Faced with the massive and even international ripple effects of widespread defaulting on mortgages nationwide (due to lenders disregarding financial information clearly showing a family’s income cannot support the mortgage in question), the crisis, called subprime lending, has taken the nation to near-recession status. Divisions between the Democratic leaders, the Republican minority, and the President over the design of an “Economic Stimulus” package, to reverse this trend, has come to a head in Washington. However, even within the party lines are being drawn between those favoring tax cuts, which business favors, and those supporting increased spending, which community advocates favor.  Whichever is chosen, and a hybrid seems very likely, it must still garner the President’s signature, hence can not be configured too far from his stated priorities.

Authorizations (programs): Some authorization matters not completed last year are being reviewed as well, in planing for a new approach.  Immigration refrorm, although many say it should be high on Washington’s priority list, proved so contentious last year that it is deemed far too controversial to take up in an election year. Congress has a shorter schedule this year, needing time at home in the fall to campaign; moreover, as the elections approach we will see a greater  and greater emphasis on partisan positions. And such “Irreconcilable Differences” is what killed the immigration bill last summer.

One group working to identify issues that can be addressed this spring with legislation that has a reasonable chance of passing is the House New Democrat Coalition, comprised so far of members (one form each) of the Education & Labor Committee (Jason Altmire of  PA), the Committee on Ways & Means (Allyson Schwartz also PA), and the Health Subcommittee of the Energy & Commerce Committee (Lois Capps CA).  To date, issues under consideration are electronic prescriptions, basing health provider pay on quality of care (outcomes), and, more broadly, health coverage portability and expanding prevention benefits in schools and the workplace. Each of these has known obstacles, such as the challenge to prove quality outcomes in the case of chronic diseases. Capps noted, “providers who care for people with debilitating conditions need to be at the table in developing pay-for-performance measures, rather than some of the special interests around the edges like insurers and pharmaceuticals.”

Another bill left over from last year that is more of a head-scratcher (as to why it did not pass) is the Genetics Anti-Discrimination Act (GINA).  Passed unanimously by the Senate at the start of the last Congress (109^th) in early 2005, reintroduced in this Congress in early 2007 and passed essentially unanimously by the House, it was nevertheless blocked successfully this time around in the Senate – where an identical bill had already passed in the previous Congress!  The reason?  Concerns, expressed more vocally this time, that “it could lead to more lawsuits,” as we reported in the April 2007 Update.  Although the threat of litigation was the main tool by which this kind of discrimination could be brought to an end, the cost impact was what was held a higher priority than the bill’s stated purposes.  It was blocked all year by one Senator, Tom Coburn (R-OK), over these concerns. The President had supported the bill, at the beginning of the year, but when leaders considered getting around the hold by adding it to the huge Omnibus spending bill in December, the President indicated he would veto the whole $500 billion bill if Genetics Anti-Discrimination was included in it.  This turnabout signals tough times for the bill in 2008 -- Mr Coburn may not even need to put a hold on it.

The State Child Health Insurance Program (SCHIP), which the majority fought hard and repeatedly to expand only to face two vetoes, has been presented to the President one more time – with the same result - vetoed.  Due to stopgap funding, no one will be dropped from the program, but the many who need it still will not be able to begin benefitting from it.

The MediGap legislation which the hemophilia community has been working on through its associations continues to need our help in advocating and in obtaining a Senate sponsor. Support is still needed in the House:  If  you live in any of the indicated areas of the following states, please call COTT for an important message: California (LA, East Bay Area, North Bay and Coast to Oregon); Texas (Austin), Illinois (Chicago), North Dakota, Ohio (East side of Cleveland) or Wisconsin (Southwest).

Although Big Pharma last year won the right to continue funding the Federal regulatory agency over licensing of its new drug products for another five years, COTT will continue efforts this year to see the FDA funded fully through the appropriations process once again, so that this grand-daddy of all conflicts of interest will one day become a thing of the past.

> AGENCIES

We will use this space to report on a disturbing development at the state level.  California Governor Arnold Schwarzenegger has sent to the state legislature a proposed budget for the next two years that contains massive cuts in some important programs near to our concerns. For example:

We will use this space to report on a disturbing development at the state level.  California Governor Arnold Schwarzenegger has sent to the state legislature a proposed budget for the next two years that contains massive cuts in some important programs near to our concerns. For example:

=> Medicaid provider rates will be cut, generating $33 million in savings (cuts to be doubled for the following year; this could drive providers to stop taking Medicaid patients).

=> Certain Medicaid benefits would be eliminated. These services are currently only available on an optional basis, but those with incomes low enough to qualify for Medicaid would no longer be able to receive through it adult dental care, eye care including glasses, acupuncture, chiropractic care, to name a few of the cuts. Savings come to only $10 million in a $37 billion-dollar health care budget.  Persons with orthopedic problems from hemophilia or HIV often find effective treatment in the latter two of these threatened categories.

=> Two forms of reductions in funds now helping Disproportionate Share Hospitals (those seeing large numbers of nonpaying clients), totalling double the cuts in provider payments mentioned above.

As this budget is considered by the Legislature in California, a state on the verge of announcing a universal health coverage plan,  contact State Senator Elaine Alquist (D-San Jose), Chair of the Senate Budget Subcommittee on Health and Human Services, to convey your concerns.  Asking your contacts in California (and especially in the San Jose area) to do the same will increase the value of these efforts.  Ms. Alquist’s office can be reached at 916-651-4013 (fax 916-324-0283).

> INDUSTRY

 

The efforts by Wellpoint, the owner of for-profit Blue Cross plans in 13 states, to roll out a sole-provider plan –for factor alone, at this point -- through its own pharmacy, Precision Rx, continue. Attachment #1 at the end of this Update, a map of Wellpoint’s states, shows the broad swath cut across the country by these developments. Despite several meetings between its representatives and the community (see below for more detail), little progress can be reported in efforts to prevail on Wellpoint to modify the plan to permit even a slightly greater number of providers (in the 11 states with early or mid-2008 rollouts, Wellpoint is permitting only those 340b Hemophilia Treatment Centers which “comply with Precision Rx standards and pricing” to participate along with Precision Rx.)  It is our understanding that a Specialty Pharmacy Customer Service number is being set up to augment ‘regular’ Blue Cross Customer Service – but one only calls when there is a problem, and while we’re afraid many will arise, we continue to press for more expanded arrangements from the outset.

If you’ve had a frustrating time dealing with the new arrangement, especially if there has been a risk of not having factor and/or supplies on hand at all, we hope the matter can be settled promptly. Afterwards, it would assist us greatly if you could jot down what happened and send it along to one of the three national hemophilia groups, for use as part of our ‘body of evidence.’

Explorations of other avenues, legal, legislative and political, are under way at the state and national levels on behalf of the hemophilia community. For example, state “Any Willing Provider” (AWP) laws bar a health plan or insurance plan from setting up a network of providers that is closed to providers in the area who are otherwise qualified to participate in the network.

Not all of the “other avenues” we indicate are under way are so sweeping, but AWP laws clearly can guarantee the freedom of choice and appropriate medical selection that is required in hemophilia care.
On Friday January 11, 2008 COTT Board members Dick Valdez, Jeffrey Moualim, Corey Dubin and Government Relations Coordinator Dave Cavenaugh met with the medical director of Anthem Blue Cross of California, Dr. Zeinab Dabbah, at its Woodland Hills headquarters near Los Angeles. Also present was Mr. Bob Charles from Wellpoint/Precision Rx and Sandra Henninger, Wellpoint’s Specialty Pharmacy Account Director for Precision Rx.

The two hour meeting was requested by COTT to discuss our ongoing concerns regarding Anthem/Blue Cross and Precision Rx. COTT attempted to provide Dr. Dabbah with an in-depth picture of our community and the impact of Blue Cross’s rollout of Precision Rx as its preferred provider for the delivery of factor concentrates and related services for the treatment of hemophilia and other bleeding disorders. It is important to understand, although it might be difficult, that Wellpoint, Anthem/Blue Cross of California (and 12 other states) and Precision Rx are all part of the same conglomerate corporate entity. It was also hard to ascertain this from the discussion that day, particularly since it is to their advantage to appear as though they are separate entities. Although Dr. Dabbah was aware of the HIV/AIDS and HCV epidemics and the plight of our community, it did not appear to impact her sense of the path Anthem/Blue Cross/Wellpoint was pursuing with its hemophilia clients.

In fact we found zero flexibility or any willingness to alter the program based on a number of the issues and problems COTT brought to her attention. Dick Valdez attempted to provide her with a view of a hemophilia family ravaged by the AIDS/blood epidemic, while Jeffrey Moualim described his two-year struggle with hepatitis C that ended in a successful liver transplant. However, it appeared to the COTT team that gaining an understanding, which would result in working together to provide a more mutually beneficial shift in their program, was not to be. What we found was a total unwillingness to make any changes in the current program even given the difficulties faced by individuals and families in our community who are Anthem/Blue Cross clients.  In one limited area, as mentioned above, COTT was able to gain a commitment to create a specialized customer service unit for biologics after we conveyed the serious difficulty community members were having in coping with Anthem/Blue Cross customer service. Dr. Dabbah suggested that, over the next 60 days, they would develop a plan for creating this more specialized customer service unit.

The meeting hit a low point when Dr. Dabbah told COTT that Anthem/Blue Cross of California was not “making a lot of profit here.” We were taken aback by the series of statement about the profits of Anthem/Blues Cross, which according to the Santa Monica based Taxpayers Foundation, have been in the $9 billion dollar range in California between the Wellpoint merger with Anthem Blue Cross in 2003 and 2006 (the Foundation For Taxpayer and Consumer Rights’ report, submitted to the California Department of Managed Care in August 2007, can be found as Attachement #2 to this Update). We responded by reminding Dr. Dabbah that we were present at this meeting to discuss the hemophilia clients of Blue Cross who are being harmed or may be harmed by the Wellpoint/Anthem/Blue Cross initiative. At one point in the meeting Dr. Dabbah stated that she felt that their mistake had been in not communicating with the community’s advocacy organizations before and leading up to the rollout of this initiative. While agreeing with that statement, COTT stated that from our perspective, the way in which this initiative has been implemented and their lack of any willingness to consider changes tended to make that statement moot in the context of the issues COTT is raising.

COTT president Corey Dubin stated that we view the Anthem/Blue Cross/Wellpoint plan as a purely economic model and not a service model rooted in positive health outcomes for persons with hemophilia and their families. We reminded Dr. Dabbah and Mr. Charles that the hemophilia community, having been the canaries in the coalmine for HIV/AIDS and hepatitis C blood borne epidemics, had no interest in being the guinea pigs for this latest attempt to dominate the factor concentrate delivery structure. Dubin stated it is important to be clear about the reality of the hemophilia clients and where we are positioned in this equation, adding that, we, the clients, are buffeted between the manufacturers of factor concentrates, the home care delivery industry, the third-party payers, the 340b hemophilia treatment centers and the federal government and that initiatives such as this are, in reality, about the distribution of the profits from the factor concentrate revenue stream which remains very lucrative. To this Mr. Bob Charles stressed that their plan is reflective of a quality service model and is rooted in delivering positive health outcomes for the hemophilia community.

It is important to understand the larger health care context of what is being rolled out by Anthem/Wellpoint/Blue Cross for their hemophilia clients. Since 1996 Anthem has been purchasing for-profit Blue Cross entities as well as acquiring and converting non-profit Blue Cross entities to for-profit entities in the Anthem/Wellpoint conglomerate. Some states have successfully opposed these buy-outs as not in the best interests of the state or its consumers of health care insurance. Other states such as Connecticut has chosen to litigate Anthem/Wellpoint and in the case of Connecticut settled their lawsuit against Anthem/Blue Cross for $41 million dollars. However, Wellpoint owns Blue Cross in 13 states now, and those states are to be under the sole-provider plan for factor by June first of this year.

COTT views the actions of the Anthem/Wellpoint/Blue Cross conglomerate as being rooted in the debate over health care and how it is to be delivered in our nation. We do not view this as a single event with one third-party payer whose actions are troubling to us. It is part and parcel of the larger struggle to ensure affordable health care for all Americans that is firmly rooted in positive health outcomes for individuals and families. We also believe that if they are allowed to pursue this unopposed in hemophilia, that the other chronic disease communities will be subsequently subjected to the same troubling initiatives as the one currently being implemented in the hemophilia community by Anthem/Wellpoint/Blue Cross. We also view this as the slippery slope that can only result in preferred drug and biologic programs as well as formularies. It is about cost-containment and the control of provider networks, which can only serve to limit end user choice and destroy what little healthy competition remains in the American health care system.



> COALITIONS / COTT Operations

COTT continues to conduct conference calls of an expanded version of its Government Relations Work Group, including representatives from the states targeted, the other two national groups NHF and HFA, and others in the community, both affiliated with home care and not.  We are still pleased by the ease of inter-organization communication in the ‘afterglow’ of the Blood Safety matters in Texas and elsewhere that led to the recent Joint Letter (see the last issue of the Update for a copy).  The current crisis, while benefiting from that period, needs to see continued high level activism, higher still however than any of our organizations have ever seen, if we are to prevail.

BLOOD SAFETY SUMMARY

COTT continues to investigate the health profiles along the US/Mexico border in south Texas, site of recent reviews of pheresis centers routinely collecting and using blood from Mexican nationals in producing what is then considered “US plasma.” We are also in a continuing dialog with the FDA and others about expanding the regulatory framework concerning blood to include issues such as poverty and pollution.  These efforts are part of a resurgence of interest in creating a national blood policy, in regulation and in law.

COTT continues to investigate the health profiles along the US/Mexico border in south Texas, site of recent reviews of pheresis centers routinely collecting and using blood from Mexican nationals in producing what is then considered “US plasma.” We are also in a continuing dialog with the FDA and others about expanding the regulatory framework concerning blood to include issues such as poverty and pollution.  These efforts are part of a resurgence of interest in creating a national blood policy, in regulation and in law.

ERRATA:  None

COTT acknowledges the assistance of Hemophilia Health Services and Factor Support Network in publication of this issue of the COTT Washington Update.

Committee of Ten Thousand  236 Massachusetts Ave., NE Suite 609 Washington, DC  20002
800-488-2688 * 202-543-6720 fax

cott-dc@earthlink.net * WWW.COTT1.ORG

Attachment #1: Blue Cross Plans by State
(Non-Profit and For-Profit State Plans Identified)

NOTE TO WEBSITE READERS:

The map (Attachment #1) and two tables in Attachment #2 will not reproduce in this copy of the Update. Contact COTT directly to obtain them via email. 

 

Attachment #2: Report by the Foundation for Taxpayer and Consumer Rights to the California Department of Managed Health Care, August 2007

August 7, 2007
Ms. Cindy Ehnes
Director
Department of Managed Health Care
980 Ninth Street, Suite 500
Sacramento, CA 95814-2725
Dear Ms. Ehnes,

We are pleased that you will hold a public meeting to
discuss Blue Cross of California’s (“BCC”) activities since the
2004 Anthem-WellPoint merger. Please accept the following as
the Foundation for Taxpayer and Consumer Rights’ (FTCR) written
comments for that meeting.

As you know, one of the key issues in the public debate
surrounding the merger was whether BCC enrollees would pay for
the approximately $4 billion in merger financing costs as well
as up to $600 million in severance, retention bonuses and stock
options awarded to company executives. FTCR and consumers feared
that Californians would ultimately pay for these costs through
either increased rates or reductions in coverage. Recent
activities suggest that BCC has violated several aspects of the
agreement (“Undertaking”) adopted by the Department and BCC to
assuage those concerns.

As you will see below, between 2004 and 2006, BCC has made
monetary transfers to affiliated companies in the form of
dividends and so-called “management and service agreements” that
exceed the amounts allowed by the merger agreement by up to $6.5
billion. Such transfers may be laundering profits that exceed
the legal limit established in the merger agreement, in the form
of purported payment for services.

DMHC must determine the purpose of those management and
service agreement payments, and analyze the value of those
services in relation to the amount of money paid by BCC. BCC
must account in detail for dividends and other transfers to
affiliated companies. Such transfers call into question BCC’s
commitment that BCC enrollees would not pay for merger-related
costs.

In addition, independent auditors must separately review
the $950 million dividend BCC transferred to its out-of-state
parent company in the first three months of this year. Per the
merger agreement, that payment should not have exceeded $141
million.¹

The apparent violations of the merger agreement are divided
into four categories below: Financial, Limited Benefit Policies,
Pre-existing Conditions & Other Patient Restrictions, and
Contract Termination. In each section, an analysis of the
violation is provided following a summary of BCC’s undertaking
commitment.

Finally, according to Undertaking 24 and 27 of the merger
agreement:

“BCC acknowledges and recognizes the concerns expressed by members of the public … and acknowledges grounds for disciplinary action … set forth in section 1386 of the Knox-Keene Act…” and entitles the Department to seek financial penalties, and
injunctions to prevent breaches of the provisions.

Overly aggressive underwriting practices and refusal to pay
medical bills in conjunction with illegal cancellations of
coverage produce profits that greatly exceed the anemic
financial penalties issued by the Department in the past.
Therefore, the Department must file injuctions to bar each
violation of the merger agreement. In addition, financial
oversight of BCC should be indefinitely continued. BCC should
not be allowed to continue to profit by breaking the law or
refusing to honor the merger agreement.

I. FINANCIAL

In the merger undertakings, BCC made various commitments
regarding it post-merger financial activity, including:

Undertaking 1. a. All of the change in control
severance and retention payments payable by reason of
the Merger “will be the sole payment responsibility of
Anthem.”

______________________________________________
¹1Los Angeles Times, WellPoint dividend is questioned, Lisa Girion, May 26, 2007

 

(c) & (d) “No amounts relating, directly or indirectly, to the change in control plan will be the obligation of BCC. . . . No such amounts will be charged to or made the responsibility of BCC, directly or indirectly, under any reimbursement or cost allocation arrangement.”

Undertaking 2². BCC will not pay “dividends, make other distributions of cash or property, or in any other way upstream any funds or property to Anthem or any of its affiliates,” if such actions:

(c) “Adversely affect the ability of BCC to provide or arrange health care services in accordance with requirements of the Knox-Keene Act or regulations adopted under the Knox-Keene Act.”

Additionally with respect to Affiliate Company Distributions made in calendar years 2004, 2005, and 2006, BCC will not make any Affiliate Company Distributions in any such calendar year if they exceed 79% of BCC’s operating income for the year prior to the calendar year of the Affiliate Company Distribution (the Limiting Percentage).

Analysis: Since 2004, BCC has made dividend payments and
management agreements & service contracts with affiliates that
greatly exceed the limit imposed by the undertakings (79% of the
prior year’s operating income).

The Department cannot accept the transfers for “management
agreements and service contracts” at face value because without
scrutiny, billions in illegal transfers could be included in
payment for purported services. In fact, the financial
incentive is precisely for the out-of-state affiliates to
overcharge for services, and for BCC to willingly overpay, in
order to transfer profit amounts that exceed the allowed limit.
What BCC is doing is no different from a public official
steering public contracts to himself without competitive
bidding. Maybe he deserved the contract and did a good job, but
the overwhelming suspicion in such a case is that it is pure
self-dealing, and no bargain to the public.

________________________
² See also Undertaking 6: “[P]remiums [including copayment, deductibles and coinsurance amounts] payable by BCC subscribers and enrollees will not increase as a result of the merger.”

A. Excessive “Affiliated Company Distributions.” See first chart on next page. For example:

> BCC’s operating income in 2003 as reported to the DMHC was
$781 million. As per the undertakings, BCC’s “affiliate
company distribution” in 2004 would be limited to 79% of $781
million, or $617 million. However, in 2004 BCC transferred
$350 million in dividends and $2.7 billion in management
agreements and service contracts for a total of $3.05 billion
- $2.3 billion more than the allowed amount.

> In 2005, BCC transferred $518 million in dividends and $2.9
billion in management agreements and service contracts for a
total of $3.4 billion. However, the 2005 “affiliate company
distributions” was limited by the 79% rule to $770 million.
The transfer exceeds the allowed amount by $2.6 billion.
 

> In 2006, BCC transferred $538 million in dividends and $2
billion in management agreements and service contracts for a
total of $2.5 billion. However, the 2006 “affiliate company
distributions” was limited by the 79% rule to $900 million.
The transfer exceeds the allowed amount by $1.6 billion.
 

> Between 2004 and 2006, the actual transfers to affiliates of
$9 billion (in dividends and management and service agreements) exceeds the amount allowed by the undertakings by at least
$6.5 billion.

 

B. Excessive Premium-Funded Reserves & Inappropriate Dividend.
Between 2004 and 2006, BCC has aggressively increased its
reserves (tangible net equity – “TNE”), well beyond required
levels, by charging excessive premiums. This year’s 1st Quarter
dividend to BCC’s out-of-state parent company stripped away $400
million in premium-funded reserves. These excessive reserves
should never have been collected and must be refunded to BCC
enrollees.

 

Between 2004 and 2006, BCC has aggressively increased itsreserves (tangible net equity – “TNE”), well beyond requiredlevels, by charging excessive premiums. This year’s 1st Quarterdividend to BCC’s out-of-state parent company stripped away $400million in premium-funded reserves. These excessive reservesshould never have been collected and must be refunded to BCCenrollees.

> The 2007 TNE reduction of $400 million represents a
significant departure in business practice and constitutes a
violation of Undertakings 8 and 9 (see Section III) and 2(c).

> See second chart below. Between 2004 and 2006, BCC increased its
reserves by $350 million. In the 1st quarter of 2007, reserves decreased by $400 million while BCC paid a $950 million dividend.

 

[Table]

* Page 5, line 34 of annual reports.
** Page 21, Schedule K, column 3 of annual reports.
*** Page 21, Schedule K, column 7 of annual reports.
**** Just first 3 months of 2007.
***** Management Agreements & Service Contracts Not reported in 3/31/2006 quarterly report.

 

[Table] 

 

II. LIMITED-BENEFIT POLICIES

In order to demonstrate that BCC would not shift merger
related costs to patients, BCC promised to provide annual
certifications in Undertaking 6 (3) that:

“BCC’s practices and methodologies for determining
products and benefit designs after the merger have not
varied from BCC’s pre-merger practices and methodologies.”
Analysis: Since 2004, BCC has dramatically increased the number
of limited benefit bare-bones policies in California. As result,
Californians pay more for less coverage and are not adequately
protected when they get sick. More detail will be provided at
the public meeting.

III. PRE-EXISTING CONDITIONS & Other Patient Restrictions

Undertaking 8 & 9. BCC will continue “its same market approach.”

Analysis: Huge out-of-state profit transfers have been
funded by anti-consumer practices that have escalated in
the years since the merger and represent a change in BCC’s
“market approach.”

> Rescissions: BCC has refused to pay out millions of dollars
in medical bills by illegally canceling health care contracts when people get sick (see below).

> Pre-existing exclusions: Internal Blue Cross underwriting
documents revised one month prior to the merger approval
show that BCC now regularly refuses to sell coverage at any
price to people with minor health conditions like Acne,
Arthritis, and Asthma. See:
http://www.consumerwatchdog.org/healthcare/pr/?postId=7218

> Prescription Drugs: Access to cancer-fighting drugs such as Avastin is routinely denied.

IV. CONTRACT TERMINATION

Undertaking 7. “BCC shall renew, and shall not terminate, any group or individual health care service plan” except as allowed under Health & Safety Code § 1357.11 for “fraud or misrepresentation by the contractholder” and various under exceptions allowed by the law.
 

Undertaking 19. “In regard to the topic of retroactive cancellation identified in the BCC Preliminary Report . . . regarding the Department’s Routine (Financial) Examination of BCC, BCC will file a semi-annual written report . . . .”

Analysis: Overwhelming evidence demonstrates a routine and
flagrant violation of Health and Safety Code § 1389.3 barring
insurance companies from terminating policies unless patients
are shown to have made willful misrepresentations of their
health conditions on enrollment applications. The practice is
also a violation of statutes prohibiting post-claim
underwriting. See:
http://www.consumerwatchdog.org/healthcare/pr/?postId=7183

A DMHC market survey found that in 90 cases reviewed, Blue
Cross illegally rescinded coverage in each case by failing to
establish that the patient fraudulently withheld information.
This illegal practice appears to have dramatically increased
since the merger.3 The reports referenced in undertaking 19 must
be made public.

Sincerely,

Jerry Flanagan
Health Care Policy Director
(310) 392-0522 ext. 319

CC: Governor Arnold Schwarzenegger
Kim Belshé, Secretary, Health & Human Services
Daniel Zingale, Office of Governor Schwarzenegger
Herb Schultz, Office of Governor Schwarzenegger
Richard Figueroa, Office of Governor Schwarzenegger
Denise Schmidt, Department of Managed Health Care (DMHC)

___________________________
³ Sick but Insured? Think Again, The Los Angeles Times, September
17, 2006