2002 National Health Policy Conference: RESOURCE GUIDE

THE 2002 NATIONAL HEALTH POLICY CONFERENCE
Washington D.C., 16-17 January 2002

Sponsored by the Academy for Health Services Research and Health Policy and Health Affairs

In the aftermath of September 11, a changed policy environment presented itself at the 2002 National Health Policy Conference, held in Washington by Health Affairs and the Academy for Health Services Research and Health Policy, 16-17 January 2002. Against a backdrop of recession and pinched public budgets, bioterrorism preparedness has eclipsed other priorities and pre-9/11 issues struggle for attention. But a new emphasis on building the public health infrastructure emerged during the conference as a theme that connects the new policy agenda to concerns that preceded it.

Wednesday, January 16

Jeffrey Koplan, director of the Centers for Disease Control and Prevention, introduced the theme in remarks opening the conference on 16 January, and it continued to resonate thereafter. Preparedness for a bioterrorist attack requires deployment of epidemiologists, supplies of vaccines and antibiotics, adequate laboratories, surveillance capabilities, information systems, and communications capabilities. These are all the same elements that are needed for routine public health activities such as monitoring emergent infectious diseases, detecting environmental health threats, tracking disease patterns, and improving public safety. "It's a dual system," Koplan said. "As we improve our capability for bioterrorist events, it is not a preparation that only looks at the unlikely but disastrous. It's something that can be used on a day-in and day-out basis."

A long history of underinvestment in public health is partly a result of the diffuse and poorly understood range of activities it encompasses, he explained. Interventions may include water quality, improved sanitation, safe foods, workplace and vehicle safety, fire safety, lead abatement, immunizations, tobacco use, and a variety of disease prevention activities at the interface of public health and medical care--promotion of physical activity, for example, or prevention and primary care related to heart disease, stroke, diabetes, and infectious diseases.

"The nation's desire to prepare for wartime threats places us on the verge of the largest investment in public health infrastructure in history," Koplan concluded. "We must ensure that today's investments build a healthier tomorrow, not just protecting us from terrorism, but protecting us from the threats we all face to our health every day." (Transcripts, webcasts, and other resource materials from the conference are available at www.academyhealth.org and at www.kaisernetwork.org.)

Thomas Scully, administrator of the Centers for Medicare and Medicaid Services (CMS), followed Dr. Koplan with an overview of the Bush administration's thinking about the agency's agenda. Health and Human Services Secretary Tommy Thompson has a high opinion of the CMS staff but gave Scully a mandate "to change the place and shake it up" because of the perception of providers and the public that it is a slow-moving and unresponsive bureaucracy, and because constant criticism has put the staff on the defensive. Changing the agency's name (from the Health Care Financing Administration) was a symbolic first step. A $30 million ad campaign featuring comedian Leslie Nielson has generated 65,000 calls a day to a beneficiary hotline. Streamlining the CMS's system of fifty-one private contractors that administer the Medicare program is a further objective, although contractor reform stalled in the Senate in 2001 after passing the House. Scully has also created eleven "open-door" policy groups to meet with CMS leaders to air concerns on issues such as rural health, nursing homes, home health, and long-term care. But Scully acknowledged that the CMS programs are "a big, big ship to turn" and that change will come slowly. "I'm just a temp," he joked.
Other administration priorities reflect long-standing bipartisan aspirations: providing consumers with improved information about the quality of plans and providers; expanding coverage of the uninsured; and finding a way to add a drug benefit to Medicare. But the scenarios are less expansive than they were at the first AHSRHP-Health Affairs national policy conference a year ago. Thompson recently announced a state demonstration project to publish in major newspapers comparative outcomes data on nursing homes in six states and to do likewise with home health agencies in the future. The National Health Quality Forum is helping with the metrics.

The administration has sought a middle ground between the positions that have divided Congress on a Medicare drug benefit, in terms of the relationship between such a benefit and proposals to restructure the balance between the fee-for-service program and private plans, Scully said. The administration's discount card proposal is seen as a "building block" toward a new benefit, offering short-term group-purchasing leverage to individual beneficiaries who are now grossly disadvantaged by retail prices. But infrastructure, expertise, and actuarial data are not yet adequate to launch a full-scale benefit, and a gradual approach is in order, he said, without raising the issue of cost or budgetary constraints.

Scully said that he did not know how large the administration's likely tax-credit package for the uninsured will be in its upcoming budget proposal ("I wouldn't tell you if I could"), but that last year's $100 billion proposal indicated the president's level of concern. A "huge philosophical debate" continues between Republicans and Democrats on coverage strategies, "and this is what melted down the uninsured package before Christmas," he noted, referring to unsuccessful negotiations on an economic stimulus package at the end of the 2001 congressional session.

Gov. John Kitzhaber, representing the perspective of the states, extrapolated from Oregon's unique experience with Medicaid to probe the dormant issue of comprehensive national reform and universal coverage. In his dual career as a legislator and emergency physician, Kitzhaber participated in trimming Medicaid eligibility and then treated critically ill patients who wound up in the emergency room as a result of lacking coverage. "What kind of system would pay to treat someone's stroke in the hospital but not to manage their blood pressure in the community?" he asked, later mocking a categorical entitlement system that presumes "to differentiate between the deserving poor and the undeserving poor."

Incremental changes such as a Medicare drug benefit or patients' bill of rights do not represent health system reform, Kitzhaber asserted. "It's about ensuring a floor of basic and primary and preventive care" for forty million uninsured people, he said, alluding to the Oregon model, "and applying limited public resources to those services which produce the greater health gain for those who depend on publicly subsidized health care." Although his criticism of Medicare raised a few eyebrows, Kitzhaber's appeal received an enthusiastic response from an audience of about 600.

Former U.S. Surgeon General Antonia Novello, now New York State's health commissioner, wrapped up the conference's opening session with a whirlwind tour of New York's response to the September 11 World Trade Center attacks that put local, state, and federal interactions; emergency preparedness; and the public health infrastructure all in a common nexus. New York had the advantage not only of deep public pockets and 66,000 hospital beds but a series of earlier emergencies--the previous World Trade Center attack, West Nile virus, meningitis, malaria, an ice storm, and a diarrhea epidemic--that tested and trained responders.

Some of the logistics: managing 50,000 doses of tetanus vaccine; deploying 525 ambulances; ordering 72,000 physicians to treat presenting patients regardless of coverage; creating a system of emergency Medicaid eligibility; coordinating identification of casualties; creating a special EKG unit for mushrooming chest pain cases; ramping up disease surveillance around ground zero; ensuring safe food for rescue workers and other volunteers; restoring electric service and safe water; monitoring air quality and exposure to dust, smoke, and fumes; and environmental testing for asbestos, dust, silica, metals, carbon monoxide, benzene, dioxide.

"Then anthrax came to New York," Novello continued, in her breathtaking litany. State labs tested more than 1,000 powder specimens, but communications was the biggest challenge--collecting information for the public and for providers, and underscoring the need for interconnecting data systems that allow public health officials to understand the scope of a bioterrorist attack. Novello identified surveillance capabilities, surge capacity at health facilities, an adequate workforce, appropriate public health laws, emergency communications, agency and jurisdictional coordination, and laboratories and pharmaceutical supplies as the factors on which future preparedness depends.

Former HHS Assistant Secretary Margaret Hamburgdescribed in more general terms the continuing threat of bioterrorism and some of its policy implications. "Lights and sirens" won't signal these attacks, but unusual cases turning up in doctor's offices, clinics, and emergency rooms will. Delays in diagnosis will occur. Symptoms will be unfamiliar to providers. Continuing contagion or exposure may protract the attack. The ability to "detect, investigate, and respond" will require trained personnel, lab capacity, and communications systems that link different levels of government and the health system. Hamburg stressed the need, arising from the disconnect between public health and medicine, "to really inform physicians about their roles and responsibility in terms of disease reporting and connection with the health department," and public health's responsibility to be informed and available when doctors call.

The right legal framework matters, too, she said, including authority to quarantine but also protection of civil liberties. Coordination of medical capabilities, whether it be pharmaceutical supplies or medical personnel, requires regional and intergovernmental collaboration, since every community can't afford surge capacity and stockpiles. Hamburg noted the tension between business pressure to downsize and new concerns about capacity, partly in the form of hospitals' fear of being left to pick up the tab when they volunteer facilities and payroll during crises--unless emergency reimbursement arrangements are put in place. To tend the interface between public health and security concerns, she suggested appointing a medical official to the National Security Council.

The theme of synthesizing emergency preparedness with long-term public health infrastructure needs was pursued further in a workshop led by Allan Rosenfield, dean at Columbia University's Mailman School of Public Health. The local infrastructure is the most critical piece of the system, but the least well recognized and understood, said workshop presenter Dean Rosen, minority staff director on the public health subcommittee of the Senate Committee on Health, Education, Labor, and Pensions. In the wake of a 1995 Sarin gas attack in Tokyo and insistent appeals by Surgeon General David Satcher, the U.S. began ramping up spending on bioterrorism, from about $90 million in 1998 to $500 million in 2001, he said. HHS received an additional $2.6 billion after September 11, and Secretary Thompson announced shortly after the conference that $1.1 billion of that amount will go to state and local public health departments. Another $1 billion is earmarked for smallpox vaccine, research, food safety, and intergovernmental communications; and $135 million is designated for hospitals, according to news reports. This scheme lends itself to the kind of dual-purpose spending suggested by Koplan and Hamburg, Rosen noted. But a local board of health representative expressed worries about sustaining infrastructure investments, particularly for trained personnel, and the difficulties state and local jurisdictions will have at a time of severely stressed budgets making commitments to fund staff increases over time unless further federal support is assured.

Connecticut Health Commissioner Joxel Garcia said that his state had implemented an emergency health alert network in 1999 and conducted bioterrorism training for staff in 2000. On September 14--three days after the World Trade Center attacks--a statewide hospital admissions surveillance system was implemented, requiring all hospitals to report data on a daily basis. In October, after the first anthrax mailings occurred, hospital surveillance was upgraded, and Post Office facilities were tested. On November 14 a Connecticut woman was hospitalized for a suspected anthrax infection, which was confirmed several days later, and on November 21 she died. Connecticut's preparations allowed the state to respond rapidly to the emergency, but Garcia said that further integration of the surveillance system and other improvements are still needed.

Carmella Bocchino, vice-president for medical affairs of the American Association of Health Plans, focused on the need to coordinate activities of public health agencies with the private sector including physicians, clinics, urgent care centers, hospital emergency rooms, health plans, and nurse telephone call lines. Patterns of complaints presenting in ambulatory settings predict future hospitalizations, Bocchino said, suggesting the value of collecting intelligence from nurse call lines prior to encounters, creating an important coordination role for health plans. The research and planning agenda for future preparedness should include creating protocols for extracting data from these call lines, standardizing syndrome descriptions, developing software to support these efforts, creating standard report formats, and testing implementation of these procedures.

A workshop on prescription drugs was led by Stanley Wallack, director of the Schneider Institute for Health Policy at Brandeis University, who presented an overview detailing the increase in the use and cost of pharmaceuticals and posing the central problem of how to assess the health benefits and avoided medical costs they confer relative to spending increases. (Several articles on this subject appeared in the Sep/Oct 2001 issue of Health Affairs, volume 20, number 5, and can be viewed at www.healthaffairs.org. Two slide presentations from the workshop are available at www.academyhealth.org or www.kaisernetwork.org.)

Barrett Toan, president and CEO of Express Scripts, one of the largest U.S. pharmacy benefit managers, described the evolution of private drug benefit management from early coinsurance and deductibles to flat copays to two-tier copays encouraging generic use in the mid-1980s and three-tier copays beginning in the mid-1990s, differentiating between generics, formulary brands, and off-formulary brands. Current arrangements give patients more choices and financial responsibility but may inhibit optimal treatment or burden some patients unduly, Toan suggested. But Express Scripts has not found evidence of adverse outcomes from three-tier copays in its research. The company is assessing four-tier models that would distinguish products of proven effectiveness.

John Ogden, chief consultant for pharmacy benefit management for the Department of Veterans Affairs (VA), and Sharon Levine, associate executive director of the Permanente Medical Group, both described the benefits of large, tightly organized formulary systems in their respective organizations. The VA moved to a national formulary in 1996-97, allowing more uniform and evidence-based evaluation and improved patient safety, as well as reduced costs. A national utilization database helped the VA build a formulary rooted in local practice patterns and has about 90 percent formulary compliance across its system, a model that Ogden said could be useful for Medicare. Levine emphasized the importance of medical group culture and intensive patient and physician education--including "counter-detailing"--in making the Kaiser system work. For example, Cox-II drugs account for only 6 percent of prescriptions in their class at Kaiser, compared with a 55 percent average across the health system.

Leading off a workshop on trends in employer-sponsored and individual insurance markets, Helen Darling, president of the Washington Business Group on Health, saw "no end in sight" to renewed double-digit cost increases, as employees age and new therapies proliferate, while managed care retreats and the delivery system is "in turmoil." A Watson Wyatt survey of 200 employers with 1.4 million employees found that 56 percent of employers will increase workers' cost sharing and 70 percent will increase retiree contributions. Only 9 percent said that they were likely to manage care more aggressively; only 20 percent said that they were likely or somewhat likely to pursue "defined contribution" strategies, Darling said.

Jon Gabel, vice-president of the Health Research and Educational Trust, reviewed additional data on resurgent costs, including an increase in PPO market share from 38 percent in 1999 to 48 percent in 2001; he described managed care as an economic success but a political failure. The next phase in cost management strategies, he surmised, might be described as "consumer-driven health care," a term that somewhat ironically denotes increased cost sharing but also means increased choices and more individualized and Internet-enabled products. Increased financial responsibility ought to promote competition and cost-consciousness on the demand side but, on the downside, taxes the sick, breaks down risk pools, and does little to promote appropriate care. Tiered network products and personal spending accounts will likely gain market share. The new approach may restrain drug spending but not hospital costs.

Deborah Chollet, a senior fellow at Mathematica Policy Research, followed with a review of the individual market, which ranges from 7 percent to 15 percent of nonelderly coverage, tends to enroll an older- and poorer-than-average population, and exhibits wide price variations. The market is unstable because it is conditioned by the ebb and flow of group coverage and because most carriers are small and financially fragile. It is less protected by the Health Insurance Portability and Accountability Act (HIPAA) than the small-group market is, although some states fill the gap with guaranteed-issue rules, high-risk pools, or some rate regulation, or a combination. But the individual market is likely to "hit the wall" in the future, Chollet warned, because of early retirement and other job changes for baby boomers, insurer concentration, benefit reductions, and increasing affordability problems. HIPAA may have to be revisited. And "part of the conversation we're not having about refundable tax credits is what it takes to make them work," Chollet said, referring to the many challenges for this market.

Alan Guttmacher, senior clinical adviser to the director of the National Human Genome Research Institute at the National Institutes of Health (NIH), gave conference participants a chance to step back from the grinding details of policymaking and contemplate the future horizons of medicine. In contrast to "the old genetics," which addressed a small number of rare conditions solely and directly determined by chromosomal abnormalities and was the province of a few highly specialized clinicians, the emerging field of genomic medicine is concerned with a huge variety of genetic mechanisms and interactions that play a role in almost all of the most prevalent diseases the flesh is heir to. In the future, Guttmacher said, "Genetics care will be supplied… primarily by primary care providers and other non-genetics specialists." Increased understanding of these mechanisms will lead to new ways of defining disease by their causes rather than by their symptoms. Genetic screening will broaden opportunities for preventive care as well as enabling individualized diagnostics and therapeutics. Among the new concerns being raised by genomic medicine are discrimination, confidentiality, access to new tools, defining and ensuring informed consent, patents, and licenses, he cautioned, concluding with former President Clinton's comment that "it is now conceivable that our children's children will know the term cancer only as a constellation of stars."

Diane Rowland, executive vice-president of the Kaiser Family Foundation, introduced the first day's final panel of pollsters by observing that health care issues are reemerging on the public's radar screen after a temporary, post-9/11 eclipse, as shown in a recent poll by Robert Blendon (at healthaffairs.org/WebExclusives/Blendon_Web_Exclusive_011602.htm) and in other surveys. Rising premiums, the uninsured, drug costs, and Medicare drug coverage are among the more prominent concerns, although action on the uninsured won't become a priority unless there is a deepening recession, and there is little realistic prospect for action on a Medicare drug benefit in the absence of a federal budget surplus.

Democratic pollster Celinda Lake, president of Lake Snell Perry and Associates, said that education has risen in prominence as terrorism recedes but that health care remains a potent issue for Democrats. Most voters are insured, but the threat of recession and unemployment keeps the coverage issue alive in the back of their minds, as it did in the early 1990s. Voters know that the surplus is gone and support military spending; they also know now that most of the uninsured have jobs and worry more about losing coverage than losing their jobs. They know more about what COBRA is than they once did and are concerned about any new burdens on business that might affect their coverage, which contributes to a supportive attitude toward tax cuts. At the same time, trust in government has returned to its highest levels since before Vietnam and Watergate, Lake said. Running against government has lost currency.

Republican Bill McInturff, partner and founder of Public Opinion Strategies, said that anti-HMO feeling has past its peak and no longer drives the public's health agenda. More than 30 percent still want "radical" changes in the health system, with a higher percentage of women so inclined, but concerns are focused on premium increases, drug costs, cost sharing, and benefit reductions. Seniors are overwhelmingly opposed to changing Medicare but worry about supplemental benefit costs and drug coverage. The body politic can only tolerate one health care issue per election cycle, McInturff said, and that issue is likely to be Medicare drugs again this year as it was in 2000, despite the lack of money. Voters trust government with this benefit better more than with a voucher system. Republicans won't want to go into this year's election without having done something in health, and a Medicare prescription discount card may best answer this need. A liberal Democratic presidential candidate with big ideas about health care might do well in Iowa and New Hampshire in 2004, he said, but if that candidate also appears to have "anti-war" ideas, it is Republicans who will benefit.

Increased mental health parity is an issue that had momentum before September 11, which will be hard to regain given the public's current sense of limits, he said. The public health infrastructure, a subject with almost no public visibility, might now translate into concern about issues such as safe food and water that would bridge the prevailing mood of security-consciousness with areas of traditional Democratic strength, Lake said.

Day one ended with presentation of the Academy Chair Award for outstanding contributions to the fields of health services research and/or health policy to John Eisenberg, administrator of the Agency for Health Research and Quality, who has made both. In his remarks, Dr. Eisenberg stressed the need to build the moorings of the bridge between research and policy, with evidence-based research to strengthen informed policymaking.

Thursday, January 17

The second day's proceedings began with a panel of four congressional staffers, who offered their guarded prognoses on how the health agenda is likely to play in the upcoming election year. Dean Rosen, Republican staff director for the Senate HELP public health subcommittee, said that Congress in 2002--as the dust settles from September 11 and preexisting issues reemerge--resembles "sort of a weird party where you wake up the next morning and a lot of the guests are still there." In the Senate, 2001 had been "very, very strange," beginning with an agenda topped by Medicare reform, prescription drugs, the uninsured, and the patients' bill of rights. But a 50-50 split and attempts at power sharing had given way to a new Democratic majority after Sen. Jim Jeffords left the Republicans. Then a controversy over stem-cell research had taken over the agenda, followed by the terrorist attacks. Bioterrorism and concerns about displaced workers then became the top priorities, and other health issues stalled.

In 2002 election politics will loom large. Government is divided, margins are very close in both houses, and "we're back to deficit politics," Rosen noted. Workforce bills and renewal of the Prescription Drug User Fee Act are on the agenda along with old business from last year, including a stimulus package, which bogged down over health insurance coverage for the newly unemployed. But Deborah Williams of the House Ways & Means Republican staff did not share Rosen's cautious optimism about the prospects for bipartisan cooperation under these exacting circumstances. "Even where the House and Senate are very close, on patients' bill of rights, for instance," she said, "we haven't seen much cooperation."

Democrats on the morning panel responded positively to Williams' suggestion that "we would really like to put medical error reporting and medical errors back in the forefront." But divisions over use of tax credits for the uninsured still loom large, she said, and "it's going to be politics rather than facts that dominate that discussion." Similarly, Republicans and Democrats seem to have irreconcilable differences about whether a Medicare prescription drug benefit must be conditional on restructuring of how the program pays for fee-for-service and private plan care. "Competitive bidding really is the correct approach," she said, but "I know it will be difficult to come up with a methodology." Nevertheless, Williams said, "We believe we will find enough money" despite budget constraints.

Debbie Curtis, minority member of the Ways and Means Health Subcommittee staff, called the drug benefit "absolutely a priority for us." But Democrats don't think that "the experience of the Medicare+Choice program since 1997 should be a building block"; and House Democrats view the president's discount card proposal as "a free way to look like you're doing something." Democrats agree about the need for regulatory relief and contractor reform, though, and hope to see the bipartisanship that attended these issues in 2001 renewed. Provider payment concerns including Medicare's scheduled 15 percent cut in home health payments and sustainable growth rate reductions in physician payment will be difficult to deal with, Curtis predicted. Bipartisan agreement on direct-to-consumer drug advertising and medical error reporting might be possible. But tax credits that rely on individual coverage remain suspect for Democrats.

Elizabeth Fowler, health counsel for Senate Finance Committee Democrats, expressed "trepidation" about stop-gap coverage protections for displaced workers as part of an economic stimulus package, since negotiations over these provisions were what hung up the package in 2001. But she said that despite concerns about the tax credit mechanism, Finance chair Max Baucus was open to discussing subsidies that allowed individuals to buy into group coverage, as long as risk rating was prohibited. Apart from stop-gap measures, coverage expansions via Medicaid or SCHIP-related programs will be more difficult in 2002 than 2001 because of "the looming budget crisis" in the states. The sticking points over prescription drug coverage that Fowler emphasized were related to the role of private insurers in drug benefit management. Among Medicare reforms, the issues in the Senate are proposed cost sharing and Medigap changes. Senate Democrats are open to the discount card proposal but are concerned that it might "take the wind out of the sails of actually enacting a Medicare benefit."

Gail Wilensky, senior fellow at Project HOPE, former MedPAC chair, and former HCFA administrator, introduced a panel on "the economy, health costs, and the future" with a concise review of the past decade's cost and cost-control patterns. The slowing of cost growth in the mid-1990s was the result of both aggressive spending controls, by first the private and then the public sector, and a vibrant economy that grew the denominator of the growth rate while controls held the numerator in check. Resurgent cost growth--a cyclical phenomenon in health care after intervals of restraint--has been aggravated by an economic downturn, an inverse "double-whammy" that has the health care share of GDP again on a pace to hit 16 or 17 percent in the coming decade. Before that happens, though, "we'll probably find ourselves doing something" to stop it, Wilensky predicted. "I really don't exactly know what… [But] we're not going to end up doing exactly what we did last time."

Bruce Bradley, director of health strategy and policy at General Motors, the pertinent indicator is not percentage of GDP but how much faster health costs are increasing than global sales prices for GM vehicles--"a gap that is broadening very, very rapidly. A huge crisis, there's no other way to put it." GM, which spends more than $4 billion yearly on health benefits, works on multiple fronts, including employee health promotion and community health and intensive interaction with providers. The company dispatches "process improvement teams" to hospitals frequented by its workers to redesign emergency and operating room procedures. It aims to push providers toward integrated delivery systems and to push employees into these systems with incentives. Safety and quality initiatives with delivery systems are part of its value purchasing strategy, including interventions to reduce waste and inappropriate care, providing decision-support tools, and tackling the systems issues that often cause medical errors.

GM spends $1.2 billion a year on prescription drugs--"a huge challenge for us," Bradley said. An example: Internal data show that 92 percent of GM workers who use Prilosec had no prior prescription related to heartburn or related physician diagnosis. The company spends $52 million a year on this drug. "Does every single person that's got heartburn need Prilosec?" he asked. Like Kaiser, GM has experimented with "counter-detailing," and Bradley sounded a harsh note on direct-to-consumer advertising. "The strategy of the drug companies to put fear in the public to sell drugs is really awful, to be honest." Since the company spends most of its drug dollar on retirees, GM would like to see a comprehensive Medicare drug benefit as well as Medicare HMO reform. But Bradley's take on variations in Medicare+Choice payment was distinctive. Referring to Robert Berenson's recent M+C proposal (at healthaffairs.org/WebExclusives/Berenson_Web_Excl_112801.htm), he urged Congress to give Medicare the authority to pay HMOs for quality. "I can tell you the variability in performance of HMOs across the country from absolutely wonderful plans to awful…is really huge."

Instead of prognosticating, Congressional Budget Office director Dan Crippen offered a series of thinking exercises. The current federal budget outlook is for relatively modest deficits and surpluses over the next few years--tight, but not terrible, as he put it; but allowing new programs only at the expense of old ones. Beyond the next ten years, as baby boomers retire, Crippen said that the important questions are not about the balances of the Medicare and Social Security trust funds but "how much do you want your kids to pay for your retirement?" By 2030, Medicare, Medicaid, and Social Security will consume a projected 15 percent of the economy, up from 6 to 7 percent now. Historically, total tax revenues don't go higher than 18 to 20 percent. "Whether you view it as a problem or not, we're gonna have a massive shift in fiscal policy," he said, either borrowing an unprecedented 8 to 10 percent of GDP (shifting the burden to our grandchildren); raising taxes by 10 percent of GDP (shifting it to our children); or cutting the three jumbo programs "by dramatic, drastic amounts" (swallowing it ourselves).

Strategies for the uninsured--probably fewer than the standard forty million estimate because of underreporting of Medicaid coverage--should be broken down into chronic and transitional components, Crippen said. The transitional group is likely to be larger, and the conventional options may need reconsideration, he suggested. In Medicare, he said, although the program has a huge aggregate risk pool of forty million beneficiaries, average risk is not distributed evenly, and payment problems are to some extent rooted in the difficulty of finding the Holy Grail of risk-adjusted payment. Meanwhile, though, 25 percent of beneficiaries spend 90 percent of the dollars, and if Medicare could focus more effectively on identifying and managing high-cost patients--chronic and acute--it would not only cut into these high-end costs but reduce the average risk across the lower 75 percent of the pool.

Hal Luft, director of the Institute for Health Policy Studies at the University of California, San Francisco, led a workshop on the implications for researchers of the HIPAA privacy provisions. To use data from "covered entities" (plans, providers, and clearinghouses) that include any of the eighteen data elements deemed as identifying under HIPAA, researchers must obtain a waiver from the entity certifying minimal risk, explained Jennifer Kulynych, director of biomedical research at the Association of American Medical Colleges. The law carries criminal penalties, which are expected to have a chilling effect on the waiver process, she said, and hospitals and universities have appealed to HHS to modify the rule.

Mary Durham, director of Kaiser Permanente's Center for Health Research, said that the HIPAA rules need clarification for research within covered entities (CEs) as well. An institution's internal review board (IRB), for example, must track data that have been disclosed for six years following release and is accountable for what its business associates do with the data to assure their compliance with protections. Durham suggested the authorization of data repositories to fulfill responsibilities beyond the reach of the CEs.

Luft suggested several modifications to improve the balance of research and privacy needs, including an intermediate level of de-identification that would not include all eighteen data elements, safe harbor for CEs from downstream violations, revision of penalties, guidelines for IRBs, and use of data repositories. Part of the problem with HIPAA is it deals only with CEs and not the ultimate data users. But Luft said that once the privacy rules have been debugged, HIPAA's administrative simplification provisions (data standardization) will be looked back on as an epochal boon to health services research.

The AHSRHP adopted a policy position in December encouraging some of the same clarifications discussed in the workshop where current regulations hinder research without clearly improving privacy protections, and the Academy plans a member education to help researchers understand and cope with the rules, which are effective spring of 2003.

Robert Berenson, senior adviser at AHSRHP and former director of the CMS Center for Health Plans and Providers, opened a workshop on reforming Medicare with a review of the purposes of Medicare risk program: to save money, add benefits, increase efficiency, increase beneficiary choice, influence fee-for-service practice, promote competition, and enhance innovation. Former CMS administrator Bruce Vladeck, now director of the Institute for Medicare Practice at Mt. Sinai School of Medicine, added that further assumptions underlying the creation of Medicare+Choice in 1997 that program benefits were outdated and administered prices paid by the fee-for-service program were probably too high. But traditional Medicare has held down cost growth since then. Another selling point for M+C was to reduce pressure from provider groups, Vladeck said, but the new program has also proved vulnerable to political pressure, especially from academic health centers and rural interests--not to mention HMOs.

Gail Wilensky emphasized an inadequate understanding of geographic variations in practice patterns as the missing factor in reform of disparate HMO payments. She also endorsed Vladeck's suggestion that unused monies earmarked for floor payments in rural and other low-pay counties that have nevertheless not attracted HMOs should be reallocated to improve payment in high-pay, minimum-update counties that are losing enrollment. Wilensky and Vladeck also appeared to agree that the negative SGR update for physicians in the current year is cause for concern. She reiterated support for raising HMO payments to 100 percent of fee-for-service rates in the AAPCC formula, a position adopted by MedPAC when she was chair.

Linda Fishman, special assistant to CMS administrator Tom Scully, said that the agency expects it will be difficult to get new money out of Congress for increased HMO payments and that Scully believes many rural counties will never have HMOs. The CMS plans regulatory simplification and hopes that data collection for a new risk-adjustment system will begin next year with implementation in 2004. Demonstrations are planned to explore ways to smooth the transition from employer coverage to Medicare, including looser forms of managed care such as PPOs (which in the private sector involve risk-sharing arrangements not now permitted in Medicare), disease management, and case management. Fishman noted that premium rebates will be permitted starting in 2003, which the CMS sees as a prelude to competition. Vladeck said that rebates would accelerate the "ghettoization" of M+C, while Wilensky said that she approves of the idea but doubts it will make much difference.

In a packed session on issues facing the states, Judy Arnold, deputy New York State health commissioner, reflected the impact of recession and September 11 by describing a focus on retaining coverage. Emergency eligibility procedures have been authorized for Medicaid and Family Health Plus (the state's coverage expansion program), waiving documentation and immigration-status requirements--with 40,000 enrollments in New York City under these arrangements. A recent court decision also has checked restrictions on immigrant enrollment. Even after increasing state cigarette taxes to $1.80 a pack, the highest rate in the nation, New York is slowing down other enrollment initiatives planned before 9/11 because of worries about funding coverage expansions as unemployment rises and revenues shrink behind the economic downturn--a predicament observed across the nation in the AHSRHP's recent "State of the States" report (available at www.statecoverage.net/pdf/stateofstates2002.pdf).

Mark Gibson, policy adviser to Oregon's Governor Kitzhaber, said that his state has been hit especially hard by the recession because of its single-source income-tax system, a 7 percent budget shortfall, and lack of rainy-day funds due to a mandatory surplus refund law. Since its path-breaking Medicaid innovations in the early 1990s, Oregon has continued to seek coverage expansions and is currently pursuing efforts to extend eligibility to 185 percent of the federal poverty level, which would add 40,000 people to the subsidy rolls. In accordance with the state's policy emphasis on extending basic coverage as widely as possible with finite resources, the expansion is designed to be budget-neutral, with benefit reductions for nondisabled adults including 5 percent coinsurance for hospitalization.

Kansas Medicaid Director Robert Day said that his state is facing a $426 million budget deficit. Ninety percent of Kansas Medicaid funds are spent on the disabled and frail elderly, although SCHIP enrollment is rising with simplified enrollment and reduced documentation requirements. But no political agreement has been reached about the Medicaid program's direction, Day said. Prescription drugs loom large in the budget crunch, but the pharmaceutical industry has a powerful ability to block change. Cox-II drugs are Medicaid's third-highest expenditure, but 8 percent of prescriptions are written for twice-daily dosage even though Vioxx is a 24-hour pill. The Medicaid department is working with the state medical society to regularize prescribing patterns. Remarkably, a tax increase has been proposed to support higher Medicaid and SCHIP reimbursement for doctors.

Three retiring leaders were honored as the conference neared conclusion: Gail Warden of Henry Ford Health System, Steve Schroeder of the Robert Wood Johnson Foundation, and Tom Frist Jr. of HCA. Warden issued a somber warning that "there's not much left to squeeze out" of the health system and that the nation needs to reexamine the premise that large-pool insurance is the right way to fund health care. Future reforms will have to be built on broad consensus, he advised, recalling the piecemeal withdrawal of stakeholders from the reform movement of the early 1990s. As a former official of the Group Health Cooperative of Puget Sound, he believed in the classic HMO model. "But there weren't many Puget Sounds," and as other plans bent on rapid growth attempted to clone the model too quickly, the seeds of rebellion were sown, along with what Warden described as the failure of Medicare HMOs. Despite the Henry Ford system's accomplishments, the "great dream" of vertical integration has turned into a disappointment. The pursuit of quality remains stuck in a "circle of unaccountability," and quality improvements will eventually require mandatory measures.

Schroeder looked back with satisfaction at the Johnson foundation's commitment to reducing use of alcohol and tobacco, especially by young people, and to efforts to expand physical activity and "social connection." Tackling the uninsured and inappropriate end-of-life care has entailed frustration, but the effort continues. Schroeder registered concern about the invisibility of the coverage issue to policy leaders, and the invisibility of public health, while quiet victories in areas such as lead abatement and fluoridation have been achieved. The effort to reduce health disparities continues, especially in the health professions. He regretted the lack of honest dialogue on the tough issues: It was never true during the Clinton reform debate that universal coverage could be achieved without more spending or controls. And now again, we are seeking cost relief, expanded coverage, drug benefits, and new technology while demoralization stalks the health professions and concerns about quality and error mount.

The oracular Dr. Frist, who was called out of his first retirement to rehabilitate the hospital chain he helped found after it had fallen into disgrace, said, "I found out it wasn't so bad being a dinosaur." Even after a period of downsizing and extensive consolidation, hospitals remain the center of the health system. "But it's still a cottage industry," he said. Even in HCA, a $19 billion, 190-hospital system, across-the-board quality improvements are difficult to implement because of the institutions' fundamentally local character. "I don't see any value added in vertical integration," Frist said. Before September 11, he said, he thought that the nation was within five years of achieving universal coverage. "Now I don't know where we're headed," he confided. Without a major crisis, he doubts that major reform is likely.

In a final workshop on research and the policy agenda, Stephen Shortell of the University of California, Berkeley, warned of the gap between the traditional research orientation, focused on questions that can be studied and documented with orderly data and theories, and policymakers' pragmatic need for ad hoc generalizations and their bias toward action. "Much of our work will often be ignored," he said, and researchers must be wary of missing the forest for the trees. "Where is the wisdom lost in knowledge; where is the knowledge?" he asked, quoting John Eisenberg quoting T.S. Eliot. But Shortell reaffirmed the research community's ability to have an impact, citing Lucian Leape's work on medical error and Robert Brook's work on quality.

Hal Luft listed potentially worthwhile research questions that emerged from the conference: How does the number of physicians who take assignment from Medicare vary geographically? What quality indicators might employers and consumers respond to? How have drug discount cards worked where they have been used? What has the impact of managed care been on the structure of the health system in terms of consolidation or cost savings? How are employers responding to the current economic slump? If Medicare implements risk adjustment, how can management of high-cost cases be improved?

Albert Siu of the Mt. Sinai School of Medicine noted some impacts of research in Medicare, such as use of the Consumer Assessments of Health Plans (CAHPS) survey, study of information formats for consumers, development of risk adjustment methodologies, and the development of information reporting systems for home health and skilled nursing facilities. The foundation for reporting of information on quality and satisfaction has been built, but continuing work is needed to track the impact of these developments and to control gaming of the systems that have been built, Siu said.

Catherine McLaughlin of the University of Michigan focused on the uninsured, revisiting Crippen's question about the relative proportions of episodic and long-term coverage problems. Which industries are most affected by the current downturn? What is the health status of the uninsured? How does causation flow: Do workers choose among available jobs based on whether they carry health benefits or a relatively higher cash wage? What kinds of jobs and coverage do women losing eligibility for cash assistance benefits look for? Intelligent design of strategies for covering the uninsured depends on the answers to such questions, McLaughlin suggested.

RAND's Nicole Lurie returned to the conference's opening theme of the relationship between bioterrorism preparedness and the public health infrastructure. Researchers can contribute to understanding what building the infrastructure requires. The relationship between hospitals and public health is one important area. The need for data-system links into individual physician offices is another. A third is how to reconcile the imperative to downsize the health system with the need for surge capacity. How does distrust of the health system work against responses to bioterrorism? What is to be done about the worried well who present during crises? Do recent experiences provide any clues to how mental health problems can be destigmatized?

ARHQ's Carolyn Clancy closed the conference with a brief review of research issues on health disparities, seconding Lurie's comments on evidence of distrust of the system among minority postal workers who declined anthrax vaccinations. Even if disparities in access were eliminated, though, disparities in health status would remain, and research is needed on how the determinants of these differences can be addressed. The relative impact of medical care, public health, socioeconomic status, environment, behavior, and genetics needs to be examined further. Researchers can help understand the pathways by which factors besides medical care contribute to health status, and how interventions can be devised that fit these pathways.

Special issues on nonmedical determinants of health are due from Health Affairs in March and from Health Services Research early next year.

Contributed by Health Affairs deputy editor Robert Cunningham. Special thanks to Lori Achman and Marsha Gold of Mathematica Policy Research for their indispensible assistance.

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