wisconsin - the horton group · stephen benton staff accountant jackie sawyer ... toll free:...

Published June 2009 ■ Copyright © 2009HealthLeaders-InterStudy, A Decision Resources, Inc. Company ■ Copyright Strictly Enforced

HEALTH PLANANALYSIS

WisconsinSpring 2009 | Vol. 6 | No. 2

09

www.healthleaders-interstudy.com

Copyright © 2009 | HealthLeaders-InterStudy | Wisconsin Health Plan Analysis | Spring 2009 Vol. 6 No. 2 2

09 HEALTH PLANANALYSIS

WELCOME TO THE ENHANCED

SearchFEATURE

CLICk HEREFor Easy

Navigation.

BACK TO INDEX

RIC GRoSSRic Gross is a Senior Healthcare Analyst covering the states of Wisconsin, Minnesota, Maine, Massachusetts, Vermont, Rhode Island and New Hampshire for HealthLeaders-InterStudy. A graduate of Auburn University, he is a veteran journalist with 18 years’ experience in newspaper, magazine and specialty business publications. He is part of a team that produces summaries of more than 450 health plans across the United States and analyzes the quarterly financial releases of publicly held health plans. The Health Plan Profiles and quarterly Earnings Calls summaries are available online at www.hl-isy.com.

NEW FEATURE: This PDF now has interactivity. Users can navi-gate through the report by clicking on the title of the article in the index. Users can also return to the index by clicking on the ‘back to index’ button in the upper left-hand corner of this report.

Example:

http://www.healthleaders-interstudy.com

http://www.hl-isy.com

WISCoNSIN HEALTH PLAN ANALYSIS


Published June 2009. Copyright © 2009 HealthLeaders-InterStudy, A Decision Resources, Inc. Company. All Rights Reserved. Intended for the sole use of a HealthLeaders-InterStudy registered subscriber. Photocopying, forwarding or reproducing in any form, in whole or in part, is a violation of federal copyright law and is strictly prohibited. Selling or otherwise providing this information to third parties violates the contractual agreement under which this report and data are provided and is a violation of federal copyright statutes. Violation of federal copyright law is punishable by fines up to $100,000. Questions regarding use of this product should be directed to HealthLeaders-InterStudy, One Vantage Way, B-300, Nashville, TN 37228; 615.385.4131.

HealthLeaders-InterStudy Staff

HEALTH PLAN ANALYSIS

President, HealthLeaders-InterStudy Sarah Fuller

Vice President, Market Analysis Sheri Sellmeyer

Director, Health Plan Analysis Jane DuBose

Assistant Director, Health Plan Analysis Paula Wade

Senior Health Plan Analysts Ric Gross, Chris Lewis

Health Plan Analysts Rick Byrne, Heather Johnston, Bill Melville, Don Mooradian, Roy Moore, Jan Shuxteau

HEALTH PLAN DATA

Principal Director of Data Operations Russell Workman

Product Manager Mark McMahan

Senior Health Plan Data Analyst Rebecca Waller

Database Analyst Lance Wolkenbrod

Supervisor of Data Procurement Randall Gish

Supervisor of Data Validation Jodi Tonkin

Research Analysts Natasha Allen, Kristi Gumm, Geppe Hernandez, John King, Allan Rodgers

SHARED SERVICES

Operations Manager Tracy Coats

Controller David Banning

New Product Manager Carol Barry

Senior Software Engineer Ben Jones

Senior Database Administrator Mike Schellhammer

Database Administrators Stephen Ham, Barbara Wolverton

Design & Production Stephen Benton

Staff Accountant Jackie Sawyer

Operations Assistant Lessie Ramovich

SALES & MARkETING

Vice President, Strategy And Analytics Eric Matckie

Vice President, Sales Jed Maley

National Account Directors Bob Fucile, Chris Mars, Jolayne Perry

Client Training Jacky Lancio-Holladay

Customer Support Susan Albano

Sales Manager Steve Silvestro

Marketing Manager Lisa Tulis Osgood

Account Managers Randall Hagopian, Irene Tourkantonis

CoRPoRATE oFFICE

One Vantage Way, B-300 Nashville, TN 37228 Phone: 615.385.4131 Fax: 615.385.4979 Toll Free: 888.293.9675

MARKET ANALYST RIC GRoSS | [email protected]

4. UNINSURED4. State To Expand BadgerCare Plus Despite

Economic Turmoil

10. PHARMACY10. Pharmacy Carve-Out Pays Off For Wisconsin

Medicaid Program

14. EMPLoYERS14. Wisconsin Employers Test Potential Value Of

On-Site Care

18. MEDICAL HoMES18. Wisconsin May Be Latest To Build Medicaid Medical

Home Pilot

21. PHARMACY21. Local Insurers Taking Look At Value-Based Drug

Benefit Design

24. HEALTH PLANS24. Dean Health Plan Looks To Expand Reach Of Its PBM26. Wisconsin Health Plan Briefs

27. PEoPLE

28. WISCoNSIN METRICS

mailto:[email protected]


BACK TO INDEX V

State To Expand BadgerCare Plus Despite Economic Turmoil

BY RIC GROSS

Despite a higher-than-expected budget deficit of $6.6 billion over the next two years, Wisconsin state officials are going ahead with the planned launch of a new state-sponsored safety net option for the uninsured.

Wisconsin’s budget shortfall, which is $1.6 million more than calculated at the beginning of the budget process, threatened the planned July 1 launch of its BadgerCare Plus Core Plan For Childless Adults. Appli-cations for the program will be accepted beginning June 15, with benefits beginning no earlier than July 15. But even as lawmakers approved the program’s expansion, they have also directed the state’s Department of Health Services to find $500 million in budget savings over the next two years, which may push the state to further expand the use of managed care in its public programs.

As many as 41,000 adults could be added as a result of the expansion, part of Democratic Gov. Jim Doyle’s plan to develop near-universal care in Wisconsin, with enrollment spread out among 16 HMOs. The eco-nomic crisis makes such a program even more imperative, as unemployment continues to climb and as thousands stand to exhaust their COBRA subsidy, which is limited to nine months.

Gov. Doyle and lawmakers are using a 1.4 percent assessment on hospitals’ patient revenue, a move geared toward capturing more federal Medicaid matching funds. According to state documents, the initiative is expected to bring an additional $900 million in federal funds to Wisconsin over the next three years. Because the state’s Medicaid investment is matched with federal dollars, it is anticipated that every $1 of tax revenue would generate $1.65 for Wisconsin hospitals. This would allow for a Medicaid reimbursement increase, which will be some welcome relief to area hospitals.

Table 1-1: Selected Information, Benefits For BadgerCare Plus ExpansionExpansion Group Monthly Income Requirements Selected Covered Services

Uninsured Childless Adults Less than 200 percent FPL, $1,805 single; $2,428.33 couple

Chiropractic services, ER visits, doctor and hospital visits, some prescription drugs, speech therapy

Source: Wisconsin Department of Health Services

Operating on a five-year federal waiver, the program for childless adults is not a standard Medicaid ben-efit nor an entitlement program, and will be a limited benefit plan due to the state and federal budgetary restraints, with spending capped at $154 million. On May 21, Doyle announced a revision of the hospital assessment targeted to bring in an additional $165 million, earmarked for the childless adults expansion.

“For those meeting the criteria [who may have lost their job], this childless adults coverage may help as, even with federal COBRA 65 percent subsidy, COBRA still requires participants to pay 35 percent of costs,” said Donna Friedsam, health policy programs director with the Population Health Institute in the University of Wisconsin School of Medicine and Public Health. “The federal COBRA subsidy is only for nine months, then you have to figure something else out. The childless adult coverage does require a 12-month waiting period following prior coverage, but many who lose jobs and health coverage due to lay-off or plant closures may qualify for good cause exemption to the 12-month waiting period. The childless adult coverage will

UNINSURED


BACK TO INDEX V

be more accessible to the low-income population who may otherwise have needed to turn to COBRA but couldn’t afford it, even with the subsidies.”

The program will cover basic healthcare services, including primary and preventive care, as well as generic drugs. Every adult who applies to the program will have to complete an online health survey before the application can be submitted, and all members must receive a comprehensive physical exam within the first year of enrollment.

Eligible adults can earn no more than 200 percent of the federal poverty level ($21,660 for an individual, $29,140 for a couple,) and will be enrolled in one of the state’s 16 Medicaid HMOs. Those include Abri Health Plan, Children’s Community Health Plan, Anthem Blue Cross and Blue Shield in Wisconsin (through its Compcare HMO), Dean Health Plan, Group Health Cooperative of Eau Claire, Group Health Cooperative of South Central Wisconsin, Gundersen Lutheran Health Plan, Health Tradition, Independent Care Health Plan, Managed Health Services, Mercy Care, Network Health Plan, Security Health Plan, UnitedHealthcare and Unity Health Plan.

In preparation for the rollout, the state clarified eligibility to include those who have lost jobs while prevent-ing the phenomenon known as crowd-out. Under the new guidelines, to enroll a person must not have access to employer-sponsored insurance. In addition, the person must not have had private health insurance coverage in the previous 12 months, unless they were laid off from a job; stopped working due to a health condition; are employed by a company no longer offering insurance; lost coverage due to the death or divorce of the policyholder; or their COBRA coverage period has ended.

Meanwhile, the recession has swelled enrollment for the existing BadgerCare Plus for Children and Families. The program, expected to exceed 2009 projected costs by $16 million because of the membership spike, is open to every Wisconsin child, regardless of income, with the state bearing part or all of the costs for children and families earning up to 300 percent of the federal poverty level.

Table 1-2: BadgerCare Plus Eligibility RequirementsCategory Income Requirements

All children under age 19 Regardless of income

Pregnant women Incomes up to 300% of the Federal Poverty Level (FPL)

Parents and relatives caring for a child Up to 200% of the FPL

Young adults in foster care who turned 18 Eligible until age 21, regardless of income

Farm families, other self-employed families May be eligible if income less than 200% of the FPLSource: Wisconsin Department of Health Services

When designing the program, the state estimated savings would come from increased use of managed care, premiums and copays paid by families, and a hoped-for reduction in administrative costs due to the merging of three public programs under one umbrella.

And while these savings may yet occur, enrollment continues to climb. BadgerCare Plus enrollment increased by almost 14,000 members from February through March and more than 9,000 members from March through April. More than 130,000 previously uninsured individuals have been added to the pro-gram since it began in February.

Over the past six months, the state has approved the expansion of BadgerCare Plus in 22 counties, 20 of the counties being areas where members will have additional choices of HMOs and two of the counties (Door and Kewaunee) being areas where HMOs were not previously available to members. In addition, in the past six months, Security Health Plan and Gunderson Lutheran Health Plan have increased their maximum limits for BadgerCare Plus by 20,000 members each.

UNINSURED


BACK TO INDEX V

Considering the number of new enrollees, the projected cost overrun shows the difficulty in executing such a public program expansion during a prolonged economic downturn.

“It’s good to have such a healthcare safety net, but maintaining it during the recession is a real challenge,” said Jon Peacock, research director for the Wisconsin Council on Children & Families. “The cost per case has been reasonable and the HMO care management strategy seems to have been effective, but the reces-sion has driven caseloads far above the level anticipated last fall when the 2009-11 state budget was first developed. Fortunately, thanks to the stimulus plan and [federal] CHIP reauthorization, we will be getting significantly more federal assistance, and that helps policymakers preserve BadgerCare Plus and proceed with the childless adult coverage. Yet because of a state deficit that has grown to more than $6 billion, the governor’s budget bill directs DHS to find more than $500 million over the next two years in unspecified cuts and efficiencies in the budget for Medicaid and BadgerCare Plus.”

COBRA Becomes An Option Many Will Consider

In addition to the BadgerCare Plus option, the newly implemented federal COBRA subsidies will make it possible for thousands of people to continue their workplace coverage after losing a job. Federal officials esti-mate about 7 million people nationwide will take advantage of the assistance made possible by the American Recovery and Reinvestment Act. But the uptake levels will not be known until businesses report to the Internal Revenue Service on their next quarterly payroll tax filings. And for insurers, the effect of the COBRA subsidies on the risk profile of employers’ group plans will not be known for some time, as COBRA is likely to attract those ex-employees who need the coverage because of ongoing medical conditions.

Subsidies provided by the federal stimulus package allow people involuntarily terminated from companies with health coverage to pay only 35 percent of their COBRA bill for nine months, instead of the full cost they would have had to pay. In addition, people who declined coverage as far back as September 2008 get a second chance to elect COBRA.

Like the rest of the nation, the timing is right in Wisconsin, which has seen its unemployment spike upward. Wisconsin’s unemployment rate for March was 9.4 percent, up 0.6 percentage points from February’s 8.8 percent and January’s 7.7 percent. The March rate was 4.4 percentage points higher than the rate of 5 percent for Wisconsin in March 2008.

Table 1-3: Wisconsin Labor ForceMonth Labor Force Unemployment Unemployment Rate

March 2008 3,065,600 153,800 5.0%

March 2009 3,086,600 290,500 9.4%Source: Wisconsin Department of Workforce Development

From February to March, total Wisconsin non-farm jobs decreased by an estimated 8,700 to 2,724,500, com-pared to 19,400 jobs lost in the January to February report. Goods producers shed 10,700 jobs, while service producers gained 2,000 jobs over the month. In the prior month comparison, goods producers lost 14,800 and service producers lost 4,600 jobs. Over the year, March showed a decline of 112,400 Wisconsin non-farm jobs. Goods producers were down 64,600, mostly in manufacturing, which was down 48,600. Service sector jobs declined by 47,800 over the year, led by professional and business services, which lost 28,300 jobs.

A March survey of Wisconsin households by the Department of Workforce Development showed 35,000 fewer employed compared to February, and 115,700 fewer employed than one year ago.

“Most of our members are addressing the downturn by cutting costs wherever they can, and when it comes to personnel and benefit costs, some are more accessible to trim than health benefits,” said Cheryl DeMars, CEO of The Alliance, a Madison-based nonprofit, employer-owned healthcare cooperative. “They are doing things such as freezing salaries, mandatory furloughs, etc.”

UNINSURED


BACK TO INDEX V

Meanwhile, health plan, broker and business representatives have been busy trying to untangle the confusion around the new subsidy program. Employers and health plans were required by April 18 to have informed all former employees—or group members, in the case of health plans—that they are eligible for the subsidies if laid off between September 2008 and the end of 2009.

Charles Stevens, an employment benefits lawyer with Michael Best & Friedrich in Milwaukee, said there has been some confusion among employers about who is responsible for fronting the subsidized premi-ums. The burden falls to employers with 20 or more employees or insurance carriers for companies under 20 employees. In both cases, the entity fronting the money gets reimbursed through a credit taken against quarterly payroll taxes.

“In addition to the confusion, there is a financial burden as well,” Stevens said. “The employer has to fund the claims but then only gets to claim it at the end of the quarter, so there is some cash flow issue there. Also, with more electing to take COBRA, it means employer plans have a greater burden of non-employees on them. It could have an impact in regard to higher claims and higher costs.”

Studies show COBRA participants cost an employer about 45 percent more than an average participant, said Jason Culp, director of sales, operations and marketing for CONEXIS, a large third-party administra-tor headquartered in Irving, Texas. “COBRA participants use the benefits more than an average participant does, which ends up obviously in higher experience on the plan, so when the employer goes to renew, the rates are higher. It does end up costing the employer,” he said.

Insurers Targeting Individual Market

While industry watchers are still in the dark about how many people will actually take up COBRA, it is much more likely to gain traction in states where individuals have few alternatives for affordable individual cover-age. Still, there will no doubt be a segment turning toward the individual market, and insurers in the Badger State are putting extra attention on marketing those products.

Wisconsin’s individual market offers a variety of plans to consumers. UnitedHealthcare, Humana, Anthem Blue Cross and Blue Shield and local carriers Security Health Plan and WPS Health Insurance are all active in the individual market, among others, where the average cost is $1,254, compared to the national average of $2,613.

In the Milwaukee ZIP code 53201, a 52-year-old man can choose among 113 individual plans offered in 2009, according to eHealthinsurance.com. The lowest-priced plans are a $97.56 premium offering from UnitedHealthcare (UnitedHealthOne) with a $10,000 deductible, and a $105.56 premium PPO plan with a $5,000 deductible offered by local carrier WPS Health Insurance. Prices go up to $562.77 a month for a $500-deductible plan from UnitedHealthcare.

A key indicator perhaps of a renewed push in the individual market can be seen in the efforts of Madison’s Group Health Cooperative of South Central Wisconsin, a staff-model HMO serving Dane County. With a limited service area and enrollment confined to Dane County, Group Health Cooperative of South Central Wisconsin operated with a two-person sales force—until now, that is.

“We have added someone just to focus on the individual market, and for an operation our size, that is a big deal,” said Al Wearing, sales and marketing director fro Group Health Cooperative. “We see an op-portunity there, and have changed our approach. We are now actively soliciting that business—while our product has remained the same, we are positioning ourselves better with our distribution system.”

The cooperative offers a variety of product options, including a plan with zero deductible and 20 percent coinsurance; a $500 deductible plan, $1,000 for a family; or a $1,000 deductible for an individual, $2,000 for a family offering, for example. All offerings can be paired with prescription drug coverage, with copays of $10 for generics and $40 for brands.

UNINSURED


BACK TO INDEX V

According to Wearing, Group Health Cooperative has set a target of 75 new applications for each quarter this year. “We weren’t focusing on that part of our business much before, and last year we did 244 memberships. We want to increase our results by 10 percent,” Wearing said. “We did 99 the first quarter of 2009, so we are already above target. We are on pace to hit 400 if we maintain that. Now, I don’t know if we can do that, but we certainly have more activity there than in the past.”

Table 1-4: COBRA Versus Unemployment Benefits In The MidwestState Avg. Monthly Unemployment Avg. Monthly CoBRA Individual Premium

Illinois $1,315 $400

Indiana $1,287 $376

Iowa $1,290 $369

Michigan $1,276 $419

Minnesota $1,530 $375

Missouri $1,083 $373

Montana $1,067 $391

Nebraska $1,049 $367

Ohio $1,327 $382

Wisconsin $1,172 $400Source: Families USA

Anthem BC/BS, meanwhile, has a full suite of individual and family products in the marketplace with seven different options including a short-term plan (one to six months), consumer-driven offerings under its Lumenos banner, life insurance and dental. The insurer recently introduced its SmartSense offering in Wisconsin, among other states, targeted toward individuals, the uninsured and for those who may have lost their jobs and find COBRA not to be an option. The product features deductibles ranging from $500 to $10,000 with a mixture of monthly premiums. For instance, a healthy 25-year-old male will find premiums ranging from $46 to $157 per month.

SmartSense is designed to provide protection against expensive and unexpected medical bills and offers a variety of deductibles that allow consumers to find a premium they can afford, officials said. Highlights include coverage for first three doctor visits with $35 co-payment before the deductible (per person per calendar year), then 30 percent coinsurance after deductible; choice of prescription drug benefits (compre-hensive or generic only); inpatient, outpatient, emergency room and professional services coverage; and coverage up to $7 million per member in lifetime benefits.

Humana, meanwhile, introduced new individual health insurance plans under the HumanaOne brand in 2007. HumanaOne Portrait, HumanaOne Autograph, and Monogram from HumanaOne offer three in-network coinsurance levels and 17 annual deductible choices. Deductibles range from $1,000 to $7,500 for single coverage and from $2,000 to $15,000 for family coverage. Premiums start as low as $30 per month for single coverage on the Monogram product. HumanaOne Autograph includes HSAs and other products, and monogram offers catastrophic coverage and some wellness benefits.

The prescription drug benefits vary by plan. For instance, in the Portrait product, there is a $500 prescrip-tion drug deductible per individual, with a $15 copayment. Meanwhile, certain HumanaOne Autograph plans offer a prescription drug benefit that covers eligible costs after a $1,000 deductible is met, while other HumanaOne Autograph plans either have no prescription drug benefit or will apply prescription costs to the medical deductible.

UNINSURED


BACK TO INDEX V

A new addition in Wisconsin under the HumanaOne banner is a short-term medical insurance offering, attractive for students who are about to graduate, those between jobs, part-time or seasonal employees, or the unemployed, for example. The offering allows applicants to choose the length of their policy, from 30 days up to six months or a year, depending on the state; the deductible, $500-$5,000 for an individual, $1,000-$10,000 for families; and the payment method. Plans have a $2 million maximum benefit and include prescription drug coverage. Company officials stress the offering is designed to bridge the gap between long-term coverage products.

Outlook

Wisconsin officials have their work cut out for them in dealing with a massive budget deficit, but they found a way to preserve expansion of the BadgerCare Plus program that should be acceptable to all parties. State HMOs stand ready to add on members, and the program will be an attractive option for laid-off workers in that demographic. Enrollment numbers won’t be high enough to shift HMO market share, however. Mean-while, uptake on COBRA will not make a significant difference on carriers’ group enrollment.

UNINSURED


BACK TO INDEX V

Pharmacy Carve-out Pays off For Wisconsin Medicaid Program

BY RIC GROSS

Just more than a year ago, Wisconsin began managing the pharmaceutical benefits for its multi-billion-dollar Medicaid programs, rather than allowing that job to remain with the state’s 16 Medicaid HMOs. A host of states have turned this direction, and with a slowing economy and rising unemployment, more will likely turn to this model in the next few years.

Although the amount of savings varies, states can expect a return of 12 percent to 15 percent on drug costs through rebates simply by taking pharmacy management in-house. Once supplemental rebates are added, that figure can double. In states such as Texas, which require supplemental rebates for drugs to be put on the preferred drug list, savings have reached more than 30 percent.

According to Wisconsin’s Department of Health Services, of the drug classes in the top 20 prescribed drugs by volume, the Stimulants and Related drug class accounted for 67 percent of all rebates at $14.7 million in state fiscal year 2008, while the Leukotriene Modifiers drug class accounted for 19 percent of rebates, at $4.1 million.

Prior to Wisconsin’s carve-out, according to figures from the state, in 2007 around $159.5 million was spent (out of a total $400 million) on prescription drugs for the 326,277 people who received pharmacy benefits through Medicaid managed care.

Table 2-1: Pharmacy Consolidation Fiscal Estimate*Category Amount

Total SSI/Medicaid amount to be carved out $159,524,005

Net FFS Cost For 2007 encounter claims $96,131,602

Annual all funds savings from pharma consolidation $63,392,404

Annual general purpose revenue savings $26,434,632*Based on calendar year 2007 data

Source: Wisconsin Department of Health Services

“States came to realize they may have the opportunity to achieve greater savings on the pharmacy component than a health plan would be able to,” said Suzanne Duda, director, Avalere Health, a healthcare consulting firm. “It’s logical to assume that savings are likely to come from drugs with the highest spending. In an analy-sis we did last year, we found that the drug classes that drive the most Medicaid spending nationwide include anticonvulsants, antidepressants, antipsychotics, antiretrovirals, and proton pump inhibitors.”

Unlike Wisconsin, a handful of states still allow managed care plans to manage the pharmacy benefit, includ-ing Massachusetts, Georgia and Ohio. Others do a partial carve-out, and still others have joined in multi-state purchasing pools—Wisconsin falling into that latter category.

As this trend continues, Medicaid HMOs are feeling the pinch from lost revenue. However, a nugget in President Obama’s 2010 budget outline could give insurers a chance to show they can obtain better savings than carve-outs while also combining drugs into the continuum of care.

PHARMACY


BACK TO INDEX V

Still, most states have brought at least part of their Medicaid drug benefit in-house. In some cases, the states have just carved out pharmaceuticals for certain groups such as the aged, blind or disabled, or particular drug classes, such as those treating HIV/AIDS.

But most are bringing the whole process in-house as a way to leverage rebates from drug manufacturers. Drugs are a major cost driver because Medicaid beneficiaries are overwhelmingly poorer and sicker than the overall population. Drug spending for this group accounted for $36.6 billion in 2004, or 12.5 percent of total Medicaid spending, according to the National Association of State Medicaid Directors.

To handle this cost, states have introduced their own preferred drug lists, prior authorization and other pro-grams. Using their PDL as the way to manage prescribing habits, states were motivated to make the change after federal legislation in 1990 guaranteed Medicaid the right to receive the “best price” from a drug maker. That law allowed states to begin receiving quarterly rebates for drugs given to Medicaid patients. As a result, states started receiving payments back from the drug companies. Large states such as Texas have rebates averaging more than 30 percent.

“The real difference is the level of control the state has on pharmacy utilization,” said Avalere’s Duda. “If the state manages the pharmacy benefit, they get to decide what drugs are covered, what kind of management utilization tools are applied, what is the level of documentation required to override a prior authorization, etc. States would see themselves as stewards.”

All of the major drug makers have signed rebate agreements with Wisconsin for 2009, including Pfizer, Merck, and Sanofi-Aventis.

Wisconsin Takes Early Dive Into The Pool

In addition to the carve-out, Wisconsin is one of many states to join a multi-state purchasing pool, team-ing with Louisiana, Maryland, Delaware, Idaho and Pennsylvania in the ‘top-dollar program,’ otherwise known as TOP$.

States that operate in these pools typically use a common preferred drug list, where preferred drugs can be obtained for lower costs because of the large volume of the states’ combined purchase. Under a PDL, states reviewing drug classes will send out a notice to manufacturers for brand-name drugs. The pharmaceutical companies then send in bids for rebates based on normal dosing, and show what the net cost is after rebate for an average script size.

Table 2-2: Commonly Used Drugs By SeniorCare, Medicaid MembersProgram Drugs

SeniorCare Metroprolol, Amlodipine, Lisinopril, Simvastatin, Furosemide

Medicaid Hydrocodone, Lorazepam, Clonazepam, Amoxicillin, AlbuterolSource: Wisconsin Department of Health Services

“Just the fact that you are in a multi-state pool can bring about 2 percent to 5 percent in savings,” said Richard Cauchi, health program director for the National Conference of State Legislatures. “Some may say that is not very much, but the practical fact is all the states in these pools are using a combination of pool-related strategies. In the multi-state pools, member states also agree on a common PDL—usually at least 95 percent or more of the drugs across the states are the same. States are able to have their own definition, but the com-mon list is what brings the buying strength.”

The first of these multi-state pools emerged in 2003 when Michigan and three other states formed what is now the National Medicaid Pooling Initiative. Today, the pool represents 12 states and the District of Colum-bia, encompassing 10.9 million Medicaid lives.

PHARMACY


BACK TO INDEX V

Two years later, The Optimal $olution (TOP$) was formed by Provider Synergies, which itself was later bought by Coventry. Unlike the NMPI system, states can receive the rebated price even without placing the drug on the PDL. The negotiated discounts are based on the number of states that place the drug on pre-ferred status. Whereas states would receive a supplemental budget of 20 cents if two elected to put the drug on the PDL, they would receive 30 cents if three states did. Like NMPI, TOP$ also bases its rebates on the Wholesale Acquisition Cost.

Put off with what they saw as high costs to participate in the earlier pools, a handful of states formed the Sovereign States Drug Consortium in 2005. This group includes six states, including Vermont, which bolted NMPI and said the Coventry unit charged much more than SSDC. Unlike NMPI and TOP$, states admin-ister the program, negotiating directly with the drug makers.

Needless to say, large states are attractive targets for these multi-state groups. By having more lives under them, they can obtain better discounts. The rise of these pools has even led larger states to look into joining. Texas in 2005 performed an analysis comparing what it receives from rebates on its own to what it could obtain by joining a pool. The result: savings of $3.8 million to $4.2 million on top of the more than 30 percent the state already receives.

The problem from Texas’ standpoint was a state law that required supplemental rebates be in place for a drug to be included in the PDL. Those rebates must be based on the Average Manufacturing Price for a specific drug, whereas TOP$ and NMPI use the WAC model. The AMP is the average price a wholesaler pays to the manufacturer for a drug that’s distributed at the retail pharmacy level after deducting for customary prompt pay discounts. Because it didn’t use the WAC model, Texas couldn’t join the two major pools.

Health Plan Reaction Muted In Wisconsin

On a national level, health plans have criticized the carve-out model, arguing that it takes away a key method health plans use to monitor and improve outcomes for members. The Association for Community Affiliated Plans said insurers use real-time data for better monitoring, increasing generic utilization and weeding out unnecessary drugs.x

In addition, insurers have argued states can’t be as aggressive as private plans in pushing low-cost generics and alternatives. They argued that 75 percent of private health plans’ prescriptions are generic, compared to 55 percent to 63 percent of carved-out FFS.

In Wisconsin, the reaction among health plans was fairly muted, however. “It does reduce our revenues, but I wouldn’t say it has been a huge impact on us,” said Robert L. Palmer, president and CEO of Dean Health Insurance, parent of Madison-based Dean Health Plan. “I would say it was a mixed reaction [among state HMOs]. We didn’t take a position. If the state wanted to understand how the market felt, if they asked every HMO, they would have gotten some answers in support, some against and some neutral, like ours.”

Ultimately, insurers were hamstrung by the 1990 law opening up fee-for-service Medicaid to “best price” rules. Insurers who participate in the Medicaid program are backing proposed legislation that would allow higher Medicaid drug rebates within managed care plans as well. It’s part of a plan that would increase the Medicaid drug rebate from 15.1 percent to 22.1 percent of the Average Manufacturer Price. The move would apply the additional rebate to new drug formulations and allow states to collect on rebates on drugs provided through managed care plans. According to Obama’s budget outline, the move should save more than $2 bil-lion from 2010 to 2019.

Pharmacy Society Concerned Over Dispensing Fee

While the health plan reaction may have been low key in Wisconsin, one group that has become rankled is the Pharmacy Society of Wisconsin. According to Tom Engels, vice president of public affairs for the group, the PSW was accepting of the switch to Medicaid dispensing rate fees rather than the managed care payment plans they had been operating under, working collaboratively with the state in the process.

PHARMACY


BACK TO INDEX V

“The state said pharmacies would get better rates under Medicaid fee-for-service than managed care, saying brand reimbursement was better under FFS and the dispensing fee was better,” Engels said. “The big differ-ence is the generic reimbursement rate under FFS in Wisconsin is a lot lower, and around 70 percent of drugs dispensed under Medicaid are generics.”

Pharmacies are reimbursed for generic medications through the use of a formula that includes a Maximum Allowable Cost for the drug product and a dispensing fee. This is a different formula than what is used for branded medications, which are reimbursed using an AWP-based formula plus a dispensing fee. The phar-macy society determined the average reimbursement differential between Medicaid and commercial plans to be $1.61 for a prescription.

Outlook

The carve-out proposal didn’t generate much backlash from state health plans, perhaps due to the state’s concerted effort to provide the daily data extracts to the plans for case management. On a national level, insurers will be closely watching President Obama’s budget proposal. Allowing insurers to enjoy the same “best price” rights as fee-for-service Medicaid, the federal government will level the playing field and allow private insurers to show what savings they can generate.

PHARMACY


BACK TO INDEX V

Wisconsin Employers Test Potential Value of on-Site Care

BY RIC GROSS

With employers constantly looking for ways to gain control of healthcare costs and employee health behav-ior, companies nationwide are taking a new look at an old idea—the onsite health clinic. However, much like an old movie franchise reworked by Hollywood to feature the latest technology (see ‘Star Trek’), the current idea of the onsite clinic has transformed as well.

Unlike the factory-workers’ clinics of yesteryear, today’s variety are a more robust offering, targeting white-collar employees and even smaller companies, complete with disease management programs, electronic medical records and integrated care. The number of worksite clinics has expanded throughout this decade as large employers sought to ease the strain of employees missing work to see the physician. In addition, by having these sites on campus, employers realized they could improve healthcare outcomes by ensuring employees met with providers and took part in care management programs.

Wisconsin is no different than other states, with many employers embracing the idea and realizing a notice-able return on investment—starting with the state’s pioneer in the field, QuadMed, a subsidiary of global printing firm Quad/Graphics Inc., based in Sussex.

Dianne Kiehl, executive director of the Business Health Care Group of Southeast Wisconsin, which fea-tures more than 900 employers, said several of the group’s member companies have onsite clinics and have expressed satisfaction with the results.

“Onsite clinics offer employers more control over quality and cost,” Kiehl said. “They can focus on improv-ing the management of chronic illness. They also improve productivity since employees don’t need to take as much time off to get their medical care needs met.”

Table 3-1: Services Offered By On-Site ClinicsImmunizations 81% of recent adopters 91% of early adopters

Screenings 78% of recent adopters 88% of early adopters

Urgent care 63% of recent adopters 75% of early adopters

Mental health/EAP counseling 18% of recent adopters 22% of early adopters

Pharmacy services 44% of recent adopters 23% of early adoptersSource: Watson Wyatt Worldwide

Likewise, Cheryl DeMars, CEO of The Alliance, a Madison-based nonprofit, employer-owned healthcare purchasing cooperative, said some of the Alliance’s members have already turned that direction as well, including Lands’ End, Dodgeville; Seats Inc., Reedsburg; and Lab Safety Supply, Janesville.

“Several of our members are either implementing onsite clinics by hiring clinicians themselves or staffing them with clinicians from their local delivery system,” DeMars said. “Their makeup varies depending on the needs of the employee population. Some provide basic primary care, while a lot of them complement the efforts the employer is pursing in regard to wellness. It is definitely part of what we see as a growing trend.”

EMPLOYERS


BACK TO INDEX V

The model goes back decades with Kaiser, which needed healthcare sites for its employees. From that model serving Kaiser construction workers and shipbuilders grew today’s giant healthcare company Kaiser Perma-nente. The old model was available in the industrial Midwest, where large manufacturers installed worksite clinics for their workers.

Hewitt Associates recently surveyed 248 large and midsized companies and found that though onsite pro-grams and services are not common, they provide the highest degree of employee satisfaction to employers that offer them. According to the survey, 19 percent of the surveyed employers offered worksite medical clinics, and 11 percent offered worksite pharmacy services. They reported that 25 percent of employees used the clinics when they were available, and half used the pharmacies. Of the employers sponsoring worksite health programs, 81 percent expressed satisfaction with worksite clinics’ results and 95 percent were satisfied with the pharmacies.

Amid this growth, Wisconsin has certainly been a player, with QuadMed as the standard bearer. QuadMed was created in 1990 as a subsidiary of Quad/Graphics to provide healthcare services for the company’s 11,000 employees, bringing nearly all primary healthcare services in-house. Today QuadMed employs its own medical staff, operates its own laboratory, pharmacy, fitness and rehabilitation centers and contracts with local hospitals for specialized and advanced care.

Along with extensive disease management programs, an electronic health record system is also utilized, and employees are charged only $6 for an office visit. QuadMed operates eight clinics—for its employees in Sussex, Lomira and West Allis in Wisconsin, along with its sites in Saratoga Springs, N.Y., and Martinsburg, W.Va.; one for Miller Brewing Co. and two for Briggs & Stratton Corp. The company has two additional clinics set to open for a company in the Milwaukee area later this year.

In addition to the $6 office visit copay, costs are $30 to visit a specialist with hospital visits set at copays between $25 and $200 in the QuadMed preferred network.

“This is really a medical home type of model, fostering that personal relationship and complete coordination of care,” said Raymond J. Zastrow, M.D., president, QuadMed. “Where we have our clinics, I’d say 85 percent of the work population utilizes our clinics. We have internal benchmarks where we can look at evidence-based medicine and compliance rates. Where we have clinics, we have been able to see significant impact in terms of compliance in a positive direction.”

As for cost savings, if a self-insuring employer can proactively identify and manage health risks and chronic disease conditions in workers through a worksite clinic, the employer can directly capture any savings through the screening, management and treatment functions of the clinic. Quad/Graphics’ healthcare cost-per-employee comes in around 30 percent less than the average Wisconsin company.

“This is really a medical home type of model, fostering that personal relationship and complete coordination of care,” – Raymond J. Zastrow, M.D., president, QuadMed

According to a report by The Horton Group, Waukesha, the average healthcare cost in Southeastern Wis-consin for 2008 was $10,500 per employee. Conversely, QuadGraphics’ cost—including total operational expenses—was $6,600 per employee.

A key component of the strategy is keeping employees healthy and heading off any unnecessary visits to the emergency room. A dedicated pharmacy management and compliance regimen is imperative, and QuadMed has a variety of pharmacy incentive programs. For example, the company is eliminating copays on generics for a six-month period. Also, diabetics have no copays on diabetic medications and supplies if they remain compliant with their treatment regimen.

EMPLOYERS


BACK TO INDEX V

“The generic incentive program is really targeted to those who have been on a branded medication. It gives them the option of switching to a generic equivalent [with agreement from their doctor],” said Pat-rick Ross, pharmacy director, QuadMed. “We did that a couple of years ago and had about an 18 percent conversion rate. In our whole network, we have about a 69.3 percent generic fill rate.” Employees have a 25 percent copay for preferred, and 40 percent for non-preferred. Outside the network, that increases to 35 percent and 50 percent.

According to data from the company, in 2007 QuadMed provided 120,500 clinic visits, 122,100 prescrip-tions, 21,800 dental visits, 17,600 rehab visits and had 230,000 adjusted claims.

Others Filling The Space As Well

A host of others are following similar strategies, such as furniture company Steinhafels Inc., businesses involved in Manitowoc’s Health Care Coalition Cooperative, the city of Racine, the county of Sheboygan, among others. In addition, Wisconsin is home to 13 Take Care Health Systems clinics, a subsidiary of Wal-greens and the largest provider of worksite health and wellness and convenient care clinics in the country. Already, the company has treated 1 million patients at its Take Care Clinics, Walgreens said.

“I think the Walgreens’ purchase of Whole Health and CHD-Meridian, wrapping them into their Take Care division, sent an important signal to the market that there was really something here,” Zastrow said.

Table 3-2: Vendors Of Worksite Health Clinics» atWORK Health Services » MediWell

» Care ATC » MinuteClinic

» CareHere » Novia CareClinics

» Comprehensive Health Services International » OnSiteSolutions

» Concentra » QuadMed

» HealthSTAT » Take Care

» IMC Healthcare » WeCareSource: YACA Group LLC, The Doctor Comes To You

Take Care offers everything from a one-person fitness center or nurse-staffed center up to physician-led primary-care centers that can have 45 employees and cover 25,000 square feet.

Typically, 600 workers can support a one-practitioner model. The larger groups, or those with 30,000 to 40,000 workers, have larger locations and typically cover dependents and retirees. The clients range from steel plants in the Midwest to acute-care centers for major investment firms in Manhattan.

The cost of setting up these centers isn’t cheap. Typically, the employer foots the bill for setup, while the vendor works closely during the design process and advises on buying equipment.

In Manitowoc, Health Care Coalition member company employees have access to nearby clinics adminis-tered by Holy Family Memorial, a local provider, for a flat $45 fee. “The group decided they didn’t want to build or lease, and Holy Memorial already had two well-established walk-in clinics. So a ‘clinic-within-a-clinic’ was developed there [for HCC member employees, dubbed EasyCare],” said Nancy A. Cirra, account executive, MC Insurance Solutions for Business.

According to the Horton Group study, 90 percent of the time the patient will be seen by a physician, not a nurse practitioner, and the total wait time is around 30-45 minutes. “Onsite clinics have taken on many dif-ferent forms, and this is one of them,” Cirra said. “This is certainly a win for employers. We all know there is

EMPLOYERS


BACK TO INDEX V

a population of employees who never go to the doctor. Maybe this will get someone to go who hasn’t gone before, and maybe EasyCare will get them to establish a relationship with a primary care provider when they haven’t before.”

However, the growth of these clinics may slow with the economic recession. Jeff Dobro, a benefits coor-dinator with Towers Perrin, who works with the nation’s largest employers, said many large companies have a temporary freeze on capital projects that weren’t directly tied to their core business. Nevertheless, the results from on-site clinics seem promising, Dobro said. As noted, employers have seen significant financial savings, not just with replacing an expensive physician visit with a cheaper alternative on site, but with better operations.

Specifically, they witnessed improved management of people with chronic conditions, better utilization of pharmacy services, better health coaching and improved tobacco cessation rates. In truth, the recession offers mixed opportunities. Employers that are downsizing may have less need for onsite clinics, but those looking to improve their bottom lines are looking at the on-site model as a long-term cost-saving measure.

“I think a lot of employers will turn this way in 2009 and 2010,” said Andy Serio, division president of the Horton Group, Waukesha. “They can do that either by putting in one of their own, or by referring people to a Walgreens or a healthcare system. It really works well for people with high deductible, consumer-driven plans.”

Self Insured Companies Tend To Be More Frequent Utilizers

Ties to health insurers remain uncertain, since the clinics remain largely the province of large, self-insuring companies. A health center can be administered as a stand-alone benefit, or integrated into an existing com-pany health plan administration through a TPA or an ASO arrangement. Some managed care companies agree to waive or reduce copays when workers visit the company clinic. The model also fits in well with employers that have adopted high-deductible health plans with medical spending accounts for employees.

Employees are always free to seek services at other providers within their PPOs, but given the cost benefits, it’s hard to see why insurers wouldn’t rather see members using the clinics.

Health insurers have another way to capitalize on the value of on-site clinics: open them for their own employees. Horizon Blue Cross and Blue Shield of New Jersey has opened three worksite clinics at its offices and support centers with Take Care.

Outlook

As with many things in the current economic environment, the nation’s recession could slow clinic project development, but some companies involved in the sector say that slowdown hasn’t reached them yet. Their proliferation over the next two years will depend on external economic factors and how well companies link employee health to a bottom-line issue.

EMPLOYERS


BACK TO INDEX V

Wisconsin May Be Latest To Build Medicaid Medical Home Pilot

BY RIC GROSS

Already a state with a strong track record of utilizing managed care, Wisconsin may institute a patient-centered medical home pilot program for the state’s Medicaid population.

However, with a massive of $6.6 billion budget deficit to deal with, it is unclear the priority level Wisconsin lawmakers will place on the bill. Regardless, the idea is one officials are intrigued by, though Wisconsin relies almost exclusively on managed care for its Medicaid population, with care coordination elements in place.

The state morphed its public programs into one comprehensive safety net initiative dubbed BadgerCare Plus. Enrollment in an HMO is mandatory in areas where two or more HMOs accept Medicaid/BadgerCare enrollees. If only one HMO is in a service area, members can choose HMO or FFS. Currently, 47 counties have mandatory enrollment in the entire county.

Medicaid HMOs in the state include Abri Health Plan, Children’s Community Health Plan, Anthem Blue Cross and Blue Shield in Wisconsin (through its Compcare HMO), Dean Health Plan, Group Health Coop-erative of Eau Claire, Group Health Cooperative of South Central Wisconsin, Gundersen Lutheran Health Plan, Health Tradition, Independent Care Health Plan, Managed Health Services, Mercy Care, Network Health Plan, Security Health Plan, UnitedHealthcare and Unity Health Plan.

Table 4-1: The 11 Requirements For A Patient-Centered Medical Home1. A personal medical home 7. Integrated and whole-person orientation

2. Patient-centered care 8. Care provided within a community context

3. Team approach to care 9. Focus on quality and safety

4. Elimination of scheduling and communication barriers 10. Sustainable reimbursement and profitable practices

5. Advanced, data-based information systems, including elec-tronic health records

11. Commitment to provide a consistent set of services

6. Redesigned and more functional officesSource: Robert Jackson, M.D., Medical Advantage Group

“We are confident we have some good momentum going [to implement a medical home pilot],” said Larry Pheifer, executive director, Wisconsin Academy of Family Physicians, strong supporters of the initiative. “In Wisconsin, none of the private insurers really have a large enough market share that would make physicians want to do what they need to do to invest in becoming medical homes. Maybe the legislation will be the impetus, even though it is just for Medicaid, for the payors to say, ok something is out there, now let’s model what we want to do,” Pheifer added. “The commercial HMOs are pretty much the same as the Medicaid HMOs, so maybe that would get things rolling.”

Phil Dougherty, senior executive officer for the Wisconsin Association of Health Plans, said the association has not taken a position, but is following the bill and continuing to explore the concept. “The potential for the medical home is uncertain, given the penetration of managed care [in the state] and its work in care coordination. What problems would the medical home address? It would increase payments to primary-care

MEDICAL HOMES


BACK TO INDEX V

physicians and possibly incentivize more students to pursue primary-care careers. On the care coordination side, in the BadgerCare Plus program many of the plans have been able to establish networks and structures that already do much of what the medical home purports to do.”

For example, North Carolina invests heavily in medical homes and features the approach as the backbone of its Medicaid program, which does not contract with MCOs. Results from 2004 found North Carolina Community Care invested $10.2 million to run the program and saved $244 million overall in healthcare costs statewide. The state focused on four quality improvement areas: disease management, high-risk and high-cost patients, pharmacy management and ER utilization. Similar results were seen in 2006 and 2005.

“North Carolina was moving straight from fee-for-service, so the magnitude of the cost savings would cer-tainly be different [in Wisconsin] as we already make extensive use of managed care,” said Donna Friedsam, health policy programs director with the Population Health Institute in the University of Wisconsin School of Medicine and Public Health. “The question is, how does this work when you go through the HMO? Where does the money come from and what is the fund flow? I think people want to do it here, and everyone shares the interest of supporting the viability of primary-care practices, but where is the return on investment and is it going to come to the state agency or the HMO, and in which case should the HMO themselves be putting out investments to establish medical homes.”

Medical Home Stresses Team-Based Model Of Care

The medical home concept centers on a team-based model of care, whereby a primary-care physician provides coordinated care throughout a patient’s lifetime. This care includes preventive services, as well as coordinated treatment of acute and chronic illness.

The medical home is meant “to address the fragmented, uncoordinated episodic care that many Americans receive,” according to the 2007 annual report of the National Committee for Quality Assurance. The report said that “with an estimated 150 million Americans predicted to be living with at least one chronic illness by 2015, the importance of comprehensive care management cannot be underestimated.”

Table 4-2: Estimated Benefits From PCMH ModelSavings on inpatient and physician reimbursement 30%

Reduction in hospital admissions 10%

Reduction in ER visits 20%

Reduction in absenteeism 10%Source: Deloitte Center for Health Solutions, “The Medical Home: Disruptive Innovation for a New Primary Care Model”

A variety of medical home pilots are under way across the nation. For example, New Hampshire and Maine are beginning patient-centered medical home pilots, working with the state’s major insurers, Medicaid pro-grams and selected physician practices. That initiative came on the heels of Rhode Island’s Medicaid program launching a chronic care medical home pilot, which went live Oct. 1, 2008. Neighboring Minnesota, mean-while, passed a law last year that lays the groundwork for statewide implementation of chronic-care medical homes for all beneficiaries of Medicaid and the Children’s Health Insurance Program or CHIP, as well as for state employees and the privately insured. Details are still being worked out, but the legislation mandates that by Jan. 1, 2010, all health plans must include healthcare homes in their networks, while by July 1, 2010, all insurers must pay a care coordination fee to certified healthcare homes.

As for provider payment in the medical home concept, payors work with the individual pilot practices to develop alternative payment for primary care that recognizes the infrastructure and system investments needed to deliver care, as well as rewards for high quality and efficient care. The most common payment

MEDICAL HOMES


BACK TO INDEX V

method is a three component system that includes a care management fee, ongoing fee-for-service payments, and some type of performance-based bonus payment.

In Rhode Island’s model, for instance, health plans are providing funding to allow nurse case managers to operate on-site, as well as a monthly $3 per member, per month fee to each practice for enhanced services.

In Rochester, N.Y., Excellus Blue Cross Blue Shield and MVP Health Care are jointly putting up funds to transform adult primary-care physician practices into patient-centered medical homes. Aside from the start-up funds, the pilot project also emphasizes a new payment methodology for participating physicians. For example, there will be fee-for-service payments to physicians but also an additional payment based on the number of patients they have with chronic conditions, such as asthma, diabetes and heart conditions. The second and third years of the pilot, participants will be entitled to higher payments based on achieving performance metrics.

“We did an analysis of the Minnesota legislation, and looked at North Carolina and some of the other pilots out there,” Pheifer said. “We are suggesting a bump in the fee-for-service payment for primary care in the medical home, as well as a $5, $10 or $15 case management fee, per member per month, based on National Committee for Quality Assurance recognition.”

Physician practices must be recognized by the NCQA to be deemed as patient-centered medical homes. The NCQA has three levels of certification for medical homes that increasingly involve more care coordination activities, management of data registries and proactive population-based care. No Wisconsin practices are currently NCQA certified, although many are far along the curve toward making that happen. “We did a survey, and found 31 practices are working toward that, so we feel we good in that regard,” Pheifer said.

Medicaid Programs Turning Toward The Concept

The medical home model has grown increasingly popular in state Medicaid programs. Today more than half are testing the model for at least a portion of their members. According to the National Academy for State Health Policy, which tracks states’ healthcare initiatives, there have been 31 states since 2006 that have adopted some kind of medical home program in their Medicaid and state Children’s Health Insurance Programs. Some are doing demonstrations they hope to take statewide, while others are targeting specific populations, such as chronically ill adults.

States are looking at solid evidence that shows focusing on primary care can prevent costly hospitaliza-tions and improve outcomes for patients. They’re attacking the 80/20 issue: 20 percent of beneficiaries are responsible for 80 percent of costs. By improving primary care for that 20 percent group, later costs can be prevented.

“I think the data does show there have been cost savings as a result of managed care, but the question we pose is, is the case management done by the HMOs the most effective place or should it be in the medical homes, and if so, what should the compensation be,” Pheifer said.

Outlook

Medical homes are gaining steam, and it is easy to see why, what with the promise of healthier com-munities, and less dependence on emergency services. As data begins to roll in from the various pilots across the country, a clearer picture will emerge of the viability of such endeavors, and their impact on utilization and spending on prescription drugs and other medical care. With Wisconsin’s tricky budget situation and proliferation of managed care, passing the medical home pilot bill may not be at the top of the list, however.

MEDICAL HOMES


BACK TO INDEX V

Local Insurers Taking Look At Value-Based Drug Benefit Design

BY RIC GROSS

While Wisconsin’s home-grown insurers have had success in pushing members to choose less costly generic drugs, a few are now testing the merits of a value-based insurance design.

The VBID concept, gaining traction around the country, reduces cost barriers to medications deemed most effective in controlling chronic diseases to drive patient compliance with treatment. Sometimes the price reduction for one drug is offset by the increase of another deemed less critical. For instance, a life-saving statin drug might be on the free tier, while a lifestyle drug, such as Viagra, might be in the most expensive category.

Although some plans and employers have been experimenting with VBID since the early part of the decade, interest spiked when professors associated with the Center for Value-Based Insurance Design published a Journal of Health Affairs article touting the improvements in care and cost gained from switching to a clini-cally sensitive formulary design. The design is most common for diabetes—not just because it’s an epidemic, but also because there’s enough evidence to show that management of the disease can save costs.

In Wisconsin, provider-owned insurers Security Health Plan, Network Health Plan and Dean Health Plan all have put forth some VBID program. For instance, Security Health Plan—sponsored by the Marshfield Clinic—piloted a program for its own employees centered on asthma and diabetes and is now offering it to employer groups.

Twila Johnson, pharmacy director for Security Health Plan, said the program offers comprehensive disease and case management, with no copays for drugs used to treat those conditions as long as enrollees are par-ticipating. “We decided to pick two disease states that would be measured slightly differently,” Johnson said. “Asthma is one we think can be measured quickly, in terms of decreased emergency room visits, whereas with diabetes we have the potential to measure the effects of preventing long term complications and costs.”

Table 5-1: Traditional Drug Utilization By Generics And Brands2007 PMPY Utilization 2008 PMPY Utilization Trend

Generics 8.64 prescriptions 9.28 prescriptions 7.5%

Brands 5.65 prescriptions 5.04 prescriptions -10.9%Source: Express Scripts 2008 Drug Trend Report

In addition, the insurer is considering a high-deductible health plan offering with a preventive drug benefit included, comparable to benefit structures where preventive measures such as physicals, mammograms, etc., are offered at no charge to members. Johnson said the drug benefit could be free or have a modest copay, but members wouldn’t have to meet their deductible for those drugs. She stressed that the company is still only considering the product.

“If a member is taking a statin to prevent cholesterol build-up, for example, then the statin would be con-sidered preventive,” Johnson said. “The problem is if you consider a drug preventive or not—some are clear

PHARMACY


BACK TO INDEX V

cut, some are not. It is something we are hoping to have ready for 2010, and I think since we are smaller than some of the larger plans, we have the flexibility to try something like this.”

Menasha-based Network Health Plan, a part of the Affinity Health System operating in a 16-county area in eastern Wisconsin, has set up a VBID program for a middle-sized client with a few hundred lives. The plan has zero copays for generics treating diabetes and asthma, for example.

“It is a real hot topic right now, because a couple of projects out there have shown value-based designs work and save money,” said Chuck Rynearson, director of pharmacy benefits for Network Health Plan. “Part of the problem, however, is that people that implement them only do a piece of it. In general, if you do zero copay for some of your maintenance drugs, you will get a bit better compliance, but by the second half of the year it is starting to fade away. If you tie a zero copay into a disease management program, that is where you will get your savings. Not too many are positioned to set those kind of programs up, but it is the actual disease management program that saves money, in my opinion.”

Madison-based Dean Health Plan, the insurance subsidiary of Dean Health Systems and SSM Health Care, is piloting a VBID program for the state of Minnesota through its pharmacy benefits manager, Navitus Health Solutions, owned by the insurer. The pilot began in January and centers on diabetes care, involving two pharmacies in the Minneapolis area. Pharmacists at the clinic play an integral role, ensuring medication compliance with enrollees.

“Members don’t pay a copay for those drugs as long as they meet with the pharmacist,” said Robert L. Palmer, CEO of Dean Health Insurance, parent of Dean Health Plan. “If they fail at any point to meet with the phar-macist or are in non-compliance with their medication, they are removed from the program.” Palmer said if the program proves to be effective, it could be expanded to other clients.

On the employer front, Cheryl DeMars, CEO of The Alliance, a Madison-based nonprofit, employer-owned healthcare cooperative, said member companies are looking to move to VBID. “I know our members are very interested in exploring that model,” she said. “It is a more tailored approach to benefit plan design to just covering things at a broader level in the same way. There is an interest in understanding what it would take to successfully implement those types of plans, and we will be exploring that with our members in the next year or so.”

Generic Utilization Remains Strong In Badger State

Meanwhile, though VBID is the new kid on the block, so to speak, insurers have been pursuing aggressive generic strategies for some time, and results seem to be paying off. On a national level, a new report from Express Scripts shows overall pharmacy cost trend for its clients was 3 percent for 2008, down 2.5 percentage points from 5.5 percent for 2007, while the data showed generic drug usage increased 7.5 percent over the same time frame, compared to use of brands decreasing by 11 percent.

By the end of 2008, 67.3 percent of all prescriptions Express Scripts filled were for generic drugs. In com-parison, the national average for generic drugs was 63.7 percent for the 12 months ending September 2008, according to IMS Health. In addition, options to save more by using generics will continue to expand going forward. According to Express Scripts, in 2009, at least 20 branded drugs are expected to become available generically, and over the next five years, more than $66 billion worth of branded drugs are expected to lose patent exclusivity.

To urge members to use generics, health plans have long used tiered formularies, with generics having the lowest copay, preferred brands a slightly higher copay, while non-preferred branded drugs cost members more. In addition to the tiered formulary, health insurers in Wisconsin—and nationwide as well—have become more active in pushing generics in recent years. Various public marketing campaigns have touted the benefits of generics and created even greater financial inducements to use generic alternatives.

PHARMACY


BACK TO INDEX V

Step therapy is commonly employed in drug utilization management to require health plan members to try a generic or preferred brand drug from the same therapeutic class before their physician can prescribe a more expensive drug. If the generic does not have the desired effect on the patient’s condition, the physician can then step them up to a brand-name drug. The tactic is effective in moving generic utilization among members who are beginning a drug for the first time or have not refilled a prescription for a time.

Table 5-2: Express Scripts Member Copayment Trends’07 Avg. Copayment % Total Cost ’08 Avg. Copayment % Total Cost Trend

Generics $7.45 29.6% $7.82 29.0% -2.3%

Brands $21.48 20.9% $22.69 19.6% 5.7%

Specialty $41.06 2.7% $44.04 2.6% 7.3%Source: Express Scripts 2008 Drug Trend Report

Madison’s Group Health Cooperative of South Central Wisconsin—a staff-model HMO serving Columbia, Dane, Dodge, Iowa and Sauk counties—has a variety of generic incentive programs, resulting in a 75 percent generic utilization rate. The insurer has a two-tiered benefit, with copays of $5 generics, $20 for brands, and manages its benefit in-house. The insurer promotes the use of generics through its mail pharmacy with a “three-for-two” copay option, whereby members can receive a 90-day supply of certain generic prescriptions for the cost of two copayments when utilizing mail order.

“One thing we also do, when we decide drug ‘X’ is something our benefit plan will cover, if it is available as both a brand and generic—and is bioequivalent—we will normally cover only the generic unless the brand is a medical necessity indicated by the physician,” said Paul Baum, manager of pharmacy services for GHC of SCW. “We do copays rather than coinsurance, as people like the predictability, and employers in our area have been hesitant to take on coinsurance.”

The insurer has not adopted a VBID program, though Baum said it is keeping an eye on the trend. “We have not jumped into that arena yet—we think the evidence is still a bit mixed,” he said. “I think the results depend on how it is implemented, and where they came from. For instance, how effective was their diabetes disease management programs, how high were the copays? Our copays tend to be on the low side as compared to the industry average. Those with higher copays are more likely to see a bigger impact when they reduce them. In effect, we feel we have reduced copays for everybody in all disease states.”

Generic dispensing rates remain strong at other provider-owned plans as well, with Network Health report-ing a 75 percent generic fill rate; Security Health Plan, 73 percent; and Dean Health Plan, 73 percent.

Outlook

Generic substitution has the opportunity to save health plans and members millions. Wisconsin health plans have been pushing the importance of generics, and as more drugs come off patent, health plans can push generic versions of these popular drugs and possibly forestall premium increases. Expect value-based design programs to continue to gain steam, especially among larger companies that self-insure their workers.

PHARMACY


BACK TO INDEX V

Dean Health Plan Looks To Expand Reach of Its PBM

BY RIC GROSS

Madison-based Dean Health Plan is aggressively expanding the reach of its self-owned pharmacy benefits manager, Navitus Health Solutions, though the economic downturn may stall a planned bid to bring on multiple partners.

Navitus was founded in 2003 by Dean Health Plan and the former owners of Touchpoint Health Plan, ThedaCare and Bellin Health. However, Touchpoint was sold to UnitedHealthcare in April 2004, and with no mutual HMO interest, the timing was right in 2007 for the former Touchpoint owners to sell their half to Dean Health Plan. Since the acquisition, Dean Health Plan officials have been working overtime to add new business.

In the past few months, Navitus—which has customers based in 12 states—closed out its first year admin-istering pharmacy benefits for Minnesota’s employee health program; took over the pharmacy contract for Oakland County, Mich.; was recommended by the Midwest Energy Association as the preferred PBM for its small to midsize members; and added a pair of contracts close to home.

Table 6-1: Navitus Health Solutions: Business ModelPharmacy Network Discounts

» Conventional PBM - Client is billed at a marked up rate and the spread (difference between reimbursement paid to the pharmacy and the price billed to the client) is retained by the PBM so that the more costly the prescription, the more revenue for the PBM

» Navitus - Client is billed at the actual contractual cost negotiated by Navitus with the pharmacy; no spread cost exists

Pharmaceutical Manufacturer Rebate Agreements

» Conventional PBM - PBM either retains a percentage of rebate dollars or receives fees from the pharmaceutical manufacturers

» Navitus - All rebates and manufacturer fees are passed along to the client

Claims Transaction Fees

» Conventional PBM - Per prescription’ transaction fee

» Increased utilization increases PBM revenue

» Navitus - Per member per month’ administration fee

» Increased utilization has no effect on revenue Source: Navitus Health Solutions

In late spring, it was announced that Navitus had inked PBM contracts with Wisconsin-based Johnsonville Sausage, as well as a deal with the city of La Crosse. Both contracts are for three years, with the Johnsonville Sausage deal including 2,400 employees and their dependents, and the La Crosse pact including 1,800 government employees, retirees and their dependents. In addition, Navitus recently completed its fifth year acting as PBM for the Wisconsin State Employee Group Health Insurance Program and renewed its contract with the city of Milwaukee.

“We have picked up quite a bit of business lately, including some good business in Arizona [the Arizona

HEALTH PLANS


BACK TO INDEX V

Local Government Employee Benefit Trust and Rural Arizona Group Health Trust],” said Robert L. Palmer, CEO of Dean Health Insurance, parent of Dean Health Plan. “We are not much short of a million lives under management now, and we consider that pretty good growth.”

Another growth engine officials are looking toward is bringing on other provider-sponsored HMOs as part-ners, with around 200,000 lives being required to become a partner. Palmer said the company is currently in negotiations with another HMO to come on board as a partner—economy permitting, that is.

“We set Navitus up in a business model that is unacceptable to any kind of venture capital for taking public. We are not looking for margins that would appeal to a publicly traded company,” Palmer said. “We have a [provider plan] we are talking to, but things have gotten sidetracked a bit due to the economy, specifically the issues all health insurance organizations have faced around hits to the investment portfolio. Health plans have to turn their attention toward that, and look at how to deal with that situation from an accounting per-spective going forward. I still have strong expectations that we will take on other provider partners in Navitus in the future, and I would like to say in the very near future, but we’ll see.”

Navitus, which oversees around $500 million in prescription drug sales annually, is not as sizeable as giants such as Medco, Express Scripts and CVS Caremark, and officials have been working to show Navitus is not just an upper Midwest company.

Navitus has gained notoriety for the way it does business and its role in lowering prescription drug costs for state and local government employees in Wisconsin. Audited findings show $157 million in savings the first three years and an overall projection of $250 million in savings as of 2008 for the state of Wisconsin.

Navitus negotiates rebates and discounts on behalf of its customers and passes those savings back, not mark-ing up the cost for drugs it manages for its clients—a major source of revenue for most traditional-model PBMs. The company has a fully transparent model, in which customers can do an audit and take a look at all transactions that occur in Navitus that affect their business. They can track them to ensure they are getting the correct pricing on their business.

Jim Mueller, executive president of insurance brokerage firm Willis Group Holdings, said Navitus does face a challenge in swiftly building numbers in the PBM space. “It is a good concept and a good product, but it is tough competing against the likes of Medco and Express Scripts, and the market share those organizations have,” Mueller said. “The kind of lives [Medco and Express Script] have give them so much more leverage and buying power.”

Outlook

Adding several provider-owned plans with significant lives could be one answer to swiftly adding numbers and market share for Navitus Health Solutions. However, the economic climate is an impediment. Still, going after provider-sponsored plans as partners is a sound strategic move.

HEALTH PLANS


BACK TO INDEX V

Wisconsin Health Plan BriefsBY RIC GROSS

Children’s Community Health Plan, a three-year-old Medicaid-only HMO, announced it will distribute a total of $500,000 in bonus payments to physicians and providers in recognition of their commitment to improving access to healthcare for its members. Children’s Community Health Plan covers more than 26,000 children and adults eligible for BadgerCare Plus in the Wisconsin counties of Milwaukee, Waukesha, Racine, Kenosha, Ozaukee, Washington and Walworth. The $500,000 bonus will be distributed among all primary care physicians, Ob/Gyns, office-based specialists, dentists and providers of behavioral health, physical and speech therapy, home health and durable medical equipment that were paid in 2008 for providing health care services to Children’s Community Health Plan members.

The insurer also announced it will be paying bonuses later this year to individual physicians in the areas of lead testing, diabetes management and asthma management. The bonus amount for each provider is based on either the number of visits they had with Children’s Community Health Plan members, or the total dollars paid for these visits, depending on the provider’s specialty.

HEALTH PLANS


V BACK TO INDEX PEOPLE

People In The NewsPlease send announcements to RIC GROSS at [email protected].

Announcements also may be faxed to 615-385-4979.

ToM LUTzoWTom Lutzow has been named president and CEO of Milwaukee’s Independent Care Health Plan (iCare), hav-ing served as interim chief since September 2008, replacing Patricia Jerominski, who left to lead an HMO in Hawaii. Lutzow is credited as one of the original architects of iCare in the early 1990s, and has served on the iCare board of directors since that time. He previously served as Milwaukee Center for Independence’s vice president over the employment services division, which included vocational programs, food service and client training. Founded in 1994 as a joint venture of Humana and the Milwaukee Center for Independence, iCare provides Medicaid and Medicare services for those who are disabled, elderly and low income in Southeast Wisconsin.

John Wuich has been named director of membership development for the Business Health Care Group, operating in a 11-county region of southeast Wisconsin and representing more than 175,000 healthcare consumers. In his new position, Wuich will focus on new BHCG member recruitment and the retention of current members. Prior to accepting his new post, Wuich served as vice president, national client manager, with Automatic Data Processing Inc. In this role, he was responsible for client retention and account growth. Prior to ADP, Wuich served as a principal with Mercer’s human resources consulting practice where he assisted clients in communicating their compensation and benefit packages.

mailto:[email protected].


BACK TO INDEX WISCONSIN METRICS

wisconsin - the horton group · stephen benton staff accountant jackie sawyer ... toll free:...

Documents