State Reaches Settlement in Pharma Pay-for-Play Scheme

The California Dept. of Insurance and whistleblowers reached a $23.2 million settlement with pharmaceutical company, Warner Chilcott. Three former employees said that Warner Chilcott paid kickbacks to doctors and falsified prior authorization forms to increase the number of prescriptions for several medications. Whistleblowers alleged that Warner Chilcott used illegal kickbacks to influence treatment decisions. They said that the company often hosted events at high-end hotels and spas with little or no educational content in order to encourage physicians to write more prescriptions for Warner Chilcott medications.

As part of the settlement, Warner Chilcott will refrain from promoting its pharmaceutical products identified in the complaint and sold in California. Of the $23.2 million state settlement, California will get $11.8 million, which is to be used for enhanced insurance fraud investigation and prevention efforts.

Scott Simmer, the whistleblowers’ lead counsel said, “The federal False Claims Act allows whistleblowers to sue for fraud related to government health plans, but only California and Illinois have statutes that allow whistleblowers to bring claims alleging illegal kickbacks to health care providers for the purpose of defrauding private health insurance plans.” In California, private citizens can sue and get a share of the recovery. The whistleblower’s share of a federal recovery in a non-intervened case is 25% to 30%.

“This case really should get the attention of state insurance commissioners around the country. To put things in perspective, the federal False Claims settlement returned a net of around $2.3 million to California’s Medicaid program, but this settlement will bring in a net of $11.8 million to the state’s general fund. Most importantly, drug companies have received a clear message not to engage in drug marketing fraud in the state of California,” he said.

A separate lawsuit was filed in federal court in Massachusetts alleging that Warner Chilcott violated the Federal False Claims Act. Also, the Dept. of Justice announced a settlement of the federal allegations on October 29, in which Warner Chilcott pleaded guilty to healthcare fraud and agreed to pay $125 million to resolve federal civil and criminal liability for alleged activities that violated the federal anti-kickback and HIPAA statutes, and for false claims submitted to Medicare and Medicaid.

Pregnant Women to Get Full Medi-Cal Coverage

The Centers for Medicare & Medicaid Services has approved California’s waiver to extend full Medi-Cal coverage to pregnant women. The amendment authorizes the state to provide full-scope Medi-Cal benefits to low-income pregnant women with incomes above 109% to 138% of the federal poverty level. The amendment also authorizes California to require pregnant women with incomes up to 138% of the federal poverty level to enroll in a Medi-Cal managed care health plan in counties in which such plans are available.

Medicaid Poses Increasing Risks to State Budgets

A rebound in healthcare spending and a shift in federal support will put more pressure on U.S. states’ long-term budgets, Fitch Ratings says. While state and local Medicaid spending growth will remain below historical levels, Fitch believes it will still outpace revenue growth, forcing states to make challenging budgetary decisions. Fitch expects most states to accelerate efforts to slow Medicaid spending and take other budgetary actions. If they do not, they face long-term budget imbalances.

The Centers for Medicare and Medicaid Services (CMS) expects state and local Medicaid spending growth to average 6.3% annually from 2014 to 2024. The increase is partially due to normalization after recession era rates bottomed at 5.2% in 2007, as well as the downshift in federal funding for the Medicaid expansion that will begin in 2016.

However, spending growth will remain below historical trends.  Fitch says that states have had some success in controlling growth in Medicaid spending, though the challenge remains substantial. Implementing managed care has been a key initiative for a number of states. From 2001 to 2013, Medicaid managed care spending increased at nearly double the rate of total Medicaid spending. Fitch says that the shift toward managed care is likely to continue.

Several states have reported net budgetary gains from ACA expansion that could offset those increased costs. CMS expects overall health spending growth to accelerate to 5.8% annually through 2024, up from 4% in 2007. The recession and its aftermath played a key role in suppressing costs in recent years.

The Public Supports Creating State Insurance Exchanges

Fifty-five percent of American say that creating state-based health insurance exchanges is their state’s top of the health priority this year, according to a survey by the Kaiser Family Foundation, the Robert Wood Johnson Foundation, and the Harvard School of Public Health. Drew Altman, president and CEO of the Kaiser Family Foundation said, “Governors are largely splitting along partisan lines on the exchanges, but the public is not. People like the idea.”

While some Republican governors are balking at the optional expansion of Medicaid under the ACA, 52% of Americans say their state should expand its Medicaid program. Sixty-six percent of Republicans prefer to keep their state Medicaid program as is; 75% of Democrats are seeking a state expansion; and Independents are evenly divided.

So far, 18 states and the District of Columbia plan to create their own state-based exchanges; seven other states will establish exchanges in partnership with the federal government; and 25 will default to a federally-run exchange.

Fifty-two percent of Americans (including 78% of Republicans) say that opponents of the ACA should continue trying to change it so that the law has less impact on taxpayers, employers, and health care providers. Forty percent say that those opposed to the health care law should accept that it is now the law of the land and stop trying to block its implementation.

Policy makers involved in budget deficit negotiations face a conundrum. Sixty-five percent of Americans say that Washington should act quickly to bring down the deficit, but there is little public appetite for major reductions in federal health care spending. “In a climate heavily focused on reducing the federal budget deficit, the public still places a high priority on federal spending on veterans’ health care, medical research, health-related responses to disasters, and preventing chronic and infectious diseases,” said Robert Blendon of the Harvard School of Public Health. Fifty-eight percent oppose any cuts to Medicare and 46% oppose any cuts to Medicaid.

Americans support only two of six proposals to trim Medicare. Eighty-five percent say drug companies should be required to give the federal government a better deal on medications for low-income people on Medicare. Fifty-nine percent say that high-income seniors should have to pay higher Medicare premiums. Fifty-one percent oppose gradually raising the age of Medicare eligibility for from 65 to 67 – an idea that’s making the rounds in Washington. Sixty-one percent strongly oppose requiring all seniors to pay higher Medicare premiums. The poll also found a widespread view that Medicare cuts are not really needed; the public believes that there are better ways to reduce the deficit, such a reducing funding for foreign aid and reducing spending in Afghanistan.

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Last Updated 07/21/2021

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