 
Act's definition of ``covered services'' does not include medication 
therapy management services of pharmacists. Lack of payment by Medicare 
is a key obstacle in implementing these cost-saving, life-enhancing 
programs.
    This lack of payment reflects the practice of pharmacy and 
construct of Medicare when the program was created. Obviously, health 
care, including the practice of pharmacy, has evolved since the 
creation of Medicare. Amending Medicare to include medication therapy 
management services provided by pharmacists would better reflect 
pharmacists' integral part of the health care team. Without this 
change, the most well-intentioned programs may never materialize due to 
lack of compensation. Payment for the provided services, in addition to 
the drug product, is critical to any program's success.
    All Medicare beneficiaries should receive the attention they need 
to avoid medication-related complications. Drug therapy management goes 
far beyond the pharmacists' traditional dispensing services, with 
pharmacists working collaboratively with physicians to match therapies 
to patients' unique needs, to streamline multiple drug regimens, or to 
monitor patient response and advise physicians on changes in dosage, 
medicine, or delivery method.
    If we were to design Medicare today, it is highly unlikely that we 
would pay for the services necessary to diagnose a patient's disease 
but not cover the treatment, both the product and the services provided 
by practitioners, necessary to address the disease. We encourage the 
Committee to consider paying for these pharmacist-provided medication 
management therapy services. Such a simple step would make significant 
inroad in addressing these preventable, costly health problems.

                                 
    Statement of the American Society of Health-System Pharmacists, 
                           Bethesda, Maryland
    The American Society of Health-System Pharmacists (ASHP) is pleased 
to submit this statement for the record of the Subcommittee on Health's 
hearing on eliminating barriers to chronic care management in Medicare.
    ASHP is the 30,000-member national professional association that 
represents pharmacists who practice in hospitals, long-term care 
facilities, home care, hospice, health maintenance organizations, and 
other components of health care systems. ASHP believes that the mission 
of pharmacists is to help people make the best use of medicines. 
Assisting pharmacists in fulfilling this mission is ASHP's primary 
objective.
    Pharmacist medication therapy management services are important to 
improving patient care, particularly for high-risk patients with 
chronic conditions or taking multiple medications. ASHP facilitates 
pharmacists in this role by offering educational programming and 
clinical information to assist pharmacists in creating an environment 
in which medication therapy management services can be fully utilized. 
ASHP promotes and encourages pharmacists to complete postgraduate 
residency training and to seek board certification in specialty 
practice. ASHP also advocates that state legislators and licensing 
boards update their pharmacy practice acts and regulations to 
explicitly authorize pharmacists to work in a collaborative 
relationship with physicians and others on the health care team to 
improve medication use. Currently, thirty-nine states, the Indian 
Health Service, the Department of Veterans Affairs, and other federal 
facilities authorize pharmacists to provide medication therapy 
management services.
    The Medicare program does not recognize nor compensate pharmacists 
for providing these services. ASHP, as part of a coalition including 
six national pharmacist organizations, is seeking to amend Medicare 
statutes to include pharmacists as providers of medication therapy 
management services. We firmly believe this will eliminate an important 
barrier in the Medicare program to improved chronic care management.
Pharmacists Have an Integral Role to Play in Any Successful Chronic 
        Care Management Program
    Health care in the United States, particularly chronic care, relies 
extensively on a growing array of complex medications. In fact, the 
average Medicare beneficiary fills almost 20 prescriptions each year. 
Beneficiaries with chronic conditions average more than 26 
prescriptions a year.
    Because medications are a significant component of most treatment 
strategies, pharmacists must be involved in all stages of planning and 
implementing disease management and/or case management programs. The 
entire health care team, including patients, physicians, nurses, and 
other practitioners, should have access to the pharmacist, the health 
care professional with specialized academic and professional training 
focused most extensively on pharmacotherapeutics and medication therapy 
management.
    Pharmacists are experts in drug therapy utilization and management. 
Working closely and collaboratively with physicians, the pharmacist can 
serve as a trusted counselor to help streamline drug therapies 
prescribed by a number of different specialists and match effective 
therapies with patients' unique needs. The pharmacist can also play a 
vital role in educating patients about their medications and the 
condition for which they are prescribed, completely reviewing the 
patient's medication history, monitoring the patient's drug therapy 
over time, screening for adverse effects, and monitoring for patient 
compliance.
    These services are already being provided on a widespread basis for 
a number of chronic conditions, including asthma, cardiovascular 
disease, depressive disorders, diabetes, and pain. It is important to 
point out however, that 32 percent of Medicare beneficiaries have four 
or more chronic conditions. Thus, a more comprehensive approach to 
caring for patients is often needed. Pharmacists have a unique 
expertise that allows them to focus on a patient's overall drug regimen 
rather than on any one disease state.
    Over the past two decades, ASHP has seen pharmacists become 
increasingly involved in improving patient care through the provision 
of medication therapy management services. This is due in part to the 
growth in managed care organizations that have a financial incentive to 
reduce the frequency of expensive and largely preventable medication-
related complications. Under managed care programs, pharmacists have 
expanded their function to include reviewing drug therapies for 
appropriateness, monitoring patients' responses to therapy, and 
counseling patients about compliance, potential drug interactions, and 
other matters. Many plans have even moved to support specialized 
pharmacist-run clinics for patients with chronic diseases like 
hypertension, asthma, and diabetes.
    ASHP's 2001 national survey of the ambulatory care responsibilities 
of pharmacists in managed care and integrated health systems confirms 
that there has been a dramatic rise in the number of practice sites at 
which pharmacists provide this type of care, jumping from 38% to 69% of 
those surveyed from 1999 to 2001. With the continued growth of 
medication use and the focus on improving therapy while controlling 
health care spending, this number is expected to continue to grow.
Research Demonstrates That Integrating Pharmacists into the Health Care 
        Team Improves Care, Reduces Health Care Spending
    Drug-related morbidity and mortality are significant problems in 
the United States. The 1999 Institute of Medicine report, ``To Err is 
Human: Building a Safer Health System,'' noted that medication-related 
complications are a leading cause of death in the United States. A 
study published in the March/April 2001 edition of the Journal of 
American Pharmaceutical Association also reported that medication-
related complications among ambulatory patients cost the United States 
an estimated $177.4 billion in 2000, a number that has more than 
doubled since last studied in 1995.
    According to the 1999 IOM report, ``[b]ecause of the immense 
variety and complexity of medications now available, it is impossible 
for nurses or doctors to keep up with all of the information required 
for safe medication use. The pharmacist has become an essential 
resource . . . and thus access to his or her expertise must be possible 
at all times.''
    Pharmacist involvement on the health care team helps to avoid 
unnecessary or counter productive treatments and streamlines the 
overall drug regimen to improve patients' quality of life. In addition, 
pharmacists help avoid medication-related complications that result in 
unnecessary physician office and emergency room visits, and therefore 
increased health care spending. A study in the March/April 2001 edition 
of the Journal of the American Pharmaceutical Association demonstrates 
that for every $1 spent on prescription drugs, $1.60 is currently spent 
correcting problems associated with prescription drug use. Including 
pharmacists on the health care team represents a meaningful response to 
this expensive problem.
    As noted previously, many managed care programs and other private 
payers have recognized this benefit and have begun to utilize 
pharmacists in this role. This includes the city of Asheville, NC, 
which offered certain disease state management and medication therapy 
management services to city employees and found that these services 
decreased cost, improved care, and improved work absentee rates.\1\
---------------------------------------------------------------------------
    \1\ The Asheville Project. Pharmacy Times. Romaine Pierson 
Publishers, Inc. Westbury: NY. October 1998. Updated, Asheville Project 
Continues to Produce Positive Results. America's Pharmacist. May 
2000:43-44.
---------------------------------------------------------------------------
    Several State Medicaid programs and demonstration projects have 
also designed case management programs that utilize pharmacist 
medication therapy management services. For example, the Iowa Medicaid 
program designed a benefit to allow physicians and pharmacists to work 
together to closely scrutinize the total drug regimens of their most 
complex patients, those taking at least four medications and with at 
least one of twelve disease states. Eligible patients who participated 
in the program received an initial assessment by the pharmacist who 
then made written recommendations to be reviewed by the patient's 
physician. The pharmacist then worked with the patient to resolve any 
problems and provide follow-up assessments. The December 2002 final 
report of the Iowa Medicaid Pharmaceutical Case Management Program 
found that the program served to significantly improve medication 
safety and did not result in any increased costs to the Medicaid 
program.\2\ This suggests that payment for professional patient care 
services was offset by reductions in emergency room and outpatient 
facility utilization.
---------------------------------------------------------------------------
    \2\ PCM Evaluation Team from the University of Iowa Colleges of 
Public Health, Pharmacy, and Medicine, ``Iowa Medicaid Pharmaceutical 
Case Management: Report of the Program Evaluation.'' As posted on the 
Iowa Pharmacy Association's website, www.iarx.com, on 02/25/2003.
---------------------------------------------------------------------------
    The report notes:

     LPharmacists detected 2.6 medication-related problems per 
patient.
     LThe most common recommendation (52%) made by pharmacists 
was to start a new medication, indicating that many patients have 
untreated conditions.
     LPharmacists also recommended discontinuation of 
medications 33% of the time.
     LPhysicians and pharmacists responding to the survey 
agreed that inter-professional discussions led to better quality of 
care, better health outcomes and increased continuity of care.

    The medical literature overwhelmingly recognizes and supports the 
value of including pharmacists on the health care team as means to 
improve patient care and control health care spending.
The Current System is a Barrier to the Role Pharmacists Play in Chronic 
        Care
    Some third-party payers are heeding the medical literature and 
covering pharmacist participation on the health care team. However, the 
Medicare program currently does not recognize nor compensate 
pharmacists for providing medication therapy management services. Thus 
access to pharmacist medication therapy management services remains 
inconsistent among different patient populations, with our nation's 
most ``high-risk patients,'' Medicare beneficiaries, having 
significantly limited access to these services.
    In order to ensure access to pharmacist medication therapy 
management services, Congress should amend Medicare Part B to recognize 
pharmacists as providers of service in a similar manner as nurse 
practitioners, physician assistants, registered dieticians, and other 
non-physician providers are recognized.
    Six national pharmacy organizations, the Academy of Managed Care 
Pharmacy, American College of Clinical Pharmacy, American 
Pharmaceutical Association, American Society of Consultant Pharmacists, 
American Society of Health-System Pharmacists, and the College of 
Psychiatric and Neurologic Pharmacists, have created the Pharmacist 
Provider Coalition to promote legislation to recognize pharmacist as 
providers in the Medicare program. Legislation was introduced in the 
House in the 107th Congress, H.R. 2799, the Medicare Pharmacist 
Services Coverage Act, and is expected to be introduced again soon in 
the 108th Congress.
    In an effort to eliminate a significant barrier to chronic care 
management, ASHP strongly urges this Subcommittee to pass legislation 
that would ensure Medicare beneficiaries have access to pharmacist 
medication therapy management services.

                                 
    Statement of Michael Matthews, Chief Executive Officer, Central 
           Virginia Health Network, L.C., Richmond, Virginia
    Millions of Medicare patients suffer from multiple chronic 
illnesses that affect the quality of their lives and, as we well know, 
drive up healthcare spending. These individuals require complex care to 
address a variety of needs, and those with the most severe illnesses 
account for the greatest spending. Nearly two-thirds of Medicare costs 
are spent on beneficiaries with five or more chronic conditions.\1\ 
Nationally, payers incurred about $510 billion in medical costs in 
2000,\2\ and Congressional Budget Office testimony given last September 
before the Special Committee on Aging indicates that in 1997, almost 90 
percent of all Medicare costs stemmed from the costliest 25 percent of 
Medicare patients.\3\
---------------------------------------------------------------------------
    \1\ Berenson and Horvath. ``Confronting the Barriers to Chronic 
Care Management in Medicare.'' Health Affairs, January 22, 2003.
    \2\ Baker G. ``Integrating Technology and Disease Management--The 
Challenges.'' Healthplan Magazine, September/October 2002, Vol. 43, No. 
5.
    \3\ Crippen/Congressional Budget Office. ``Disease Management in 
Medicare: Data Analysis and Benefit Design Issues.'' Testimony given 
September 19, 2002, before the Senate Special Committee on Aging.
---------------------------------------------------------------------------
    These patients include people like a 77-year-old man with type 2 
diabetes whose health has improved significantly since he enrolled on 
September 13, 2002, in a care management program we offer at CenVaNet 
(Central Virginia Health Network, L.C.), an integrated delivery system 
comprised of 10 not-for-profit hospitals and 900 community-based 
physicians. Like many Medicare patients, this man was unable to control 
his diabetes on his own, and his high blood sugar levels made him feel 
fatigued.
    By coaching this elderly man on the phone, through mailings and 
even during three personal visits to the man's home, our nurse care 
managers helped him learn to take an active role in better managing his 
disease. Our care managers also coordinated with his doctors to adjust 
his insulin dosage appropriately and schedule the tests he needed. Such 
proactive intervention is possible with the help of a user-friendly 
software platform that helps care managers identify potential problems 
and direct patients to appropriate healthcare providers, while 
providing evidence-based national treatment guidelines, medical 
information and other resources.
    Since enrolling in our program, this particular patient has seen 
some significant changes. He now exercises and monitors his blood sugar 
levels every day, follows diet recommendations and takes his medicine 
as instructed by his physician. Importantly, his blood sugar levels 
also have improved, making him less likely to end up in the emergency 
room or be hospitalized, thus avoiding costly health complications in 
the future.
    This man is not alone. CenVaNet has seven care managers (registered 
nurses and social workers), each treating between 50 and 70 patients, 
who provide in-home, telephonic and online care management focusing on 
four chronic diseases common in the Medicare population: congestive 
heart failure, chronic obstructive pulmonary disease, diabetes and 
asthma.
    Our program is one of 16 sites nationwide participating in the 
Medicare Coordinated Care Demonstration (MCCD) project sponsored by the 
Centers for Medicare and Medicaid Services to evaluate the 
effectiveness and cost savings of such care management programs. We 
have enrolled more than 1,000 patients in this project, with about 460 
patients actively receiving care management services (vs. those in the 
control group). Our successful recruitment effort has been possible 
because of the support of leading physician groups in our area.
Barriers to the Care of Chronically Ill Medicare Patients
    Our care management program at CenVaNet seeks to address the four 
main barriers to treating chronically ill Medicare patients:

    1. LLack of prescription drug coverage for Medicare patients--Many 
Medicare patients cannot afford their medicines, so they simply stop 
taking them. Scientific literature indicates that patient behaviors, 
including whether they comply with their doctors' instructions, have a 
real effect on clinical outcomes. In fact, the American Heart 
Association testimony given at this hearing stated that ``An important 
focus of disease management should be to influence the behavior of 
providers, patients and other caregivers to better understand and 
adhere to treatment plans that will help improve patient outcomes.''

    2. LPoor health literacy--People with multiple conditions may not 
be well informed about their diseases, and often are prescribed a 
variety of medicines, each with its own instructions on when and how to 
take it. When patients do not understand these instructions, they may 
take their medicines or follow other treatments incorrectly, leading to 
additional health problems. Unfortunately, the people who most need to 
understand their conditions and treatments tend to be those with the 
greatest deficits in knowledge, which leads to poor health status in 
these already at-risk patients.

    3. LMultiple data sources, which result in fragmented care--Our 
current healthcare system segments information about a patient's health 
into separate ``silos'' (hospitals, group practices, pharmacies, home 
care companies) that rarely have the capability of exchanging data with 
each other. Patients with multiple chronic conditions can visit several 
different physicians, and none will have a record of the medications 
the others prescribed. To provide more thorough care, medical 
professionals must coordinate their efforts, yet in many cases their 
information systems are not compatible and do not allow for such 
integration.

    4. LLack of reimbursement for the care coordination needed--
Medicare does not reimburse for the vital services of care managers, 
who address these problems in the healthcare system by educating 
patients and facilitating the physician/patient relationship. Nor does 
Medicare reimburse for the purchase of software platforms that 
integrate the different aspects of a patient's care.

    This last barrier is a significant one. Proper reimbursement for 
care management services and technology may encourage more health 
organizations to take on the costly, complicated process of 
implementing a robust care management program, which involves:

     LDetermining which patients have a particular disease, and 
of those, which patients are most at risk for complications and may 
benefit most from appropriate intervention
     LRecruiting and enrolling patients, which takes 
considerable time and effort
     LPerforming interventions, such as educating patients and 
coordinating care
     LObtaining care management support, such as a software 
platform, which requires:

       LPurchasing the technology
       LTraining staff on its use
       LImplementing the system
       LSupplying ongoing maintenance and support

     LEnsuring patient retention in the program
     LMeasuring and analyzing clinical, financial and 
behavioral outcomes
     LEvaluating the program and making necessary adjustments

    As the eHealth Initiative stated at this hearing, there is a need 
for the Medicare payment system to reimburse physician services for 
care coordination.
CenVaNet has Made Progress Overcoming These Barriers
    Although there still are challenges to overcome, particularly in 
the area of reimbursement, CenVaNet has made significant progress, as 
our success with the 77-year-old diabetic man described above shows.
    While Congress debates the issue of a Medicare prescription drug 
benefit, CenVaNet has taken a creative approach to pursuing other 
funding sources for our patients' prescription medicines. We educate 
patients about prescription drug savings cards and encourage providers 
to prescribe less costly medications, knowing that patients will be 
more likely to take medicines they can afford. We also are exploring 
grant funding opportunities.
    Additionally, our care management program addresses health literacy 
through in-depth patient education efforts. We have sevencare managers 
dedicated to the Medicare demonstration project, and they offer not 
only telephone counseling, but also actual in-home visits with patients 
to provide more individualized care.
    To supplement our care managers' patient education efforts, we 
offer other resources for patients to learn about their health, such as 
printed and electronic materials. Through the care management software 
technology developed by Pfizer Health Solutions Inc (PHS), the care 
management subsidiary of Pfizer Inc, our patients can take advantage of 
a vast library of reliable health information and access patient tools 
designed to improve their care and increase their knowledge of their 
chronic conditions.
    This technology also addresses the problem of fragmentation of 
information. Care managers, physicians and patients are linked together 
by using the same software, increasing communication and improving the 
quality of care. We will further strengthen this connectivity by 2004, 
when automated interfaces will allow hospital labs, home care companies 
and others involved in a patient's care to download information 
directly into our software platform. This will eliminate the need for 
patients to recall which diagnostic tests they had performed and why. 
All of these capabilities are important steps in improving the care our 
Medicare patients receive.
    Finally, we are encouraging Medicare reimbursement for care 
management services by participating in the Medicare Coordinated Care 
Demonstration project, which we are confident will show that proactive 
care management is both clinically effective and cost-effective, and 
should qualify for Medicare reimbursement.
What Sets CenVaNet Apart?
    The overwhelming number of patients we have enrolled in the 
Medicare demonstration project makes CenVaNet unique. Patient 
enrollment is a key component of making a care management program 
viable, and our enrollment figures are a testament to our success.
    Many care management programs, especially in the commercial sector, 
do not take the extra step we do of providing home visits with 
patients; however, we find the personal interaction in a patient's home 
environment gives us greater insight into our patients' needs. In-home 
visits can even alert us to other problems, such as patients who do not 
have working smoke detectors in their homes, so our care managers can 
coordinate a solution with the local fire department.
    Finally, early behavioral outcomes from our participation in the 
demonstration project are promising. As of January 2003, more patients 
with cardiovascular disease had become competent in the following areas 
after an average of six months of follow-up care at CenVaNet:

     LTaking their medications (31 percent increase)
     LMonitoring their own blood pressures and weight 
(increases of 31 percent and 23 percent, respectively)
     LUnderstanding the symptoms of cardiovascular disease (15 
percent increase)
     LManaging their diet and nutrition (12 percent increase)

    Although it is still too early in the five-year demonstration 
project to determine whether our patients' health has improved (i.e., 
through clinical outcome measurements such as blood pressure values, 
etc.), these changes in behavior indicate that patients are taking a 
more active role in managing their conditions, which can only benefit 
their overall health.
Conclusion
    The Medicare demonstration project is an important step in 
overcoming the barriers to treating chronically ill patients in this 
population, and CenVaNet is proud to be a part of this study. The 
success of our program--as well as others--points to the need for 
Medicare reimbursement for care coordination services to help improve 
the quality of healthcare delivery, increase access to care and reduce 
the overall cost of care.

                                 
 Statement of Christobel Selecky, Chair, Government Affairs Committee, 
               Disease Management Association of America
I. Introduction
    Thank you for the opportunity to submit testimony on behalf of the 
Disease Management Association of America (DMAA) on the need to 
eliminate barriers to chronic care management in Medicare.
    Disease Management (DM) is fundamentally concerned with the 
management of chronic illness toward the twin goals of improving 
quality of life and reducing health care expenditures. Properly 
designed and administered DM programs can produce quality improvements 
and cost savings. This is not news in the private sector where DM has 
been incorporated into private health insurance. It is not news to 
Medicare+Choice, where DM is frequently utilized. And it is not news to 
FEHBP or Medicaid, where the use of DM is increasing. A growing body of 
evidence from these programs shows that DM works.
    DM represents an important strategy to address the need, as 
detailed in such reports as the Institute of Medicine's ``Crossing the 
Quality Chasm,'' to re-engineer our healthcare system to address the 
growing chronically ill population. Making DM available to the 
approximately 35 million fee-for-service Medicare beneficiaries 
currently denied these services would represent a major step forward in 
addressing this need.
    The purpose of this testimony is to discuss the role that Disease 
Management (DM) should play in Medicare, and to address some of the 
definitional and benefit design issues that must be answered in order 
to better incorporate DM into Medicare.
    In the testimony that follows, DMAA will--

     LExplain what DM is and how it is distinguishable from 
other services.
     LExplain how DM has been incorporated into Federal health 
care programs other than fee-for-service Medicare.
     LProvide information concerning the cost savings and 
quality improvements that can result from a properly designed and 
administered DM program.
     LAddress some of the questions that have been raised about 
how to programmatically include DM in the fee-for-service Medicare 
program.
II. Understanding Disease Management
    A. What is DM?
    The central premise behind DM is elegant in its simplicity. Simply 
stated, the value proposition for DM is that ``healthier people cost 
less.'' Put another way, if we can improve the health of the 
population, we will reduce their demands on the health care system and 
that reduced demand translates into lower costs. Chronic illness is a 
major driver of health care costs. One reason for this is that many 
chronically ill individuals experience acute episodes that require 
expensive (and often traumatic) treatment in institutional settings. 
The incidence of such episodes can be reduced or entirely avoided 
through proper management of chronic conditions, as can the progressive 
worsening of chronic conditions that leads to complications and co-
morbidities. Thus, if health care payors can efficiently deliver 
interventions that result in improved management of their chronic 
condition to those beneficiaries, quality improvement and cost savings 
will result.
    The types of illness that are most amenable to disease management 
interventions are those where evidence-based practices have been shown 
to reduce costs and improve quality of life. Candidates for DM services 
are typically identified through review of their health insurance and 
available medical data by health insurers and Disease Management 
Organizations (DMOs), or by their primary care providers. Disease 
managers then reach out to these individuals and, in concert with their 
physicians, enroll them in DM programs.
    Many of the interventions that can be provided to individuals with 
these chronic illnesses are often relatively simple. For example, great 
progress can be made by promoting smoking cessation, improvements in 
diet and exercise, and teaching patients to better self-manage many 
aspects of their condition like blood glucose level self-monitoring and 
adherence with prescription drug regimens. These interventions are 
supported by regularized, ongoing communication between beneficiaries, 
care providers and disease managers through a variety of media 
including phone, mail and electronic, that serves to promote adherence, 
monitor clinical status, ensure a continuum of care, and to proactively 
identify and address situations that could lead to avoidable acute 
events. Most DMOs have proved adept at addressing populations with 
multiple conditions--this is important because of the high percentage 
of overlap (co-morbidity) among these diseases.
    One challenge in delivering effective DM services lies with the 
fact that the beneficiary population can be a difficult one to impact. 
Often, the harmful behaviors and habits that DM programs seek to 
address have become highly ingrained over decades. In other cases, 
beneficiaries are depressed as a consequence of their condition, have 
grown skeptical of health care interventions, and may have developed 
hostility toward the health care system. DM programs have developed 
techniques for successfully reaching these populations and are able to 
uncover and motivate the underlying desire of most chronically ill 
individuals for improved quality of life.
    Another important feature of Disease Management is the integration 
with the beneficiary's personal physician. Many DM programs assist the 
physician as well as the patient by helping to provide evidence-based 
practice guidelines specific to their patients and their conditions. DM 
programs develop programs and techniques for reaching out to physicians 
and have generally been successful in achieving positive physician 
satisfaction and participation.
    DM has demonstrated that it works. Not making DM available to the 
Medicare fee-for-service population creates a situation whereby health 
care quality is not what it could be and the Medicare Trust Fund is 
tapped for billions of dollars per year in unnecessary spending. While 
the Center for Medicare and Medicaid Services (CMS) has recently 
initiated new DM demonstration projects that are comprehensive in 
approach, the three year delay in benefiting from these demonstration 
projects represents three years of delays in helping Medicare patients 
suffering from chronic disease.
    B. Definition and Accreditation
    After many years of development, the Disease Management community 
has been able to balance the need for continuing innovation with the 
desire for definitions and standards. In order to capture the essential 
elements that are required for a successful DM program, the DMAA 
several years ago worked to develop a definition of DM programs and 
entities. The DMAA definition--established in consultation with primary 
care and specialty physicians, and incorporating private practice, 
health plan and institutional perspectives--has become the standard 
definition and is relied upon widely: \1\
---------------------------------------------------------------------------
    \1\ The definition is cited by CMS in its February 28, 2003 
solicitation for capitated Disease Management demonstration projects, 
in its February 22, 2002 solicitation for proposals to conduct the DM 
demonstration projects authorized in the Benefits Improvement and 
Protection Act of 2000 (BIPA), by DM accreditors, and by payors and 
providers.

          Disease management is a multidisciplinary, systematic 
        approach to health care delivery that: (1) includes all members 
        of a chronic disease population; (2) supports the physician-
        patient relationship and plan of care; (3) optimizes patient 
        care through prevention, proactive, protocols/interventions 
        based on professional consensus, demonstrated clinical best 
        practices, or evidence-based interventions; and patient self-
        management; and (4) continuously evaluates health status and 
        measures outcomes with the goal of improving overall health, 
        thereby enhancing quality of life and lowering the cost of 
        care. Qualified Disease Management programs should contain the 
---------------------------------------------------------------------------
        following components:

         LPopulation Identification processes;
         LEvidence-based practice guidelines;
         LCollaborative practice models that include physician 
and support-service providers;
         LRisk identification and matching of interventions 
with need;
         LPatient self-management education (which may include 
primary prevention, behavior modification programs, support groups, and 
compliance/surveillance);
         LProcess and outcomes measurement, evaluation, and 
management;
         LRoutine reporting/feedback loops (which may include 
communication with patient, physician, health plan and ancillary 
providers, in addition to practice profiling); and
         LAppropriate use of information technology (which may 
include specialized software, data registries, automated decision 
support tools, and call-back systems).

    DM organizations may voluntarily apply for accreditation by the 
National Committee for Quality Assurance (NCQA), which has a specific 
DM accreditation program.\2\ DM organizations may also pursue 
accreditation from the American Accreditation Healthcare Commission 
(URAC) or the Joint Commission on the Accreditation of Healthcare 
Organizations (JCAHO). These three national organizations have all 
recognized the importance of DM and created meaningful standards and 
programs that serve to maintain the high quality of DM services and to 
standardize many of the new processes and terms that have evolved with 
the development of DM. These accreditation programs, combined with the 
consensus definition of DM, provide a clear basis for the Department of 
Health & Human Services to identify DM organizations that should be 
eligible for contracting under Medicare.
---------------------------------------------------------------------------
    \2\ NCQA is an independent organization that evaluates health care 
in three different ways: through accreditation (a rigorous on-site 
review of key clinical and administrative processes); through the 
Health Plan Employer Data and Information Set (HEDIS--a tool 
used to measure performance in key areas like immunization and 
mammography screening rates); and through a comprehensive member 
satisfaction survey. Criteria for accreditation and certification can 
be found at: http://www.ncqa.org/Programs/Accreditation/DM/dmmain.htm.
---------------------------------------------------------------------------
    C. Distinguishing Disease Management
    There are a variety of other health care activities and 
interventions that seek to improve public health, address the costs and 
consequences of chronic illness, or better promote a continuum of care. 
Whatever their relative merits, it is important to understand how these 
terms and activities relate to DM.
    First, it should be recognized that DM contains a preventive 
component but it is not co-extensive with ``prevention.'' Preventing 
the onset of chronic or other major illness is a highly meritorious 
goal, and one that the Secretary of Health & Human Services has made a 
priority. Through promoting proper diet, exercise and lifestyle choice, 
it is hoped that the future incidence of conditions such as diabetes, 
COPD, CAD and CHF can be reduced. In addition, Federal policymakers 
have in recent years sought to improve the availability of primary and 
preventive health care, including screening to detect and address 
conditions that can lead to chronic illness. DM can be distinguished 
from these types of prevention efforts in that DM programs work with 
identified populations of individuals that already suffer from chronic 
illness (and with their personal physicians) to manage the consequences 
of those illnesses. As a general proposition, it is easier to 
demonstrate measurable cost savings and quality improvements through a 
DM program than through these other, more generalized forms of 
prevention.
    Nor is DM the same as ``case management'' although there are 
similarities. The cardinal distinction is that DM programs seek to 
proactively identify an entire population of individuals suffering from 
a chronic illness and to provide evidence-based educational, 
monitoring, and coaching interventions to that population. Case 
management by contrast generally denotes an intervention based around 
the particular health and economic circumstances of high-risk 
beneficiaries, regardless of their chronic health conditions, and 
frequently involving the coordination of social service and other non-
health benefits.\3\ While DM programs often provide case management-
type services for identified beneficiaries, DM programs begin by 
identifying a group of beneficiaries that share common attributes 
(chronic illness) and then provide a more defined service to that 
group. Whatever their merits, it is much more difficult to demonstrate 
and realize cost savings on a population basis from heterogeneous case 
management services than from targeted, accredited DM programs.
---------------------------------------------------------------------------
    \3\ As MEDPAC has noted, ``[b]oth case management and disease 
management programs seek to coordinate care for people who are at risk 
of needing costly medical services. The two programs differ in their 
emphasis and target populations. Case management tends to focus on 
medically or socially vulnerable ``high risk'' patients, while disease 
management programs focus on a single disease. . . . MEDPAC, Report to 
Congress, June 2002 at 54-55.
---------------------------------------------------------------------------
    The relationship between DM and ``care coordination'' also merits 
comment. Care coordination generally describes a function that should 
be--but too often is not--part of a competent health care system but 
that is always a central element of a competent DM program. While 
primary health care providers and health systems generally assert that 
they provide care coordination, in practice such service is often 
absent due to institutional barriers, the absence of an economic 
incentive to provide such service, or functional difficulties. In those 
provider environments where formal care coordination service is 
available, it typically reaches a smaller population of beneficiaries 
(e.g., the patients of an individual provider or group practice) than 
can be reached through a DM program. Case management programs also seek 
to promote care coordination but, as mentioned above, often with a 
smaller, more disparate population. Care coordination is an integral 
part of DM. Successful DM programs work closely with primary care, 
specialty and institutional providers to coordinate service, and 
research has shown that such providers typically recognize the value of 
this service to their patients and their practice.\4\
---------------------------------------------------------------------------
    \4\ A Fernandez, et al, Primary Care Physicians' Experience with 
Disease Management Programs, J. of Gen. Internal Med., pp. 163-167 
(March, 2001).
---------------------------------------------------------------------------
III. The Use of DM in Federal Health Care Programs
    At this point in time, fee-for-service Medicare can be 
distinguished from other major Federal health care programs by the fact 
that disease management programs are not available to its 
beneficiaries. The involvement of other Federal programs with DM can be 
briefly summarized as follows:
    A. Federal Employee Health Benefits Plan (FEHBP)
    The Office of Personnel Management (OPM) administers FEHBP by 
qualifying certain plans to provide services under the program to 
current and retired Federal workers. FEHBP offers a range of plans 
including fee-for-service (FFS), PPO and closed plans and beneficiaries 
elect a plan under which to receive coverage. The Federal Government 
pays a portion of the monthly premium, and the beneficiary is 
responsible for the remainder. Plan costs vary. Health plans typically 
contract with health care clearinghouses to conduct a variety of claims 
processing and payment functions. Today, FEHB plans provide DM services 
to beneficiaries. For example, the FEHB plan offered through Blue 
Cross/Blue Shield of Delaware and other Blue Cross/Blue Shield plans 
across the country contract directly with a Disease Management 
Organization (DMO) for DM services. These programs have been shown to 
be successful in improving health status and reducing cost for members 
with chronic disease.
    B. Medicare+Choice
    Under Medicare+Choice, CMS contracts with a Medicare+Choice 
Organization (MCO)--typically a closed health plan or HMO--that enrolls 
beneficiaries for the receipt of all Medicare services covered by fee-
for-service Medicare and sometimes additional services (e.g. 
prescription drugs). The MCO receives a capitated payment from CMS that 
may be adjusted for a variety of factors. DM services are often 
available under Medicare+Choice. The arrangement is similar to that 
seen under FEHBP--the MCO typically contracts directly with a DMO for 
the provision of DM services. In addition, M+C has promoted some 
minimal incentives to encourage successful DM interventions by 
providing an additional risk adjustment payment for outpatient DM 
services to CHF patients who demonstrate certain quality improvements. 
Again, these programs have been shown to be successful in improving 
health status and reducing cost for beneficiaries with chronic disease.
    C. Fee-for-Service Medicare
    As mentioned above, DM is largely unavailable to the fee-for-
service Medicare population. However, one study is available and 
deserving of note. This unpublished study conducted by Dr. David W. 
Plocher, Vice President of Cap Gemini Ernst & Young, reviewed the first 
ten months of results on an American Healthways program involving 
approximately 6,000 Hawaii Medicare fee-for-service beneficiaries with 
diabetes. The study shows concurrent and statistically significant 
improvement in all clinical outcomes measures and a net, after-fee 
reduction in total health care cost of approximately $5.1 million, or 
17.2% on an inflation adjusted basis. This study strongly suggests the 
potential for DM in fee-for-service Medicare.
    D. Medicaid
    A growing number of States are incorporating DM into both 
traditional and managed care Medicaid. Among the first States to become 
involved with adopting DM programs were Texas, Florida, North Carolina, 
Virginia, West Virginia, and Maryland. Today, over half the States have 
incorporated at least limited DM initiatives into their Medicaid 
programs, while others, such as California, are considering language to 
promote DM. There are a wide variety of State programs and approaches, 
many of which have shown promising results. Florida has perhaps the 
most ambitious DM program in the country. Under this Medicaid Primary 
Care Case Management Program (called ``MediPass''), nine diseases have 
been managed through risk-based contracts with Disease Management 
Organizations (``DMOs''). The Florida Agency for Health Care 
Administration has contracted with DM organizations to provide DM 
services to Medicaid recipients enrolled in MediPass who have been 
diagnosed with diabetes, HIV/AIDS, asthma, hemophilia, CHF and end 
stage renal disease (ESRD).
IV. Demonstrated Cost Savings and Quality Improvement from DM
    Evidence on the growing nexus between health care expenditures and 
chronic illness continues to mount. People with chronic illnesses such 
as diabetes and CHF account for more than 60 percent of the medical 
care dollars spent in the United States.\5\ According to 1997 data, 25% 
of the Medicare population consumed almost 90 percent of Medicare 
spending while a Johns Hopkins study has shown that 90% of Medicare 
spending is attributable to beneficiaries with three or more chronic 
conditions.\6\ As this data suggests, the cost implications for 
Medicare of more effectively managing chronic illness are potentially 
quite large.
---------------------------------------------------------------------------
    \5\ Broad Disease Management Interventions Reducing Health Care 
Costs for Plan Members with Congestive Heart Failure. Joel C. Hoffman, 
Ernst & Young, LLP. Citing United States Department of Health and Human 
Services, Centers for Disease Control and Prevention. New Brunswick 
(NJ): The Robert Wood Johnson Foundation.
    \6\ See, Disease Management in Medicare: Data Analysis and Benefit 
Design Issues, Statement of Dan Crippen, Director of Congressional 
Budget Office, before the United States Senate Special Committee on 
Aging, September 19, 2002.
---------------------------------------------------------------------------
    Quality of life considerations aside, the cost effectiveness of 
successful DM programs results from the decreased utilization of other 
health care services--especially such institutional services as 
hospitalization and emergency department visits--to a degree that more 
than offsets costs. While the proper and comparative measurement of 
such costs and savings is no easy matter, a constantly growing body of 
evidence demonstrates the cost savings and outcome improvements that 
can result from DM.\7\ And recent efforts, like the recently released 
Johns Hopkins Consensus Panel paper on measurement guidelines and 
metrics are helping to bring increased standardization concerning 
outcomes studies.
---------------------------------------------------------------------------
    \7\ DMAA has commissioned a comprehensive review of DM literature 
as part of its ``Outcomes Validation Project.'' The purpose of the 
project is to create a complete reference of DM peer-reviewed 
publications that exhibits the outcomes of DM programs. 133 articles 
have been selected for full-length review. The Outcomes Validation 
Project is focused on formal evaluation of outcomes and hopes to 
increase awareness regarding methodologies and outcomes.

     LA peer-reviewed study of the American Healthways, Inc. 
(``AMHC'') Healthways' Diabetes NetCareSM program shows a 
17.1 percent or $114 per diabetes member per month reduction in total 
direct health care costs for the first year of operation.\8\ Patients 
also demonstrated improved adherence to recognized standards of care. 
For example, 74 percent of patients took their A1c test, a signal 
measure of a diabetic's health status, versus 61 percent in the base 
year; 16 percent took cholesterol exams versus 4 percent in the base 
year; and 12.2 percent took foot exams versus 2.5 percent in the base 
year.\9\ AMH patients experienced reduced admissions per 1,000 by an 
average of 15.6 percent, reduced days per 1,000 by 21.7 percent, and 
reduced average length of stay by 7.2 percent.\10\ Indeed, ``[h]ospital 
costs decreased by $47 per diabetic plan member per month, or $564 per 
year.'' \11\
---------------------------------------------------------------------------
    \8\ Robert J. Rubin et al., Clinical and Economic Impact of 
Implementing a Comprehensive Diabetes Management Program in Managed 
Care, 83 J. Clin. Endocrinol. and Metab. 2635, 2640 (1998) (Attachment 
B).
    \9\ http://www.americanhealthways.com/res__art01.pdf (visited 
January 18, 2003).
    \10\ http://www.americanhealthways.com/res__art01.pdf (visited 
January 18, 2003).
    \11\ Rubin, at 2641.
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     LLifeMasters Supported Self-Care, Inc. (``LifeMasters'') 
has demonstrated that a multidisciplinary DM program including patient 
education, interactive vital sign monitoring, nurse support and 
physician intervention can significantly reduce utilization and improve 
quality of care. One study published in a peer reviewed cardiology 
journal followed the progress of a population of CHF patients enrolled 
in the LifeMasters program through a San Francisco-based managed care 
organization.\12\ Evidence compared against baseline data showed 
significant improvements 12 months post enrollment. Clinical impact 
included 48 percent reduction in inpatient (acute) days, 36 percent 
reduction of inpatient admissions, 31 percent decrease in emergency 
department visits, and a 20 percent decline of average length of stay. 
Per member per month financial savings of the same study group over the 
same enrollment period averaged a total reduction in disease-specific 
claims of 54 percent, while an average reduction in all claims 
associated with the group improved by 42 percent on average.\13\
---------------------------------------------------------------------------
    \12\ Am Heart J 1999; 138:633-40.
    \13\ Id.
---------------------------------------------------------------------------
     LCorSolutions, Inc. demonstrated impressive results for 
its business partner, Highmark, through implementation of a DM program 
for Highmark's chronic population. For the health plan's target patient 
group, hospital admissions declined 65 percent, hospital days declined 
52 percent, the number of patients receiving appropriate drug therapy 
rose 43 percent, and optimal drug regimen adherence climbed to 58 
percent.\14\ Finally, CorSolutions has been able to reduce total costs 
for nearly 13,000 patients in the Medicare+Choice program by about 50 
percent compared to a baseline of $22,236, or an actual savings of 
$11,000 per patient per year. These results are based on fully-
reconciled administrative data available for this subset of total 
patients managed.\15\
---------------------------------------------------------------------------
    \14\ Jean Lawrence, High Marks for Chronic Care, HealthCare 
Business, DM6, 14 (June 2000).
    \15\ Medicare+Choice Disenrollment: Consequences and Opportunities, 
presented to CMS by CorSolutions, Inc., Aug. 9, 2000.
---------------------------------------------------------------------------
     LA coronary artery disease (CAD) study conducted over 
twenty one months found that a physician decision supported disease 
management model by QMed, Inc. reduced the incidence of heart attacks 
by 30 percent, hospitalizations for angina or suspected infarction by 
32 percent, cardiac catheterizations by 20 percent and coronary 
angioplasties by 22 percent, while coronary artery bypass grafting was 
unchanged. Costs for CAD, the most costly among Medicare members, 
declined 17 percent. The model used in this study has been selected in 
both the Care Coordination demonstration and the CHF and CAD 
demonstration.\16\
---------------------------------------------------------------------------
    \16\ Levin et al, Risk Stratification and Prevention in Chronic 
Coronary Artery Disease: Use of a Novel Prognostic and Computer-based 
Clinical Decision Support System in a Large Primary Managed-Care Group 
Practice, DM Journal 5:197-213 (Winter 2002). The referenced 
demonstrations are discussed below in part III.C.3 of this paper.
---------------------------------------------------------------------------
     LParticipants in Humana's CHF DM program ``eat less salt, 
can walk farther, are more mobile, and generally have a higher quality 
of life and a lower mortality rate'' than those enrollees not utilizing 
the programs. Humana saved an estimated $22 million in costs through 
disease management last year.\17\
---------------------------------------------------------------------------
    \17\ Chris Rauber, Disease Management Can be Good For What Ails 
Patients and Insurers, 29 Modern Healthcare 48, 51 (1999).

    With regard to Medicare specifically, the literature contains an 
expanding body of evidence regarding the savings DM can bring, 
---------------------------------------------------------------------------
including the following:

     LMeasuring Outcomes of a Chronic Obstructive Pulmonary 
Disease Management Program. This study, focusing on members with asthma 
and COPD, showed a 24.7 percent cost-savings for the Medicare group of 
1,700 beneficiaries.\18\
---------------------------------------------------------------------------
    \18\ Barry Zajac, MHSA, Measuring Outcomes of a Chronic Obstructive 
Pulmonary Disease Management Program, Disease Management, V5(1): 9-23 
(2002).
---------------------------------------------------------------------------
     LEconomic Impact of a Diabetes Disease Management Program 
in a Self-Insured Health Plan: Early Results. This study showed a 5 
percent decrease in spending over three years for the study group and a 
3 percent increase over the same time period for the control group.\19\
---------------------------------------------------------------------------
    \19\ Jan Berger et al, Economic Impact of a Diabetes Disease 
Management Program in a Self-Insured Health Plan: Early Results, 
Disease Management, V4(2): 65-73 (2002).
---------------------------------------------------------------------------
     LEvaluation of Disease-State Management Dialysis Patients. 
1,541 Medicare patients enrolled in a renal DM program in 1998 and 1999 
had 19 to 35 percent better survival rates compared with ESRD patients 
in traditional FFS Medicare and hospitalizations for the renal program 
patients were 45 to 54 percent lower than the FFS Medicare group.\20\
---------------------------------------------------------------------------
    \20\ Allen A. Nissenson et al, Evaluation of Disease-State 
Management Dialysis Patients, American Journal of Kidney Disease, 
V37(5): 938-944 (2001).
---------------------------------------------------------------------------
     LDoes Diabetes Disease Management Save Money and Improve 
Outcomes? The per member per month cost averaged $424 for Medicare 
patients enrolled in a diabetes DM program and averaged $500 for non-
program participants, a difference of 15.2 percent.\21\
---------------------------------------------------------------------------
    \21\ Jean Sidorov et al, Does Diabetes Disease Management Save 
Money and Improve Outcomes? Diabetes Care, V25(4): 684-689 (2002).

    Effectively run DM programs often involve certain increased 
expenditures that result from the provision of new services.\22\ In 
addition, a DM program may result in greater utilization of certain 
other healthcare goods and services. In a number of DM programs this 
has proven true with regard to the utilization of prescription drugs 
because the programs' strive to promote access to and compliance with 
drug regimens. In this way, DM actually results in the most effective 
use of healthcare resources by funding potential cost increases caused 
by appropriate utilization from the cost reductions caused by the 
elimination of preventable hospitalizations and procedures. Typically, 
physician visits increase as well.
---------------------------------------------------------------------------
    \22\ It should be noted, however, that providing effective 
comprehensive DM services is not the same as providing the most 
intensive intervention possible. For example, telecommunications 
between beneficiaries and DMOs is ordinarily effective to facilitate 
enhanced clinical outcomes and cost savings and the added cost of a 
home visit is not necessary except in particularized circumstances.
---------------------------------------------------------------------------
V. Applying DM to Fee-For-Service (FFS) Medicare
    In testimony to this Subcommittee last year, the Congressional 
Budget Office (CBO) defined the challenge of providing DM under FFS 
Medicare as requiring the consideration of a number of questions, 
including: how beneficiaries would be identified and enrolled in DM 
programs, how Medicare would pay for DM services, and how it would 
capture the resultant savings. We would like to offer some thoughts on 
these issues.
    At the outset, it should be understood that incorporating DM into 
FFS Medicare does not mean that Congress should simply authorize the 
reimbursement of DM as another covered Part B service. To do so would 
create a difficult situation where CMS, through its carriers, would 
need to become heavily involved in controlling utilization on a per-
beneficiary basis through payment, coverage and other controls similar 
to those it employs for any Part B service. More fundamentally, any 
such approach to a DM benefit would not encourage the type of structure 
and organization necessary to provide DM services on an area-wide or 
population basis absent extensive intervention by CMS with individual 
providers.
    Rather, it makes more sense and would result in less administrative 
burden for CMS to incorporate DM into FFS Medicare at a broader level. 
For example, CMS could be authorized to contract directly for DM 
services. This could be done through pending Medicare contractor reform 
legislation or in any other Medicare legislative vehicle. A possible 
alternative approach might involve the creation of the authorities and 
incentives necessary for carriers to contract with DMOs to provide 
coordinated DM services within a region (an arrangement that would be 
similar to what is done under FEHBP or M+C). This alternative, would 
likely be less efficient, however, with respect to the minimization of 
administrative costs. The vendor selection process would be facilitated 
by the existence of standardized definitions and external accreditation 
of DM programs and organizations, as well as through the application of 
other factors such as the ability to deliver services at scale, 
experience with Medicare beneficiaries and demonstrated and validated 
clinical and financial outcomes.
    As discussed above, private sector health insurers, M+C 
organizations, DMOs, and FEHB plans review encounter information to 
identify candidates that would benefit from DM services, and to refer 
those candidates for DM services that are ordinarily provided by an 
accredited Disease Management Organization that has a contract with the 
insurer. The DMO then contacts the beneficiary (and, when appropriate, 
their physician) to deliver the DM program. Similar mechanics could be 
used to create a DM service under FFS Medicare if policy makers can 
effectively address the cardinal difference between FFS Medicare and 
these other forms of care, namely that the medical information 
necessary to identify candidate beneficiaries is processed through Part 
A Intermediaries, Part B Carriers and through CMS itself. This 
difference can be addressed in any one of several ways: CMS could 
undertake the data review function itself; CMS could direct its 
carriers and intermediaries to do so and provide guidance to providers 
on the identification of candidates; or CMS could contract with a DMO, 
clearinghouse or other entity to perform this function.
    The first of the aforementioned options is likely the most 
administratively efficient. In the case that CMS chooses to utilize the 
resources and services of an outside company to perform this function, 
in order to protect patient health information, CMS, as a covered 
entity under the Health Insurance Portability and Accountability Act of 
1996, HIPAA, would enter into agreements with the third parties to 
ensure the confidentiality of patient health information. These 
agreements would allow CMS to share patient health information with 
third parties for the purposes of treatment, payment, and health care 
operations. As defined under HIPAA, health care operations include the 
typical functions of DMOs including data review and identification of 
candidates for participation in DM programs. CMS would be permitted to 
share patient health information with a third party who would then 
utilize the patient information to identify candidates on behalf of CMS 
without compromising the confidentiality of such information.
    With regard to the identification of proper candidates for DM 
services, it is elemental that only beneficiaries who are in need of 
and can benefit from DM services--namely, those suffering from an 
appropriate chronic illness--should be qualified to receive services. 
Identifying this population is not difficult, but must be undertaken 
with care to avoid using algorithms that identify an unnecessarily 
large number of false positives. These techniques are well developed in 
the private sector and CMS need only import this learning into fee-for-
sevice Medicare. Again, reference to and use of only accredited DMOs is 
advisable to ensuring appropriate population identification.
    As for enrollment, it is critical that participation be voluntary 
but, at the same time, DM programs create the most benefit by engaging 
as large a proportion of the population as possible. Private sector 
practice suggests that an opt-out approach to enrollment is the most 
effective method of meeting these twin goals.
    Finally, payment could be approached in a number of ways. One 
method, utilized by essentially all commercial plans and in many 
Medicare+Choice plans and state Medicaid agencies, is to pay a monthly 
fee to the DMO on a per enrollee per month basis to cover the cost of 
the disease management services provided to a population of 
beneficiaries with chronic disease. Under this payment methodology, 
beneficiaries can retain their fee for service coverage and savings 
immediately accrue to the Medicare Trust Fund with some upside risk 
sharing possible for the DMO.
    We appreciate the opportunity to submit this testimony to the Ways 
and Means Health Subcommittee concerning the need to address barriers 
to the incorporation of disease management in the Medicare fee-for-
service program. As this testimony should make clear, we believe that 
DM can be successfully incorporated in FFS Medicare to improve the 
lives and well being of the chronically ill and we hope that our 
recommendations assist the Subcommittee in so doing.

                                 
 Statement of Jaan Sidorov, M.D., Medical Director, Care Coordination 
     Geisinger Health Plan, and Geisinger Health System, Danville, 
                              Pennsylvania
    Chairman Johnson and Members of the Committee, I am Jaan Sidorov, 
MD, Medical Director, Care Coordination of Geisinger Health Plan (GHP). 
GHP, a part of the Geisinger Health System, is a not-for-profit health 
maintenance organization (HMO), serves the health-care needs of members 
in 38 counties throughout central and northeastern Pennsylvania. Begun 
in 1985, the Health Plan has steadily evolved into one of the nation's 
largest rural HMOs by providing high quality, affordable health-care 
benefits.
    I appreciate the invitation to present our views on eliminating 
barriers to chronic care management in Medicare.
Overview
    Disease management is a system of coordinated healthcare 
interventions and communications for populations in which patient self-
care efforts are significant. The components included 1) population 
identification processes, 2) evidence based practice guidelines, 3) 
collaborative practice models, 4) patient self-management education, 5) 
process and outcomes measurement, and 6) routine reporting and 
feedback.
    Diseases in which disease management has been shown to result in 
improved outcomes are: Congestive Heart Failure (CHF), cardiac disease, 
Chronic Pulmonary Obstructive Disease (COPD), diabetes, asthma and 
cancer.
    Geisinger Health Plan has implemented a ground breaking, national 
role model disease management program. For its 240,000 enrollees in 
northeastern and central PA, over 10,000 Medicare+Choice (+C) and 
Commercial insurance enrollees have avoided unnecessary 
hospitalizations, become better able to manage their diabetes, CHF, 
hypertension, COPD and asthma, simultaneously avoiding complications 
and reducing health care costs. The reason they have been able to do 
this is because they are enrolled in a health care insurance plan that 
is able to use premium to support this novel health care strategy. In 
addition, please note that disease management is a strategy that is 
more `virtual' than the traditional one-on-one health care; the latter 
is hostage to the availability of providers, which in rural PA remains 
a challenge. Disease management--which is independent of location or 
level of service--is able to project services outside the outpatient 
clinic setting. We are not talking just home visits by non-physicians, 
but novel use of the telephone, the internet, groups visits etc.
    Up until now, Medicare has not explicitly recognized disease 
management for beneficiaries who are not enrolled in a +C program. As a 
result, these individuals are at increased risk for unnecessary 
hospitalizations and are effectively shut out from taking the advantage 
of clinical programs that have been shown to improve clinical outcomes 
and reduce health care costs.
    We salute Tommy Thompson, Secretary, HHS for his willingness to 
expand demonstration projects that will ultimately prove the value of 
disease management programs. Congress should approve expansion of these 
projects as well as the ongoing research being conducted by AHRQ, the 
CBO and GAO.
Recommendations for +C
    HHS should actively encourage the expansion of ``accredited'' 
disease management programs for the +C program. One example of a good 
start is the extra payment provided to participating organizations that 
meet certain requirements for the treatment of enrollees with CHF. This 
should be expanded to other diseases. In addition to promoting the 
attainment of measurable outcomes, this would help slow the exit of 
Managed Care Organizations from the +C Program.
Recommendations for FFS Medicare
    The Secretary of HHS may designate entities that can provide 
disease management services to eligible individuals--eligibility is 
determined by diagnoses such as CHF, Diabetes, Asthma, Coronary Artery 
Disease or Cancer or any other diagnosis that is deemed by the 
Secretary to be amenable to disease management services. This would 
mean that M'care could contract directly with organizations to provide 
services, preferably on a geographic or population basis.
    Disease management services include but is not necessarily limited 
to health screening and assessment, coordination of providers and 
referrals to same, monitoring and controlling medications, patient 
education and counseling, nursing visits, consultations by phone, email 
or web-site, and transitioning to programs outside disease management 
if the enrollee elects to opt out.
    The Secretary may enable entities to use cost sharing (within the 
limits of the law) with respect to health care items and services.
    Entities should be qualified by criteria set by the Secretary. 
Qualifications should include JURAC, JCAHO, or NCQA accreditation.
    The Secretary should also set performance standards regarding 
clinical outcomes, based on a standardized baseline assessment of 
individuals' health prior to entry into disease management with re-
measurement at specified intervals. The Secretary should establish 
performance measures of baseline and follow-up aggregate costs.
Recommendations for the Pharmacy Benefit
    Drug coverage is an important component of any total health care 
package, and disease management entities have a proven track record of 
educating and coordinating patient contact that provides optimum 
compliance and reductions in drug-drug interactions. As a pharmacy 
benefit is made available, disease management entities should be 
engaged in helping to assure that enrollees use the benefit to maximum 
advantage.
    Thank you for the opportunity to present views on this most 
important issue. If I can be of any further assistance to the 
Committee, please feel free to contact me.
Attachments:
    Sidorov, J., Shull, R., Tomcavage, J., Girolami, S.: Diabetes 
Disease Management Is Associated With Pharmacy Savings in a Managed 
Care.
    Sidorov, J., Shull, R., Tomcavage, J., Girolami, S., Lawton, L., 
Harris, R.: Does Diabetes Disease Management Save Money and Improve 
Outcomes? Diabetes Care 25:684-689, 2002.
Diabetes Disease Management Is Associated With Pharmacy Savings in a 
        Managed Care Setting
    Jaan Sidorov, MD, FACP, CMCE, Robert Shull, Ph.D., Janet Tomcavage, 
RN, MSN, Sabrina Girolami, RN, Care Coordination Program Geisinger 
Health Plan. Geisinger Health Plan, Hughes Office Building, Danville, 
PA USA 17822-3020, Tel: 570-271-8763, Fax: 570-271-7860.
Objective
    Little is known about the impact of disease management programs on 
medical costs for patients with diabetes mellitus. This study compared 
pharmacy costs for patients fulfilling HEDIS criteria for 
diabetes who were in an HMO sponsored diabetes disease management 
program versus those who were not in diabetes disease management.
Research Design and Methods
    We examined HMO paid pharmacy costs for all medications, insulin 
products, oral hypoglycemic agents (OHAs), diabetes supplies and other 
pharmaceuticals among 1,362 continuously enrolled Geisinger Health Plan 
(GHP) members who fulfilled HEDIS criteria for diabetes and 
had an insurance benefit for prescription drug coverage from January 1, 
2000-December 31, 2001. Two groups were compared: those patients who 
were enrolled in an ``opt-in'' diabetes disease management program 
versus those patients who were not enrolled. Multiple linear regression 
was used to control for the impact of age and gender on pharmacy costs.
Results
    Of 1,362 patients fulfilling HEDIS criteria for the 
diagnosis of diabetes mellitus with prescription drug insurance 
coverage, 1,273 (93.5%) were enrolled in this diabetes disease 
management program (``Program'') versus 89 (6.5%) who were not enrolled 
(``Non-program''). Both groups were similar in male/female ratio 
(Program M/F=52.4%/47.6% vs. Non-program M/F=58.6%/41.4.1%, p=0.07), 
and Program patients were 1.9 years younger than Non-program patients 
(56.0 years vs. 57.9 years, p=0.15). Mean per member per month overall 
paid pharmacy claims (PMPM) for Program patients was $92.24 (standard 
deviation or STD = $99.18) versus a mean of $143.98 (STD = $136.78) 
among Non-program patients (see Table). This difference was 
statistically significant (t=4.63, p<.0001). The mean PMPM for insulin 
products ($20.17 Program vs. $15.49 Non-program), other diabetes 
medications ($29.71 Program vs. $25.39 Non-program) and diabetes care 
supplies ($4.31 Program vs. $5.77 Non-program) were not statistically 
different between the two groups. Program patients experienced a lower 
mean PMPM of $61.06 (STD = $81.91) for all other medications vs. Non-
program patients, who had a mean PMPM of $123.34 (STD = $131.97). This 
difference remained statistically significant after controlling for age 
and gender (p<.0001).


----------------------------------------------------------------------------------------------------------------
                                                                            Other
                                                Total         Insulin     diabetes       Diabetes        Other
                   Category                   Pharmacy        PMPM       medication     supplies    medications*
                                                PMPM*                       PMPM          PMPM
----------------------------------------------------------------------------------------------------------------
Program                                          $92.24        $20.17        $29.71         $4.31        $61.06
                                               ($99.18)      ($19.68)      ($33.58)       ($6.67)      ($81.91)
N=1,273
 (standard
deviation)
----------------------------------------------------------------------------------------------------------------
Non Program                                     $143.98        $15.49        $25.39         $5.77       $123.34
                                              ($136.78)                    ($27.27)                   ($131.97)
N=89                                                         ($14.79)                     ($6.71)
 (standard
deviation)
----------------------------------------------------------------------------------------------------------------
* Statistically significant after controlling for age and gender, p<0.001.

Conclusions
    In this HMO, an opt-in disease management program appeared to be 
associated with a significant reduction in overall pharmacy costs. The 
savings we observed were among pharmacy costs that were not directly 
associated with diabetes care, which may be partially explained by 
improved control of diabetes. In addition, these data suggest that 
diabetes disease management is not necessarily associated with an 
increase in costs for medications directly related to diabetes care.

                                 
 Statement of Richard M. Wexler, M.D., Medical Director, Medical Care 
              Development Inc/Maine Cares, Augusta, Maine
    Maine Cares (ME Cares) is a coalition of 32 rural and urban Maine 
hospitals that offer community-based, telephonic disease management 
programs for patients with heart failure (HF) and coronary heart 
disease (CHD). Medical Care Development (MCD) is a Maine-based not-for-
profit corporation that plans, develops and operates health programs. 
MCD serves as the facilitating organization for the ME Cares coalition.
    Since implementing our program over two years ago, we have seen 
significant improvement in our HF and CHD patients that previously may 
not have had access to disease management services. We know that 
community-based programs combined with the right technological support 
are effective in improving the lives of our patients. We believe that 
the ME Cares program may serve as a model for Medicare, and we are 
honored to have been chosen to participate in the Medicare Coordinated 
Care Demonstration. On behalf of ME Cares, I would like to thank 
Representative Johnson and the Ways and Means Subcommittee on Health 
for holding this important hearing.
An Innovative Approach to Disease Management
    Every year, nearly 30,000 hospitalizations in Maine are caused by 
heart disease at a cost of more than $400 million. Maine also has an 
older-than-average population, more than half of who live in rural 
areas. In the effort to improve and reorganize HF and CHD management, 
the ME Cares coalition of hospitals was formed based on the shared 
beliefs that: 1) the care of ambulatory patients with chronic illness 
is aided by building an infrastructure to extend the scope and reach of 
traditional office-based care; 2) community-based programs will 
encourage resource development that will benefit patients with chronic 
illness as well as patients at-risk; 3) physician support will increase 
the likelihood of success of the program; and 4) physician support is 
more apt to occur if the program is locally accessible and available to 
patients regardless of their payer affiliation.
    When we developed the ME Cares coalition health plan based programs 
were at various stages of development using plan staff or contracted 
out to private firms. From the patient's perspective, there would 
undoubtedly be a disruption of care should their employers switch 
health plans. From the provider's perspective, complexity of 
interfacing with numerous plans and programs posed a significant 
problem, so our challenge was to create a community-based care 
management support program that was an alternative to the diverse 
health plan-based programs.
    Our first order of business was to develop a set of key program 
elements. These include: explicit patient eligibility criteria and 
physician enrollment orders; regular communication between the nurse, 
patient and physician to coordinate care and optimize care management; 
patient-specific goals set at program entry and monitored throughout 
participation; individualized treatment plans for each patient; 
educational interventions on medications, diet, exercise, smoking 
cessation, stress management, and symptom identification and response; 
continuous telephonic access for patients to nurse support services; 
ongoing monitoring of medical regimen adherence; and active outreach to 
physicians to gain endorsement and feedback.
    We then sought to establish standardization of care across 
coalition sites to assure quality. To achieve this, we decided that all 
participating hospitals should use the same information system that 
would support patient-specific care plans using evidence-based clinical 
guidelines and facilitate measuring outcomes. After reviewing several 
systems, we chose Pfizer Health Solutions' (PHS) disease management 
software technology for its ability to collect patient histories, key 
symptoms, clinical and laboratory data, and treatment status 
information. More importantly, PHS' software was user-friendly and 
enabled local providers to use the technology.
Proven Results
    Today, ME Cares has grown to include 32 hospitals that provide 
health services to over 90% of Maine's population. Over 1,400 patients 
have enrolled in the HF and CHD programs and for the most part, care 
support services have been non-reimbursed services. Despite this 
limitation, the level of participation among providers has been 
exceptional.
    When outcomes were measured in December of 2001, average patient 
participation lengths were 9.4 months for HF and 7.5 months for CHD. 
Outcomes were measured by the New York Heart Association (NYHA) 
physical activity classification, the Short-Form 12-Item Survey (SF-12) 
for mental and physical health scores, and symptom relief, adherence 
and cholesterol values. At follow-up, 78 percent of HF patients 
improved or maintained their NYHA class and improved their SF-12 mental 
scores. HF patients also reported a reduction of HF symptoms (shortness 
of breath, cough), less weight gain and leg swelling, increased self-
monitoring and beta-blocker use. CHD patients had improved SF-12 mental 
and physical health scores, and experienced a reduction in mean LDL 
cholesterol.
Conclusion
    Implementing a statewide, provider-sponsored care support program 
in Maine using PHS' care management technology significantly improved 
HF and CHD patient outcomes. What does this mean for Medicare? We know 
that disease management can improve quality of life and reduce 
hospitalizations, yet at the present time, these services are only 
available to Medicare+Choice members who represent only a small 
percentage of Medicare beneficiaries. Our model is significant to 
Medicare not only because our program has proven outcomes, but also 
because we operate outside the managed care and fee-for-service 
environment. It is our hope that our participation in the Medicare 
Coordinated Care Demonstration will clearly validate the importance of 
the ME Cares model for disease management in Medicare.

                                 
   Statement of the Pharmacist Provider Coalition, Bethesda, Maryland
    The Pharmacist Provider Coalition is pleased to submit this 
statement for the record of the Subcommittee on Health's hearing on 
eliminating barriers to chronic care management in Medicare.
    The Pharmacist Provider Coalition is composed of six national 
pharmacy organizations, which represent pharmacists working in all 
sectors of pharmacy practice. The coalition partners joined forces to 
educate Members of Congress and the public about the role pharmacists 
play in the safe and effective use of medications and to provide 
patients access to pharmacist medication therapy management services 
under the Medicare program. Our membership consists of the following 
groups: the Academy of Managed Care Pharmacy, American College of 
Clinical Pharmacy, American Pharmaceutical Association, American 
Society of Consultant Pharmacists, American Society of Health-System 
Pharmacists, and the College of Psychiatric and Neurologic Pharmacists.

Need: Improved Care, Avoid Medication-Related Complications

    On average, persons aged 65 and older take 5 or more medications 
each day.\1\ The high utilization rate of medications is particularly 
common in patients who have one or more chronic conditions that call 
for drug treatment. These medications are often prescribed by several 
different physicians for concurrent chronic and acute conditions. As a 
result, these patients are at high-risk for medication-related 
complications, resulting in up to 11.5% of all hospitalizations.
---------------------------------------------------------------------------
    \1\ ASHP Consumer Survey, ``Medication Use Among Older Americans,'' 
2001.
---------------------------------------------------------------------------
    Recently published research indicates that drug-related problems 
cost the U.S. health care system as much as $177 billion each year.\2\ 
A substantial portion of this expense is preventable through 
collaborative medication management services provided by pharmacists 
working with patients and their physicians.
---------------------------------------------------------------------------
    \2\ Ernst FR, Grizzle, AJ. Drug-Related Morbidity and Mortality: 
Updating the Cost-of-Illness Model. Journal of the American 
Pharmaceutical Association. 2001: Mar-Apr; 41(2):192-199.

---------------------------------------------------------------------------
Solution: Access to Pharmacist Medication Therapy Management Services

    Pharmacist medication therapy management services help to eliminate 
unnecessary or counterproductive treatments and assure that patients 
are receiving the most appropriate drug therapy for their medical 
conditions. For example, pharmacists working closely with the health 
care team can identify or prevent duplicate medications, drugs that 
cancel each other out, or combinations that can damage hearts or 
kidneys. Pharmacists may also find that a newer multi-action drug may 
be exchanged for two older drugs or an alternative drug may be 
substituted for another therapy that causes side effects and results in 
the patient either taking additional medication or stopping their 
medication--the result of which may lead to their medical condition 
worsening. Drug interactions, adverse effects, and low patient 
adherence with prescribed therapies are costly and preventable medical 
complications of usual care.
    The specialized training pharmacists have in medication therapy 
management has been demonstrated repeatedly to improve the quality of 
care patients receive and to control health care costs associated with 
medication-related complications. As the Institute of Medicine report 
``To Err is Human: Building a Safer Health System'' stated: ``Because 
of the immense variety and complexity of medications now available, it 
is impossible for nurses and doctors to keep up with all of the 
information required for safe medication use. The pharmacist has become 
an essential resource . . . and thus access to his or her expertise 
must be possible at all times.''
    Current Medicare payment policies are woefully outdated and fail to 
recognize pharmacists as providers of health care services. This 
restricts the patient's ability to access pharmacist services. To 
ensure access, Medicare statutes must be updated to explicitly 
recognize services provided by pharmacists just as nurse practitioners, 
physician assistants, registered dieticians and other non-physician 
providers have been recognized in recent years.

Conclusion

    Pharmacist medication therapy management services can and will make 
a real difference in the lives of patients with chronic conditions. 
This is a logical and very affordable step towards eliminating barriers 
to chronic care management and establishing the essential 
infrastructure of a Medicare prescription drug benefit. The Coalition 
strongly encourages the Subcommittee to pass legislation to provide 
patients access to pharmacist provided medication therapy management 
services under Part B of the Medicare program.
    Thank you for the opportunity to present the views of pharmacists 
who care for Medicare patients on a daily basis.

                                   - 
