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.

The FEHBlog listened to a New York Times investigative reporter Walt Bogdanich on NPR’s Fresh Air program while in the car last night. The reporter discussed his ongoing series of articles “about the medical and regulatory issues that have arisen as radiation therapies have become more ubiquitous in both dental and doctors’ offices.”  These eye opening articles, which have been running since early last year, are worth your attention as a patient and/or a parent.

Government Health IT News and Health Data Management report on the status of the HHS Office for Civil Right’s efforts to publish a final omnibus rule implementing the HITECH Act by year end.

Business Insurance reports that the IRS has released the slightly increased health savings account contribution limits and the high deductible health plan and maximum out of pocket expense cap for 2012.

Last week, the House Appropriations Committee chairman issued a schedule for consideration of FY 2012 appropriations bills. The Financial Services subcommittee will consider its bill, which includes FEHB Program appropriations, by June 13, and the full committee will consider that bill by June 23.

Last Wednesday, the Health subcommittee of the House Ways and Means Committee held a May 12 hearing on alternatives to Medicare’s sustainable rate of growth formula. The FEHBlog found the Blue Cross Blue Shield of Massachusetts testimony interesting reading. The BCBS MA representative discussed their Alternative Quality Contract (“AQC”) program.

The AQC [is] an innovative global payment model that uses a budget based methodology, which combines a fixed population-based budget (adjusted annually for health status and inflation) with substantial incentive payments for performance on a broad set of clinically important, nationally accepted measures of quality, outcomes, and patient care experiences.

First-year results show the AQC is on track achieve its original goals of improving patient care and moderating health care costs. In year-1 of the contract [2009], all AQC groups met their budgets, and  achieved a surplus.  On the quality side, the AQC groups’ first year improvements in the quality of patient care were greater than any one-year change seen previously in our provider network – well exceeding both the rates of improvement on quality measures that AQC groups were achieving prior to the contract, and exceeding rates of improvement among non-AQC physicians. 

Business Insurance reported that the House Energy and Commerce Committee approved HR 5, a medical malpractice reform bill, by a 30-20 vote.  The House Judiciary Committee approved a version of the bill on March 17. Both House committees with jurisdiction over the bill have now cleared it. 

The AHIP Coverage blog published an interesting chart about the profitability of different sectors of the health care industry. Based on Yahoo Finance data for the most recent quarter, hospitals enjoyed a  5% profit margin; health insurers 4%, and medical practitioners 3.6%. The average profit margin was 4.4%. The sectors with profit margins over 10% include drug and medical device manufacturers.

The Blogger service that the FEHBlog uses was down on Thursday and Friday. Here are the items that the FEBlog had planned to post on Thursday.

The Federal Times reported on Thursday that the Federal Postal Coalition of federal and postal employee unions and associations “pressed Senators” to reject the House budget proposal’s changes to federal employee compensation. The article notes that “Also the coalition objects to a proposal [from the White House deficit reduction commission] to turn the Federal Employees Health Benefits Program into a voucher-based system. Because that voucher would only increase by the gross domestic product plus one percentage point, the coalition said it would quickly fall behind medical inflation costs and essentially double employees’ premium costs by 2030.”  There was some talk that the White House would adopt this proposal but it hasn’t happened.

The Milliman actuarial consulting firm released its 2011 Milliman Medical Index (“MMI”).

The MMI includes an analysis of costs paid by the employer and costs paid by the employee. An increasing portion of the cost has been borne by the employee—in nine years, the total cost paid by the employee has also more than doubled. In 2002, the employee share of these costs was $3,634 and it now stands at $8,008.
Specific findings:

Between 2010 and 2011, the MMI increased by $1,319 or 7.3%.

Employees’ share of the total cost is at an all-time high, having increased from 36.8% in the first year of the MMI (2005) to 39.7% in 2011.

The annual rate of increase for the MMI is down 0.5% from 2010 to the lowest rate since the inception of the MMI, but is still in excess of spending increases for most other sectors of the economy.

Even though hospital spending is only 48% of total healthcare spending, increases in facility spending (inpatient and outpatient combined) account for over 60% of this year’s total increase in cost of healthcare.

The AP via AHIP HiWire reports on a letter that the American Medical Group Association, a trade association which represents 400 large medical groups like the Cleveland Clinic and the Mayo Clinic sent to CMS Director Donald Berwick on May 11. The trade association’s press release includes the following startling statement:

In an AMGA survey of its membership, 93 percent of respondents stated that they would not participate in the [accountable care organization] ACO program unless the requirements in the final rule reflect major modifications to the proposals. In their current form, the requirements would render the ACO program a missed opportunity to inject value and accountability into the delivery system.

The AP article notes that

Private insurers are also experimenting with versions of the accountable care idea, but successful adoption by Medicare is seen as the key to spreading it across the country. The Obama administration had estimated as much as $960 million in savings from the first three years of the program, and bigger amounts thereafter.

[Donald] Fisher, the medical association head, said he does not think the administration will easily back off its approach, because on paper it saves the government money.

The comment deadline on the ACO is June 6, 2011.

The Wall Street Journal provides an update on efforts by large health insurance companies to divesify their product offerings.

Diversification plans, touted in meetings with investors this year, include stepped up acquisitions and partnerships that will allow the companies to employ doctors directly, deliver health-information technologies, and participate in new hospital-doctor groups known as accountable-care organizations.

The AIS Reports on Patient Privacy reports on steps that HIPAA covered entities are taking to ramp up efforts to keep an eye on their business associates.

The Affordable Care Act required HHS to prescribe the format for a new four page summary of coverage (to supplement the FEHB plan brochures and summary plan descriptions in the private sector) no later than March 23, 2011. However, no regulation has been issued. Today, the FEHBlog ran across a Kaiser Health News article explaining that focus groups are being organized to evaluate the summaries and the cost of treatment “labels” to be included in the summaries. The hang up appears to be these labels.

Given OPM’s call letter emphasis on controlling drug costs, I took note of two Reuters articles discussing comments made by a senior Food and Drug Administration official Janice Woodcock. In the first article, Ms. Woodcock announced that the pharmaceutical manufacturer pipeline is beginning to pump out more new drugs that the FDA has approved. In the other article, Ms. Woodcock projected that the FDA will issue guidance on a pathway for FDA approval of biosimilar drugs by the end of this year. The European Union already has created such a pathway. According to Reuters, “The worldwide market for copies of biotech medicines will grow to $3.7 billion by 2015 from just $243 million in 2010, according to a recent report from market analysis firm Datamonitor.” Interestingly, Reuters quoted Ms. Woodcock as follows:

She said the U.S. agency has yet to receive any actual biosimilar applications, but there is a great deal of industry interest.
“We are open for business right now,” Woodcock said.

Considering how aggressiveness of the generic manufacturers on the small  molecule side of the playing field (who have had an FDA regulatory pathway for 25 years), it appears that the biosimilar manufacturers are taking a wait and see attitude in this country.

The AMA News is all worked up this week about the new CMS Physician Compare website which evidently is suffering a case of garbage in, garbage out.

Finally, an article on a study concluding that colonoscopies may be overutilized caught the FEHBlog’s attention. The study’s findings, along with other research published today in Archives of Internal Medicine, suggest that doctors need to better target the tests to patients who are most likely to benefit, and conserve limited screening resources and prevent complications by sticking to recommendations more closely, researchers said.” Is it possible that over-utilization for this uncomfortable and expensive but lifesaving procedure occurs due to scare tactics by the news media? The FEHBlog does not know. It does goes to show how difficult it is to bend the cost curve down.

Happy Mothers Day!!

The Affordable Care Act expands FEHB Program coverage to Indian tribes at the tribes’ expense. OPM explains

Section 10221 of the Affordable Care Act incorporated S. 1790, the Indian Health Care Improvement Reauthorization and Extension Act of 2009 (IHCIREA). IHCIREA amended and reauthorized the Indian Health Care Improvement Act (IHCIA). Section 409 of the IHCIA allows eligible Indian tribes, tribal organizations, and urban Indian organizations to purchase Federal Employees Health Benefits (FEHB), rights and benefits for their employees. Eligible employees of urban Indian organizations and tribes or tribal organizations carrying out programs under the Indian Self-Determination and Education Assistance Act are entitled to purchase coverage, rights, and benefits for their employees, providing the necessary contributions are paid into the appropriate trust fund(s).

OPM has been working with the tribes for the past year in an effort to implement this provision.  Last week, OPM created a website dedicated to this ongoing effort. A May 2, 2011, OPM letter posted on the site explains that

In the coming weeks, we [OPM] will be circulating a consultation schedule, along with documents that will summarize and outline many of the questions we will work through during consultation. At the conclusion of the consultative process, we plan to convene a Tribal-Federal work group to discuss remaining technical requirements, and we will be providing additional information on that as well. We will conduct the consultative process over the summer, and make access to this coverage available as quickly as possible thereafter.

The FEHBlog will continue to track the progress of this initiative.

Last week HHS Secretary Kathleen Sebelius (who wrote a Mother’s Day paean to the Affordable Care Act) had the pleasure of appearing before Senate and House Committees last Thursday about the Affordable Care Act implementation. The Senate Committee on Health, Education, Labor, and Pensions heard her testimony as part of a hearing on the Affordable Care Act’s impact on consumers. The FEHBlog notes the following observation from the Committee’s minority ranking member, Sen. Mike Enzi (R Wyoming)

During a hearing today on improving health quality and patient safety, Senator Enzi asked where the promised health care savings are for government initiatives like the Partnership for Patients program.  Enzi said that Congress should focus on substantive changes that can really improve patient care instead of providing funds to encourage providers to do what they should already be doing. 

Sen. Enzi added that he would be sending a letter to the CMS actuary requesting an estimate of the net savings that the Partnership for Patients program wll generate.   Secretary Sebelius also testified before the House Education and the Workforce Committee to discuss her agency’s implementation of the new law.

Kaiser Health News and Modern Healthcare report on the current state of the medical community’s efforts to fix the statutory sustainable rate of growth formula for adjusting the amounts that Medicare Part B pays doctors. For the past several years, the formula has produced a reduction that Congress has temporarily overridden thereby increasing the cost of correcting the problem. The current temporary fix expires at the end of this year. As Newman (from the Seinfeld show) once said in a slightly different context, it’s “quite a conundrum.”

Finally, although the FEHBlog suffers from allergies, the FEHBlog failed to notice that in March the allergy medicine Allegra became with Food and Drug Administration approval an over the counter drug. This means that health plans no longer cover Allegra. But it’s still good news for consumers. Consumer Reports has weighed in on OTC Allegra vs. generic OTC versions of the drug.

We found a 30-day supply of Allegra Allergy for $19.99 at Drugstore.com and $25.88 at Walmart.com. But a 30-day supply of generic loratadine at Drugstore.com was $6.99, and the Walmart store-brand version of loratadine (Equate) was just $3.81 for 30 pills. Those are some of the reasons generic loratadine was our recent Best Buy Drugs pick for allergy drugs.

Of course, not all allergy drugs work equally well for all people. In fact, our survey published last year found that allergy sufferers tried an average of three medications to get relief, and 26 percent tried five or more. Some even took two or more medications simultaneously to treat different symptoms. So if loratadine doesn’t work for you, it might be worth giving Allegra Allergy a try. 

Forbes reports that Walgreen’s earnings have been hurt by this switch.