CONTENTS

Advisory of February 19, 2003, announcing the hearing

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

American Geriatrics Society, and Washington Hospital Center, George A. Taler, M.D.

Caremark Rx, Incorporated, Jan Berger, M.D.

Group Health Cooperative, Ed Wagner, M.D.

Progressive Policy Institute, Jeff Lemieux

AdvancePCS, letter and attachment

American Association of Health Plans, statement

American Association for Homecare, Alexandria, VA, statement

American Healthways, Nashville, TN, statement

American Heart Association, statement

American Pharmaceutical Association, statement

American Society of Health-System Pharmacists, Bethesda, MD, statement

Central Virginia Health Network, L.C., Richmond, VA, Michael Matthews, statement

Disease Management Association of America, Christobel Selecky, statement

Geisinger Health System, and Geisinger Health Plan, Danville, PA, Jaan Sidorov, M.D., statement

Medical Care Development Inc/Maine Cares, Augusta, ME, Richard M. Wexler, M.D., statement

Pharmacist Provider Coalition, Bethesda, MD

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:]

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. It 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 of 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 time frame 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:]

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 towards 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 trade-offs. 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 trade-offs.

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:]

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 of 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.

Lastly, 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:]

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 four-fold 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:]

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 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, 32 percent of beneficiaries have 4 or more chronic conditions. These individuals account for a disproportional share of total Medicare 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 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:]

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 decision making 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 afterwards, 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 spin-off 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, letter and attachment

American Association of Health Plans, statement

American Association for Homecare, Alexandria, VA, statement

American Healthways, Nashville, TN, statement

American Heart Association, statement

American Pharmaceutical Association, statement

American Society of Health-System Pharmacists, Bethesda, MD, statement

Central Virginia Health Network, L.C., Richmond, VA, Michael Matthews, statement

Disease Management Association of America, Christobel Selecky, statement

Geisinger Health System, and Geisinger Health Plan, Danville, PA, Jaan Sidorov, M.D., statement

Medical Care Development Inc/Maine Cares, Augusta, ME, Richard M. Wexler, M.D., statement

Pharmacist Provider Coalition, Bethesda, MD