Congress is on its August break.

There’s no doubt that the Affordable Care Act has spurred change in the health care industry. Of course, change is not necessarily good so that’s why the FEHBlog enjoys tracking it.

AIS provides a helpful update on bundled payment approaches that will bend the cost curve down.

Government Health IT muses about whether heathcare is ready for comsumerization. But this Kaiser Health News article about Medibid tells us that ready or not consumerization of healthcare is here. KHS explains

The four-year-old online service links patients seeking non-emergency care with doctors and facilities that offer it, much the way Priceline unites travelers and hotels. Vetting doctors is left to prospective patients: Medibid does not verify credentials but requires doctors to submit their medical license number for patients to check.

According to Medibid’s website, the company also is offering its service to employer sponsored health plans.

Yesterday, OPM issued its final phased retirement rule. The OPM press release explains that

Employees who are eligible for Phased Retirement and want to continue working on a part-time basis may do so with the agreement of their agencies.  During Phased Retirement, an employee will receive a partial annuity and will keep accruing additional service credit toward their final annuity.  The employee will also spend 20 percent of his time in mentoring activities to facilitate the transfer of their knowledge and skills to other employees within the agency. Each agency will have the flexibility to implement the mentoring component in a way that is best for the agency and employees.

The final rule (5 C.F.R. § 831.1715(a)(1)) explains that employee whose applications for phased retirement are accepted will remain full time employees for FEHB purposes. That means that the FEHB plan remains primary to Medicare if the employee engaged in phased retirement is over 65.  OPM will begin to accept phased retirement applications on November 6, 2014.

Earlier this week, CMS released its final Medicare Part A Inpatient Payment Regulation for FY 2015 which begins on October 1, 2014. Of note, “the payment rate update to general acute care hospitals will be 1.4 percent in FY 2015,” and “[t]he maximum reduction in payments under the Hospital Readmissions Reduction program will increase from 2 to 3 percent as required by law.”

Thanks to Politico Pro, the FEHBlog stumbled across this Altarum Institute website that keep track of health care economic indicators.

Health care gained a modest 7,000 jobs in July, bringing the 2014 year-to-date monthly average down to 18,000, very close to the monthly average for all of 2013. Health care prices in June 2014 were 1.7% higher than in June 2013, but similar to the rates reported for April and May, and 0.6% higher than for the first quarter of 2014. Health spending in June 2014 grew 4.8% over June 2013, a significant increase over the 4.2% growth estimated for calendar year 2013.  

Very helpful

Finally, at the end of last month, the FEHBlog’s health plan clients dutifully paid the ACA required $2 per member bellybutton fee to support the ACA created Patient Centered Outcomes Research Institute. The FEHBlog mused what’s happening with all that money. IHealthBeat reports that

According to Modern Healthcare, some critics have said pilot projects funded by PCORI over the last two years have not included rigorous enough trials to inform changes to the way care is delivered. For example, an opinion piece by Scott Gottlieb — a fellow at the American Enterprise Institute — published recently in Morning Consult noted that PCORI was supposed to help fill a “purported private void” of research that was not being done by the private sector to assess pressing questions about the comparative effectiveness of different treatments. However, he wrote that the $54.8 million in funding for 33 new research projects awarded last week by PCORI were “mostly trivial” and for “studies of how to do studies.”

Of course, PCORI disagrees.

The ACA includes a provision which amends the Fair Labor Standards Act, a federal minimum wage and overtime law administered by the Labor Department, to require large employers (in this case more than 200 employees) to automatically enroll full time employees into one of their health plans subject to the employee’s right to change that decision. The federal government, which is subject to the FLSA, obviously meets the large employer standard. Because the provision did not include an effective date, the Labor Department decided that the provision would not take effect until the Department issued regulations and no earlier than 2014 when the employer shared responsibility mandate was scheduled to take effect. The IRS delayed that mandate until 2015, and the Labor Department still has not issued implementing regulations. Kaiser Health News explains in this article that the ACA’s automatic enrollment provision is controversial and might be repealed in the lame duck session of Congress.

In the OPM call letter for 2015 benefit and rate proposals, OPM recommended that FEHBP carriers begin to use managed formularies to control prescription drug costs. In that regard, the WSJ’s Pharmalot blog reports on recently announced 2015 changes to the formularies of the two largest prescription drug managers, Express Scripts and CVS Caremark.

Speaking of drug costs, it’s worth noting the Politico report that the American Hospital Association is joining the campaign against Gilead Science’s pricing policy for its Hepatitis C drug, Sovaldi.

Finally Modern Healthcare reports that the Blue Cross organizations in California are chipping in $80 million to finance the backbone for the electronic health record systems in that state.  The insurers also will seed the backbone with claims history, hoping to encourage providers to add the real records. The backbone allows the systems that the federal government has funded to the tune of billions and billions of dollars to communicate with each other thereby allowing for example an emergency room to quickly learn about a patient’s medical history, Good move.

Congress is now in recess until after Labor Day. Here’s a link to last week’s news up on the Hill.

The New York Times had two stories that bear on our beloved FEHBP this weekend. The first concerned  a claim dispute involving an FEHBP HMO where after about five years of going back and forth with a member about coverage of health care trial related expenses the carrier agreed to pay around $200,000 in benefits plus another $180,000 in interest calculated at the rate that the carrier charges when it is collecting overpayments from healthcare providers (18%).  The ACA now generally requires plans to cover these expenses.

The other story reviews the controversy over Gilead Science’s pricing policy for its Sovaldi drug that treats Hepatitis C. Pricing is as much of an art as it is a science. In the FEHBlog’s view, Gilead deserves a lot of credit for developing this drug but it could not be charging $1,000 a pill with the price support provided by health insurers. Gildead’s $1,000 per pill price has raised the bar for all types of drugs where the market is constricted, e.g., vaccines. The article strikes a hopeful tone that the crisis will be shortlived. Hope does spring eternal.

Medcity News interviews the head of development at Cambia Health Solutions (Regence Blue Cross). The insurer certainly has its fingers in a lot of pies as part of its effort to control healthcare costs.

Many of its wholly owned companies grew out of internal projects. hubbub health is a company initially built for its health plan clients but which now extends to a broader customer base. Healthsparq, which  uses price transparency to guide employer plans, was originally developed for its own plan customers but now serves 65 health plans. Other examples include Wellero, LifeMap, SpendWell and OmedaRx.
But Cambia investments span a much broader range of categories and include many technology-enabled services. There’s Wildflower Health, which is about high-risk pregnancy and pregnancy management, particularly for Medicaid patients; Qliance — a primary care provider; ClearCare — a health IT company for home healthcare agencies, Live!y — a remote monitoring sensor producer to support aging in place; CoPatient — a healthcare bill review service;  Retrofit — a weight loss program using wireless devices and apps; and PockitDoc.

Interesting.

Yesterday, HHS issued a final rule setting as expected October 1, 2015, as the ICD-10 coding rule compliance date. Congress earlier this year had forced HHS to push back this compliance date from October 1, 2014, to at least October 1, 2015. HHS went with the earliest date which in the FEHBlog’s view is misguided because a January 1 switc hover would fit better for calendar year health plans.

The Milliman actuarial consulting firm issued a report on the impact the new high priced Hepatitis C therapy will have on Medicare Part D.

We estimate that the cost of new HCV drug therapies , including Sovaldi and Olysio, will increase 2015 federal spending on the individual Medicare Part D program by approximately $2.9 billion to $5.8 billion. This is equivalent to a 6% to 11% increase in federal Part D spending or approximately $100 to $200 per Medicare Part D beneficiary per year.
We estimate that the cost of HCV drug therapies will increase total annual individual Medicare Part D beneficiary premiums by $481 million to $965 million in 2015. This is equivalent to a 4.3% to 8.6% increase over 2014 beneficiary premiums or an additional $17 to $33 per beneficiary per year. 

The FEHBlog would not be surprised to see the drug therapy have a similar impact on the FEHBP.

BenefitsPro reports on a new Blue Cross study concluding that consumer driven health plans are less costly and more efficient than traditional plans.

The FEHBlog was surprised to read this FedSmith article which suggests that based on a 1978 law OPM does not have the authority to extend FEHB coverage to intermittent, seasonal, and temporary employees who meet the ACA’s standard for a full time employee. Assuming the accuracy of the description of the 1978 law, this would only be one of several FEHBA provisions that the ACA impliedly repealed. Go ahead and look in the statute books for 5 U.S.C. 8901 and you’ll see that family member is still defined as a spouse and child under age 22. Nobody blinked in 2010 and there was no reason to blink when OPM jacked up the eligible limit for child coverage to 26 and removed all financial dependency requirements. To the contrary the debate was over whether OPM should have waited until January 1, 2011, to make the change, which it appropriately did. In this case, the ACA’s employer shared responsibility mandate does require the eligibility change that OPM has proposed.

Kaiser Health News collects reports on major health insurers’ 2nd quarter 2014 earnings releases.  The Wall Street Journal and Modern Healthcare report on the earnings release from the major prescription benefits manager Express Scripts which suggest that the Medco acquisition a few years ago combined with the loss of United Healthcare’s business is dragging down earnings.

Ihealthbeat.com reports on a large healthcare consumer study which concludes that  “‘a single exposure of loyalty rewards
significantly influenced enrollment’ in [health plan] online health management
programs. However, they added that ‘additional strategies are required to maintain engagement.'”

Finally, Fierce Health Payer reports on a study which suggests three ways to improve collaboration between those two feuding parties — providers and payers.  The article suggests that payers should take the initiative to

1. Reimburse for the end-to-end population health management workflow — Instead of focusing on only closing care gaps or reducing utilization
rates, for example, payers should reimburse for the entire workflow so
that providers are more willing to invest in the sometimes pricey
resources needed to implement value-based programs.
2. Share as much data as possible –For example, as the publication previously reported, Aetna
shares its data with its provider partners, believing that the
information helps doctors and hospitals do a better job at a lower cost, FierceHealthPayer previously reported. But insurers
shouldn’t just dump data on providers and expect them to understand it;
instead, they should assist in analyzing and drawing specific
conclusions. On the flip side, providers that are collecting their own data, which
is often richer in patient care history than payers’ claims data,
should share this information with insurers. Then, payers and providers
can both use a more complete set of data to improve quality of care. and
3. Collaborate at the organization, rather than the individual practice level. 
 

The weekend update is a little late this week because the FEHBlog did not return home from Connecticut until late last night. A good time was had by all.

This is expected to be Congress’s last week in DC before the August recess. Here’s a link to the Week [that was] in Congress.

The Congressional Budget Office just released more information on national heath care spending projections.

In tomorrow’s Federal Register, OPM will publish a proposed rule that extends FEHBP coverage with a government contribution to temporary, seasonal, and intermittent federal employees who work 130 hours a month beginning next year. This change is being driven by the Affordable Care Act’s employer shared responsibility mandate, but in the FEHBlog’s opinion, the FEHBA, 5 U.S.C. § 8913, authorizes OPM to take this action.

OPM projects in the rule’s preamble. that this change will not generate many new enrollees because most of the affected employees already have coverage from other sources. The irony is that the ACA imposes an enormous excise tax on insured FEHB plan carriers and other health insurers and HMOs to mop up the “excess profits” stemming from the ACA’s shared responsbility mandates

And speaking of ACA burdens, the IRS last week posted draft forms (1094c and 1095c) that FEHB plan carriers and all other health plans will use to report to the IRS on whether their members comply with the ACA’s individual shared responsibility mandate. This process involves a tremendous administrative burden of of collecting all covered family member Social Security Numbers which of course the IRS uses as Tax Identification Numbers. Remember folks that this collection effort benefits you, not the carrier.

By the way, also last week the IRS announced the cap on the 2014 tax on individuals who don’t have minimum essential coverage —

For 2014, the annual payment amount is:
The greater of:
1 percent of your household income that is above the tax return filing threshold for your filing status, or
Your family’s flat dollar amount, which is $95 per adult and $47.50 per child, limited to a family maximum of $285,
But capped at the cost of the national average premium for a bronze level health plan available through the Marketplace in 2014. For 2014, the annual national average premium for a bronze level health plan available through the Marketplace is $2,448 per individual ($204 per month per individual), but $12,240 for a family with five or more members ($1,020 per month for a family with five or more members).  See Rev. Proc. 2014-46.

P.S. The IRS delayed the required distribution of these forms until January 2016 for the 2015 tax year.

Reuters reports that the Food and Drug Administration has accepted an application for a  bio-similar drug.

U.S. regulators have accepted an application by Sandoz – the generics arm of Novartis – seeking approval for a copycat version of Amgen’s drug Neupogen, or filgrastim, for patients with low white blood cell counts.
The Food and Drug Administration’s decision to accept the filing under a new pathway for so-called biosimilar drugs marks a milestone in the rollout of cheaper copies of injectable biotech medicines in the United States.
Sandoz said on Thursday that overcoming the first hurdle in the approval process was an important step in increasing U.S. patient access to such treatments.
The generics company already sells a biosimilar version of Amgen’s drug in more than 40 other countries, but the United States has been slower than other markets to establish a regulatory framework for biosimilars.

Better late than never as the saying goes.

Gilead Sciences just came out with its second quarter earnings. Sovaldi sales totalled almost $3.5 billion in the second quarter or around $5.75 billion for the first six months of 2014. The Wall Street Journal reported earlier this week that the prescription drug manufacturers are engage in “unusual” patent litigation / tong wars with Gilead over Sovaldi. CVS officials discuss Gilead’s “unsustainable” pricing policy here.

Speaking of health care costs. Fierce Healthcare reports on a investment bank survey finding that hospital inpatient volumes trend slightly up (0.4%) in the second quarter of 2014, after several years of downward trends. “Researchers attribute the uptick to a combination of the improving economy, the implementation of the Affordable Care Act and patients waiting as long as possible for procedures, compounding demand.”

Yesterday, the U.S. Court of Appeals for the D.C. Circuit ruled that the Affordable Care Act (ACA) does not permit the federal government to pay subsidies to participants in the federal exchanges, only to those in state established exchanges or market places. . The U.S. Court of Appeals for the Fourth Circuit ruled the other way, affirming the Obama Administration’s position.

Employee Benefit News reports that a couple of leading benefits lawyers are predicting that these conflicting decisions could lead the federal government to delay the employer mandate for another year. Evidently the impetus for this prediction is that the employer mandate falls by the wayside if subsidies cannot be paid in the 36 states that use the federal exchanges. Talk about water torture.

The FEHBlog heard a law professor yesterday remark that it would not be a particularly heavy lift for states in the federal exchange to create their own exchanges in the wake of a Supreme Court decision siding with the DC Circuit. In that regard, Maryland is picking up the pieces of its hopelessly broken state exchange and switching to Connecticut’s exchange technology.

Of course, we don’t even know at this point whether the Supreme Court will take the case because there is a high likelihood that the entire bench of active DC Circuit judges (7 Democratic President appointees and 4 Republican appointees) will reverse the panel decision en banc leaving no split in the circuits. The Supreme Court still could take the case, but the lack of circuit split reduces the urgency to do so.

In other legal news, the Hill reports that on Monday the U.S. District Court for the Eastern District of Wisconsin dismissed Sen. Ron Johnson (R Wisc) challenge to OPM’s decision to provide a FEHBP government contribution to members of Congress and their official staffs who have transitioned from the FEHBP to the DC SHOP program, which is part of the ACA’s health insurance market place.  The Hill explains that

The judge dismissed the argument that, without a court challenge, there would be no other way to fix the regulation. Lawmakers can cite the regulation on the campaign trail to sway elections, the judge said, or Congress could use some of its other powers to rein in the executive.
“The Congress itself is surely not helpless to rein in the executive: It has spending authority, investigative powers, and it even wields the blunt instrument of impeachment,” the judge wrote.

The FEHBlog enjoyed the afternoon at Nats Park watching Jason Werth hit a walk off double to win the game over the Milwaukee Brewers. The Nationals pointed out during the President’s race that today is the 45th anniversary of the Apollo 11 moon landing. Federal News Radio has a photo collage of that historic space flight.

Congress is in session this week. Here’s a link to the week in review up on Capitol Hill.

The WSJ Pharmalot blog discusses another very expensive specialty drug called Kalydeco which treats cystic fibrosis. The drug’s manufacturer Vertex Pharmaceuticals charges around $300,000 a year for the drug. Arkansas Medicaid is requiring Medicare beneficiaries suffering from this disease to try less expensive drugs before resorting to Kalydeco. A 14 year old girl with cystic fibrosis, which is a rare genetic disease, is suing the Medicaid Program. Vertex claims that its hands are tied by the Medicaid rules — no special treatment for this girl. Note that if Vertex lowers the cost of the drug for Medicaid, it will wind up lowering the cost of all payers because Medicaid pricing is the floor price for brand name drugs.

The drug manufacturer’s trade association Phrma defends these unconscionable pricing policies here.

The shift from managing a condition to being able to cure it has already occurred for hepatitis C patients. The disease affects nearly three million Americans today who face high medical costs if the infection is left untreated. New and forthcoming treatments have sparked controversy with their high price tag of approximately $1,000 per pill. When considering the $600,000 bill for a liver transplant or the $85 billion combined annual medical costs for all hepatitis C patients projected by 2034, however, the cost doesn’t seem so off base. Additionally, solely looking at the cost of the medicine, fails to account for the invaluable increase in lifespan and quality of life that patients gain from these innovative new medicines.

Why Phrma’s argument is facially appealing, the bottom line is that Gilead Sciences which makes the Sovaldi Hepatitis C drug recovered its research and development costs from the first quarter of Sovaldi sales — over $2 billion according to the NY Times.  The drug manufacturers need to come to their senses fast.  With this attitude there will never be cost savings from medical advances. Gilead reports its second quarter 2014 earnings on Wednesday July 23.