Growth of U.S. Health Spending Slows
BALTIMORE--Due to a decline in the growth of prescription drug expenditures, national health spending slowed in 2004, according to a report released last week by CMS.

The report, issued annually by CMS' Office of the Actuary, was published in the journal Health Affairs. It shows the nation's health spending in 2004 increased 7.9 percent--the lowest growth rate in four years--to $1.9 trillion, or $6,280 per person. That compares to health spending increases of 8.2 percent in 2003 and 9.1 percent in 2002.

But the country's health spending still grew faster than wages and inflation and has reached its highest share yet of the gross domestic product at 16 percent, compared to 13.8 percent in 1992 and 9.1 percent in 1980. Moreover, health care costs from 1993 to 2004--the most recent year for which actual numbers are available--have doubled.

The report shows slower growth in prescription drug spending has contributed to slower overall spending growth over the past few years. In 2004, prescription drugs accounted for only 11 percent of the growth in national health care expenditures, smaller than its share of the increase in recent years. In addition, the rate of growth in prescription drug spending, at 8.2 percent in 2004, is slower in absolute terms than in previous years.

Prescription drug spending had accounted for 23 percent of the growth in personal health spending between 1997 and 2000, but by 2002-2004 it accounted for only 14 percent.

On the other hand, hospital spending accounted for 28 percent of the growth in personal health spending between 1997 and 2000 and increased to 38 percent by 2002-2004. Spending for physician services accounted for 29 percent of the total growth in personal health spending in 2004, up from an average 25 percent share in the 2000-2002 period.

In 2004, private payers played a greater role in slowing spending than public payers, the report showed. Private spending growth slowed to 7.6 percent in 2004 compared with 8.6 percent in 2003.

Federal, state, and local government spending for health care rose 8.2 percent in 2004. Public spending continues to be dominated by Medicare ($309 billion in 2004), whose growth rebounded in 2004 in part due to the Medicare Modernization Act, which raised payments for physicians, capitated health plans and rural and other providers. Combined with increases in the use of physician and home health services, these factors contributed to more than a 2-percentage point rise in Medicare spending growth to 8.9 percent in 2004.

Medicaid spending reached $291 billion in 2004, comprising 15 percent of national health spending. In contrast to the acceleration in Medicare's spending, Medicaid spending growth decelerated from 8.8 percent in 2003 to 7.9 percent in 2004, reflecting continued cost containment efforts from states that contributed to a marked slowdown in spending growth for prescription drugs.

CMS Proposes Expansion of O2 Coverage
BALTIMORE--CMS has issued a preliminary decision that would expand Medicare coverage criteria for home oxygen.

After considering the issue for several months, the agency concluded home oxygen is "reasonable and necessary" for Medicare beneficiaries with arterial oxygen partial measurements from 55 to 65 mm Hg or whose oxygen saturation is at or above 89 percent.

Current policy, which has been in effect since 1993, covers beneficiaries with arterial oxygen partial measurements at or below 55 mm Hg or whose oxygen saturation is at or below 88 percent.

The agency's proposal includes issuing a national coverage determination to cover beneficiaries meeting the new criteria who are enrolled in clinical trials identified by CMS and sponsored by the National Heart, Lung & Blood Institute.

CMS is seeking public comment before making its final decision. To view the proposed decision memo and submit comments, click here.

Medicare Beneficiaries File Suit Challenging ALJ Transfer
PHOENIX--Two Medicare beneficiaries and a national organization seeking certification as a class action have filed a lawsuit against CMS challenging recent changes to the Medicare appeals process.

The complaint states that under Medicare's new appeals process--which transferred administrative law judges from the Social Security Administration to HHS in July--it is nearly impossible for a beneficiary to get an in-person hearing. The ALJ transfer was mandated by the MMA.

Eleanor Webber, Judith Schneider and The Gray Panthers Project Fund, a national organization of Medicare beneficiaries, filed the complaint last month in U.S. District Court for the District of Arizona, claiming that they were deprived of a fair and impartial hearing. Webber and Schneider received medical treatment that was determined to be not covered by Medicare, and their appeals are now at the ALJ stage, according to the complaint.

HHS currently has four hearing location sites, compared to 141 when appeals were handled by the SSA. While HHS claimed its use of video-teleconferencing in more than 1,000 cities would speed up the process, the lawsuit argues it denies beneficiaries a right to a fair hearing.

The complaint asks the court to issue a declaratory judgment that CMS' regulations violate the MMA by having only four sites and discouraging beneficiaries from seeking in-person hearings. It also asks, among other things, for a permanent injunction requiring CMS to give class action members an opportunity to receive in-person ALJ hearings.

Grassley Wants Answers on 'Lavish' Travel by CMS Employees
WASHINGTON--Amidst concerns about extravagant conferences and travel by quality improvement organization (QIO) staff and other officials of the Centers for Medicare and Medicaid Services, Senate Finance Committee Chairman Charles Grassley is demanding more information about the agency's expenses.

In a letter to CMS Administrator Mark McClellan, Grassley requested "a detailed accounting" of the funding and costs for conferences and other travel meetings attended by CMS or QIO staff members in the last four years.

According to Grassley, R-Iowa, photographs of an annual QIO conference at the Don CeSar Beach Resort near St. Petersburg, Fla., "depict a luxurious resort, lavish dinners, dessert buffets and Hawaiian dance parties--all in a tropical beach locale.

"As you look at the photos of the Don CeSar event, you wonder if these contractors are going to luaus and playing golf instead of investigating patient complaints about poor Medicaid quality," Grassley said. "And then you have to wonder whether the federal employees who are supposed to make sure the contractors are doing the job we pay them to do are instead going to luaus and playing golf themselves."

Calling the notion of a lavish retreat "completely wrongheaded," Greg Simmons, a member of the planning committee for the 2005 meeting and CEO of Madison, Wis.-based Metastar, the Wisconsin QIO, said the pictures show a celebration largely funded by the hotel to commemorate the long-standing relationship between the resort and the conference.

ACHC Marks 20th Year
RALEIGH, N.C.--Having grown from one accreditation program in one state to 10 programs with accredited companies in all 50 U.S. states, Puerto Rico and Guam, the Accreditation Commission for Health Care turns 20 this year.

In recent years, the organization has introduced accreditation programs for specialty pharmacy, fitter services, rehabilitation technology supplier services, medical supply provider services and respiratory nebulizer medication programs, according to ACHC President Tom Cesar.

"ACHC has also answered the question 'who accredits the accreditor' by having the distinction of being the only accrediting body certified to [the International Organization for Standardization] 9001:2000," Cesar said. "Part of our vision is to do things in a new way for accreditation that will improve the delivery of care and service for the consumer and also be a more effective way for the businessperson to run the business and become more profitable."

For ACHC, that means continuing the development of a hybrid accreditation standard that combines ACHC's own standards with ISO's, said Cesar. A beta test of the hybrid was completed last year (see HomeCare, "Katrina! What Went Right," Oct. 2005).

"The underpinning of ISO is a quality management system for excellence in customer service, and that's what we're trying to achieve," Cesar said. "We believe that in time the hybrid will prove to be something that's going to evolve into a new way of doing things."

According to a recent HomeCare survey, the accreditation business shouldn't be letting up anytime soon. Fifty-five percent of providers participating in HomeCare's "2006 Forecast Survey" said their organizations were not currently accredited, and 56 percent of those said they plan to apply within the next 12 months. (For more information, see HomeCare, "2006 Forecast," Dec. 2005.)

Manufacturer News
Medline Launches Respiratory Division
MUNDELEIN, Ill.-- Medline, the nation's largest privately held manufacturer and distributor of medical supplies, has announced the launch of a new respiratory division.

"Over the past 10 years we've experienced tremendous growth in respiratory sales, averaging close to 30 percent per year," said Dennis Cook, a respiratory therapist who will head up the new division as president. "There are more than 40 million people in the United States with some type of respiratory ailment, ranging from asthma to chronic obstructive pulmonary disease to obstructive sleep apnea to pneumonia. We want to provide our customers with the best service, so we really needed to invest in this market."

As the baby boomer generation gets older, Cook noted that demand for respiratory products also will increase. Census Bureau projections indicate that by 2030, one in five Americans will be age 65 or older.

The new respiratory group will include a team of engineers working on the development of a series of new products, according to a company statement. The division also will offer continuing education, and its staff will include several clinicians serving as product managers to help both Medline engineers and customers to better understand the complex product area.

"We're dealing with products that can literally mean the difference between life and death, so it is imperative that we have the expertise in-house to make sure we are providing our customers the technical know-how to provide better care for their patients," Cook said.

Cook, a licensed respiratory therapist for more than 17 years, joined Medline in 1999 as vice president of the DME division and has served in that position until now.

Roscoe Medical Acquired by River Associates
STRONGSVILLE, Ohio--Roscoe Medical, which distributes parts and replacement supplies, has finalized a recapitalization of the company with River Associates, a Chattanooga, Tenn.-based private equity investment group. "Our new partnership with River Associates will allow Roscoe Medical to enter a new phase of growth that will do nothing but improve our service to home medical equipment dealers," said Roscoe Founder Rochelle Thuener.

The plan allows for Thuener's retirement as well as transition of partial ownership to the company's current management team. Vice President of Product Development Jessie Keirn, Vice President of Sales Richard Keirn and Vice President of Operations Jason Ziebro will continue to oversee day-to-day management of the company and will become minority owners. The Keirns also will serve as co-presidents. Roscoe Medical currently employs nearly 40 full-time staff. Thuener said she expects employment levels to continue to grow as sales expand.

Sunrise Opens Distribution Center in Indy
LONGMONT, Colo.--Sunrise Medical has opened a new distribution center in Indianapolis. Designed to expedite delivery to customers in mid-America and parts of the mid-Atlantic, the new center will offer same-day customer service for "will call" orders. This is the company's third new distribution center to open within the past year as part of an expanded strategy aimed at increasing overnight delivery coverage in the U.S. from 30 percent to more than 80.

State News
New York Medicaid Spends Double the National Average
ALBANY, N.Y.--A federal agency has reported that New York's Medicaid program paid more than one-fifth--21.6 percent--of all of the state's health care expenses in 2003, more than twice the national average.

The Agency for Healthcare Research and Quality compared health care expenditures in the 10 largest states to national averages.

Among the agency's findings:

--The national average for Medicaid was 9.2 percent.
--California's Medicaid program paid 13.2 percent of the state's total health care expenses; Texas' program paid 10.8 percent.
--The smallest proportions were in Illinois, at 3.9 percent, and Pennsylvania, at 4.4 percent.
--The average health care expenditure per capita in the country in 2003 was $3,082. Results ranged from $2,325 per capita in Texas to $4,020 per capita in Pennsylvania.
--42.4 percent of total health care expenses in the United States was paid by private health insurance; 19.6 percent were paid out-of-pocket.
--Some 85 percent of the U.S. population living outside of nursing homes, institutions and the military sustained health expenses in 2003.

To access the report, click here.

Former Governor Proposes Universal Health Plan in Oregon
SALEM, Ore.--Former Oregon Gov. John Kitzhaber has launched a publicity campaign to promote his universal health care plan, which he hopes to put on the statewide election ballot in November. Under the plan, the state would use public funds to provide basic coverage for all U.S. citizens in Oregon, regardless of income. Individuals could purchase additional coverage or benefits using their own money. By implementing his plan, Oregon could force Congress to consider making similar changes nationally, said Kitzhaber, who is considering running for a third term as governor.

Tennessee Considers Health Plan for Uninsured
NASHVILLE, Tenn.--Gov. Phil Bredesen, who was criticized for cutting Tennessee's Medicaid program last year, is working on a plan that would provide health insurance to 600,000 uninsured residents. The plan would split costs among beneficiaries, employers and the state. If a trial is successful, Bredesen said he will ask for federal funding in 2007, when the state's waiver for TennCare, its Medicaid program, expires. "What I'm trying to do, is say, 'Look, I had to unfortunately do some dismantling of TennCare. I'm not done with what I'm doing,'" Bredesen told the Associated Press. "But now we're going to take the pieces and put it back together with something that's more modern and forward looking and has got some chance of surviving."

Visit this week's sponsor at www.remitdata.com.