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Medicare Compliance & Reimbursement

Medicare Advantage:

Rules On Formularies, PPOs Raise Concerns

Published on Sat Oct 09, 2004

Many questions remain before Medicare reform can be completed.

As the Centers for Medicare & Medicaid Services works to finalize regulations for last year's Medicare Modernization Act, the most anxiety from lawmakers and stakeholder groups seems focused on drug-formulary issues, region size for preferred provider organizations, and employer subsidies for retiree drug coverage. Those were the top issues raised by witnesses and lawmakers from both parties at a Sept. 14 Senate Finance Committee hearing on the proposed rules, which were issued this summer.

  • What drugs are on formularies - and how to get those that aren't - will continue to be contentious questions. Sen. Max Baucus (D-MT) and Sen. John Breaux (D-LA) - another of the law's few Democratic supporters - said they're unhappy that CMS doesn't appear ready to set strong standards for the appeals processes beneficiaries would use to get access to drugs that aren't on their private plans' formularies.

    "A lot of appeals processes can be different," and some require enrollees to provide significant amounts of clinical information that could be prohibitively difficult for beneficiaries to produce, said Breaux. He added that it seems reasonable to think that Medicare might set a universal, standard appeals process.

    CMS Administrator Mark McClellan wouldn't commit to setting a universal format for appeals but pledged that there would be significant oversight as well as standards. The agency will use as its models some Medicaid processes, for example, which don't require beneficiaries to marshal scientific information, he said.

    Meanwhile, the National Alliance for the Mentally Ill - and a senatorial ally, Gordon Smith (R-OR) - voiced some complaints against the proposed model formulary released last month by the U.S. Pharmacopeia.

    USP is helping CMS develop a model formulary that private plans can adopt as at least a partial safe harbor against charges that their drug benefits discriminate against patients with certain illnesses. CMS will look at more than just the number and nature of drug classes a formulary includes to determine discriminatory conduct, however, McClellan said.

    While multiple classes of anti-psychotic drugs appear in the USP draft model, only one class is provided for antidepressants, Smith told McClellan. Smith, whose son committed suicide last year, is a vocal new congressional spokesperson on mental-illness issues. Given the wide number of side effects from antidepressants, more classes are needed, he argued.

    NAMI agrees, and also is concerned that all anticonvulsant drugs for epilepsy also are lumped into one class. The group is "concerned that restrictions on the number of classes and categories of drugs ... could discourage the development of new medications."

  • The proposed rules also are silent on the size and location of geographical regions that new Medicare PPOs and drug-only plans will serve.

    Congress initially punted the region question to CMS and now CMS has punted it, too, complained Baucus. There's "no guidance here" on what course the agency is likely to take, he said.

    McClellan pledged that, ultimately, the administration won't punt. CMS is examining mounds of public input and will make a call later, he said. America's Health Insurance Plans, which represents most U.S. health insurers, has told CMS that "it would be prudent" to begin with 50 regions, one per state. That's the view of many AHIP members, President Karen Ignagni told the Senate Finance Committee.

    Given the quick implementation timelines, "building on current state-based licensure and provider networks" at the outset will ensure fuller insurer participation, she said.

    A few health plans are pushing for large, multi-state regions. UnitedHealth Group Inc., Humana, and Aetna all have told CMS that they're interested in offering PPOs in such large regions, McClellan told reporters after the hearing.

    Baucus also announced that the Government Accountability Office will release an analysis shortly of CMS's PPO demonstration project. GAO has found that CMS exceeded its statutory authority in some of the measures it took to encourage PPO participation in the demo, he said.

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