Free Declaration - District Court of Arizona - Arizona

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ELLEN SUE KATZ, AZ Bar. No. 012214 WILLIAM E. MORRIS INSTITUTE FOR JUSTICE 202 E. McDowell Rd., Suite 257 Phoenix, AZ 85004 (602) 252-3432 [email protected] JENNIFER L. NYE, AZ Bar No. 019230 ARIZONA CENTER FOR DISABILITY LAW 100 N. Stone Ave., Suite 305 Tucson, AZ 85701 (520) 327-9547 [email protected] JANE PERKINS NATIONAL HEALTHnd LAW PROGRAM 211 N. Columbia St., 2 Floor Chapel Hill, NC 27514 (919) 968-6308 [email protected] Attorneys for Plaintiffs UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA ) ) ) ) No. CIV 03-2506 PHX EHC ) ) ) SECOND DECLARATION OF ) LEIGHTON KU, PH.D., M.P.H. IN ) ) SUPPORT OF PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT ) ) Plaintiffs, ) ) v. ) (Assigned to Hon. Earl H. Carroll) ) ) Anthony Rodgers, Director of the Arizona ) Health Care Cost Containment System; and Michael O. Leavitt, Secretary of the ) ) United States Department of Health and ) Human Services, in their official ) ) capacities, ) ) Defendants. ) ) Sharon Newton-Nations; Manuela Gonzalez; Cheryl Bilbrey; Donald McCants; Hector Martinez; Anne Garrison; Dawn House; Dana Franklin; Edward Bonner; D.H.; Jack Baumhardt; Manuel Esparza; and Patricia Jones, on behalf of themselves and all others similarly situated,
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I, Leighton Ku, declare as follows: 1. The matters stated in this declaration are given of my own personal

knowledge and, if called as a witness, I would truthfully and competently testify consistent with the following. 2. I recently joined the faculty of the School of Public Health and Health

Services as a Professor of Health Policy at George Washington University in Washington, D.C. My work focuses on conducting and analyzing health research, trends in insurance coverage, health care for immigrants, and federal and state budget concerns and their impact on health care. I have conducted extensive research about the Medicaid program, including state health reforms, Medicaid managed care, and the effects of welfare reform on Medicaid. I am a nationally-recognized expert on cost-sharing and low-income patients and have written research papers and lectured on this topic. I have been invited to speak on this topic in briefings to Congressional staff when they were considering the Deficit Reduction Act, to the National Academy of State Health Policy, to the National Association of State Medicaid Directors, and to the Centers for Medicare and Medicaid Services. I have also taught research methodology and statistics to doctoral students in the public policy and public administration for about 15 years. 3. Before this, I was a Senior Fellow at the Center on Budget and Policy

Priorities, a nonpartisan policy institute that conducts research and analysis on a range of government policies and programs, with an emphasis on those affecting low- and middleincome people. Before that, I was a principal researcher at the Urban Institute, a

nonprofit nonpartisan policy research organization based in Washington, D.C. I authored and directed studies on how welfare reform has affected Medicaid, health care coverage, and health care access for immigrants. Particularly pertinent to this declaration, I was one of the principal evaluators for several states' Medicaid section 1115 demonstration projects, under contract to the Health Care Financing Administration (the prior name of the Centers for Medicare and Medicaid Services) and authored or co-authored of a

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number of reports about section 1115 projects. Thus, I am familiar with both research and policy issues related to these projects. 4. At the Urban Institute, I was a founding member of the Institutional Review

Board which is responsible for determining whether research studies meet ethical standards for the protection of human subjects in research studies. I reviewed numerous research projects for adherence to these standards. Equally important, as a researcher, I was responsible for ensuring that we maintained ethical safeguards for those who participated in research studies that I conducted. As such, I am familiar with protocols used in research studies that concern voluntary and informed consent in research projects. 5. I received a Ph.D. in health policy from Boston University and a Masters in My curriculum vita is

Public Health from the University of California, Berkeley. attached as exhibit A, and includes a listing of my publications. 6.

In preparation for this declaration, I have reviewed the Arizona co-payment

regulations at issue in this case, Declarations of Plaintiffs in Support of Plaintiffs' Motion for Preliminary Injunction and Motion for Class Certification, Declarations of Class Members and Other Witnesses in Support of Plaintiffs' Motion for Preliminary Injunction and Motion for Class Certification, Arizona's waiver request the federal approval documents posted at the federal Web site and the exhibits submitted by the federal defendant in a document entitled Certification of Administrative Record. Review of research concerning copayments for low-income people 7. In the past few years, I have written two reviews of the research literature

about the effects of medical cost-sharing for low-income people. On May 7, 2003, the Center on Budget and Policy Priorities published a report that I authored, Charging the Poor More for Health Care: Cost-Sharing in Medicaid (Charging the Poor More). On July 7, 2005, the Center released a report that I co-authored with Victoria Wachino, The Effect of Increased Cost-Sharing in Medicaid: A Summary of Research Findings. True and correct copies of this report are attached as exhibits B and C.

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8.

In these reports, I provided comprehensive analyses of the research to date,

assessing the effects of cost sharing on the poor. Cost sharing occurs when insured individuals are required by the insurer to pay for some of their health care coverage, for example, by paying a "copayment" each time a health service is obtained or prescription is filled. (Most of the information described below is documented in the reports, so I do not provide citations in this declaration, since they are available in the reports. In this declaration, I have added some updated information from more recent studies and provide citations for the new evidence.) 9. Over the last 35 years, a number of studies have looked at the effects of

cost sharing on the poor. Of all forms of cost sharing, copayments are the most heavily studied. Three conclusions can be drawn from this research: first, copayments keep many low-income people from getting needed medical care or medications; second, lowincome people cannot always afford these copayments and must choose between them and other basic necessities of life; and third, copayments are not an efficient Medicaid cost saving measure for states. Negative effect on care needed by low-income people 10. A substantial and rigorous body of research has consistently concluded that

low-income individuals­those with income below 100 percent of the federal poverty level­are more vulnerable to the adverse effects of copayments than other groups. Copayment policies that cause only modest reductions in health care use among middleclass individuals can result in more substantial reductions in health care use and lead to significant adverse health consequences among low-income individuals, especially those with chronic health problems. For example, multiple studies have concluded that higher copayments for medical services or prescription drugs cause low-income people to use substantially fewer essential and effective medical services or medications. 11. Copayments have also been shown to lead to poorer health among low-

income adults, including worse blood pressure and vision, than among those not subject to copayments. One large, recent study in Quebec found that after copayments for
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prescription drugs were imposed, poor adults had 88 percent more emergency room visits and experienced a 78 percent increase in medical events like hospitalization or institutionalization as a result of problems experienced when these low-income people went without essential medication. Still other studies have demonstrated the difficulties that Medicaid beneficiaries encounter in accessing medical services when they are being assessed copayments. For example, in a study of Medicaid beneficiaries in Tennessee (in which copayments were elevated under a section 1115 waiver), 20 percent of the patients said they were not able to pay the copayment at the time of a doctor's office visit and 22 percent could not pay the prescription drug copayment. Most of those unable to afford the drug copayment went without the medication. 12. A very recent study examined the medical consequences that may occur

when older adults are unable to fill prescriptions because of cost-related problems. In this study, those who limited their use of medications due cost problems were significantly more likely to experience heart attacks, strokes, angina attacks and to experience a decline in their health status two or three years later, compared to those who did not limit their use of medications because of cost problems. (M. Heiser et al. "The Health Effects of Restricting Medication Use Due to Cost," Medical Care, 42(7):626-34, July 2004.) 13. Recent studies have also examined the effect of "tiered" copayments, such

as those developed in Arizona, in which copayments for certain drugs (e.g., generic medications) are lower than for other drugs (e.g., brand name medications.) A study of privately insured patients found that there was a reduction in some patients' use of medically essential medications as a result of tiered copayments. For example, diabetics reduced their use of anti-diabetes medications, which could lead to progression of their disease and poorer health outcomes (D. Goldman et al., "Pharmacy Benefits and the Use of Drugs by the Chronically Ill," Journal of the American Medical Association, 291: 2344-50, May 23, 2004). Proponents of tiered copayments argue that copayments

provide financial incentives for patients to select lower-cost medications instead of more
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expensive versions. The problem with this argument is that a physician selects the prescription drug, not the patient, and the physician may not know about the levels of copayments their patients face or may not care; there is no incentive for a physician to prescribe the drug with the lower copayment. In such a situation, the patient may be unable to afford copayment for the medication prescribed, while the physician was unaware that a different medication selection might have had a lower copayment. 14. A study conducted at the Hennepin County Medical Center (in

Minneapolis) in 2004 found that the enforcement of Medicaid prescription drug copayments (from $1 to $3) reduced the access of Medicaid patients to prescription drugs and contributed to adverse medical outcomes, including emergency room visits and hospital admissions, for problems such as strokes, asthma attacks and complications due to diabetes. About half (52%) of those who faced copayments reported being unable to pay for at least one prescription in the past six months after copayments were raised. (M. Mendiola, et al. "Medicaid Patients Perceive Copays as a Barrier to Medication Compliance," Hennepin County Medical Center, Minneapolis, MN, presented at the Society of General Internal Medicine national conference, May 2005 and American College of Physicians Minnesota chapter conference, Nov. 2004.) 15. A study that was just published shows that women on Medicare who had to

pay higher copayments were less likely to use mammograms, a recommended preventive screening test for breast cancer. (A. Trivedi, et al. "Effect of Cost Sharing on Screening Mammography in Medicare Health Plans," New England Journal of Medicine, 358:37583, Jan. 24, 2008). While the cut-off for heightened copayments in that study was $10, it is worth noting that only a small share of women in the cost-sharing plans (11 percent) in the study had incomes below the poverty line, whereas all of the women subject to the challenged Arizona have incomes below the poverty line. Because they are poorer, it is reasonable to conclude that these beneficiaries would be deterred from using this screening test even at much lower copayment levels. The cumulative and consistent research concludes that the imposition of heightened copayments on low-income
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people--particularly those living at or below the poverty line--will likely place the health and well-being of these affected individuals in significant danger. Low-income people forced to choose between health care and other necessities 16. Cost sharing is on the rise for middle and upper income people with private

health insurance coverage. Thus, it is not surprising that states might be interested in mirroring these activities in their Medicaid programs. However, as documented in Charging the Poor More and The Effect of Increased Cost-sharing in Medicaid, there is an accumulated and consistent body of research concluding that low-income people cannot financially bear copayments as easily as those with higher incomes. This is because low income people are in a different economic position. Data show that

Medicaid beneficiaries already have substantial out-of-pocket medical care expenditures. On average, Medicaid beneficiaries pay a larger share of their incomes in out-of-pocket medical expenses than do higher-income individuals with private insurance. Increases in Medicaid copayments would exacerbate their financial burdens. 17. Low-income families must also stretch their incomes to meet competing

demands for rent, child care, and other expenses. Research indicates that, despite the presence of programs like food stamps, poor families often have difficulties meeting basic needs. In many areas, rising housing costs are claiming an increasing share of poor families' incomes. Studies show that those with incomes below the poverty line already experience hardships, such as running out of food or having difficulty paying rent or utility bills. Elevated copayments for low-income people force many of them to choose between health care and other basic needs. Medicaid copayments are not an efficient way to reduce state expenditures 18. Instituting or increasing copayments is not an efficient way for states to

lower their expenditures for Medicaid because they lose a substantial portion of any savings generated when they institute copayments because this approach reduces federal matching funds. For example, consider a prescription drug that costs $60. Under

Medicaid matching rules, the federal government will pay $39.72 (or 66.2 percent, the
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federal Medicaid matching rate for Arizona in 2008), while the state of Arizona pays $20.18 (33.8 percent of the total). If there is a $10 copayment, the total cost to Medicaid for the drug is reduced to $50, so the state share will fall to $16.90 (33.8 percent of $50) and the federal government will pay $33.10. Even though a poor state resident has paid $10 of his or her limited income for that prescription, the state of Arizona saves only $3.32 (33.2 percent of $10), while the great majority of savings accrues to the federal government. That is, the state has imposed a $10 regressive user fee or tax, which falls only upon low-income state residents, but the state saves only one-third of that amount. From a public finance perspective, this is both regressive and fiscally inefficient. That is, the financial burdens paid by low-income Medicaid recipients are disproportionate relative to the budgetary savings that the state of Arizona accrues. (This example is somewhat simplified, since Arizona does not usually directly pay for prescription drugs on a fee-for-service basis, but pays for these services as part of a larger a capitated amount paid to managed care organizations. But if the managed care organization pays less to pharmacies and reaps savings, these savings will eventually lead to lower capitation rates paid by the state and subject to Medicaid matching rules.) 19. The declarations submitted by the plaintiffs and class members in this case

are consistent with the findings and conclusions consistently reached in the research literature. Requiring copayments from people with incomes below the federal poverty level, especially copayments that exceed "nominal" levels, in order to receive essential medical care or medications creates a substantial risk of harm to the health of these individuals, as well as creating additional financial burdens upon them. The research shows that copayments lead many patients to forego essential medical care or medications, which can in turn jeopardize their health and lead to worse medical outcomes or require more costly and intensive medical care. If they must pay more for medical care, poor patients are forced to make difficult choices between using their limited incomes to pay for medical services or medications or for other basic needs, such as food or rent. Finally, increasing copayments is an inefficient way to reduce state
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Medicaid expenditures in which the financial burdens for low-income state residents substantially outweigh the savings for the state of Arizona. Congress continues to hold that Medicaid beneficiaries with incomes below the poverty line should not pay copayments that exceed nominal levels. 20. Since this case was originally filed, two laws have been enacted that

modify Medicaid rules regarding copayments: the Deficit Reduction Act of 2005 (Public Law 109-171) and the Tax Relief and Health Care Amendments of 2006 (Public Law 109-432). The Centers for Medicare and Medicaid Services, the federal agency that administers Medicaid, recently released a notice of proposed rule-making to implement these provisions, but has not yet issued final regulations. Although these laws offer states new options to increase cost-sharing in Medicaid under certain circumstances, they also make it clear in Section 1916A(a)(2)(A) that individuals with incomes below 100 percent of the federal poverty line should not pay copayments that exceed "nominal" levels of about $3 per service or medication. Moreover, they also clarify that total aggregate costsharing amounts for families with incomes below 100 percent of the poverty line should not exceed 5 percent of family income. Statement about federal policy regarding cost sharing and waiver projects 21. On page 28 of the Memorandum in Support of Defendant Thompson's first

motion for summary judgment, the federal attorneys include a quotation from a report I co-authored with Edwin Park: "States also would have complete flexibility to impose whatever cost-sharing they wish on "expansion" individuals, which could restrict access to necessary services even when the services are covered." (Administration Medicaid and SCHIP Waiver Policy Encourages States to Scale Back Benefits Significantly and Increase Cost-Sharing for Low Income Beneficiaries, Center on Budget and Policy Priorities, August 15, 2001). This quotation is used to imply that it was considered legitimate for the federal government to increase cost sharing in section 1115 waiver projects. However, that quotation was merely a description of the federal policies that had been recently announced (the Health Insurance Flexibility and Accountability or
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HIFA waiver initiative, which was introduced by the Bush Administration in 2001) toward cost-sharing in section 1115 waivers, not an assessment of whether these policies are appropriate or legal. A true and correct copy of the complete report cited by the federal defendant is attached as exhibit D. 22. In a later report, Charging the Poor More, I again describe current federal

policies regarding cost sharing and waivers, but also note that the federal agency might not be following statutory criteria when it decides to approve waivers: "Under Section 1115 waivers, the federal government may permit states to modify these cost-sharing rules. Although these modifications commonly apply to groups that become newly eligible for coverage under the waiver (particularly individuals with incomes above the poverty line), the Centers for Medicare and Medicaid Services (CMS) at the U.S. Department of Health and Human Services (HHS) has been willing to let states modify cost-sharing for those already eligible for benefits, particularly through HIFA waivers which the Bush Administration introduced in 2001. In its HIFA waiver guidance, CMS has not set a limit on total cost-sharing, except for a limit of five percent of family income for children. Federal law establishes criteria concerning when CMS may waive cost-sharing limits in Medicaid, but CMS has not necessarily followed these criteria in approving waivers." Arizona's waiver will not provide meaningful research or demonstration findings about copayments 23. Central to the concept of section 1115 projects is that they are research and

demonstration projects that should serve a scientific purpose in testing the effects of a new method of delivering benefits. Under this aegis, the Secretary of Health and Human Services may waive certain federal rules that would otherwise pertain. Section 1115 projects are not intended to simply serve as a mechanism to waive or "get around" federal rules for the convenience of either the state or the federal government. Despite this underlying purpose of the section 1115 projects, my assessment is that neither the State

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of Arizona nor the Centers for Medicare and Medicaid Services planned to make any serious attempt to assess or research the effects of copayments under this project. 24. The research expectations that relate to waiving Medicaid cost sharing rules

are specified in the Medicaid statute. Under 42 USC §1396o(f), there are a number of criteria that the Secretary of Health and Human Services must consider in advance to determine whether to grant a waiver of cost-sharing rules that otherwise apply. The purpose of these criteria is to ensure that cost sharing rules are waived only under circumstances that would provide useful and scientifically sound research findings, which are appropriate in the context of section 1115 research and demonstration projects. One of the key criteria is that the Secretary determine that the project "test a unique and previously untested use of copayments." As this declaration indicates, there has been ample research about the effects of copayments in Medicaid. The research

predominantly shows that copayments generally reduce the utilization of essential health care services and of medications by low-income people. Some of the studies demonstrate that there were adverse health consequences for those who were required to make copayments. I am not aware of any "unique or untested" aspect of cost-sharing or copayments that would be examined under this project; other states have imposed copayments of a similar nature for the same services (prescription drugs, physician office visits, non-emergency use of emergency rooms). Neither Arizona's waiver application nor the federal approval letter delineates any unique or untested uses of copayments in this section 1115 project. 25. Similarly, 42 USC §1396o(f) also specifies that a waiver of cost sharing

rules should be granted only if the demonstration project is "based on a reasonable hypothesis which the demonstration is designed to test in a methodologically sound manner, including the use of control groups of similar recipients of medical assistance in the area." To an experienced researcher and one who teaches public policy research methodology at the graduate level, it is clear that neither the state nor the Centers for Medicare and Medicaid Services laid out a reasonable hypothesis or a sound
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methodological plan to assess the effects of cost sharing in this project. They did not establish a "control group," that is, a group of similar people who would not be required to make copayments, whose health care utilization or health status could be compared to those required to make copayments. There is no evidence in the relevant federal or state documents that any research design was planned, much less a methodologically sound research design. 26. An additional requirement of 42 USC §1396o(f) is that the project must be

determined to be "voluntary or makes provision for assumption of liability for preventable damage to the health of recipients of medical assistance resulting from involuntary participation." As I understand it, AHCCCS beneficiaries were not asked to volunteer for copayments, not asked for informed consent and not given any protections with respect to the assumption of liability for preventable damage in the event of involuntary participation. I suppose that one might argue that AHCCCS is voluntary and that no one is forced to join the program, but that once enrolled, a beneficiary must abide by program rules including copayments. But such an argument would be flawed. Based on the declarations of the plaintiffs in this case that I read, it appears that applicants were not asked to voluntarily participate in a copayment project. My experience with the Urban Institute's Institutional Review Board concerning ethnical standards that apply to research involving human subjects indicates that standards for voluntary and informed consent cannot be met when the incentive for consenting to a research project or the penalty for not consenting to it is so great that there is no reasonable alternative but to consent. While people were not forced to join AHCCCS and abide by its copayment policies, the penalty for not consenting would be to go without health insurance coverage. Even if applicants knew about copayments in advance, they had no reasonable choice but to accept the imposition of copayments as a condition of gaining health insurance coverage; thus, they lacked a credible voluntary choice in this matter. 27. For the work I have performed on this case to date, I have requested no fee.

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ORIGINAL of the foregoing electronically filed with the Clerk of the Court this 10th day of March 2008. COPY of the foregoing emailed via Electronic Case Filing System this 10th day of March 2008 to: Logan Johnston Johnston Law Office PLC One North First Street, Suite 250 Phoenix, Arizona 85004-2359 Attorney for Defendant Rodgers COPY of the foregoing mailed this 10th day of March 2008, to: Vesper Mei U. S. Department of Justice Federal Programs Branch Civil Division ­ Room 7316 20 Massachusetts Avenue, N.W. Washington, D.C. 20001 Attorney for Defendant Leavitt COPY of the foregoing mailed this 10th day of March 2008, to: Honorable Earl H. Carroll United States Senior District Judge United States District Court District of Arizona Sandra Day O'Connor U. S. Courthouse 401 West Washington Street, SPC 56, Suite 621 Phoenix, Arizona 85003-2156

By /s/ Gaynell Carpenter

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