6
Recommendations

The Committee reiterates that the primary goal of a publicly financed program for HIV/AIDS care is to improve the quality and duration of life for those with HIV and promote the effective management of the epidemic by providing access to comprehensive care to the greatest number of individuals with HIV infection. As discussed in Chapter 4, the existing public and private programs do not achieve this goal. In Chapter 5, the Committee set forth criteria for a financing program that would be more likely to achieve this goal. After assessing seven different approaches, the Committee concluded that the approach most closely aligned with the Committee’s criteria is a federally funded, state-administered program that purchases a uniform benefits package meeting the standard of care for HIV/AIDS on behalf of low-income individuals with HIV.

In this chapter, the Committee puts forth its vision for an improved public financing and delivery system for HIV care and examines the cost and health implications of such a program. For expository convenience, the Committee has named its proposal the HIV Comprehensive Care Program (HIV-CCP). The Committee anticipates that the vast majority of individuals with HIV/AIDS currently receiving care financed through state Medicaid programs would be eligible for and would enroll in the HIV-CCP. This shift will cause an increase in federal expenditures on HIV/AIDS care but is offset by substantial savings by the states. In all, the Committee estimates that approximately 400,000 individuals would be eligible to enroll in the HIV-CCP in the first year of the program and that approximately 280,000 of these individuals would enroll and remain in care. Of these, the Com-



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Public Financing and Delivery of Hiv/Aids Care: Securing the Legacy of Ryan White 6 Recommendations The Committee reiterates that the primary goal of a publicly financed program for HIV/AIDS care is to improve the quality and duration of life for those with HIV and promote the effective management of the epidemic by providing access to comprehensive care to the greatest number of individuals with HIV infection. As discussed in Chapter 4, the existing public and private programs do not achieve this goal. In Chapter 5, the Committee set forth criteria for a financing program that would be more likely to achieve this goal. After assessing seven different approaches, the Committee concluded that the approach most closely aligned with the Committee’s criteria is a federally funded, state-administered program that purchases a uniform benefits package meeting the standard of care for HIV/AIDS on behalf of low-income individuals with HIV. In this chapter, the Committee puts forth its vision for an improved public financing and delivery system for HIV care and examines the cost and health implications of such a program. For expository convenience, the Committee has named its proposal the HIV Comprehensive Care Program (HIV-CCP). The Committee anticipates that the vast majority of individuals with HIV/AIDS currently receiving care financed through state Medicaid programs would be eligible for and would enroll in the HIV-CCP. This shift will cause an increase in federal expenditures on HIV/AIDS care but is offset by substantial savings by the states. In all, the Committee estimates that approximately 400,000 individuals would be eligible to enroll in the HIV-CCP in the first year of the program and that approximately 280,000 of these individuals would enroll and remain in care. Of these, the Com-

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Public Financing and Delivery of Hiv/Aids Care: Securing the Legacy of Ryan White mittee estimates that 58,697 individuals with HIV who are in need of but are not receiving highly active antiretroviral therapy (HAART) would begin antiretroviral therapy. As a direct result of receiving HAART, the Committee predicts that premature deaths among this cohort of individuals would fall over a 10-year period by more than half (55.9 percent). Put another way, an estimated 19,825 lives would be saved. The Committee estimates that the incremental cost of providing HAART to these individuals for 10 years in 2002 dollars is $2.65 billion, discounted (over 10 years). In the judgment of the Committee, this investment would be cost effective for the nation, yielding an estimated cost per quality-adjusted life year (QALY) saved of $42,972, less than one-fourth of the estimated cost per QALY of an annual mammography for women ages 55–65. These estimates, combined with its analysis of current public programs and alternative options, persuade the Committee that establishment of a new federally funded, state-administered program for low-income individuals with HIV is the most appropriate policy direction at this stage of the epidemic. The Committee therefore makes a number of specific recommendations regarding the major structural elements of such a program: eligibility, benefits, provider payment, financing, administration, and cost containment. The Committee recognizes that these recommendations do not constitute a detailed set of specifications from which implementing legislation could be drafted. Instead, the Committee intends that its recommendations serve as a framework for a complete program design by policy makers. The recommendations are: Recommendation 6.1: The federal government should establish and fully fund a new entitlement program for the treatment of individuals with HIV that is administered at the state level. Recommendation 6.2: The new program should extend coverage for treatment to individuals determined to be infected with HIV whose family incomes do not exceed 250 percent of the federal poverty level (FPL). Individuals with HIV infection whose family incomes exceed this standard should be allowed to establish eligibility for coverage by spending down or by buying in on a sliding scale basis. Recommendation 6.3: The new program should entitle each eligible individual with HIV to a uniform, federally defined benefit package that reflects the standard of care for HIV/AIDS. Recommendation 6.4: The new program should reimburse providers who elect to participate at rates comparable to those paid by Medicare for comparable services. Recommendation 6.5: To ensure that the new program is a prudent purchaser of drugs used in the treatment of HIV/AIDS, the Congress

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Public Financing and Delivery of Hiv/Aids Care: Securing the Legacy of Ryan White should implement measures that lower the cost of these drugs such as applying the federal ceiling price or the federal supply schedule price currently used by some major federal programs. Recommendation 6.6: The new program should adequately fund a nationwide demonstration of the effectiveness of Centers of Excellence in delivering covered services to eligible individuals with HIV. Recommendation 6.7: The new program should coordinate closely with the Ryan White CARE Act, which should be refocused to meet the needs of low-income individuals who are not eligible to be served by the new program. The Committee acknowledges that the group of recommendations it makes to redesign the way HIV care is financed and delivered is a bold response to its charge. In formulating its response and recommendations, however, the Committee conducted extensive modeling and analysis of the program before deciding to move forward. In the next section, the committee presents the results of its analyses, including the anticipated impact of the program on HAART use, the expected health benefits associated with the program, the cost and cost effectiveness of the program, the program’s overall budget impact, and the prevention benefits associated with the program. Finally, the committee presents an outline of the program it recommends. COST AND HEALTH IMPLICATIONS OF THE HIV COMPREHENSIVE CARE PROGRAM1 The Committee’s recommendations were guided by an assessment of the financial implications, health benefits, and relative cost per health benefit gained of increased access to HAART under the HIV-CCP. In the next section, the analysis and results of the assessment are presented. In its approach to making calculations of cost and benefits, the Committee first identified access to HAART as its primary indicator of receiving appropriate and quality HIV care. This decision was based on the centrality of HAART to treatment for HIV infection. Second, the Committee made 1   For a complete discussion of the methods used to derive the cost and health outcome estimates reported here, see Appendix A. The numbers presented in the Cost and Health Implications section are estimates derived from data on current HIV population size and care patterns, and assumptions regarding program rules, eligibility, enrollment, and care seeking. Therefore, these numbers are subject to two types of imprecision. There is rounding error because in the tables we round calculated values to whole numbers of individuals. More importantly, the estimates are subject to uncertainties in inputs; we address this issue in the sensitivity analyses.

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Public Financing and Delivery of Hiv/Aids Care: Securing the Legacy of Ryan White two assumptions in estimating the benefits and costs of the program. The first assumption is that the implementation of the HIV-CCP would not have the effect of providing incentives for the privately insured to discontinue their coverage and enroll in the program, resulting in “crowd-out” and an increase in the publicly insured population. This assumption is based on recent findings indicating that subsidized health insurance for low-income persons did not result in crowd-out in four state programs among adults with incomes below 100 percent of poverty. Some crowd-out did occur among person with incomes of 100 to 200 percent of poverty in two states (Kronick and Gilmer, 2002). Though it is reasonable to expect there will be some level of crowd-out if the program is implemented, any estimation of its potential effects was deemed too unreliable to be included in the Committee’s calculations. Thus, an estimated 167,500 individuals who are aware of their infection and privately insured are not included in the policy changes being modeled. The second assumption is that the creation of a health care entitlement will not increase enrollment in care or increase HAART use among individuals who are unaware of their HIV status.2 Thus, the estimated 280,000 individuals who are unaware of their HIV serostatus are also not included in the modeling. Anticipated HAART Use Gain and Program Enrollment of HIV-CCP As discussed previously, 670,000 individuals are aware of their positive HIV serostatus; of these, the Committee estimates that 69 percent (463,070) are in need of HAART as determined by treatment guidelines (Table 6-1). Evidence from Kahn and colleagues (2002) indicates that slightly less than half of those who need HAART (230,000 individuals) receive it, leaving 233,070 individuals with an unmet need for HAART. Among those on HAART, the Committee estimates that 73 percent (167,650) are publicly insured through Medicaid, Medicare, or both, or are uninsured and rely on a public program to finance their care. Of those who need HAART but do not receive it, the Committee estimates that 77 percent (180,314) are publicly insured or uninsured. Program Eligibility and HAART Gain for the HIV-CCP Using the federal poverty level of $8,860 for an individual in 2002, and extrapolating from the HIV Cost and Services Utilization Study (HCSUS) 2   This assumption underlies the Committee’s base case analysis and results. A univariate sensitivity analysis was performed, however, for 36 model input values, including total population estimates. The sensitivity analysis produced results for values of ±20% of the base case. These results are presented in Appendix A.

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Public Financing and Delivery of Hiv/Aids Care: Securing the Legacy of Ryan White TABLE 6-1 Estimated HAART Need Use and Deficit by Insurance Status   Private Public Uninsured Public/Uninsured Subtotal Total Total aware of HIV status 167,500 335,000 167,500 502,500 670,000 Need HAART 115,106 247,766 100,198 347,964 463,070 Receive HAART 62,350 123,024 44,626 167,650 230,000 HAART deficit 52,756 124,742 55,572 180,314 233,070 data presented by Bozzette and colleagues (1998), the Committee estimates that about 80 percent of publicly insured and uninsured individuals (400,975) who are aware of their positive status would meet the HIV-CCP income eligibility requirements (250 percent of FPL, or $22,150 for an individual in 2002; see Table 6-2). The Committee further estimates that about 71 percent (285,503) of those eligible would enroll and receive care, and that about 78 percent (222,681) of those enrolled and in care need HAART. Estimates of enrollment were derived using the Committee’s expert judgment assessment of the likely enrollment rates across four subpopulations of those infected with HIV who are aware of their infection: those publicly insured and in care (90 percent), publicly insured and not in care (40 percent), uninsured and in care (90 percent), and uninsured and not in care (30 percent). The result equaled 71 percent of the total population that the Committee estimates is publicly insured or uninsured and aware of their TABLE 6-2 HIV-CCP by Eligibility, Enrollment, and Care Status, HAART Need and HAART Gain Eligibility, Enrollment, and Care Status HIV-CCP Individuals eligible to enroll in program 400,975 Individuals predicted to enroll in program and remain in care 285,503 Individuals enrolled and in care who need HAART 222,681 Individuals who will receive HAART through the program 181,848 Individuals receiving HAART through the program who received HAART prior to enrolling in the program 123,151 Individuals who will continue to receive HAART through a public program such as Medicaid or ADAPa 44,499 Total gain in HAART use as a result of the program 58,697 aThese individuals represent a small percentage of individuals in public programs who may not transition into the new program because of imperfect outreach and awareness of the program, imperfectly implemented enrollment procedures, or personal choice.

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Public Financing and Delivery of Hiv/Aids Care: Securing the Legacy of Ryan White TABLE 6-3 Comparison of Total HAART Use Estimated as a Result of the HIV-CCP by Insurance Status Prior to Implementation (new program numbers are in bold) Insurance Status Prior to the Implementation of Alternative Financing Option Current HIV-CCP Public 123,024 169,868 Uninsured, in care 44,626 56,480 Subtotal 167,650 226,348 Continued private insurance 62,350 62,350 Total 230,000 288,697 Total HAART Gain n/a 58,697 HIV-positive status. See Appendix A for a complete discussion. Taking into account the increased likelihood of receiving HAART through insurance coverage and comprehensive support services, the Committee predicts that nearly 82 percent (181,848) of those in need of HAART will receive antiretroviral therapy paid for by the program. In addition, the Committee estimates that a small number of individuals (44,499) will continue to receive publicly funded HAART without enrolling in the program. Of 181,848 receiving HAART through the program, approximately 68 percent, or 123,151 individuals, were previously on HAART financed through public programs, largely Medicaid, but also programs for the uninsured such as the AIDS Drug Assistance Progra (ADAP). The Committee estimates that the implementation of the HIV-CCP will result in 58,697 individuals gaining access to HAART, or approximately one-third of those publicly insured or uninsured who are aware of their infection and need HAART but are not currently receiving it (Table 6-3). Health Benefits of the HIV-CCP Although the increase in HAART use is one measure of the benefit of implementing the Committee’s policy recommendations for public financing of HIV care, it is an intermediate outcome that relates to but is not a direct measure of the likely impact of the Committee’s recommendations on life expectancy or the quality of life of those living with HIV. To estimate the health impact of providing greater access to antiretroviral therapy, the Committee used a model of HIV disease states to conduct a computer simulation of HIV disease progression. The model, adapted from Kahn et al. (2001), was used to estimate the

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Public Financing and Delivery of Hiv/Aids Care: Securing the Legacy of Ryan White number of lives saved (or, more precisely, premature deaths averted) and gain in life expectancy (life years) and quality-adjusted life-years3 for those likely to receive HAART assuming the Committee’s recommendations are implemented. The model is also used to estimate health care costs, the cost per life year gained, and the cost per QALY gained. These cost-effectiveness ratios can be compared with cost-effectiveness ratios for other health care investments to establish the relative value of providing greater access to antiretroviral therapy. All estimates for the HIV-CCP assume full participation occurring at the time of implementation, are calculated only for individuals who enter the program in the first year, and are based on a 10-year time horizon. Preventing Deaths and Adding Years of Life The Committee estimates that, of the initial cohort of 58,697 individuals who would not otherwise be taking HAART but who will receive it under the HIV-CCP, most are likely to have AIDS or symptomatic HIV disease, reflecting both current population distribution and evidence of substantial barriers to HAART. Without access to antiretroviral drugs, the model predicts 35,489 individuals from this cohort (60.1 percent) would die from an AIDS-related illness over a period of 10 years4 (Table 6-4). Providing immediate access to antiretroviral medications would prevent an estimated 19,825 deaths among the initial cohort of 58,697 individuals receiving HAART through the first 10 years that the program is in place; this is a 55.9 percent reduction in mortality. With each additional year, the number of HIV-infected individuals who will benefit from the program will grow along with the number of lives that are “saved.” Adjusting for quality of life, the life-year gain as a result of the HIV-CCP is equivalent to 129,385 QALYs. This adjustment assumes that, in addition to extending life, there are benefits associated with HAART that improve quality of life (e.g., from reduced morbidity due to fewer opportu- 3   A quality-adjusted life year is a measure that takes into account both life expectancy and the quality of life, and is based on the notion that many people value a year of life lived in perfect health more highly than a year of life lived in less than perfect health. QALYs can be used to assess the relative benefits of alternative investments in health. 4   The estimate is based on a computer simulation of disease progression that accounts for the current distribution of HIV disease by stage of illness, insurance, and financial status of the infected population. If no changes are made to the current system of public financing of HIV care, some of the initial cohort of 58,697 individuals who would not otherwise be on HAART at the time they would qualify for the program recommended by the Committee would eventually receive antiretroviral therapy as a result of a worsening in their disease status and/or finances.

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Public Financing and Delivery of Hiv/Aids Care: Securing the Legacy of Ryan White TABLE 6-4 Premature Deaths Prevented Among the Year One Cohort (58,697) in the HIV-CCP   Deaths in a Period of 10 Years Without access to HAART 35,489 With access to HAART 15,664 Premature deaths prevented 19,825 nistic infections and less HIV disease progression). These benefits are greater than the negative impacts of HAART, including the burdens associated with the side effects of taking antiretroviral medications. Cost and Cost Effectiveness The Committee recognizes that there are competing demands for society’s health care resources. One way to determine whether or not the Committee’s recommendation to increase the level of HIV care funding is an efficient use of those dollars is to compare the incremental cost effectiveness of increased HIV care funding to the cost effectiveness of alternative uses of the same dollars. The Committee estimates that the incremental cost of providing antiretroviral therapy to 58,697 individuals for 10 years in 2002 dollars is $2.65 billion, discounted. Adding in the cost of the complete benefits package (including case management, substance abuse treatment, and mental health care services), and setting the rate of reimbursement for outpatient services at the Medicare rate and at Medicare plus 5 percent for services provided through Centers of Excellence, the incremental cost from a societal perspective associated with implementation of the HIV-CCP is estimated to be $5.6 billion, discounted over 10 years (Table 6-5). The Committee estimates that the cost per QALY gained associated with the implementation of the HIV-CCP will be $42,972. This figure is substantially higher than previously reported cost-utility ratios for expanding access to HAART, but is well within the range of what is considered to be a cost-effective investment in health. The difference is due largely to a disparity in the breadth of the policies studied, assumptions made about the timing of the initiation of HAART, and the impact of medical care inflation on the cost of care. To generate its estimate, the Committee followed the recommendations of the U.S. Panel on Cost-Effectiveness in Health and Medicine. Specifically, the Committee adopted the Panel’s recommendation that the “societal perspective” be used in developing reference case analyses rather than the

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Public Financing and Delivery of Hiv/Aids Care: Securing the Legacy of Ryan White TABLE 6-5 Cost Effectiveness of HIV-CCP   Gain in HAART Use Gain in QALYs Incremental Cost over 10 Years Cost Effectiveness (cost per QALY gained) HIV-CCP 58,697 129,385 $5.6 billion $42,972 perspective of a particular set of beneficiaries or that of a specific payer—that is, to incorporate all costs and benefits (including adverse effects) associated with an intervention, regardless of who pays the costs or to whom the benefits (or harms) accrue (Russell et al., 1996). Recognizing that the benefits associated with an investment in health may accrue in different years than the costs are incurred, and that people have a time preference for money and health, the Committee also adopted the panel’s recommendation that both benefits and costs be discounted to their present value (Weinstein et al., 1996). The recommended discount rate is 3 percent per year after adjusting all costs for inflation (Weinstein et al., 1996). Previous analyses focus narrowly on providing access to HAART in the early stages of the disease. The program modeled by the Committee provides for comprehensive care and therefore has substantial costs and benefits beyond the costs and life-expectancy gains associated with HAART. For example, the Committee recommends that case management, substance abuse treatment, and mental health services be provided as part of the packet of services to which beneficiaries are entitled in order to support the goal of early entry into care, retention, and adherence. Each of these services is likely to benefit the health of enrollees in ways that are independent of life expectancy. Although quality of life gains are difficult to quantify precisely, the Committee incorporated conservative estimates into its cost-effectiveness analysis, partially capturing these effects. The Committee’s estimate necessarily overstates the true cost per QALY gain because it accounts for all the costs, but not all benefits. Still, even overstated, the creation of an HIV care entitlement appears to be “cost effective.” Generally speaking, an investment of health care resources that can purchase an additional QALY for less than $50,000 is considered to be a “good buy” (Hirth et al., 2000), and many of the health care investments routinely made are considerably more expensive. Table 6-6 uses the Committee’s estimate of the incremental cost per QALY gained for the creation of an entitlement to care based on HIV infection and places it in the context of other health care investments society has decided to make. The interventions and cost per QALY numbers were drawn from the Harvard Center for Risk Analysis (Graham, 1999) and are expressed in 2002 dollars. Among current investments in health care that are somewhat less expen-

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Public Financing and Delivery of Hiv/Aids Care: Securing the Legacy of Ryan White TABLE 6-6 Cost-effectiveness Ratios for Selected Life-saving Measures (2002 $)a Intervention Comparator Target Population Saved Cost/QALY Annual colorectal screening No screening People ages 50 to 75 $23,000 Frontal airbags with manual belts Manual belts (50% use) Drivers of passenger cars $31,000 HIV Entitlement Current treatment context HIV-infected individuals with incomes <250% of the federal poverty level ($) $42,972 Radon mitigation in homes No testing or mitigation Home residents with radon levels above 20 pCi/liter $74,000 Coronary angioplasty No revascularization Patients with mild angina and one-vessel disease $143,000 Annual mammography Annual clinical breast exam Women ages 55 to 65 $194,000 Screening to prevent HIV transmission to patients Universal precautions Health care workers in acute care settings $636,000 Lap/shoulder belts in rear center seat of car (9% use) No restraints Rear-center seats of cars $3,100,000 aFigures were obtained from Risk in Perspective (Graham, 1999) and were adjusted to 2002 dollars using the Medical Care Consumer Price Index (CPI) from the Bureau of Labor Statistics. sive than an HIV health care entitlement are annual colorectal screening for individuals ages 50 to 75 ($23,000 per QALY gained) and adding driver side airbags to passenger cars in combination with manual seat belts ($31,000/QALY). Investments that are significantly more expensive than implementation of the Committee’s recommendations for public financing of HIV care are annual mammography (versus clinical breast exam) for women ages 55 to 65 ($194,000/QALY), coronary angioplasty (versus no revascularization) for patients with mild angina and one-vessel disease ($143,000/QALY), and installation of lap and shoulder belts in the rear-center seats of cars versus no restraints ($3,100,000/QALY).

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Public Financing and Delivery of Hiv/Aids Care: Securing the Legacy of Ryan White Estimated Budget Impact Data derived from the Committee’s model suggest that implementation of an entitlement to care based on HIV infection is likely to produce considerable benefits at a cost that compares favorably to other investments in health. The Committee recognizes, however, that its recommendations will have a substantially different budgetary implication for the federal government relative to other public payers—particularly the states. The Committee estimates current public spending on care for people with HIV disease, including the cost of care for the uninsured, to be $7.161 billion. If an entitlement to care were established as recommended by the Committee, an additional $574 million in public spending would be needed in the first year the program is operational (Table 6-7). The estimate collapses the budgetary impact on all public payers into a single, summary figure. It assumes no crowd-out of private insurance and does not take into account any cost savings, such as discounted drug costs or reductions in disability that might be found to offset the cost of an expansion of publicly financed HIV care. The estimate assumes that provider reimbursement is set at Medicare rates for outpatient services and at Medicare plus 5 percent for outpatient services provided through a Center of Excellence. TABLE 6-7 Comparison of Estimated Year One Expenditures, Current and Anticipated, by Payer Associated with the HIV-CCP (in millions)   Current Year 1 of HIV-CCP Incremental Costs/(Savings) Federal share of Medicaid/Medicare $3,003 $5,610a $2,607 State share of Medicaid $2,138 $984b ($1,154) Subtotal CMS-administered (federal/state Medicaid/Medicare)c $5,141 $6,594 $1,453 Care for the uninsuredd $2,020 $1,140 ($880) Total public (includes Medicare and federal/state Medicaid and the uninsured) $7,161 $7,734 $574 aThe cost of the HIV-CCP ($4,408) is included in the federal share of Medicaid/Medicare. bThis reflects state spending on individuals with HIV who remain in the Medicaid program as well as incomplete adjustment for dual Medicaid and Medicare eligibility. cThis excludes the cost of care provided by the Ryan White CARE Act, which is included in “care for the uninsured”. See text for discussion of potential CARE Act savings. dThe estimate of the cost of care for the uninsured includes care provided to veterans with HIV/AIDS by the Department of Veterans Affairs (VA) health care system. Though the VA is the largest single provider of HIV/AIDS care in the country, the amount of money it spends on HIV/AIDS care is small compared with other public programs, totaling less that $400 million in FY 2002. The VA does not cover care for veterans with private insurance, so in a sense it is a program for the uninsured.

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Public Financing and Delivery of Hiv/Aids Care: Securing the Legacy of Ryan White clinical effectiveness. Medications must include not just antiretroviral drugs but also drugs necessary to treat opportunistic diseases, such as antibiotics and antifungals. Because of the complexity of the disease process and the susceptibility of those with HIV to opportunistic infection, primary care services, case management, and prevention services are essential. To prevent HIV transmission from pregnant women to their newborn children, transmission that is virtually completely avoidable with appropriate drug therapy during pregnancy, obstetric and reproductive health services must be included. Finally, many people with HIV/AIDS suffer from co-morbid conditions such as mental illness or substance abuse disorders that interfere with compliance with treatment regimens. The inclusion of services for these conditions is fundamental to retention in care and continuation of therapies essential to disease management The Committee acknowledges that the six core elements of the defined benefit package it recommends are not new. In fact, much of what is included in the benefit package can be found in some of the currently funded CARE Act programs. Title III-Early Intervention Services, Planning and Capacity Grants, for example, allow for coverage of medical evaluation, primary care, antiretroviral therapies, medical and mental health care, case management, screening and testing, and other services. Title IV of the CARE Act addresses the specified needs of women, infants, and children and youth living with HIV. It covers primary and specialty medical care, psychosocial services, logistical support and coordination, and outreach, and case management (HRSA, 2002) for this subpopulation of HIV-infected individuals. The HIV/AIDS Dental Reimbursement program acknowledges the need for well trained oral health providers to provide oral health services to clients with HIV. What is new about the Committee’s recommendation is that it hopes to make these benefits available to all low-income individuals who need them, regardless of the state they live in. Recommendation 6.4: The new program should reimburse providers who elect to participate at rates comparable to those paid by Medicare for comparable services. As in the Medicare and Medicaid and CARE Act programs, the Committee suggests that provider participation in the new federal HIV program be voluntary. Whether an individual practitioner or clinic or hospital or other provider decides to participate would depend on a number of factors. One of these is the adequacy of reimbursement. This may be particularly important for services that are technically complex or are time- or resource-intensive, as are many of the services required for effective clinical management of individuals with HIV. As discussed in Chapter 4, low reimbursement rates in many state Medicaid programs affect access to care for beneficiaries of that program.

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Public Financing and Delivery of Hiv/Aids Care: Securing the Legacy of Ryan White In fact, Medicaid reimbursement to HIV/AIDS providers historically has been so low that in many states access to care for Medicaid beneficiaries with HIV/AIDS is the same as for those who are uninsured (Shapiro et al., 1999). Such access barriers are incompatible with the Committee’s objective of reducing morbidity, mortality, and disability among low-income individuals with HIV. While reimbursement levels will not in and of themselves guarantee widespread participation by qualified providers, they are an important determinant. Perhaps the best illustration of this is the contrast between Medicare and Medicaid. Physician participation in Medicare, which sets reimbursement rates higher than those in most states, has been consistently higher than in Medicaid, resulting in better patient access to care and easier patient referrals (MedPAC, 2003). This is not to say that Medicare rates for every covered item or service are always optimal. However, a public program that relies on Medicare payment principles and rates is much more likely to succeed in attracting sufficient qualified providers than is a program that pays providers less. Recommendation 6.5: To ensure that the new program is a prudent purchaser of drugs used in the treatment of HIV/AIDS, Congress should implement measures that lower the cost of these drugs such as applying the Federal Ceiling Price or the Federal Supply Schedule price currently used by some major federal programs. Implementation of this recommendation would lead to an estimated discount off of Medicaid antiretroviral prices of 9 percent to 25 percent, as discussed below. Drug manufacturers sell the same product at different prices to different purchasers. The price established for the different segments of purchasers depends on the price sensitivity of each group or the extent to which the group would change the amount of a product it buys if the price increases or decreases. Under current law, the price drug manufacturers can charge the Department of Veterans Affairs (VA), the Department of Defense (DOD), the Public Health Service (PHS), and the Coast Guard for products (brand-name drugs) listed on the Federal Supply Schedule (FSS) is capped at the Federal Ceiling Price (FCP). That price is at least 24 percent off the average price paid to a manufacturer (AMP) by wholesalers for drugs distributed to nonfederal purchasers (NFAMP). The NFAMP is not publicly available (GAO, 2000). The VA manages the FSS, another cost containing measure. The schedule specifies the quantities of and prices paid by the federal government for a wide range of medical goods including drugs. Competitive procedures are used to award contracts to companies to provide drugs at “the most favored customer price.” Under the Medicaid program, state agencies are allowed to purchase drugs at a lower cost for the treatment of HIV/AIDS through a rebate program. Under this Medicaid Drug Rebate Program, established by the

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Public Financing and Delivery of Hiv/Aids Care: Securing the Legacy of Ryan White Omnibus Budget Reconciliation Act of 1990, manufacturers must enter into rebate agreements with the Secretary of Health and Human Service and pay quarterly rebates to state Medicaid agencies. The amount of the rebate received by the State is calculated as the greater of 15.1 percent of the AMP or AMP per unit, or the difference between the AMP and the manufacturer’s “Best Price” for brand-name drugs. The “Best Price” is the lowest price the manufacturers charge “best customers” other than Medicaid (e.g., wholesalers, retailers, non-profits, FSS, etc.). For generic drugs, state agencies are given a rebate of 11 percent of the AMP (DHHS, 2001). Certain entities are eligible to purchase pharmaceuticals under the 340B Drug Discount Program, including ADAP programs. This program allows for these entities to purchase drugs directly from manufacturers though a centralized mechanism at a lower price or to obtain rebates under the state Medicaid rebate program. The 340B discount is roughly the AMP minus the Medicaid rebate amount. Twenty-two state ADAP programs that directly purchase pharmaceuticals through a centralized purchaser obtain drugs at the 340B discount price. Twenty-six state ADAP programs take advantage of their states’ Medicaid unit rebates on a quarterly basis (Aldridge and Doyle, 2002). ADAP programs that use this method do not purchase drugs but reimburse retail pharmacies for prescriptions filled (DHHS, 2001). In a report released in 2001, the Office of the Inspector General for the Department of Health and Human Services (OIG) estimated that state Medicaid programs in 1999 paid 33 percent more than the FCP for antiretroviral medications (DHHS, 2001). The OIG also estimated that Medicaid’s price for antiretroviral drugs was 10 percent higher than the FSS, and 5 to 15 percent higher than the price paid by state-administered ADAP programs (depending on how the ADAP programs were organized). In its report, the OIG recommended that Medicaid be given access to the FCP for antiretroviral drugs (DHHS, 2001). In a separate report, the OIG recommended that ADAP programs also be given access to the FCP (DHHS, 2000). The Committee finds that the OIG analysis has merit and that it should apply with equal force to the new federal HIV program. By replacing and expanding upon both Medicaid and ADAP, the new federal HIV program would be this country’s single largest purchaser of the prescription drugs that make possible effective HAART therapy. As discussed earlier in this chapter, while the new federal program would be demonstrably cost effective, it would nonetheless impose a net new burden on the federal treasury. The incremental cost of providing antiretroviral therapy alone would be in the range of $2.65 billion over the next 10 years. At this projected level of expenditure, simple fiscal prudence requires that the new program use mechanisms currently in use by other federal purchasers to

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Public Financing and Delivery of Hiv/Aids Care: Securing the Legacy of Ryan White constrain its expenditures and give taxpayers confidence that it is paying for needed items and services in an efficient manner. The Committee estimates that purchasing antiretroviral drugs at the FCP would reduce the federal government’s outlays by $419.3 million. It is also worth noting that further cost savings may be achieved by extending this policy to Medicaid Managed Care Organizations (MCOs), which currently must negotiate directly with pharmaceutical manufacturers to obtain discounts on drugs. The Committee recognizes that pricing policies of public programs can affect the research and development investment decisions of pharmaceutical manufacturers, particularly when, as in this instance, the public program is a dominant purchaser. There is a risk that, if the new program purchases antiretroviral drugs at the FCP, manufacturers may be less willing to invest significant resources in research and development for HIV therapies because they project a reduction in potential revenues for new drugs in this class. There are also concerns that manufacturers will raise prices to other purchasers to offset revenue losses resulting from the lower reimbursement for HIV/AIDS drugs (GAO, 2000). The Committee takes this matter seriously: after all, research and development of antiretroviral therapies by pharmaceutical manufacturers have made fundamental contributions to our understanding of HIV and the dramatic change in the clinical course and outcome of HIV infection brought about by HAART. However, the Committee is firm in asking the federal government to be a prudent purchaser and to explore ways that would reduce the cost of pharmaceuticals in the new program while recognizing that the steps taken should not undermine research and development of new HIV/AIDS drugs. The preceding concerns led the Committee to conduct the following analysis, which suggests that there is substantial room for lowering prices while still substantially increasing manufacturer net revenues with this initiative. Specifically, the added revenue associated with increasing the number of individuals on HAART by 58,697 should be compared with the decrease in revenue for 123,151 individuals already on HAART who switch to the new program and thus obtain drugs for a more discounted price. The Committee calculated the discount off of the current Medicaid price at which net revenue is zero. We conservatively assumed that the marginal cost of production is $1,500 per person year of HAART therapy. This is conservative because brand-name HAART is available for low-income countries at costs substantially less than this (Médecins Sans Frontières, 2003). With this assumption on marginal cost of production, a 27 percent discount leads to revenue neutrality. Thus, any discount less than 27 percent leads to increased revenue to manufacturers, further defraying the cost of research and development. While this quantitative analysis is not the final word on maintaining adequate profits for manufacturers, it suggests that there is

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Public Financing and Delivery of Hiv/Aids Care: Securing the Legacy of Ryan White room for price discounts while still increasing net revenue and profits and thus maintaining incentives for research and development. Ideally the Committee would prefer to rely on a formal analysis of the future costs of research and development for new ARV medications and their potential market. However, such an analysis would be based on hypothetical assumptions and is beyond the scope of the Committee’s research resources. In the absence of such an analysis, the Committee believes that a discount that increases net revenues in association with a drug-benefits expansion should assure ARV manufacturers that the United States government is committed to allowing them to recover substantial research and development costs. Recommendation 6.6: The new program should adequately fund a nationwide demonstration and evaluation of the effectiveness of Centers of Excellence in delivering covered services to eligible individuals with HIV. Consistent with past IOM reports (IOM, 2000, 2001, 2002, 2003a, 2003b), the Committee embraces a chronic care model for HIV care and recognizes the need for any new delivery system to be grounded in the tenets of quality care. Centers of Excellence (CoEs) surfaced as a concept that embodies these goals. In the Committee’s view, a system of HIV care needs to (1) ensure effective treatment and efficient resource utilization, (2) coordinate care and social support across a number of providers within any given community, and (3) be accountable to patients and to the programs that are purchased on their behalf. As discussed in Chapter 5, one promising model for a system of care meeting these criteria is the CoEs. The Committee recognizes that this model is not currently operational in many communities, that CoEs can be structured in a number of ways, and that testing is required to see which model is feasible in different geographic areas and circumstances. However, the Committee believes that the new federal program offers an opportunity to test this model for the benefit of low-income individuals with HIV, providers, and public and private purchasers. The Committee therefore recommends that the new program include adequate funding for a nationwide, multiyear demonstration of the effectiveness of CoEs in delivering the standard of care for HIV/AIDS to eligible individuals. The demonstration should include an independent evaluation of the quality, cost, and outcomes of the services furnished. Positive evaluation results would provide support for a wider dissemination of the model and the possibility of incorporating other responsibilities such as research to improve care delivery. Recommendation 6.7: The new program should coordinate closely with the Ryan White CARE Act, which should be refocused to meet the

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Public Financing and Delivery of Hiv/Aids Care: Securing the Legacy of Ryan White needs of low-income individuals who are not eligible to be served by the new program.7 The Committee emphasizes that the creation of a new federal HIV program for low-income individuals with HIV would not eliminate the need for the Ryan White CARE Act. It would, however, alter the role of the CARE Act, particularly with respect to funding drug therapies and other services that would be covered by the new federal program. Many of the individuals with HIV who are now served by the CARE Act would be eligible for the new federal program. As an entitlement, the new federal program would have more funds with which to address the treatment needs of these individuals than the CARE Act programs, which are subject to the annual appropriations process. In the case of individuals eligible for both programs, the new federal program should be the first dollar payer for the services that it covers. This would free up remaining CARE Act funds for other purposes, such as assisting individuals in enrolling in the new federal program, filling in any remaining service gaps, and supporting delivery system improvements. The proposed program has significant implications for a number of CARE Act sub-programs, notably Title II and ADAP. As noted before, ADAP represents the majority of Title II expenditures. Under the new program, the majority of these expenditures would be covered. However, the Committee recognizes that low-income immigrants with HIV infection will not be eligible for the federal program. Thus, a percentage of current ADAP funds should continue to be available to address the needs of this population and the public health imperative to control the spread of this infectious disease. Title I under the CARE Act would also be notably impacted by the new program. If implemented as recommended by the Committee, the new program would lessen the need for Title I. Title I funds are primarily, but not entirely, devoted to services included in the Committee’s benefit package and, as an entitlement program, eligibility is triggered by HIV infection; thus, funds follow the individual. Under this scenario, planning bodies would be refocused, and Title I funding savings could be used to offset federal spending on the HIV-CCP or some portion of the funds shifted to Title III. The Committee gave considerable attention to the need for continuing to allocate funds for Title III, Early Intervention Services discretionary grants. Current grantees include community and migrant health centers, hospitals or university-based medical centers, and city and county health 7   For a discussion on the new program’s budget impact on the Ryan White CARE Act, please see the earlier section of this chapter.

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Public Financing and Delivery of Hiv/Aids Care: Securing the Legacy of Ryan White departments. Grantees use these funds to conduct risk reduction, counseling, and testing, and to provide clinical care, medications, and case management (GAO, 2000). The Committee envisions two possible roles for Title III grantees under the new program. In one role, Title III grantees—community health centers, hospitals, or university-based medical centers—with high-quality services and accountability structures, are engaged to participate as part of CoEs since many of the services they provide are included in the proposed program. In the second role, the Committee envisions Title III grantees acting to address two specific groups with unmet needs under the new program: those populations ineligible for the program and vulnerable populations who are often unable to access formal systems of care. These populations require additional outreach and support, services which the CARE Act system provides. In addition, these programs are a means to provide voluntary counseling and testing that enables individuals to be made aware of their infection at an earlier disease stage and to enter care. Thus, a refocused Title III program could continue to fulfill the mission of the CARE Act by covering the much smaller gaps remaining in the new system and acting as a link to CoEs (assuming they are implemented) by guiding the most vulnerable persons into care. CONCLUSION The Committee’s recommendation for the establishment of a federally funded, state-administered entitlement to care for low-income Americans with HIV may strike some as imprudent. After all, the federal government is already experiencing high budget deficits, and the Committee’s recommendation would require increased federal spending. In addition, current notions of federalism assume the devolution of responsibility for social welfare functions from the federal government to the states, and the Committee’s recommendation would elevate all financial responsibility for HIV care to the federal level. In short, the Committee’s recommendation does not reflect conventional wisdom. Instead, it reflects the Committee’s conviction that such a program is demonstrably the most effective way for the United States to respond to the HIV epidemic and the needs of those affected by it. With the development of HAART and other tools, we now have the technology to extend life and reduce morbidity and disability among those Americans with HIV. The Committee’s estimates indicate that the cost effectiveness of delivering these technologies to low-income individuals with HIV compares favorably with that of other common public health interventions, such as frontal air bags and radon mitigation. To possess a demonstrably life-saving and cost-effective technology but not make it available to

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Public Financing and Delivery of Hiv/Aids Care: Securing the Legacy of Ryan White Americans with HIV who cannot otherwise afford it is, in the Committee’s view, indefensible. Making these technologies available to those in need will require additional resources from the public sector. While both the federal government and state governments face serious budgetary constraints, it is clear to the Committee that the federal government is the proper locus of financial responsibility for this purpose. The HIV epidemic is global in scope, not state-specific; the federal government’s revenue base is broader and more structurally sound than that of the states; and uniformity of eligibility and benefits, essential to an effective treatment of HIV nationally, cannot be sustained over time if states are required to fund the program. Of course, federal financing does not necessarily imply the establishment of a new federal bureaucracy. Indeed, the Committee recommends that the new national program be administered by the states. But without additional federal resources, harnessed through a national program along the lines recommended by the Committee, low-income Americans with HIV will continue to suffer avoidable death and disability. Our nation can and must do better. REFERENCES Aldridge C, Doyle A. 2002. Issue Brief: AIDS Drug Assistant Programs: Getting the Best Price? National ADAP Monitoring Project. Washington, DC: Kaiser Family Foundation. Pp 1–8. Altera T. 2001. Understanding the Dynamics of “Crowd-out”: Defining Public/Private Coverage Substitution for Policy and Research. Washington, DC: Academy for Health Service Research and Health Policy. Bozzette SA, Berry SH, Duan N, Frankel MR, Leibowitz AA, Lefkowitz D, Emmons CA, Senterfitt JW, Berk ML, Morton SC, Shapiro MF. 1998. The care of HIV-infected adults in the United States. HIV Cost and Services Utilization Study Consortium. New England Journal of Medicine 339(26):1897–1904. CDC (Centers for Disease Control and Prevention). 2003. HIV Diagnoses Climbing among Gay and Bisexual Men . Press Release, CDC Office of Communications. Cohen-Ross D, Cox L. 2000. Making it Simple: Medicaid for Children and CHIP Income Eligibility Guidelines and Enrollment Procedures. Washington, DC: The Kaiser Commission on Medicaid and the Uninsured. Cutler DM, Gruber J. 1996. Does public insurance crowd-out private insurance? Quarterly Journal of Economics, 8(2): 391–430. DHHS (U.S. Department of Health and Human Services). 2000. AIDS Drug Assistance Program Cost Containment Strategies. OEI-05-99-00610. Washington, DC: DHHS Office of Inspector General. DHHS. 2001. Cost Containment of Medicaid HIV/AIDS Drug Expenditures. OEI-05-99-00611. Washington, DC: DHHS Office of Inspector General. Dubay LC. 1999. Expansions in Public Health Insurance and Crowd-Out: What the Evidence Says. Washington, DC: Kaiser Family Foundation. Pp. 1–17. Dubay LC, Kenney GM. 1997. Did the Medicaid expansions for pregnant women crowd-out private insurance? Health Affairs 16(1):185–193.

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Public Financing and Delivery of Hiv/Aids Care: Securing the Legacy of Ryan White GAO (General Accounting Office). 2000. Federal Drug Discounts. GAO/T-HEHS-00-118. Washington, DC: GAO. GAO. 2000. Ryan White CARE Act: Opportunities to Enhance Funding Equity. GAO/T-HEHS-00-150. Washington, DC: GAO. Graham JD. 1999. An investor’s look at life-saving opportunities. Risk in Perspective. Harvard Center for Risk Analysis. [Online]. Available: http://www.hcra.harvard.edu/pdf/ February1999.pdf [accessed April 14, 2004]. Hammett TM, Gaiter JL, Crawford C. 1998. Reaching seriously at-risk populations: health interventions in criminal justice settings. Health Education and Behavior 25(1):99–120. Hirth RA, Chernew ME, Miller E, Fendrick AM, Weissert WG. 2000. Willingness to pay for a quality-adjusted life year: in search of a standard. Medical Decision Making 20(3): 332–342. Holahan J. 1997. Crowding-out: how big a problem? Health Affairs 16(1):204–206. Holtgrave DR. 2004. Estimation of annual HIV transmission rates in the United States, 1978–2000. Journal of Acquired Immune Deficiency Syndromes 35(1):89–92. HRSA (Health Resources and Services Administration). 2002. Title IV Services or Women, Infants, Children, Youth, and their Families. [Online]. Available: http://hrsa.gov/hab/titleiv.htm [accessed April 14, 2004]. IOM (Institute of Medicine). 2000. To Err Is Human: Building a Safer Health System. Washington, DC: National Academy Press. IOM. 2001. Crossing the Quality Chasm: A New Health System for the 21st Century. Washington, DC: National Academy Press. IOM. 2002. Fostering Rapid Advances in Health Care: Learning from Systems Demonstration. Washington, DC: The National Academies Press. IOM. 2003a. Priority Areas for National Action: Transforming Health Care Quality. Washington, DC: The National Academies Press. IOM. 2003b. Measuring What Matters: Allocation Planning and Quality Assurance for the Ryan White CARE ACT. Washington, DC: The National Academies Press. Kahn JG, Haile B, Kates J, Chang S. 2001. Health and federal budgetary effects of increasing access to antiretroviral medications for HIV by expanding Medicaid. American Journal of Public Health 91(9):1464–1473. Kahn JG, Zhang X, Cross LT, Palacio H, Birkhead GS, Morin SF. 2002. Access to and use of HIV antiretroviral therapy: variation by race/ethnicity in two public insurance programs in the U.S. Public Health Reports 117(3):252–262; discussion 231–232. Kaiser Commission on Medicaid and the Uninsured. 2002. The Medicaid Resource Book: Eligibility, Benefits, Financing, Administration. Washington, DC: The Kaiser Commission on Medicaid and the Uninsured. Pp. 6–7. Kronick R, Gilmer T. 2002. Insuring low-income adults: does public coverage crowd out private? Health Affairs 21(1):225–239. Médecins Sans Frontières. 2003. Untangling the Web of Price Reductions: A Pricing Guide for the Purchase of ARVs for Developing Countries. [Online]. Available: http://www.accessmed-msf.org/documents/untangling4thapril2003.pdf [accessed February 6, 2005]. MedPAC (Medicare Payment Advisory Commission). 2003. Report to the Congress: Medicare Payment Policy. Washington, DC: Medicare Payment Advisory Commission. Pp. 71–82. Moon M, Friedland R, Shirley L. 2002. Medicare Beneficiaries and Their Assets: Implications for Low Income Programs. Washington, DC: Henry J. Kaiser Family Foundation. Rich JD, Holmes L, Salas C, Macalino G, Davis D, Ryczek J, Flanigan T. 2001. Successful linkage of medical care and community services for HIV-positive offenders being released from prison. Journal of Urban Health 78(2):279–289.

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