This tidbit from the report caught the FEHBlog’s eye:

Retail prescription drug spending (10 percent of total health care spending) grew only 1.2 percent to $259.1 billion in 2010, a substantial slowdown from 5.1-percent growth in 2009 and the slowest rate of growth for prescription drug spending recorded in the NHE.

This calculation was made using data that predates the huge conversion of brand name blockbuster drugs, like Lipitor that began late in 2011. Will we see a decrease in this spending category in future years?

Of course, this cogitation reminds me of the still ongoing dispute between Express Scripts and Walgreens. As the FEHBlog recalls, Walgreens wanted Express Scripts to pay for pharmacist advice to customers. Interestingly, CVS Caremark announced yesterday a study

highlights the central role pharmacists play in improving the health of their patients and how our programs leverage that expertise as we reinvent pharmacy care,” Foulkes said. “The program featured counseling by pharmacists at retail stores and a dedicated pharmacist call center for those identified as having diabetes. The pharmacist interventions resulted in increased patient adherence and encouraged higher initiation rates of medications needed to best treat diabetes. The results show we are helping people on their path to better health.”

The FEHBlog does expect that the pharmacy chains will win this battle over time.

The NHE reports “Physician and clinical services spending, which accounted for 20 percent of total health care spending, grew 2.5 percent to reach $515.5 billion in 2010, slowing from 3.3-percent growth in 2009.” The AMA News has been very concerned about this recession related slowdown. A recent AMA News story concerns a study which finds that more people from age 19 to 26 report having a doctor which offers a glimmer of hope for the medical community.

The FEHBlog is betting that the mapping of the human genome eventually will pull the cost curve down permanently. The Wall Street Journal reports that medical technology is on the verge of charging $1,000 — the cost of an MRI test — to map an individual’s DNA — down from $350,000 about five years ago. And the price will go lower over time.

But understanding how genes work together to cause a condition or to develop a treatment will require extensive laboratory research far beyond merely analyzing the genome, said Karen Kaul, a molecular pathologist at NorthShore University HealthSystem in Evanston, Ill., and spokeswoman for the American Society for Clinical Pathology.

“We are just beginning to scratch the surface about what [genomic] changes are clinically relevant,” she said. “I think we have to be realistic and a little cautious” about current genomic information.

True but as a wise philosopher once said “If you build it, they will come.”

Congress remains in recess this week.  The House returns on January 17 and the Senate returns on January 23.

The FEHBlog doubts that federal regulators will approve the merger of the two large prescription benefits managers Express Scripts and Medco after the government rejected the AT&T – T-Mobile deal. However, Business Week reports that “Even as U.S. regulators take a tougher stance on takeovers, traders are
convinced they can reap the biggest return in America by betting Express
Scripts Inc. will win antitrust approval to buy Medco Health Solutions
Inc.” The Business Week article explains why investors are distinguishing between the two deals.

The FEHBlog has been wrong before. The FEHBlog never expected that Walgreens and Express Scripts would fail to resolve their contract dispute when it was first reported last summer. But here we are six months later and Express Scripts has stopped covering Walgreen’s prescriptions. This dispute does not impact a lot of FEHB plan members but it affects a ton of TRICARE beneficiaries because Express Scripts is the sole PBM for TRICARE.

The Chicago Tribune explains why Walgreens is hurting but not down for the count. Business Week reports that Walgreens is asking Express Scripts to reopen negotiations. 

On January 5, the Department of Health and Human Services issued new electronic standards for fund transfers under the Health Insurance Portability and Accountability Act (“HIPAA”).  This interim final rule has a  January 2014 compliance date. The press release explains that

Future administrative simplification rules will address adoption of:

• A standard unique identifier for health plans;
• A standard for claims attachments; and
• Requirements that health plans certify compliance with all HIPAA standards and operating rules.

The press release quotes the HHS Secretary as follows — “Thanks to the Affordable Care Act, health care professionals will spend less time filling out paperwork and more time focusing on delivering the best care for patients,” said HHS Secretary Kathleen Sebelius. The FEHBlog finds this statement to be quite humorous because HIPAA was enacted in 1996. HIPAA called for electronic funds transaction, health plan identifier, and claims attachment standards. Here we are over 15 years later and we are just getting the EFT standards. This is not a knock on the government. It is a knock on Congress for embedding fast moving technology standards in the law.

Kasier Health News offers an upbeat article on how collaborative efforts among insurers, providers, employers, and patients can save money and improve care. Well I’ll be darned.

Perhaps the biggest roadblock is the predominant fee-for-service system, which pays providers to deliver more services, rather than better, more efficient care. Health-care payers, including private insurers and Medicare, have been slow to change their payment models to reward outcomes rather than volume of care. That sometimes puts providers in the position of losing revenue by doing the right thing for patients.

Dr. Donald Storey, who worked on the Seattle collaborative as an Aetna medical director and now is a vice president at Premera Blue Cross, blames insurers’ reluctance to change on their having many different contracts with employers and providers. In addition, not everyone wants a more efficient system. “One man’s waste is another man’s income,” he says.

Some insurers have embraced collaboration. In Sacramento, Blue Shield of California, Catholic Healthcare West and Hill Physicians Medical Group have worked with CalPERS, the state public employee benefit system, to redesign care after they identified quality problems and high costs for 42,000 plan members.

Key areas were obesity-reduction surgery, hip and knee care, hysterectomies, and preventable emergency department visits and hospital readmissions. For example, Hill Physicians persuaded its OB/GYNs to perform more minimally invasive hysterectomies, which are safer and cheaper than open hysterectomies, when appropriate. Catholic Healthcare West hospital staff worked closely with patients on their medication instructions before discharge, to make readmissions less likely.

Redesigning care through a collaborative is “not easy to do. There’s a lot of investment of human resources, and we didn’t know if it would work or not,” says John Wray, senior vice president for managed care at Catholic Healthcare West. “But this was something we thought was important to try to learn from.”

It worked. Hospital length of stay and readmissions both declined 15 percent in 2010. That helped save more than $20 million, exceeding the $15.5 million target and allowing Blue Shield to keep CalPERS’ premiums flat in Sacramento for 2011. The remaining savings were split among the three partners, who would have lost money if the target hadn’t been hit.

In the same vein, the actuarial consulting firm Milliman provides a link to its recent report on bundled payments as an alternative to fee for service coverage.

My how time flies when it’s a four day work week. When Congress returns to work later this month, it must face the loose ends created by the two month long tax extenders act. One of this loose ends which impacts the health care industry is the Medicare Part B payment patch. Absent this patch the statutory sustainable rate of growth formula would cut Medicare Part B payments to doctors by 27.4%, leaving FEHBP plans, among others, to pick up the slack. Kaiser Health News offers an interesting FAQ on this important issue.

Modern Healthcare reports that “Highmark, the Blue Cross organization for western Pennsylvania, with a deal to acquire West Penn
Allegheny Health System, announced a $20 million investment in the
system’s Forbes Regional Hospital and a new medical group affiliation.”

Speaking of acquisitions, the Denver Post reports that “Aetna has purchased Lakewood-based Healthagen, developer of iTriage, a [free and very popular] mobile application [for the Iphone or Android phone] that helps injured or sick people determine what’s wrong and find local treatment.” Mobihealth News adds that “Aetna is also leveraging the mobile application in its accountable care organization (ACO) offering, where it will be a key component for consumer engagement, Aetna executives said during an investor day presentation this week.” And there’s no profit cap on technology at least for now.

Even though both of these acquisitions strike the FEHBlog as pretty innovative, the CMS Innovation Center announced the names of 73 new innovation advisors, none of whom (evidently by law) are from the health insurance industry. “The Innovation Advisors Program is designed to broadly help individuals
refine, apply, and sustain managerial and technical skills necessary to
drive delivery system reform for the benefit of Medicare, Medicaid, and
Children’s Health Insurance Program (CHIP) beneficiaries.”

The FEHBlog wishes everyone a very happy and prosperous New Year. In 2012, we can expect final rules on the Affordable Care Act’s summary of benefits and coverage rule and the HITECH changes to the HIPAA Privacy Rule. Hopefully, common sense will prevail among the regulators. Business Insurance notes that another major regulatory action will involve the Affordable Care Act’s pay or play provisions applicable to employers.

Walgreen CEO Greg Wasson said Friday chances are probably “slim to
none” that the drugstore operator will reach an agreement with pharmacy
benefits manager Express Scripts before their current contract ends
Saturday.

Walgreen Co. announced that it is taking several steps
to help patients covered by an Express Scripts pharmacy network to
continue to use Walgreen locations after the agreement ends. It expects
to keep more than 120 Express Scripts clients, which include employers
and health plans.
Walgreen has said it expects about keep about 10
million of the prescriptions it fills for Express Scripts. It filled
about 88 million prescriptions in fiscal 2011, so that would amount to a
loss of almost 90 percent of the prescriptions.

That’s a lot of revenue to lose.

CMS dropped Chickasaw Nations Industries as the Medicare Secondary Payer Recovery Contract effective
September 30, 2011, and it has issued an RFP to combine the secondary payer recovery and coordination of benefits functions according to the Medivest Blog. In the meantime, GHI is performing this combined contract.  Senator Claire McCaskill explained the Government’s dissatisfaction with CNI in this fact sheet. Personal injury lawyers with aged clients have been having problems with delays encountered in trying to settle Medicare liens against tort recoveries — at topic discussed at Congressional hearing in June 2011.

The National Quality Forum has released a 2011 update to its list of Serious Reportable Events in Healthcare, such as wrong site surgeries and medication errors. The AMA News explains that

Hospitals in 24 states and the District of Columbia are required to report on some version of the National Quality Forum’s list, and items from the list have been selected for nonpayment by private health plans, Medicare and many state Medicaid programs. Four new items — part of the first update to the list since 2006 — are:

• Death or serious injury of a new born baby associated with labor or delivery in a low-risk pregnancy.

• Patient death or serious injury resulting from the irretrievable loss of an irreplaceable biological specimen (e.g., for a biopsy).

• Patient death or serious injury resulting from failure to follow up or communicate laboratory, pathology or radiology test results.

• Death or serious injury of a patient or staff associated with the introduction of a metallic object into the magnetic resonance imaging area.

The list now contains 29 serious reportable events.

Happy New Year!

The FEHBlog hopes the everyone is enjoying the holidays. It’s a slow week as we wind down 2011 and look forward to 2012.

Last week, CMS released a list of the thirty two health care organizations that will be serving as “pioneer” accountable care organizations beginning next week. “Under this initiative, operated by the Centers for Medicare &
Medicaid Services (CMS) Innovation Center (Innovation Center), Medicare
will reward groups of health care providers that have formed ACOs based
on how well they are able to both improve the health of their Medicare
patients and lower their health care costs.”

OPM has added a progress report to its web page concerning the Affordable Care Act mandated expansion of FEHBP coverage to Indian Tribal employees. OPM leads the progress report with the following announcement

OPM is excited to announce that Indian tribes, tribal organizations and urban Indian organizations may purchase FEHB coverage for their employees beginning in Spring of 2012. The earliest effective date of coverage for these employees is May 1, 2012. Tribes, tribal organizations and urban Indian organizations may also purchase FEHB coverage effective after this date.

Finally, the Tennessean reminds us that on January 1, 2012, doctors will face a one percent cut in Medicare Part B reimbursement if they are not using an electronic prescription system.

The news that today is the FEHBlog’s birthday has been eclipsed by the Hill report that

A House GOP leadership aide told The Hill that Speaker John Boehner (R-Ohio) and Senate Majority Leader Harry Reid (D-Nev.) reached an agreement to pass a version of the Senate’s two-month payroll tax cut legislation, with a fix demanded by Republicans to make implementation easier. 

This means that the temporary Medicare Part B doctor reimbursement fix also is in this bill which avoids a lot of headaches for the healthcare industry, including FEHB plans.

Another looming deadline is the conversion to the ANSI X 5010 electronic transaction standards for health care transaction purposes under HIPAA. Health Data Management reports that

The Medical Group Management Association is calling for a contingency plan of at least six months for the transition to the HIPAA 5010 transaction sets, which has a compliance date of Jan. 1, 2012. Under the plan, health plans would continue to accept Version 4010 transactions and adjudicate 5010 transactions that lack all required data. The association, which regularly surveys members and has previously warned that physicians and much of the industry remain unprepared for 5010, says federal officials need to expand the current contingency plan. The Centers for Medicare and Medicaid Services in November announced a 90-day grace period for enforcement of 5010.

This conversion sets the stage of the ICD-10 conversion. The American Medical Association recently announced its belated opposition to this ICD-10 conversion. Good luck with that.

Speaking of exercises in futility, Business Insurance reports that the Medco shareholders have approved the company’s acquisition by Express Scripts. Considering how the Administration squashed the T-Mobile / AT&T deal, the FEHBlog will be surprised if this PBM deal survives anti-trust scrutiny. But stranger things have happened. Business Insurance notes that

Medco shares trade at a roughly 17% discount to the offer price,
reflecting caution about the deal’s ultimate approval, but that spread
has narrowed in recent months.

Finally, while Houses of Congress have resolved their spat, the New York Times reports that

Barring a last-minute agreement, the [contractual] relationship between the pharmacy benefits manager Express Scripts and the major pharmacy chain Walgreens] will end Jan. 1. Customers covered by an Express Scripts prescription plan will then face the choice of switching to another pharmacy or paying for their drugs out of their own pockets if they stay at Walgreen.

Walgreen has made a major push to get health plans and employers to end relationships with Express Scripts and contract directly with Walgreen. The drugstore chain said more than 100 health plans, employers and other clients had either changed benefit managers or taken steps to maintain access to Walgreens pharmacies in 2012. But some major clients, including the health insurance giant Wellpoint and the military’s Tricare plan, stuck with Express Scripts.

Meanwhile, Walgreen rivals like CVS Caremark and Wal-Mart have been marketing aggressively, including running radio ads, to woo its customers. A CVS spokeswoman said the pharmacy chain expected to pick up 20 million prescriptions managed by Express Scripts in 2012 that were previously filled by Walgreen.       

The President has signed into law the megabus appropriations bill discussed in Friday’s FEHBlog according to this Govexec story.  The Federal Times adds that

The bill gives the U.S. Postal Service another reprieve on a
legally required $5.5 billion payment into a retiree health care fund.
The payment, which USPS officials say they lack the money to cover, was
originally due Sept. 30. Lawmakers however, pushed back that deadline
until Friday under the existing continuing resolution. The megabus delays it again until Aug. 1, 2012.

Hopefully this will be enough time for Congress, the Postal Service, and the Postal Unions to straighten out this problem.

On Friday, the Senate approved a two month long tax extenders bill. This bill also would have extended the Medicare Part physician reimbursement patch until February 28, 2012. According to this Wall Street Journal report, the House leadership disclosed today that it wants a conference with the Senate over the year long tax extenders bill that it passed earlier in December. The Washington Post compares the House and Senate bills here.

The Senate leadership has stated that the Senate will not be returning until January 23 so it will be the House’s fault if the Social Security tax returns to 6.2% at the end of the current one year reduction. In that event, the 27.4% reduction in Medicare Part B reimbursements to doctors would kick in because CMS usually can only delay the implementation for two weeks. We’ll have to wait and see what happens. .

Last week, Standard and Poors announced that

The S&P Healthcare Economic Composite Index indicates that the
average per capita cost of healthcare services covered by commercial
insurance and Medicare programs increased by 5.11% over the 12-months
ending October 2011.

That’s quite a leap.

As measured by the S&P Healthcare Economic Commercial Index, healthcare costs covered by commercial insurance increased by 6.91% over the year ending October 2011. This annual rate has rise for a fourth consecutive month. Growth rates in Medicare claim costs rose from its September low of +2.03% to an annual rate of +2.39%, as measured by the S&P Healthcare Economic Medicare Index. The S&P Healthcare Economic Hospital Medicare Index also increased from +0.66% in the year ending September 2011 to +1.12% in October

These indices illustrates the cost shifting from Medicare to the private sector. This Washington Post article about Medicare coverage of hospice care exposes the basic problem with Medicare — if you build it they will come.

Congress is in the process of approving the final Fiscal Year 2012 appropriations bill (H.R. 2055) known colloquially as the megabus. This bill includes the now standard FEHBP appropriations provisions — a Cost Accounting Standards exemption (OPM has created specific rules for the FEHBP), an abortion coverage limitation, and a contraception coverage mandate. The FEHBP’s appropriations provisions are found in Parts 6 and 7 of Division C.

The FEHBP’s contraception coverage mandate is narrower in scope than the HHS mandate issued this year under the no-cost preventive care provision of the Affordable Care Act because it allows for the impostion of enrollee cost-sharing. It is broader in the sense that it applies to all FEHB plans while the HHS mandate applies to FEHB and other health plans that are not grandfathered for Affordable Care Act purposes. The FEHBP’s contraception mandate also has a more generous exception for religious institutions than the HHS mandate. The HHS mandate does not apply to the FEHBP until January 1, 2013.

HHS issued an essential health benefits bulletin for public comment today. HHS appears to be following the recommendations of the Institute of Medicine — a good move in the FEHBlog’s view. This is the next step in the process that will lead to the Secretary of HHS issuing an essential benefits package for use by qualified health plans operating in state health insurance exchanges. The guidance indicates that HHS will be allowing the States leeway in establishing a package for their respective populations. Plans operating outside the exchanges will not be required to offer the essential health benefits package but will be prohibited from imposing annual or lifetime dollar caps on those identified benefits.