Drugmakers, Hospitals Fight Changes to Health Bill (Update1)

Dec. 10 (Bloomberg) -- Drugmakers, hospitals and insurers are ramping up their opposition to provisions targeting their industries in health-care legislation as senators try to squeeze more savings out of the companies.

The U.S. Senate today may vote on an amendment that would allow the importation of cheaper medicines from Canada and other countries. The plan, from lawmakers led by North Dakota Democrat Byron Dorgan and Maine Republican Olympia Snowe, drew fire from drugmakers such as Indianapolis-based Eli Lilly & Co.

“It would be a huge mistake for Congress to pursue policies that could expose Americans to counterfeit and substandard drug products,” said Ken Johnson, senior vice president of the Pharmaceutical Research and Manufacturers of America, the Washington industry association.

Insurers, hospitals and doctors objected to a plan that would increase participation in Medicare because of the potential for lower payment rates. And insurers such as Hartford, Connecticut-based Aetna Inc. took aim at a proposal that would mandate that 90 percent of premiums go to benefits.

With too many changes, Democrats risk losing the support of industry groups that say they support an overhaul of the health- care system, depending on the form it takes. Few have forgotten how the industry-supported “Harry and Louise” advertising campaign helped doom the 1994 health-care effort.

Millions of Customers

The companies stand to benefit from millions of new customers. President Barack Obama and fellow Democrats have worked to keep drugmakers and hospitals from mounting campaigns against the legislation by striking deals that limit the hits to their industries.

Still, senators in recent days have begun to push the boundaries, with the drug-importation amendment and a package of ideas that emerged on Dec. 8 from 10 Democrats trying to find alternatives to a new government-run insurance program, or public option.

One aspect of that deal was to let insurers offer new plans to millions of uninsured Americans under the supervision of the federal Office of Personnel Management. Another was to allow Americans as young as 55 to buy into the Medicare program for the elderly, an idea that drew most attention from health-care industries yesterday.

Medicare Expansion

Senate Majority Leader Harry Reid is now waiting for the Congressional Budget Office to deliver a cost analysis on the new ideas. House Speaker Nancy Pelosi said today the Medicare proposal has “certainly a great deal of appeal” because “that is something people in the House have advocated for years.” She said she hasn’t seen any details of the plan.

The companies involved in offering health care disagreed.

Expanding Medicare is “a bad idea,” said Joseph Zubretsky, Aetna’s chief financial officer, in a telephone interview. The government program already underpays physicians, who then charge higher rates of private payers like Aetna to make up the loss, he said.

“Having more consumers being reimbursed at Medicare rates will just put more pressure on commercial rates and increase the cost shift,” Zubretsky said.

Rick Pollack, executive vice president of the American Hospital Association, warned in an e-mail that Medicare- reimbursement levels make it harder to maintain hospital services “that communities depend upon.” The American Medical Association, the largest doctors’ group, also objected.

‘Extremely Concerned’

“We are extremely concerned about these approaches because they move people away from the private sector into government programs which are chronically underfunded,” Pollack said.

Insurers yesterday criticized a plan included in the new framework from Senator Jay Rockefeller, a West Virginia Democrat, that mandates a percentage of premiums go to benefits.

Such so-called mandatory medical loss ratios would leave insurers with less money to spend on programs aimed at keeping people healthy or managing chronic diseases, expenses that might be considered “administrative,” Zubretsky said.

“If you start simply mandating a minimum benefit, you’ll stifle the innovation, the growth in new technologies and some of these value-added services that we think are so important to bending the cost curve,” he said.

Senators Susan Collins, a Maine Republican, and Joe Lieberman, a Connecticut Independent, introduced an amendment that accelerates a system of penalties for hospitals with high rates of infection to 2013, instead of 2015 in the current bill. They also are proposing a database where consumers could research which insurers most frequently reject claims and find data that would allow them to comparison-shop for doctors.

‘About the Numbers’

The Senate bill is designed to cover 31 million uninsured Americans and curb medical expenses. At a cost of $848 billion over 10 years, the measure represents the most sweeping changes to U.S. health care since the 1965 creation of Medicare.

Like a measure passed Nov. 7 by the U.S. House, the Senate plan would require all Americans to get health coverage or pay a penalty. It would expand the Medicaid health program for the poor, set up online insurance-purchasing exchanges and provide subsidies for those who need help buying policies.

Reid met with Democrats late yesterday to let lawmakers who worked on the latest public-option compromise explain it to the party. Like many senators, North Dakota Democrat Kent Conrad said afterward that his vote depends on the final result and a cost analysis by the nonpartisan Congressional Budget Office.

“It’s all about the numbers,” Conrad said.

To contact the reporters on this story: Nicole Gaouette in Washington at ngaouette@bloomberg.net; Kristin Jensen in Washington at kjensen@bloomberg.net;