Happy Flag Day! OPM Director John Berry spoke to the Society of American Indian Government Employees today. His remarks included the following points about the FEHB Program:

OPM’s Director of Healthcare and Insurance, John O’Brien, is up in Milwaukee at National Congress of American Indians this week to engage in meaningful consultations about how we bring tribal employees into our Federal Employee Health Benefits Family, and I’ll say more on that in a moment.

We’ve launched a new innovation era in the Federal Employees Health Benefits Program, which is nine million members strong – and growing. We’re excited to add Tribal employees – even before the state-operated insurance markets, for the general public, go live. We have a real opportunity here to provide Tribes and their employees with a vital service. Our presence at NCAI is just one part of our process of meaningful consultation. And of course, any member can get self and family coverage for children up to age 26.

We’re getting FEHBP’s insurance companies to cover preventive care with no co-pay and introducing other far-sighted reforms. Nudging them to make these investments in the long term health of their members will also benefit the government as an employer.

It’s worth adding that according to a Twin Cities bizjournals.com report, Congress has just created a Wellness Caucusthat will investigate and share ways for companies to support employee health and wellness.

America’s Health Insurance Plans today released its annual health savings account / high deductible health plan survey finding that HSA / HDHP coverage among large employers jumped 26% last year. 11.4 million Americans are now covered by these consumer drived plans. AHIP warned that the Affordable Care Act could impair future growth.

• Restrictions on Over-the-Counter Medications: Starting this year, HSA funds can no longer be used to purchase over-the-counter (OTC) medications without a prescription.  This requirement reduces consumers’ access to common OTC drugs, such as allergy medications, and instead provides an incentive to use higher-cost prescription drug alternatives.
• Medical Loss Ratio: The medical loss ratio (MLR) regulation is particularly problematic for HSA-eligible plans.  By Congressional design, these plans are intended to provide consumers with a high-deductible, low-premium coverage option along with the ability so save for health care expenses through an HSA.  While these plans typically have lower benefit costs, they are not necessarily less costly to administer on a per-enrollee basis, and, as a result, naturally have lower loss ratios.  Policymakers should recognize the unique nature of HSA plans to preserve consumers’ access to this important coverage option.
• Minimum Actuarial Value Requirement: Effective in 2014, insurance coverage sold in the individual and small-group markets must meet certain minimum actuarial values for each level of coverage provided: bronze, silver, gold, and platinum.  The lowest level, bronze, must have a minimum 60 percent actuarial value, which is the dollar value of the average expected benefits paid out by the plan.  The ACA directs the HHS Secretary to establish the process for determining actuarial values and states that the Secretary “may” include the amount of the annual employer HSA contributions toward the actuarial value calculation.  Including employer HSA contributions in the actuarial value calculation significantly increases the likelihood that HSA plans will meet the minimum requirement and will help ensure consumers continue to have access to the high-quality, affordable coverage they rely on today. 

The AMA News reports this week on a new study confirming that adverse drug events “send millions back for care.”

Both Houses of COngress are in session this coming week. The FEHBlog has noticed several interesting business developments.

Thomson Reuters announced last week that it will be selling off its healthcare business. That business “provides data, analytics and performance benchmarking solutions and services to companies, government agencies and healthcare professionals.” United Healthcare has its Ingenix division which provides similar services. Will a major health insurer (as opposed to IBM or GE) snap up this opportunity?

Wellpoint,  a major health insurer, announced last week its purchase of Caremore, “a senior focused health care delivery program that includes Medicare Advantage plans and 26 clinics designed to deliver [managed] health care [to 54,000 Medicare Advantage plan members] in select California, Arizona, and Nevada markets. Wellpoint plans to expand the Caremore model inside and outside this region.

The New York TImes reflects that “The transaction should turn heads in the deal world because health care mergers and acquisitions have slowed as a result of the uncertainty surrounding President Obama’s health care overhaul and its effect on the managed care sector, especially Medicare organizations The FEHBlog reflect that this is a smart business move because the Affordable Care Act imposes profit limits on health insurers but not on health care providers or health care information services.

Last week was the deadline for comments on the HHS rules implementing accountable care organizations. AHIP, the health insurers’ trade association, submitted thoughtful comments – suggested that the government should build on private sector initiatives, avoid Medicare’s fee for service platform and take steps to control provider consolidation.

Imitation is said to be the sincerest form of flattery. The FEHBlog is visiting East Haven, CT, the town where he grew up this weekend, and he noticed that Yale New Haven Hospital has built an urgent care center to compete with the MinuteClinics as discussed in this New London Day article. But does Yale charge MinuteClinic prices or ER prices?

The Federal Times reports that NARFE, among other organizations, is concerned that Congress will pick up on the Presidential deficit reduction commission’s recommendation that the FEHB Program provide premium support instead of the current defined contribution. Currently, the government pays 72% of the enrollment weight average premium capped at 75% of the selected plan’s premium. Under premium support, the government would give employees and annuitants a voucher to purchase health insurance. If the plan’s annual premium falls under the voucher amount, there’s no employee contribution. However, if the plan’s annual premium exceeds the voucher amount, the employee must pay the difference. And the voucher amount usually is adjusted using a measure that reflects cost changes in the general economy rather than the health care industry. Unquestionably, the premium support approach would push employees to enroll in low premium plans.

A similar game changing event occurred in the early 1980’s when the incoming Reagan administration mandated an across the board benefit cut that had a smaller impact on the lower cost plans. The Reagan adminstration’s change shook up the Program and so would a switch to premium support. However, to adopt premium support, Congress must amend the FEHB Act and according the Federal Times article, “Republican staffers on the House Oversight and Government Reform Committee, which oversees federal employee issues, and the House Budget Committee, which Ryan chairs, say they’re interested in the FEHBP proposal, although they aren’t pursuing it now.”

Barron’s reported this afternoon that “Shares of health insurance giants Aetna (AET) and Cigna (CI) jumped today amid growing speculation that the two companies should merge.”

Drugstore News reports that “Moody’s Investors Service compared the three largest pharmacy benefit managers — CVS Caremark, Express Scripts and Medco Health Solutions — in a report issued Tuesday. While it maintained a positive view of all three, it gave CVS Caremark the highest credit rating.” Moody’s gave Caremark a higher rating because of the diversity of its business — combining a retail pharmacy chain with a PBM — which until recently was a knock on the company.

Kaiser Health News offers a lengthy report on the regulatory controversy over Food and Drug Administration approval of medical devices. Here’s a snippet:

The device industry has launched an aggressive campaign to avoid tighter Food and Drug Administration rules that would help generate the information needed to show whether newer devices are actually superior to the ones they replace. The latest devices – from heart valves and defibrillators to artificial knees and hips – are usually significantly more expensive than older devices, and the intense marketing surrounding the introduction of new devices has become a major driver of rising health care costs.

Many medical specialists say tighter rules are needed to ensure newer devices are safe and effective, which could help hold down costs. “Better regulation of medical devices has the potential to reduce health care costs,” said Steve Nissen, chairman of cardiovascular medicine at the Cleveland Clinic. “New devices are often more complex and expensive than existing products, but may not offer any improvements in health outcomes. The current regulatory approach allows these devices to reach the market with little or no clinical data.” * * *

After health-care reformers targeted the industry for higher taxes to help pay for covering the uninsured, Democratic leaders in Congress asked the prestigious Institute of Medicine (IOM) to convene a blue-ribbon panel to determine if the industry needed tougher regulations to ensure the safety and effectiveness of its products. With the IOM’s final report due later this month, the industry is mounting a major public relations offensive to blunt calls for stronger oversight.

Speaking of Affordable Care Act fees, the Internal Revenue Service’s website announces that

The Affordable Care Act establishes the Patient-Centered Outcomes Research Institute and that the institute be funded by the Patient-Centered Outcomes Research Trust Fund. The institute will assist patients, clinicians, purchasers, and policy-makers in making informed health decisions by advancing clinical effectiveness research. The Trust Fund is to be funded in part by fees to be paid by issuers of health insurance policies and sponsors of self-insured health plans. IRS Notice 2011-35 requests comments regarding how the fees to fund the institute should be calculated and paid, including several possible rules and safe harbors.

 It puzzles the FEHBlog that health care providers (the “clinicians”) are not required to kick into this fund.

As previously noted in the FEHBlog, a doctor who works for Medco spoke about advances in personalized medicine at the OPM AHIP carrier conference back in March. The Wall Street Journal lead yesterday’s paper or I-pad) with a report that “New research is signaling a major shift in how cancer drugs are developed and patients are treated—offering the promise of personalized therapies that reach patients faster and are more effective than other medicines.” The FFHBlog was startled to read that “Massachusetts General Hospital and MD Anderson Cancer Center are among institutions beginning to offer routine genetic profiling of tumors for every patient, moving into clinical practice a strategy reserved only for research just a year or two ago and unheard of a decade ago.” Now, that’s progress.

The AMA News reports that the Affordable Care Act’s accountable care organization initiative is giving second life to independent practice associations or IPAs. “IPAs are organizations in which physicians retain their practice’s independent corporate status, but become part of a separate organization with other practices to contract as a group to provide services.” IPAs are becoming attractive because ACOs must treat at least 5,000 patients under the Medicare rule currently being finalized by HHS. However, the IPAs went broke in the 1990s because they could not operate successfully under HMO capitated rates. The ACO rule is much more complicated. Good luck with that.

Business Insurance reports that a McKinsey consulting survey predicts that 30% of employers who currently provide employee health benefits will cancel their plans and put their employees in the state health insurance exchanges.  Although the FEHB Program will still be here in 2014 and beyond, the FEHBlog will not be surprised if a large percentage of employers, particularly small employers drop coverage in 2014.  The ACA’s generous premium and cost sharing subsidies available to people with income under $90,000 will create plenty of opportunities for employers to [legally] game the system. While the ACA’s penalties on employers are higher for employees who are subsidized in the exchanges, the FEHBlog doesn’t think that the penalties will come close to current health plan premiums. 2014 will be a very interesting year. 

The House is holding a constitutent work week this week while the Senate is in session. The FEHBlog cannot find any committee activities of note for the coming week.

The FEHB Act, 5 U.S.C. Sec. 8902(m)(2), requires FEHB fee for service plans to expand their coverage of different types of providers in medically underserved states. Last week, OPM announced in the Federal Register that for 2012 South Carolina will leave, and Alaska will join, the list of medically underserved states. 15 states currently are on the list.

The FEHBlog was reminded last week that there are two OPM websites — the regular site and the open site.  The open website is soliciting public comments the agency’s preliminary plan for retrospective review of its existing regulations. On OPM’s review list is the similarly sized subscriber group methodology used to price community rated plans. OPM is developing a new approach based on the Affordable Care Act’s minimum loss ratio. The comment deadline is July 1.

Last week the Centers for Medicare and Medicaid Service (“CMS”) announced a final rule that 

prohibits States from making payments to providers under the Medicaid program for conditions that are reasonably preventable.  It uses Medicare’s list of preventable conditions in inpatient hospital settings as the base (adjusted for the differences in the Medicare and Medicaid populations) and provides States the flexibility to identify additional preventable conditions and settings for which Medicaid payment will be denied.  The final rule is effective July 1, 2011 but gives States the option to implement between its effective date and July 1, 2012.

Kaiser Health News reports that

Some physician groups have concerns about the new policy. “Simply not paying for complications or conditions, that, while extremely regrettable, are not entirely preventable, is a blunt approach that is not effective or wise for patients or the Medicare or Medicaid program,” Dr. Michael Maves, CEO of the American Medical Association, said in written comments to CMS in March.

He said the medical association has “grave concerns” about states extending the non-payment policy beyond the conditions considered by Medicare. The American Hospital Association expressed similar reservations.

Finally, CMS offers excellent websites that provide quality of care data on hospitals. nursing homes, home health agencies, dialysis facilities, and soon doctors. The websites are based on care rendered to both Medicare and non-Medicare patients. CMS announced on Friday “proposed rules that will enable consumers and employers to select higher-quality, lower-cost physicians, hospitals and other health care providers in their area.” More specifically,

CMS would provide standardized extracts of Medicare claims data from Parts A, B, and D to qualified entities.  The data can only be used to evaluate provider and supplier performance and to generate public reports detailing the results. ·        The data provided to the qualified entity will cover one or more specified geographic area(s).
·        The qualified entity would pay a fee that covers CMS’ cost of making the data available.
·        To receive the Medicare claims data, qualified entities would need to have claims data from other sources.  Combining claims data from multiple sources creates a more complete and accurate picture about provider and supplier performance.
·        Publicly reporting the results calculated by the qualified entity is important for transparency in health care and consumer empowerment.  To prevent mistakes, qualified entities must share the reports confidentially with providers and suppliers prior to their public release.  This gives providers and suppliers an opportunity to review the reports and provide necessary corrections.
·        Publicly released reports would contain aggregated information only, meaning that no individual patient/beneficiary data would be shared or be available.
·        During the application process, qualified entities would need to demonstrate their capabilities to govern the access, use, and security of Medicare claims data.  Qualified entities would be subject to strict security and privacy processes.
·        CMS would continually monitor qualified entities, and entities that do not follow these procedures risk sanctions, including termination from the program.  

The proposed rules will be published in the June 8 Federal Register and CMS will accept comments for six days from that date.

Earlier today, the Department of Health and Human Services announced changes to the federal pre-existing condition insurance plan administered by HHS and the Office of Personnel Management. The changes are intended to make enrollment easier and more affordable. Modern Healthcare reports 

HHS Secretary Kathleen Sebelius told members of a congressional panel May 5 that the program had about 18,000 participants. When it was launched in 2010, HHS officials said they expected it to include 200,000 people at any one time.

Federal officials blamed both the cost of the premiums and a lack of publicity for minimal enrollment in the program, “Cost is always a factor for people buying health insurance coverage,” John Berry, director of the OPM, said during the same call with reporters. Berry said there is no cost estimate for the changes but that the federal government will pay for the lowered premiums using the program’s original $5 billion appropriation.

Happy Memorial Day weekend! This is a time to remember the brave men and women who gave their lives for our country, including my cousin Army Captain Eric Paliwoda who was killed in action in Iraq in January 2004.

Business Insurance and Reuters  report on the Blue Cross Blue Shield Association’s decision to award CVS Caremark an expanded contract to provide mail order and specialty pharmacy services to its Federal Employees Plan (“FEP”) effective next year. Caremark will replace Medco as FEP’s mail order and specialty pharmacy and will continue to provide FEP with a retail pharmacy network.

The U.S. Office of Personnel Management added a page to its website with guidance on the federal employment of transgendered persons. The guidance on insurance benefits states that

Employees in [gender] transition who already have Federal insurance benefits [which of course includes the FEHBP] must be allowed to continue their participation, and new employees must be allowed to elect participation, in their new names and genders.  If the employees in transition are validly married at the time of the transition, the transition does not affect the validity of that marriage, and spousal coverage should be extended or continued even though the employee in transition has a new name and gender. 

In the FEHBlog’s view, this guidance does not run afoul of the Defense of Marriage Act  because the validity of a marriage is determined at the time when the marriage occurs. Of course, a spouse’s decision to transgender a marriage could cause a divorce but if it does not the marriage remains intact.

Modern Healthcare and Health Data Management report on the HHS Office for Civil Right’s 95 page long proposed rule to be published in the May 31, 2011 Federal Register concerning accounting for disclosures of electronic protected health information. In the preamble to the proposed rule, OCR explains that

The purpose of these modifications is, in part, to implement the statutory requirement under the Health Information Technology for Economic and Clinical Health Act (“the HITECH Act” or “the Act”) to require covered entities and business associates to account for disclosures of protected health information to carry out treatment, payment, and health care operations if such disclosures are through an electronic health record. Pursuant to both the HITECH Act [of 2009] and its more general authority under HIPAA, the Department proposes to expand the accounting provision to provide individuals with the right to receive an access report indicating who has accessed electronic protected health information in a designated record set. Under its more general authority under HIPAA, the Department also proposes changes to the existing accounting requirements to improve their workability and effectiveness.

This first purpose principally impacts health care providers who rather ironically have been financially incented to purchase electronic health record systems as recently discussed in the Federal Times. Section 13400 of the HITECH Act defines an electronic health record (“EHR”) as “an electronic record of health-related information on an individual that is created, gathered, managed, and consulted by authorized health care
clinicians and staff.” However, the unanticipated and broader second and third purposes will impact health plans too.

RAND has published a report on whether or not the Affordable Care Act will cause an increase in the number of self-funded health plans. Before Congress enacted the ERISA in 1974, most employer sponsored health plans were insured. For a number of reasons, such as the dichotomy in the scope of ERISA’s preemption of state law, ERISA caused employers to see the value in self funding their health plans. Now, over 25 years later, most employers with 500 or more employees self fund their health plans.  The Affordable Care Act imposes financial penalties (in the FEHBlog’s view) on health insurers, such as the 2% fee on health insurers that takes effect in 2014, which may cause smaller employers to consider self funding. The smallest employers likely will look to the exchanges. The report’s executive summary explains that

Stakeholders expressed significant concern about adverse selection in the health insurance exchanges due to regulatory exemptions for self-insured plans. However, our microsimulation analysis predicts a sizable increase in self-insurance only if comprehensive stop-loss policies become widely available after the ACA takes full effect and the expected cost of self-insuring with stop-loss is comparable to the cost of being fully insured in a market without rating regulations. 

The AMA News reports about the continuing confusion created by the interim final regulations governing the Affordable Care Act’s co-pay free preventive care mandate. Unfortunately, as public commenters, including the AMA and AHIP, have pointed out the rules are based on medical treatment guidelines not health plan coverage. rules. The AMA News highlights the problem as follows:

Physicians, health plans and consumer advocates hailed the new rules as a way to promote prevention and cut down on chronic illness. But so far, the reality has been mixed at best, as few patients seem to be either aware of the benefit or able to take advantage of it. Physicians also are confused about when to collect a co-pay, leaving some practices with refunds due to patients and others short on cash they could have collected rightfully.

A final rule clarifying the the ambiguities inherent in the interim rule is not expected soon.

Healthday, via the AHIP Hi Wire, reports about “a new report [in the Archive of Internal Medicine that promotes]  a “Top 5″ list of action items for each of the primary care disciplines — family medicine, internal medicine and pediatrics — to help save money and conserve health resources.” Perhaps health plans should exclude from coverage inconsistent actions as not medically necessary.

In an interesting development, Fierce Healthcare is reporting that the Mayo Clinic is now “sharing its hefty brand with health facilities around the U.S. that it doesn’t own. The Clinic already covers 70 hospitals and clinics in Minnesota, Michigan and Iowa under its Mayo Health System umbrella. Going forward, Mayo will affiliate with more centers like Altru [Health System of Grand Forks, N.D.], and eventually build a nationwide group of partners, David Herman, a medical director at Mayo, told the [Rochchester, Minnesota, Post Bulletin] newspaper“.

The Senate and the House are both back in session this week as FEHB plans scramble to complete their 2012 benefit and rate proposals which must be filed with the Office of Personnel Management at the end of this month.

Last week, Standard and Poors released its composite medical indices for March 2011 which disclosed that

Healthcare costs continue to rise, but at a declining rate. The Composite index, at +5.77%, is virtually back to the lowest annual growth rate in its six-year history, which was +5.76% in June 2007. The highest annual growth rate for the Composite index was during the 12-months ending May 2010, when it posted +8.74%. In the 10 months measured from this peak, this index has gone through a sharp deceleration,down 2.97 percentage points.

Over the year ending March 2011, healthcare costs covered by commercial insurance rose by 7.57%, as measured by the S&P Healthcare Economic Commercial Index. Medicare claim costs rose at an annual rate of 2.78%, as measured by the S&P Healthcare Economic Medicare Index. This is the lowest annual rate of growth posted for the Medicare Index in its six-year history.

Note that health care providers cost shift from Medicare to the private sector, including the FEHBP.

In response to the medical community’s cool reception to the Accountable Care Organization rule, HHS took its standard approach — throw more money at the hospitals and doctors. Last week, the Centers for Medicare and Medicaid Services announced three new ACO initiatives. Medscape explains that the principal initiative is

a plan to pay some accountable care organizations (ACOs) in part on a monthly, capitated basis, similar to how traditional health maintenance organizations (HMOs) have compensated providers.

The partially capitated ACOs would consist of hospitals and medical practices that are already adept at coordinating patient care and cutting costs through quality improvement. CMS wants to recruit such providers to form up to 30 “Pioneer” ACOs that would begin operating this year, well ahead of the January 1, 2012, kick-off for ordinary ACOs.

Speaking about low Medicare reimbursements, the American Medical News reports on the American Medical Association’s proposal to replace the sustained rate of growth formula for adjusting Medicare Part B payments to physicians with

A five-year period of positive Medicare payment updates based on practice costs.

Test and transition [during that five year period] to multiple payment models designed to enhance the coordination, quality and appropriateness of care while addressing cost concerns.

Congress has to take some legislative action on the Medicare reimbursement formula by year end or doctors will face a double digit Medicare cut. Financing the change is the big problem.

The AMA News article further reports that at a May 5 Congressional hearing,

Medicare payment reform should include an option for full private contracting between patients and physicians, said M. Todd Williamson, MD, a spokesman for the Coalition of State Medical and National Specialty Societies. Private contracting also is on a menu of pay options from the AMA.

The organizations support the Medicare Patient Empowerment Act [HR 1700], introduced by Rep. Tom Price, MD (R, Ga.), on May 3. The bill would allow patients and physicians to contract freely for Medicare services without penalty. Patients and physicians would be able to negotiate prices for most outpatient services, but Medicare rates would apply when a patient has an emergency medical condition or requires urgent care.

Medicare does not allow physicians billing the Medicare program to accept fees that are different from rates set by the Centers for Medicare & Medicaid Services. Doctors can contract privately with patients, but only if the physicians completely opt out of Medicare for at least two years and patients agree not to accept any reimbursement from the government for that care.

 The FEHBlog will keep an eye on this bill given the large cadre of Medicare eligible FEHBP participants.

HHS released today its a final rule under the Affordable Care Act that, according to its press release, allows the government “to fight” unreasonable individual and small group health insurance premium increases beginning in September 2011.  The AHIP President Karen Ignagni commented that

“Focusing on health insurance premiums while ignoring underlying medical cost drivers will not make health care coverage more affordable for families and employers.  The public policy discussion needs to be enlarged to focus on the soaring cost of medical care that threatens our economic competitiveness, our public safety net, and the affordability of health care coverage.

“Health plans are doing their part to restrain health care cost growth by partnering with providers across the country to change payment models to promote and reward safe, high-quality, cost-effective care.”

The FEHBlog wonders why there is even a need to perform this review when the Affordable Care Act requires health insurers to refund premiums when they exceed the minimum loss ratio (85% in the group market and 80%) in the individual market beginning this year. The minimum loss ratio rule applies to insured FEHB plans while the premium review rule does not. Of course, the government in the form of OPM negotiates FEHB premiums.

PwC’s Health Research Institute released its annual Behind the Numbers report which is projecting that U.S. employers will confront an 8.5% health care cost increase in 2012 as the result of increased consolidation among hospitals and physicians and increase cost shifting from Medicare and Medicaid. The report indicates that employers are mitigating the cost increase by restricting their provider networks to higher quality hospitals and specialists. In that regard, the Wall Street Journal reported that the large health insurer Wellpoint, Inc. “is raising the stakes for reimbursing about 1,500 hospitals across the country, cutting off annual payment increases if they fail to deliver on the big health insurer’s definition of quality patient care.” Now that’s how to bring down the cost curve.

Medco, Inc., a major prescription benefits manager, released its 2011 Drug Trend Report. The report indicates that the cost of cancer drugs, which often are speciality or biologic drugs, is rapidly escalating. The top sellers are diabetes, central nervous system, and diabetes drugs.

Higher generic drug dispensing helped limit prescription drug spending growth to 3.7 percent during 2010, the report also revealed. In 2010, more than 71 percent of the prescription drugs dispensed were for generics. In fact, Medco, during its second quarter earnings reported that the generic dispensing rate had reached a record 73 percent. Generic drugs had a limited inflation rate of 0.5 percent and served as a lever to control overall prescription drug costs during 2010, the report said. Drug utilization during 2010 increased 2.1 percent, which is the highest rate of growth since 2005 when it was 2.7 percent.

As previously noted in the FEHBlog, the FDA has not yet established the legal pathway for putting generic versions of specialty drugs on the market. That pathway, which the Affordable Care Act authorized, cannot come soon enough.