Washington -- The Bush administration is running a full-court press on physicians to get them to embrace electronic prescribing well ahead of a new Medicare mandate that is a little more than three years away.

Under the Medicare payment bill that became law in July, doctors who prescribe electronically for Part D patients in 2009 will get an incentive payment equal to 2% of all the Medicare services they provide for the year. This bonus will phase down over five years and disappear at the beginning of 2014.

Starting in 2012, physicians who are still paper-only will see a cut in their total Medicare payment for the year.

A physician may be eligible for an exemption from the penalties if Medicare determines that compliance would represent a significant hardship. The law cites an example of a doctor who practices in a rural area that has insufficient Internet access.

The Bush administration did not support the measure as a whole but is moving forward aggressively to implement the e-prescribing provision, which President Bush did endorse. The Centers for Medicare & Medicaid Services will issue rules later this year that will determine exactly how the incentive system will work and when bonuses will be paid.

Plans also are in the works for a CMS conference this fall that will educate physicians about what technology to use and how to use it. The agency wants to take advantage of its "bully pulpit" to get as many doctors on board with this technology as soon as possible, said Kerry Weems, CMS acting administrator.

The question of cost

Physicians consider the incentive program a good first step, and the bonuses could help doctors absorb the costs of the new technology, said American Medical Association Board of Trustees member Steven J. Stack, MD. But additional government payments alone likely will not provide enough financial support for what can be an expensive undertaking, he said. Private industry partners need to provide doctors with extra assistance.

Although the prospect of future Medicare physician payment cuts for noncompliance is very real, Congress could step in to stop them if it determines that too many doctors would take a hit, Dr. Stack said. "Whether these financial penalties will prove insurmountable, we are going to have to take the optimistic approach and hope that we can work through them."

American Academy of Family Physicians President James King, MD, said the fact that several years worth of positive incentives will go by before penalties kick in takes some of the sting out of the e-prescribing mandate.

CMS estimates that it would cost each physician about $3,000 to purchase and install a basic electronic prescribing system and $80 to $400 per month to maintain it. A 2% Medicare payment bonus in many cases could cover these costs, Weems said.

To give an idea of the money available, he cited the lump-sum payments Medicare made last month for the Physician Quality Reporting Initiative. For the 2007 PQRI, which featured a 1.5% bonus and covered only six months of reporting, the average incentive paid to individual physicians was more than $600, and the average for group practices exceeded $4,700. The largest single payment to a group practice topped $200,000.

Under the new Medicare law, CMS will drop e-prescribing use from the list of PQRI measures. The quality reporting program will run all of next year, and Congress boosted the possible bonus to 2%. So in 2009, physicians could receive the additional 2% for e-prescribing under the new Medicare law and another 2% for reporting quality measures under PQRI.

The Bush administration expects that the e-prescribing incentive program will save Medicare an estimated $156 million over five years by reducing the number of adverse drug events. Without the safety and accuracy of electronic drug orders, patients have poorer health outcomes, and practices use up unnecessary resources clarifying orders to pharmacies, said Dept. of Health and Human Services Secretary Michael Leavitt.

"That's a lot of people needlessly hurt and a lot of time wasted," he said.

Barriers to overcome

The AMA has argued that physicians cannot fully adopt e-prescribing in Medicare until the government allows electronic drug orders for controlled substances. Physicians complain that the need to maintain a separate paper system for these medications, which make up about 10% of all prescriptions, renders moot any potential savings or efficiency gains from going electronic.

The White House took a big step toward removing that barrier to adoption in late June when the Drug Enforcement Administration proposed new regulations that would lift the ban on e-prescribing controlled substances. The rules would apply to all controlled substances Schedule II and higher. Schedule I drugs cannot be prescribed for medical purposes. The DEA is accepting comments on its proposal through Sept. 25.

Penalties for paper prescriptions will start in 2012.

The AMA's Dr. Stack welcomed the proposed end to the ban and said it was long overdue. But the additional requirements on physicians proposed by the DEA for e-prescribing controlled substances are too cumbersome to be practical, he added.

For example, the requirement that physicians carry around a portable data drive or other "hard token" that must be used to authenticate their identities on the e-prescribing system is too big a burden for practices, he said. Dr. Stack also criticized the proposed requirement that doctors review monthly prescription logs for all the controlled substances they order. He said the DEA's layers of protection are too stringent, given that electronic prescribing is less prone to drug diversion than is a paper-based system.

In addition, CMS still needs to finalize three additional standards on e-prescribing use before physicians can truly embrace the technology, Dr. Stack said. The agency must complete this work a minimum of two years before any Medicare penalties take effect, he said. This means CMS would need to finish the task by the end of 2009 to meet the AMA framework.

The DEA proposal hits on just one of the major roadblocks to e-prescribing adoption, but more daunting impediments remain, said Ned Milenkovich, a registered pharmacist and an associate with the law firm McDermott Will & Emery in Chicago.

"At the end of the day, the barriers are all going to come down to dollars and cost," he said. Physicians are going to need to determine if the positive benefits associated with going electronic outweigh the economic downsides that go along with taking on the new technology.

Some physicians who already have made the leap into e-prescribing have run into other problems that need addressing.

For example, state laws still prohibit electronically prescribing over state lines, and many independent pharmacies lack the ability to receive paperless drug orders, said the AAFP's Dr. King, who prescribes electronically when he can in his Tennessee practice.

Washington -- A New Jersey statute that broadens access to public health insurance for parents and mandates coverage for children also is intended to lay the groundwork for universal coverage in the state.

Under the measure, signed by Gov. Jon Corzine on July 7, parents with incomes of 133% to 200% of the federal poverty level now are eligible for the State Children's Health Insurance Program. The mandate that children have some form of insurance will take effect in July 2009. But the act does not penalize families with children who remain uninsured.

"It's a soft mandate," said Suzanne Esterman, spokeswoman for the New Jersey Dept. of Human Services.

Bill sponsor Sen. Joe Vitale didn't want to include penalties because he is concerned about insurance costs, said Laurie Cancialosi, his chief of staff. Vitale, who chairs the Senate Health, Human Services and Senior Citizens Committee, also wants to study, in advance of considering universal insurance measures in the fall, why people remain uninsured.

The expansion of parents' SCHIP eligibility is an attempt to get more children in the program, because if parents can't sign up, they are less likely to enroll their children, Cancialosi said. Children in families that earn 350% of the poverty level or less are eligible for SCHIP in New Jersey.

The law institutes premiums for parents enrolled in SCHIP who earn between 150% and 200% of the poverty level. The rate will be $32 per month for the first parent and $13.50 for the second. Parents who wish to enroll must already have children in SCHIP or must enroll with them.

The Medical Society of New Jersey and the state chapter of the American Academy of Pediatrics backed the bill. Michael J. Kornett, chief executive of the MSNJ, said the society supports getting more people access to health care but is concerned that there might not be enough funding. "It's nice to create an expectation, but can you follow through?"

The act anticipates that an additional 56,800 parents and 17,100 children will enroll in SCHIP by June 2011 at a total state cost of $64 million.

Washington -- There is no shortage of national health reform plans this year, but only one will come from four former Senate majority leaders.

Tennessee Republican Howard Baker, South Dakota Democrat Tom Daschle, Kansas Republican Bob Dole and Maine Democrat George Mitchell joined in 2007 to form the Bipartisan Policy Center. It is designed to forge consensus policy plans on five issues: national security, energy, agriculture, transportation and health care.

The first stage of the health project consists of four public forums -- one conducted by each former senator. They will use their findings to create a reform proposal they all agree upon and then advocate for it in Congress and at the White House. Daschle held his forum on April 24 in Washington, D.C. The others will hold their events in their home states in coming months. Daschle said he expects the center to offer a health reform proposal by the end of this year.

"Our hope is to solicit the views of as broad of an array of participants as we can make contact with," said Daschle, who along with Dole was interviewed by AMNews. Dole agreed that the recommendations will be driven by input from outside the policy center. "What we're not talking about is having a staff put together something and we sign off on it."

Still, day-to-day project guidance will be provided by Chris Jennings, a senior health care policy adviser to President Clinton, and Mark B. McClellan, MD, PhD, a senior health care policy adviser to President George W. Bush. Dr. McClellan also was Centers for Medicare & Medicaid Services administrator and Food and Drug Administration commissioner.

Four tenets will guide the effort:

• Preserving and improving quality and value.
• Increasing availability and accessibility of affordable coverage options in a reformed insurance market.
• Promoting the individual's role in health care coverage and cost.
• Securing a workable financing mechanism for the nation's health care system.

Ready for reform?

The proliferation of news outlets on cable TV and the Internet have allowed partisanship to flourish, Daschle said. But comprehensive health care reform could be easier for Congress to adopt today than in the early 1990s when President Clinton's effort failed, he added, because problems in our system have worsened.

For example, per-person spending was $3,300 in 1993 but eclipsed $7,000 in 2006, CMS said. Also, about 47 million people lack insurance today, an increase of 7 million since 1993, according to Census Bureau estimates.

U.S. health spending was $7,000 per person in 2006.

"My view is that people who may be totally against any change have come around to the view that something is going to happen, and we better get ready," Daschle said.

Although there's more partisan rhetoric from lawmakers today than in the past, Dole said he doesn't think Congress itself is more partisan.

New members are less shy about speaking their minds than in 1960 when he was first elected. "It just wasn't appropriate to have some whippersnapper like Bob Dole from Kansas in his first term in Congress say anything," he said.

Partisanship doesn't extend into the policy center's leadership, Dole and Daschle said. "We start with a good chemistry and a good working relationship, and we hope we can build on that," Daschle explained.

Dole said he can discuss anything with the others. "That's why we have a chance [to succeed]. ... There are no bomb throwers in this group."

Still, the former lawmakers will have to forge agreement from very different perspectives.

Daschle views the U.S. health system as facing three major interrelated problems: affordability, quality and access. But the country also needs to come to terms with myths about our health system, he said.

"We don't have anywhere near the best health care system in the world, and we should acknowledge that. We have islands of excellence, but those islands are in a sea of mediocrity," Daschle said. "But I also think we've got 21st-century operating rooms and 19th-century administrative rooms. We've got serious problems with regard to transparency."

Access, cost issues

Dole doesn't share this critical view but agrees that access and cost are major issues.

"Overall, we have a good system. How do you make a good system better and make it more available to the little kid down the block who's 5 years old and has never seen a doctor?"

Dole prefers reforms that limit government responsibility for health care. Daschle, meanwhile, authored a book, Critical: What We Can Do About the Health Care Crisis, that calls for a national board to oversee the U.S. health system the way the Federal Reserve board regulates the financial sector.

But Dole isn't worried that Daschle is closed to all other options. "Tom's got some ideas, but he's not going to try to sell us that book."

Dole said he doesn't have a preconceived plan for the project. "If you ask me today which way we're going, I would have no idea. We don't want to have any ideas at this point. We're trying to gather information."

He acknowledged that it's possible both presidential candidates, who have their own health reform plans, could ignore the policy center's recommendations. "What if they say, 'This is my plan, and why should we change?' I don't have a good answer. ... We may fall on our face."

But it's also possible the senators' recommendations will bridge the gap between the McCain and Obama plans, Dole said.

The U.S. Supreme Court recently narrowed the application of the False Claims Act in a decision experts say could have implications in health care fraud cases.

The ruling in Allison Engine Co. Inc. v. United States comes at a time when some federal lawmakers are seeking to broaden the scope of the act -- which carries a penalty of triple damages. The decision could either force some reversal of those efforts or fuel the legislative fire, experts said.

The June opinion stemmed from a conflict in the lower courts over whether those who do not bill the government directly, but go through another entity that contracts with the U.S., can be held liable under the False Claims Act for fraudulently obtained funds.

The high court unanimously said yes, but with some limitations.

Justices clarified that the plaintiffs must show that the defendants intended to defraud the U.S. and not another entity, and that the alleged false statement was relevant to the government's decision to pay the claim.

The ruling suggests that the statute was not meant to be an all-purpose remedy that allows the government to invoke the act any time federal funds are misused, said David Deaton, a health care fraud expert and partner with O'Melveny & Myers LLP in Los Angeles.

To convert the False Claims Act into a broader anti-fraud statute runs contrary to its purpose, which strictly is to protect the federal treasury, Deaton said. In the case of fraud against or by a government contractor, the proper avenue to prosecute must be determined. "The court said [under the act], it's not enough to show that government money was somewhere involved," he said. "Plaintiffs must show there was fraud on the government to obtain government funds."

Impact on health care

Some legal experts said the decision could make it more difficult for whistle-blowers, who are sometimes physicians, to prove certain cases using the false claims statute, as opposed to other state or federal anti-fraud remedies.

For example, they could face hurdles alleging illegal off-label marketing by pharmaceutical companies, Deaton said.

"If what a manufacturer is really trying to do is increase market share and expand usage of a product, the question is whether that is something that can be brought under the False Claims Act if the purpose is not to obtain money from the government," he said.

Los Angeles-area health care attorney Wayne J. Miller said that under the ruling, defendants still could be held liable for fraudulently billing the government through a Medicare Advantage plan or a state Medicaid managed care program. However, even though the courts have generally viewed these health plans as standing in the shoes of the government, such cases now may require additional proof. "Plaintiffs may have to work harder to show liability," he said.

While the ruling could make it tougher for doctors and others acting as whistle-blowers, it could, on the flip side, help cut down on weak cases and offer extra defense to physicians who believe they wrongly are being sued under the false claims statute. Whistle-blowers, in successful cases, are rewarded financially for reporting fraud to the government.

A doctor may not be held liable for unwittingly participating in fraud, said Andrew L. Hurst, a Washington, D.C., expert on health care fraud and abuse, and a partner with Reed Smith LLP. Such situations might involve, for example, a physician employed by a hospital and paid by fraudulently obtained Medicare funds; or a medical supply company that deceptively sells equipment to a doctor, who ends up billing Medicare for the product.

Hurst said the act also may not apply in cases in which a whistle-blower alleges that a physician practice falsely certified to the federal government that it followed certain Medicare requirements, if the erroneous documentation had no tie to the government's decision to pay.

"The question is, if the government knew about it, would they still pay?" he said. In some cases the government may cite a practice for noncompliance with Medicare requirements but still would pay the claim, he explained.

The recent ruling may help cut down on "creative" whistle-blower lawsuits that use such mistakes to assert a false claims act case, Hurst said. "The court said this is about government money and not finding new ways to find liability, and brought the focus of the act back in line."

Federal legislation in the wings

Meanwhile, legal observers say the decision could impact federal legislation pending in the Senate and House Judiciary committees aimed at expanding liability under the False Claims Act.

Introduced in September 2007, the False Claims Act Correction Act runs counter to the high court ruling that lawsuits must show that the defendant intended to defraud the government, said Washington, D.C.-based false claims lawyer Robert S. Salcido.

The proposed bill would remove an existing prohibition against whistle-blower claims brought on the basis of publicly disclosed information or claims lacking specific proof, said Salcido, a partner with Akin Gump Strauss Hauer & Feld LLP. Only the government would have the authority to dismiss such claims, whereas now defendants also have the ability to make such a request, he said.

In addition, the legislation would broaden the pool of potential whistle-blowers to include government employees in certain circumstances, and increase the time frame for bringing federal false claims cases.

Washington -- Both houses of Congress on July 15 defeated a veto from President Bush and enacted a bill that implements an 18-month Medicare physician payment patch by reducing extra program payments to private health plans.

The votes, which came the same day Bush issued the veto, ensure that physicians will be paid at the same rates for the remainder of this year that they have since January. Next year they will receive a 1.1% raise. Without this action, payment would have been cut 10.6% for the rest of 2008 and an additional 5.4% in 2009. The House vote was 383-41, and the Senate tally was 70-26.

If the double-digit cut had gone into effect for the last six months of the year, it would have been devastating for beneficiary access to physicians, said American Medical Association President Nancy H. Nielsen, MD, PhD. "It has been a long and winding road, but today we celebrate that Congress heard the voices of millions of patients and physicians and voted to override President Bush's veto and protect the health of America. We thank the bipartisan majority in Congress who voted to put patients first."

The bill had a bumpy path. In the Senate, supporters were unable to garner enough votes on June 26 to cut off debate on the measure. The AMA and other physician organizations expressed outrage that a minority of Republican senators blocked the bill. The Association ran a series of television advertisements in six states that named 10 of these senators and blasted them for voting against the legislation.

Congressional aides said the ads and a grassroots groundswell from angry doctors appeared to have the desired effect over the Independence Day break. Nine GOP senators changed their positions, clearing the way for the bill's final passage on July 9.

After the legislation had achieved a veto-proof margin in both houses, organizations representing physicians, seniors and patient advocates joined Democratic lawmakers in urging Bush to see the writing on the wall and sign the bill into law. But Bush insisted on the veto, citing his opposition to a provision that would slash Medicare Advantage plan payments to help fund the physician pay freeze and increase.

Bill supporters argued that Medicare overpays private insurers and that the reduced pay would level the playing field with traditional Medicare. Opponents said the plans offer extra benefits not available under fee for service.

"I support the primary objective of this legislation, to forestall reductions in physician payments," Bush said in a statement announcing his veto. "Yet taking choices away from seniors to pay physicians is wrong."

What's in store for physicians

The action by Congress is retroactive to July 1, meaning that all 2008 claims eventually will be paid at the same rate that they have been since January. The Centers for Medicare & Medicaid Services held physician payments until July 15 to give lawmakers more time to act, but the presidential veto meant that Congress was unable to enact the final legislation until late that day. So at least some of the first physician claims of the month will go out with the 10.6% cut in effect.

Medicare will need to reprocess those claims before physicians receive the full rates to which they are entitled. CMS officials could not immediately say how many claims would fall into this category but said physicians should start to be paid at the revised rates in up to 10 business days.

The American College of Physicians blamed the White House for the missed deadline.

"An immediate presidential signature following last week's Senate passage of the bill would have prevented a disruption of physician claims creating uncertainty and cash flow problems for many practices," said ACP President Jeffrey P. Harris, MD.

In addition, the legislation does nothing to address the sustainable growth rate formula that has set up physicians for numerous yearly cuts over the next decade. Because the 2008 retroactive freeze and the 1.1% update in 2009 will not be taken into account when applying the payment formula in the future, the projected cut in 2010 will be roughly 20%.

"This congressional debate underscores the need for lawmakers to permanently replace the flawed Medicare physician payment formula so physicians can focus on the real work at hand: taking care of patients," the AMA's Dr. Nielsen said.

Bush cited the temporary nature of the physician payment patch as another reason for his veto.

"It is fiscally irresponsible, and it would imperil the long-term fiscal soundness of Medicare by using short-term budget gimmicks that do not solve the problem," he said. "The result would be a steep and unrealistic payment cut for physicians ... likely leading to yet another expensive temporary fix."

Bush also cautioned that a provision in the bill allowing Medicare Part D to expand the number of protected drug classes -- the types of medications for which plans must cover virtually every drug -- would lead to higher prices for enrollees.

Insurers warned that physicians who treat Medicare Advantage beneficiaries would find that their patients will have fewer benefits after the health plan payment cuts go through. As a result, fewer seniors will opt for this type of coverage. The Congressional Budget Office estimated that 2.3 million fewer beneficiaries will be enrolled in Medicare Advantage in five years because of the payment reductions.

Under the new law, federal policy on electronic prescribing will undergo a major change. Starting next year, physicians will receive incentives of up to 2% of their Medicare payments for using electronic prescribing to place drug orders covered by the program's drug benefit. The bonus will phase down to 0.5% in 2013. Starting in 2011, doctors will be required to use e-prescribing in Medicare and eventually will see their pay docked by up to 2% if they don't.

Dr. Nielsen hailed provisions that boost rural physician payments, raise bonuses starting next year for quality reporting, phase out higher co-payments for mental health services, increase funding for the medical home demonstration project and boost payments for anesthesia teaching programs.