Last Thursday, HHS provided an update on the ACA’s Medicare savings initiative, including Accountable Care Organizations. The lead sentence in the related Kaiser Health News’ report says it all — “Accountable care organizations are saving some money, though what exactly that means is still unclear.” In fairness to HHS, it’s still early in the game.

The Wall Street Journal on Saturday (best paper of the week) published a review of a book on the development of the first Hepatitis C drug that reached the market. This drug recently was overtaken by the Gilead drug mentioned in last Tuesday’s Tidbits. The book review discloses that Gilead owes a lot to the developer of the first drug, Vertex.

Hepatitis C was an “underrated and undervalued disease,” Mr. Werth writes in “The Antidote,” lacking the visibility of AIDS or cancer. The disease also lacked a deep history, its causative virus and responsibility for cirrhosis and liver cancer having been discovered only recently. Worse still for the political visibility of hepatitis C was the disease’s demography: Major vectors of transmission were widely understood to be intravenous drug use and tattooing. There were about three million people infected in America, and 150 million to 200 million world-wide, but U.S. victims were concentrated among the poor and African-Americans. In California, 40% of prisoners were infected with the hepatitis C virus, compared with about 2% of the general population.

So Vertex took a leading role in lobbying to widen hepatitis C screening, to shed any stigma associated with the disease, and to get it thought of not as a drug users’ disease but as an affliction of the influential baby-boomer generation. The company also tried to show that even a hugely expensive drug treatment—Incivek was eventually priced at about $50,000 for a 12-week course—would cost patients and insurers less than the alternatives, such as liver transplantation. For Vertex’s molecule to make serious money, hepatitis C had to be culturally reconsidered and politically repositioned. 

PBMs are pushing back at Gilead’s decision to price its drug $84,000 per course of treatment.

The Government Accountability Office released a report last week on recent trends in federal civil service employment.

From 2004 to 2012, the federal non-postal civilian workforce grew by 258,882 employees, from 1.88 million to 2.13 million (14 percent). Permanent career employees accounted for most of the growth, increasing by 256,718 employees, from 1.7 million in 2004 to 1.96 million in 2012 (15 percent). Three agencies–the Departments of Defense (DOD), Homeland Security (DHS), and Veterans Affairs (VA)–accounted for about 94 percent of this increase. 

For a little FEHBP perspective, OPM’s March 2012 headcount report as found in the FEHBlog’s archives indicates that 1,858,330 annuitants, 1,707,618 civil service employees, and 449,183 Postal Service employees were then enrolled in the FEHBP,  From March 2007 to March 2013, civil service employee enrollment increased by 10% (2/3s of the total permanent career service employee increase of 15%), Postal Service employee enrollment dropped by a jaw-dropping 27% (from 614,044 in March 2007), and annuitant enrollment increase by 3% across the FEHBP. Annuitants compose roughly 46% of the total FEHBP enrollment.

Yesterday, the Senate Homeland Security and Government Reform Committee began its markup of a substitute postal reform bill (S 1486) sponsored by the Committee’s Chairman Sen. Tom Carper (D. Del.) and Tom Coburn (R. Okla.).  For several years, the Postmaster General has been seeking legislative authority to pull Postal employees and annuitants out of the FEHBP.  His goal is to lower the health benefit costs by betting coordinating coverage with Medicare.  The Postmaster General got on this kick because of a 2006 statutory change that requires the Postal Service to pre-fund its retiree health insurance obligations. As the Postal Service and the Postal unions have pointed out, no other American business is under this obligation. Nevertheless, postal reform bills in Congress reduce but retain that obligation.

The Carper-Coburn substitute bill (Section 104) would create a Postal Service Health Benefits Program within the FEHBP under OPM’s administration. The PSHBP would be more tightly coordinated with Medicare. As one Senator noted at the markup yesterday, the Postal Service is funded by its customers just like any other U.S. business and all other U.S. businesses that cover there annuitants with Medicare put the primary payment obligation on Medicare. More details can be found in the Federal News Radio article.

Section 104 strikes the FEHBlog as a Goldilocks solution. There was a lot of discussion at the markup yesterday but no concerns were raised about Section 104. Govexec’s headline on yesterday’s meeting is that after contentious debate the Committee delayed the bill.  The markup did end after three hours without a final vote. However, the FEHBlog expects that the issues eventually will be ironed out, thereby allowing the bill to reach the Senate floor. This may be the year that postal reform legislation is enacted. Good luck to the Postal unions.

Following up on Sunday’s post about drug costs, the FEHBlog noticed this LifeHealth Pro article about how prescription benefit managers and insurers are pushing back against a prescription drug manufacturer Gilead that is charging $1,000 per pill for a Hepatitis C medication — that’s $84,000 for a 12 week course of treatment. Gilead has leverage because Hepatitis C is a serious illness with few treatment options that affects a lot of people.  The article explains that

Express Scripts Holding Co., Catamaran Corp., Aetna Inc. (NYSE:AET) and CVS Caremark Corp. among others are already pushing back against the high cost of Gilead’s drug. They’re discussing how to pit similar drugs against each other, refusing coverage for some, or subjecting treatments to more review by outside experts and refusing to pay a premium based on one drug being more convenient to take than another.

Good luck with that.

Yesterday, three senior Republican Senators introduced a bill to replace the Affordable Care Act.  The FEHBlog The FEHBlog read the position paper last night.  The proposal certainly is worth discussion.

Finally Congress created a three month sustainable growth rate formula (“SGR”) patch in the budget deal. That patch expires at the end of March. The SGR is the flawed statutory formula for reimbursing doctors under Medicare Part B. Former CMS administrators are suggesting that Congress should suspend the SGR for five years in order to allow time to develop a sensible replacement. This Medpage article reports that the administrators believe that their approach would cut the cost of the repeal and replace approach in half. Of course, Congress passed the SGR in 1997 so there already has been over 15 years to fix it.

The New York Times today reported on Medicare’s efforts to crack down on health care provider fraud in the Medicare program.  

In a related action, the Obama administration this month scrapped a policy that broadly prohibited the release of federal data showing how much Medicare paid individual doctors each year. The administration said it would consider releasing payment data in response to Freedom of Information Act requests.

This change, which was driven by a successful Wall Street Journal lawsuit, will take effect on March 18, The American Medical Association is not amused.

The FEHBlog remains fascinated by prescription drug pricing. The Wall Street Journal reported last week that drug manufacturers are starting to wade back into the antibiotic development business which certainly is good news. Here’s the catch according to the article:

Unlike a drug to treat a chronic condition, antibiotics are usually taken for a week or two, limiting sales. The most commonly prescribed ones, including azithromycin and amoxicillin, are now available as low-cost generics.
Charging higher prices could help spur development. In a recent paper in Nature, Drs. Spellberg and Rex argue a hypothetical new drug to treat Acinetobacter baumannii, a cause of hospital-acquired infections, could offer value for health-care providers even if priced at as much as $30,000 a course.
U.S. health insurers Aetna and Cigna declined to comment on the hypothetical price, but the U.K.’s pricing-advisory body NICE already recommends the use of two cancer drugs that cost more relative to the additional lifespan they offer patients.
While most big drug makers continue to invest elsewhere, some smaller companies are stepping into the antibiotics breach. Small and medium-size companies are now responsible for 73% of antibiotics in development, according to BioPharma statistics.

Well let’s wrap up the week with a couple of interview reports.

First OPM Director Katherine Archuleta was interviewed by the Federal Times. The interview covers a lot of topics but does not address the FEHBP.

Aetna CEO Mark Bertolini,  who in the FEHBlog’s view is a real straightshooter, described U.S health care spending — in a Businesweek interview — as out of control because “Americans have an ‘unsustainable attitude’ that ignores the increasing cost of health care.”  The article explains

Spending on drugs, hospitals and other services rose 3.7 percent in 2012, half the rate from before the recession that ended in 2009. While Bertolini ascribed the slowdown to the economy, the U.S. health-care law known as Obamacare also has encouraged collaborations among doctors and hospitals to coordinate patient care. Companies including Hartford, Connecticut-based Aetna, the third-biggest U.S. insurer, have started their own “accountable care” partnerships.
Instead of a medical system of solo practitioners, U.S. health-care needs to “bring the whole team together to get the right services” to patients, Bertolini said from Davos, where he was attending the World Economic Forum.
Americans are gaining more control and more responsibility for their medical bills, Bertolini said, with individuals paying about 40 percent of costs through premiums, deductibles and other charges.

With regard to consolidation, Fierce Healthcare reports on an American Hospital Association funded study identifying  three ways that this ACA inspired realignment can help hospitals.

Finally, in a man bites dog kind of story, Government Health IT reports on an expert who is assuring provides that the ICD-10 implementation won’t be so bad. Here’s a link to the transcript of the expert’s presentation made possible by Florida Blue Cross, which is worth reading.

FierceGovernment.com reports that the federal government shed 75,000 jobs in 2013 according to a Bureau of Labor Statistics report. Not all of these positions were FEHBP eligible. In that regard, Federal News Radio reports that OPM is laying off more than 300 employees from its Human Resources Solution office.

Kaiser Health News discusses how the Affordable Care Act’s preventive services mandate can be confusing to plan members. The fact of the matter is that it’s confusing for everyone because the nature of the mandate which relies on expert medical panels like the U.S. Preventive Services Task Force, requires HHS to interpret the medical expert’s positions, and HHS tends to take an expansive view of the required coverage. And it remains controversial whether or not all of these preventive services actually save health care dollars from a macro-standpoint as this Reuters article explains.

A 2010 study in the journal Health Affairs, for instance, calculated that if 90 percent of the U.S. population used proven preventive services, more than do now, it would save only 0.2 percent of healthcare spending.
Some disease-prevention programs do produce net savings. Childhood immunizations, and probably some adult immunizations (such as for pneumonia and the flu), are cost-saving, found a 2009 analysis for the Robert Wood Johnson Foundation. The vaccines are cheap, and large swaths of the population are vulnerable to the diseases they prevent. The cost of providing them to everyone is less than that of treating the illnesses they prevent.
Counseling adults about using baby aspirin to prevent cardiovascular disease also produces net savings. The counseling is inexpensive, the aspirin even cheaper and the costs of heart disease, which strikes one in three U.S. adults, are enormous. Screening pregnant women for HIV produces net savings, too.
Those, however, are exceptions.

But it’s the law.

The Drug Channels Institute is preparing to release its 2013-14 Economic Report on Retail, Mail, and Specialty Pharmacies. Here are some highlights:

• The top five dispensing pharmacies—CVS Caremark, Walgreens, Express
  Scripts, Rite Aid, and Walmart—accounted for about 65% of U.S.
  prescription dispensing revenues in 2013.

• Market share concentration in 2013 was slightly greater than that of 2012.

• We project total 2013 retail, mail, and specialty pharmacy revenues of $287.0 billion, up 1.6% from 2012.

Congress returns to work on Tuesday following the MLK holiday tomorrow. On Thursday, the Senate also approved the FY 2014 omnibus appropriations bill (H.R. 3547). The President has said that he will sign the bill into law. Federal News Radio offers a helpful chart showing how the bill impacts various federal departments and agencies.

The next checkpoint is the debt ceiling increase that will have to occur late next month according to the Treasury Department. The current debt ceiling suspension expires on February 7.  Politico reports however that the Senate Majority Leader thinks that a debt ceiling increase will not be needed until the Spring. In any event, all signs point to peace on the Potomac. No government shutdowns this year.

The lead article in the New York Times concerns how medical specialists are soaking the populace. The article focuses on the pecuniary benefits of dermatology.

[M]inor procedures typically offer the best return on investment: A cardiac surgeon can perform only a couple of bypass operations a day, but other specialists can perform a dozen procedures in that time span. That math explains why the incomes of dermatologists, gastroenterologists and oncologists rose 50 percent or more between 1995 and 2012, even when adjusted for inflation, while those for primary care physicians rose only 10 percent and lag far behind, since insurers pay far less for traditional doctoring tasks like listening for a heart murmur or prescribing the right antibiotic.

Of course, it’s the insurers’ fault.

Finally, one of the more onerous Affordable Care Act provisions is the complicated IRC 6055/6056 reporting that caused the IRS to delay the employer shared responsibility mandate for one year. The 6055 reports must be submitted by health plans, including FEHB plans, to document enrollee and dependent compliance with the individual shared responsibility mandate. The 6056 must be submitted by large employers to document their compliance with the employer shared responsibility mandate. This helpful report from Buck Consultants discusses the public hearing that the IRS held on these new reporting requirements in November 2013.

Following up on the weekend update post on personalized medicine, the Wall Street Journal reported yesterday on the useful expansion of personalized medicine from breast cancer to prostate cancer  .

Researchers say, for instance, that several new genomic prostate-cancer tests can help separate high-risk tumors from those at low or intermediate risk, offering information to doctors and patients to guide treatment choices.
About 240,000 men in the U.S. are diagnosed with prostate cancer each year. Most cases are low-risk forms of the disease that will have little effect on their lives or longevity. In these cases, a big concern is that overtreating the cancer puts these men at unnecessary risk for impotence, incontinence and other complications.
About 20% of diagnosed men are considered at high risk for having their cancers spread beyond the prostate gland based on a measure called the Gleason score and other factors. For some men with an aggressive form of the disease, the 10-year-survival rate is well below 50%. “We may not be treating them aggressively enough,” says William Polkinghorn, a radiation oncologist at Memorial Sloan-Kettering, in New York.

Keep hope alive.

In another interesting development here’s a link to a press release about how a drug manufacturer Vivus is teaming up with Aetna to offer its new weight loss drug Qsymia as part of Aetna’s lifestyle coaching programs. “The Aetna pilot program is currently being offered to self-insured plan sponsors, and includes outreach to appropriate members and health care providers regarding covered options. Participants in the pilot will also receive free membership to Lose It!, a mobile app provided through Aetna Navigator® and CarePass®, to support weight loss and positive lifestyle changes.”

Finally, CIO magazine reports on how data analytics can help the accountable care organization model succeed in contrast to capitated rates lead to the failure of the gatekeeper HMO model in the 1990s and FierceHealthcare reports on the demonstrated benefits of the patient centered medical homes.

As noted in Friday’s post, Congress will be focused this week on passing an omnibus appropriations bill as required by the current continuing resolution (H. J. Res. 59). The Hill’s Floor Action blog elaborates here.

The FEHBlog was not terribly surprised to learn from EHR Intelligenence that that the American Medical Association has not give up on its belated fight against the implementation of the ICD-10 code set scheduled for October 1, 2014, under HIPAA.  HIPAA was enacted to facilitate electronic claims transactions and the current ICD-9 does the job well. However, this is what you get when technology standards are set in law. The AMA likely will be able to convince the Centers for Medicare and Medicaid Services to continue to accept ICD-9 coded claims for Medicare payment for a few months after this compliance date but that’s the most the FEHBlog expects will come of this campaign.

Speaking of technology, the FEHBlog ran across this genomeweb.com article about developments in next generation / lower cost DNA sequencing in 2013.  This technology permits rapid genomic comparisons for the purpose of identifying genetic defects that may cause cancer, for example. It turns out that the Food and Drug Administration approved the use of Illumina’s next generation sequencing technology last year. Illumina has licensed the technology to the big time laboratory services vendor Quest Diagnostics. The genomeweb.com article explains the Blue Cross, Aetna, and United Healthcare have established policies for covering the technology in certain circumstance.

House Appropriations Committee Chairman Harold Rogers says bipartisan negotiations on the broader spending bill will carry into the weekend in hopes that an agreement can be sealed by Sunday or Monday. The secretive talks have yielded agreement on at least eight of the omnibus bill’s 12 titles. But issues like funding implementation of the new health care law remain unresolved. 

The House leadership is proposing a three day extension of the continuing resolution in order to allow for the conclusion of negotiations and the application of regular order to the resulting omnibus appropriations bill.

As you also know, we are on a path that leads to Super Bowl XLVIII next month. Yesterday, the Affordable Care Act regulators came out with ACA Frequently Asked Questions XVIII.  What is the likelihood that the ACA regulators will reach FAQ L at the same time the NFL play Super Bowl L in 2016?

Enough musing though, the FAQs announce a new preventive care mandate that will apply to the FEHBP for 2015. The U.S. Preventive Services Task Force B level recommendation provides that “For women who are at increased risk for breast cancer and at low risk for adverse medication effects, clinicians should offer to prescribe risk-reducing medications, such as tamoxifen or raloxifene.” The ACA regulators make it clear that health plans must cover the prescription drugs not just the physician counselling with no member cost sharing in network subject to reasonable medical management practices. (The rule applies only to non-grandfathered plans which at this point are few and far between — the FEHBlog places this qualification in parentheses because OPM sensibly disregards this fine point for FEHBP purposes.)

The FAQs also allow plans to break up the statutory in-network out of pocket maximum applicable to FEHB and other group health plans (in 2014 $6,350 for self-only coverage and $12,700 for coverage other than self-only coverage) among different benefit categories as long as medical/surgical and mental health / substance abuse conditions fall under the same category. For 2014 only, plans can impose separate $6,350 / $12,700 limits on separately administered benefits like prescription drugs. But that administrative waiver is gone for 2015.

The FAQ is 10 pages long and full of good stuff.

Finally, for thirty years, CMS has exempted the State of Maryland from Medicare’s prospective payment system. Maryland has used its own system to regulate hospital prices, and Kaiser Health News reports that CMS has blessed a “radical” change to Maryland’s system.    

After months of negotiations with state and the federal officials, the hospitals also agreed that their revenue from all sources — private insurance, government and employers — will rise no faster than growth in the overall state economy.
Maryland regulators with the power to cap spending will enforce the agreement, which analysts say could serve as a model for other states and eventually the nation. Enforcement muscle gives Maryland’s deal a better chance to succeed than a similar measure passed last year in Massachusetts, analysts said.
“Maryland is actually doing a leapfrog over Massachusetts,” said John McDonough, a Harvard University professor and former state legislator who helped design Massachusetts’ 2006 insurance-coverage expansion. “It really establishes a new frontier in terms of controlling growth.”  * * * Specifically, [starting in 2014] statewide hospital revenue for inpatient as well as outpatient care will rise no more than 3.58 percent annually — the state’s rate of per-capita economic growth since 2002.

Time will tell. Price controls do not have a great history of success. The article concludes by musing that Maryland hospitals took this deal because insurers outside Maryland are “starting to pit hospitals against each other, presenting a risk of a fierce price war like airlines.” Now, that’s more like it.