Today, Gov. Bobby Jindal (R-LA) is expected to propose restructuring the state’s Medicaid program by steering “hundreds of thousands of low-income Louisiana residents into private managed-care plans.”

The Jindal ‘concept paper’ establishes “managed care” networks of physicians, hospitals and other medical care providers to improve patient health, eliminate duplications or unnecessary services and generally reduce cost by better managing and coordinating an individual’s care.

Under the proposal, the government would “pay a per-patient fee that would vary by the health status of its patients” and “doctors and hospitals would receive incentive payments if they meet certain performance criteria.”

While Jindal’s efforts to coordinate care and reform the poor fee-for-service payment model are laudable, the governor has yet to detail his proposal.

It could go one of two ways: the governor could either be introducing a truly effective ‘medical home model‘ — as is required by a 2007 state law — or a more industry-friendly approach that allows insurers to make short-term profits without focusing on long term investments (or value of care).

Some have indicated that Jindal has chosen the latter. Louisiana Hospital Association president John Matessino, for instance, has described Jindal’s plan as “a very top-heavy, managed care’ assignment of patients” that would actually take money out of the Medicaid system to fund more insurance bureaucracy. The primary care physician would act as a gatekeeper, limiting care and keeping costs low, without coordinating patients’ care to ensure that each individual patient receives efficient, timely, and effective treatment. These plans have difficulty changing the behavior of physicians because they pay for episodic care and not value of care.

In a medical home model, conversely, health service providers help coordinate care and manage success primarily through improved health outcomes and patient satisfaction. Medical homes reconfigure the delivery of primary care to involve interdisciplinary teams of doctors, advanced information technology, care coordination, patient outreach, and other techniques designed to improve quality of and access to services.” This approach can actually reduce costs and improve health outcomes.

Pharmaceutical Research and Manufacturers of America (PhRMA), the nation’s largest pharmaceutical lobbying group, is gearing up for a “multimillion-dollar public relations campaign to tout the importance of free-market health care and undercut an expected push by the Obama administration for price controls of prescription drugs,” the Washington Times reports.

During the campaign, executives and employees of the companies — wary of McCain’s legislative support for bringing low-cost generic drugs to market, letting consumers import cheaper medicines from Canada and opposing Medicare Part D — donated “three times as much” (approximately $1.6 million) to Obama as to McCain. Now, they’re seeking a return on their investment:

“We’re going to do an ad campaign that is designed to make people aware of the importance of preserving your free-market health care system,” Mr. Johnson [senior vice president with PhRMA]said. He added that PhRMA recognizes that “some reforms are needed in order to keep that system vibrant.”

But the reforms Obama proposes — allowing for the reimportation of safe drugs when prices are lower than in the U.S., enabling Medicare to directly negotiate drug prices, increasing the use of generic drugs in government programs and prohibiting large drug companies from keeping generic competition out of the market — will likely eat into Big Pharma’s profits. According to one study, giving Medicare the authority to negotiate drug prices, “would cause the pharmaceutical industry to lose $10 billion to $30 billion in annual revenues.”

Thus, the industry will no doubt argue that reduced profits will force companies to cut back on new medical research and slow down the discovery of new medical breakthroughs. They claim that we pay sky-high prices for their drugs because of ever-rising research and development costs. Yet according to a recent GAO report, big pharmaceutical companies are failing to deliver new and better drugs to the American people. While companies are spending more on Research and Development—147 percent more by the end of 2004 compared to 1993—by the end of 2004, the number of new drug applications were down 22 percent over 1999 levels, the most recent high watermark for new drug applications. In fact, their entire ‘higher prices for better drugs’ argument is highly problematic:

- The top U.S. drug makers spend 2.5 times as much on marketing and administration as they do on research.

- At least 1/3 of the drugs marketed by industry leaders were discovered by universities or small biotech companies and are sold to the public at inflated prices.

- 75 percent of new drugs approved by the FDA are me-too drugs that can be less effective than current drugs or no better than drugs already on the market to treat the same condition.

- With a blockbuster drug, it’s not unusual for a manufacturer to budget $50 million to $100 million for advertising aimed at consumers. (In 2000, Pfizer spent $89.5 million advertising Viagra to consumers.)

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