Business Insurance reports that “In 2011, total U.S. health care spending hit $2.701 trillion, or $8,680
per person. While this is a record, expenditures rose only 3.9% in 2011,
unchanged from 2010 and 2009, according to statistics compiled by
researchers at the U.S. Centers for Medicare & Medicaid Services and
published in the journal Health Affairs.”  The Wall Street Journal reports that health care costs are poised to jump again as people get back to work and Obamacare becomes unleashed.  The Healthcare Cost Institute, a group of large health insurers with a huge claims database, has released new charts on how we spend our health care dollars.

HHS today trumpeted the growth of accountable care organizations in Medicare. Accountable care organizations are an approach to coordinating care under which the providers assume financial risk.  The AMA News reports on a recent Commonwealth Fund study finding that becoming an ACO is easier said than done.

The AMA News also reports on the provider community’s now quixotic (in the FEHBlog’s view) campaign to prevent the scheduled implementation of the ICD-10 code set in 2014. The FEHBlog is sympathetic to this campaign. The ICD-10 upgrade that HHS has mandated under HIPAA will not improve the claims process a whit. Public health groups have advocated the change because the ICD-10 gives much more detailed diagnostic coding information that the ICD-9. But the idea of HIPAA was to improve electronic claims processing, not public health.

And since this entry is supposed to include miscellany, let’s end with a Kaiser Health News article about how doctors, dentists, and allied health professionals are resorting to Groupon and other social media sales techniques to hawk their services. Hippocrates must be rolling in his grave.

The 113th Congress of the United States was sworn in last Thursday. The House is now in recess for a week and the Senate is in recess for two weeks according to the Hill’s Floorwatch.  The Hill also reports that “House and Senate appropriators have been quietly working behind the scenes for months to craft 12 compromise annual spending bills to avoid a shutdown that is slated to occur when the current six-month stopgap spending bill expires [ on March 31].” Similarly, the Federal Times reports that “Two top lawmakers from opposing parties [Senator Tom Carper (D Del) who chairs the Senate Homeland Security and Government Affairs Committee and Rep. Darrell Issa (R. Calif.) who chairs the House Oversight and Government Reform Committee] this [past] week pledged cooperation to put the U.S. Postal Service back on its feet financially.” That, of course, will require legislation.  By the way, Rep. Blake Farenthold (R – TX) will chair the House Oversight Committee’s subcommittee with responsibility for the FEHBP.

The AMA News reports that although the Medicare doc fix is in place for another year, the 2% cut in Medicare pay to doctors created by the sequestration law remains looming. Congress punted the sequestrations down the road for two months to March 1, 2013. The doc fix stuck it to the hospitals while the sequestration sticks it to the doctors. It is conceivable that the sequestration may take effect.

The FEHBlog was startled yesterday by the Washington Post’s below the fold headline that the breast pump industry is booming due to the ACA. This is front page news?? Did the Post reporter never see the movie Field of Dreams?  If you build it they will come. In the women’s preventive health care rule that created the contraceptive mandate, the Obama Administration also mandated that health plans cover breast milk pump rentals with no cost sharing. That mandate became applicable to the FEHBP on January 1. A breast milk pump costs $30 on Amazon.com ($110 for an electric model.) Adding the complexity of insurance and removing any consumer incentive to engage in price comparison will drive the cost curve up.

Following up on yesterday’s post, here is a link to Health Data Management which provides a CMS explanation of the Medicare changes made by the New Years Day tax law that provided another year of the doc fix to Medicare Part B payments.

Here is a link to a Kaiser Health News flowchart that explains the IRS’s approach to the Affordable Care Act’s share responsibility / pay or play provisions discussed in a recent FEHBlog post.

Finally, on the HIPAA front, ihealthbeat reports that CMS has announced that it will delay enforcement of two HIPAA standard transaction operating rules for three months (until March 31, 2012). The standard operating rules in this case for eligibility and claim status are intended to replace the multiplicity of individual health plan implementation guides for the transaction standards.

Securityinfowatch.com reports that

The Hospice of North Idaho (HONI) has agreed to pay the U.S. Department of Health and Human Services’ (HHS) $50,000 to settle potential violations of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Security Rule. This is the first settlement involving a breach of unprotected electronic protected health information (ePHI) affecting fewer than 500 individuals.

In this case, the Hospice had a laptop with unencrypted data on 441 patients stolen in 2010.  The article points out that the government now has a website that discusses the myriad HIPAA security risks of mobile devices. It’s worth a look.

As I’m sure your know, Congress passed a bipartisan fiscal cliff bill on New Years Day and the President has signed it into law. The bill includes a one year extension of the Medicare Part B doc fix, thereby avoiding a 26.5% cut in Medicare Part B payments to doctors.  The Washington Examiner provided the following list of the pay fors.

The principal pay for hits hospitals — see first bullet point (DCI adjustment) and ninth bullet point (DSH adjustment). The hospitals are up in arms according to Kaiser Health News.  

Documentation and Coding (DCI) adjustment.  This provision will phase in the recoupment of past overpayments to hospitals made as a result of the transition to Medicare Severity Diagnosis Related Groups (MS-DRGs).   Savings: $10.5 billion.

Rebase End Stage Renal Disease (ESRD) payments. This provision incorporates recommendations from the General Accountability Office by re-pricing the bundled payment to take into account changes in behavior and utilization of drugs for dialysis. Savings: $4.9 billion.

Therapy Multiple Procedure Payment reduction.  This provision further reduces payment for subsequent therapies when therapies are provided on the same day.  Savings: $1.8 billion.

Payment for Certain Radiology Services.  This provision would equalize payments for stereotactic radiosurgery services provided under Medicare hospital outpatient payment system.  Savings: $0.3 billion.

Adjustment of Equipment Utilization Rate for Advance Imagining Services.  This policy would increase the utilization factor used in the setting of payment for imaging services in Medicare from 75% to 90%.   Savings: $0.8 billion.

Competitive Prices for Diabetic Supplies.  This proposal would apply competitive bidding to diabetic test strips purchased at retail pharmacies.     Savings: $0.6 billion.

Adjust Payment Adjustment for Non-Emergency Ambulance Transports For ESRD Beneficiaries.  This provision reduces the payment rates for ambulance services by 10% for individuals with ESRD obtaining non-emergency basic life support services involving transport, based on a recent General Accountability Office report.  Savings: $0.3 billion

Increase statute of limitations for recovering overpayments.  This provision increases the statute of limitations to recover overpayments from three to five years, based on recommendations from the Office of Inspector General at the Department of Health and Human Services.  Savings: $0.5 billion.

Medicare Improvement Fund. This provision eliminates funding for the Medicare Improvement Fund. Savings: $1.7 billion.

Rebase Medicaid Disproportionate Share Hospital (DSH) payments to extend the changes from the Affordable Care Act (ACA) for an additional year.  This proposal rebases DSH allotments to maintain the level of changes achieved in the ACA, and determines future allotments off of the rebased level using current law methodology.  Savings: $4.2 billion.

Repeal of Class Program.  The provision repeals the Community Living Assistance Services and Supports (CLASS) program established by the Affordable Care Act.  This provision has no scoring implications.

Commission on Long Term Care. The provision establishes the Commission on Long Term Care to develop a plan for the establishment, implementation, and financing of a high quality system that ensures the availability of long-term services and supports for individuals.  This provision has no scoring implications.

Coding Intensity Adjustment.  Under current law, Medicare Advantage plans receive risk-adjustment payments that are further adjustment to reflect differences in coding practices between Medicare fee-for-service and Medicare Advantage.  This provision increases this coding intensity adjustment.  Savings: $2 billion.

Consumer Operated and Oriented Plan (CO-OP). This provision will rescind all unobligated CO-OP funds under section 1332(g) of the Affordable Care Act.   This provision also creates a contingency fund of 10 percent of the current unobligated funds to be used to further assist currently approved co-ops that have already been created.  The provision does not take away any obligated CO-OP funds.  Savings: $2.3 billion

The law also punts the sequestration ball on the road for two months. A Reason magazine blogger aptly analogizes the doc fix problem to the sequestration problem here.

2013 will bring us one short year away from full implementation of the Affordable Care Act. The Internal Revenue Service issued a proposed rule on this shared responsibility or “pay of play” mandate which applies to employers of 50 full time employees (30 or more hours per week) or more.  The IRS’s FAQ on this mandate can be found here. Here’s a link to a Wall Street Journal article on the rule, which included some surprises.  OPM will have to consider changes to the FEHBP necessary to comply with this mandate and avoid the penalties associated with non-compliance.

Folks interested in health care spending should read the New York Times’ article about Questor. Questor manufactures a drug Acthar Gel that first was developed in the 1950s due to Armour packing company’s efforts to find uses for pig by-products. Questor’s drug is derived from the pituitary glands of that animal. The drug treats an orphan (rare) condition called infantile spasms. Questor acquired the drug about ten years ago. In 2007, a new CEO “repositioned” Acthar as a specialty drug and jacked up the price which rose from $700 per vial in 2007 to $28,000 today.  A health insurer that balked at the price increase but was mau maued into paying. The New York Times explains

Insurers generally pay for Acthar because it is considered the best treatment for infantile spasms. They also tend to pay for other approved uses if cheaper drugs have been tried first. And Questcor has carefully executed the orphan-drug playbook. Patients who cannot pay are given the drug free. The company helps with insurance co-payments, to make sure that a patient’s inability to make a co-payment doesn’t stand in the way of the drug being used and the insurer paying $28,000 a vial.

In other words, Questcor shifts the cost onto insurance companies while staving off consumer protests. It has a staff of 30 people who do nothing but work on insurance reimbursements — about one staff member for each of the roughly 30 prescriptions it gets in a typical day for all uses.  Questcor executives argue that with the free drug program and the ample supply, patients have better access to Acthar now than when it was cheaper and often in short supply.

Wow, that’s a lot of chutzpah upon which to reflect.

Here is the FEHBlog’s aummary of Affordable Care Act changes that take effect in 2013 a/k/a Tuesday, many of which have been discussed on the blog earlier this year:

The FEHBlog hopes that all of his readers are enjoying the holidays. Of course, the calendar year end is a time for reflection. Healthcare Data Management reports that Aetna’s CEO Mark Bertolini has been musing about the future of the changing health insurance industry. He observed that “A new business model for insurers predicated on partnering with providers [e.g. accountable care organizations] coupled with skillful use of technology can turn the focus back on the customer. ‘We can use technology to make it easier for the consumer. Convenience is the new word for quality.’”

In a bit of a man bites dog story, the Government Accountability Office yesterday released a report recommending that CMS consider adopting certain private payer strategies to improve health care quality, which the medical industry supports:

•Private entities generally measure performance and make incentive payments at the physician-group level rather than at the individual-physician level. Physician organizations favor this approach.
•Private entities use nationally endorsed performance metrics and noted the need for a standardized set of metrics across all payers. Physician organizations concur that a standardized set of metrics would be less administratively complex.
•Most private entities in GAO’s study provide financial incentives tied to meeting absolute benchmarks–fixed performance targets–or a combination of absolute benchmarks and performance improvement. Physician organizations prefer incentives tied to absolute benchmarks over those based on how physicians perform relative to their peers. Physician organizations also favored incentives that reward improvement because baseline levels of performance vary.
•While private entities’ incentive payments vary in size and in method, private entities typically provide such payments within 7 months of the end of the performance measurement period. Physician organizations stated that financial incentives should be distributed soon after the measurement period to have the greatest effect on performance.

Happy Holidays everyone. The lame duck Congress is in recess until Thursday December 27.  The new 113th Congress begins on January 3, just a week later. Congress did pass two bills last week – an amendment to the Improper Payments Act discussed in this Federal Times article and a defense authorization act discussed in this govexec.com article. These laws impact government contracts and FEHB plan carriers are government contractors.

Kaiser Health News reports that last week the Centers for Medicare and Medicaid Service  “disclosed bonuses and penalties for nearly 3,000 hospitals as it ties
almost $1 billion in payments to the quality of care provided to
patients.” The changes take effect on January 1. Under the Affordable Care Act, Medicare reduced hospital payments by 1% which CMS reallocates based on quality assessments.

While every hospital is getting something back, almost half aren’t
recouping the 1 percent they forfeited and thus are net losers.

Seventy percent of the scores are based on how frequently hospitals
followed 12 basic clinical standards of care, such as controlling heart
surgery patients’ blood sugar levels and giving them beta blockers to
lower their blood pressure. The other 30 percent is determined by how
well hospitals were rated by former patients in surveys asking about the communication and responsiveness of doctors and nurses and the cleanliness and quietness of their environment.

Medicare already publishes the scores for individual facilities on its Hospital Compare website. Hospitals
were scored both on how well they performed compared to their peers
from July 2011 through March 2012, and how much they improved over time.  

Standard and Poors announced last week

As measured by the S&P Healthcare Economic Commercial Index, healthcare costs covered by commercial insurance plans increased by 7.16% over the year ending October 2012, up from +7.09% reported for September 2012. Annual growth rates in Medicare claim costs rose by 2.41%, according to the S&P Healthcare Economic Medicare Index, up from +2.04% recorded in September 2012. The Professional Services Index annual growth rate was +6.63% in October 2012, up from +6.16% September print. The Hospital Index’s growth rate hit its seven-and-a-half year historic low of +3.83% in October from +3.86% recorded in September 2012. It was driven by the Hospital Commercial Index, which hit a new recent low with an annual growth rate of +4.78% – its lowest rate since October 2009. It posted +5.15% annual rate last month.

Cost curve up. Health insurers are trying to lower the cost curve. The Wall Street Journal reported last week about insurer initiatives to cover online and telephonic doctor visits in order to expand the availability of primary care coverage. “The virtual consults often cost around $40 to $45, which is much less than an ER visit and also cheaper than an urgent-care center or most in-person doctor visits.”

OPM for the past few years has engaged the FEHBP in its anti-tobacco initiatives.  Last month, HHS unveiled its new anti-tobacco website called betobaccofree.hhs.gov  In good news, Reuters reported last week that teen smoking in the USA has reached a new low.

A front page article on the New York Times this morning discussed an encouraging drug research development. The article explains that

Normal healthy cells have a mechanism that tells them to die if their DNA is too badly damaged to repair. Cancer cells have grotesquely damaged DNA, so ordinarily they would self-destruct. A protein known as p53 that Dr. Gary Gilliland of Merck calls the cell’s angel of death normally sets things in motion. But cancer cells disable p53, either directly, with a mutation, or indirectly, by attaching the p53 protein to another cellular protein that blocks it. The dream of cancer researchers has long been to reanimate p53 in cancer cells so they will die on their own.

 Drug researchers are now trying to insert another molecule between the p53 protein and the protective protein so that the p53 protein can kill the cancer cell. The interesting aspect of this research is that a successful approach will treat several different forms of cancer, including both rare and more prevalent  forms of cancer.  So it’s encouraging cooperation among the foundations that focus on cancers striking certain organs.

The article mentions that the treatment could help a retired postal clerk, likely an FEHBP enrollee. Unfortunately the article discloses in its last sentence that the clerk passed away before a human drug trial was initiated.

OPM is in the process of unveiling a new version of its website.

The FEHBlog has been predicting that the Supreme Court eventually will have overturn the Defense of Marriage Act on federalism grounds. States should have the right to define domestic relations under the Constitution. Joe Davidson weighs in with a column reaching the same conclusion today. A Republican Congress did pass DOMA but Congress could have repealed the law when the Democrats controlled Congress in 2009-10. It didn’t Instead lawyers pocket the litigation fees (and of course the FEHBlog as a lawyer has no objection to that.)

Similarly the Administration, according to Modern Healthcare, got the American Medical Association wound up over the doctors’ fiscal cliff the 27% cut in Medicare Part B payments to doctors that will occur January 1 if Congress does not take action soon. (What’s more under the general fiscal cliff the doctors will get hit with an additional 2% cut in Medicare payments due to the sequestration law.)  In the 1990s a Republican Congress did pass a law that created the sustainable growth rate formula to control Medicare spending on doctor bills. In 2009-2010, Congress considered fixing the sustainable growth rate formula as part of the Affordable Care Act but as Politico explained Speaker Pelosi punted on the issue because the fix was too expensive. As the FEHBlog has noted the CBO has billed a one year extension of the current fix at $25 billion. As Newman said (in Seinfeld) it’s a real conundrum. But everyone should have egg on their faces.

We will just have to wait and see what happens now on Capitol Hill.

Well the Federal Benefits Open Season is now over and it appears that the lame duck session will not accomplish much as the President and the Speaker are having a hard time reaching a compromise solution to the fiscal cliff created by last years debt ceiling increase law and the end of the Bush era tax cuts. Nevertheless, the Hill Floor Watch blog outlines the work that Congress has planned for this week while cliff negotiations continue.

Kaiser Health News provides insights on how going over the cliff, e.g., the mandatory sequestration affect health care programs, like Medicare. Going over the cliff would not impact the FEHBP directly because the Program is funded by the Employee Health Benefits Fund held in the U.S. Treasury. Government and employee contributions toward FEHBP coverage are deposited into this fund. However, the FEHBP would be adversely affect indirectly by for example federal employee layoffs or the 2% cut in Medicare payments (as doctors would expect the FEHBP to pick up the slack.)

Speaking of FEHBP funding, the FEHB Act requires a 4% surcharge on premiums — 3/4s of the surcharge is placed in a contingency reserve to stabilize premiums and 1/4 is available to OPM for its FEHBP administrative expenses. OPM typically uses only a portion of the available funds (less than 1% of premiums) and any balance is returned to the plans again to stabilize premiums.

The FEHBlog has been reviewing the flood of ACA regulations that have been issued since the election. One proposed rule which is several hundred pages long and is titled 2014 parameters for qualified health  plans participating in the exchanges is a real humdinger. It explains the Rube Goldberg like scheme of risk adjustments, risk corridors, and reinsurance arrangements to stabilize the exchanges. As the Washington Post notes, the charge that HHS plans to make to reimburse its exchange administrative costs is 3.5% of premiums or almost as much as the entire FEHBP surcharge which both stabilizes the Program and funds OPM’s administrative expenses. How is the law ever going to bring down the health care expense curve?