Happy King Day weekend, everyone. It’s a little over two weeks before the President’s state of the Union address and everyone on the majority side of Congress is scrambling to complete the healthcare reform bill. The Politico offers a helpful update. The Washington Post is reporting that Sen. Ben Nelson (D Neb) has backed away from his deal that would have exempted his state from increased Medicaid costs associated with the healthcare reform bill. Govexec.com is reporting that while the Cadillac plan tax compromise discussed in Thursday’s FEHBlog covers state and local government health plans, it excludes the FEHB Program because

According to a labor source with knowledge of the negotiations, some lawmakers expressed concern that if the five-year delay of the tax was applied to health care plans in the Federal Employees Health Benefits Program, it would appear to be a conflict of interest. Members of Congress are enrolled in FEHBP as employees of the federal government.

I don’t buy that explanation because the Senate bill, thanks to Senator Chuck Grassley, would transfer all members of Congress and their staff members from the FEHB Program to the health insurance exchanges. Bye bye conflict of interest. More likely it’s all about the Benjamins due to the FEHB Program’s size.

Unfortunately, there were reports about three erroneous disclosures of unsecured protected health information by various health insurers:

• The State of Connecticut exercised its new right under the HITech Act by filing a HIPAA enforcement lawsuit against Health Net of Connecticut, Inc., “for failing to secure private patient medical records and financial information involving 446,000 Connecticut enrollees and promptly notify consumers endangered by the security breach.”
• Blue Cross Blue Shield of Tennessee announced that

  In October 2009, 57 hard drives containing audio and video files related to coordination of care and eligibility telephone calls from providers and members were stolen from a leased facility in Chattanooga that formerly housed a BlueCross BlueShield of Tennessee call center. The video files were images from computer screens of BlueCross customer service representatives and the audio files were recorded phone conversations from January 1, 2007 to October 2, 2009. The files contained BlueCross members’ personal data and protected health information that was encoded but not encrypted, including:

  • Members’ names and BlueCross ID numbers
  • In some recordings – but not all – diagnostic information, date of birth and/or a Social Security number

  BlueCross immediately investigated the theft and continues to work closely with local and federal authorities in their investigation of this crime. In addition, BlueCross hired Kroll, a global leader in security services, to conduct an independent assessment of its system-wide security and has taken several actions to strengthen these protocols.

  According to the announcement, BCBST is complying with all the notice requirements of the recent HHS regulation governing erroneous disclosures of unsecured protected health information. The Chattanooga Free Times Express reports that “The data was encoded in such a way that it would be hard for anyone who obtained a stolen hard drive to view it, company spokeswoman Mary Thompson said.”

• Finally Kaiser Permanente announced “a storage device with personal information for about 15,500 members in Northern California was stolen from an employee’s car last month, the San Francisco Chronicle reports.” California Healthline reports that
  

  Kaiser officials said there is no evidence that information on the storage device has been used inappropriately (San Francisco Chronicle, 1/13). Kristin Chambers, Kaiser’s vice president for compliance and privacy, said that members have been notified (Calvan, Sacramento Bee, 1/13)

The New York Times reports tonight that

White House officials, Democratic Congressional leaders and labor unions said they had agreed to an increase in the thresholds at which policies would be [subject to the 40% excise tax]: to $8,900 for individual coverage [from $8500] and $24,000 for family coverage [from $23,000]. Moreover, they said, starting in 2015, the cost of separate coverage for dental and vision care would be excluded from the calculations.In addition, they said, health plans covering state and local government employees and collectively bargained health plans would be exempted from the tax until 2018.
This transition period addresses the concerns of schoolteachers and other public
employees who had denounced the tax.For people in certain high risk occupations, including police officers and construction workers, the thresholds would be higher: as high as $27,000 for family coverage.In addition, Richard L. Trumka, president of the A.F.L.-C.I.O., who led a team of labor leaders negotiating with the White House, said the thresholds would be increased for “age and gender,” to reflect that premiums may be higher for health plans with large numbers of women, older workers and retirees.

The thresholds will increase annually by the Consumer Price Index for Urban Consumers plus one point which historically has been lower than the medical cost inflation rate. Other fees, e.g., on medical devices, reportedly will be increased in order to offset this revenue loss. According to the Times report, the compromise has not been vetted yet with the membership.The last component of the compromise may benefit FEHB plans because overall enrollment is just about evenly split between employees and annuitants (or retirees). Also excluding dental and vision coverage from the premiums counted toward the threshold will be helpful to FEHB plans because hundreds of thousands of federal employees and annuitants have opted for FEDVIP coverage. We will have to wait and see.The House and Senate leadership is aiming to send a consolidated healthcare reform bill to the Congressional Budget Office for scoring tomorrow. We may not get a chance to see the bill until the scoring is completed.

The U.S. Office of Personnel Management announced today that it will be holding a ribbon cutting ceremony for its newly renovated health unit on Thursday. “The OPM health unit is one of the largest units within a federal agency, providing services such as blood pressure screenings, Influenza and H1N1 vaccinations, body mass index measurement, health education and cholesterol screenings. All services are free of charge to federal employees.” The OPM health unit will be available to around 6,000 federal employees who work at OPM as well as the Interior Department, and the General Services Administration, which are nearby. Fierce Healthcare reported in July 2008 that

With no relief in site from staggering healthcare costs, on-site clinics run by employers are becoming steadily more popular. Employers say the clinics help lower health costs by encouraging workers to seek primary care before they need more costly emergency services or hospitalization, and nudging them to use cheaper medications.

The Federal Times reports today that

Sixteen federal unions and employee groups signed [a] Jan. 12 [,2009,] letter saying the FEHBP’s insurance options are in no way excessive and do not deserve to be taxed. [See the November 25, 2009, AFHO white paper on these taxes for more details.] The letter was sent to Senate and House Democratic leaders, committee chairmen involved in health care and members of the National Capital Area delegation. * * *

The organizations also asked to be allowed to review and comment on the final agreement between the House and Senate on the role the Office of Personnel Management will play in health care. * * *

The House-passed health care bill would extend coverage for dependent children up to age 27. [The Senate bill provides for an extension to age 26.] The unions want clarification in the final bill that the extension of benefits applies to FEHBP plans.

Groups signing the letter include the American Federation of Government Employees, Federal Managers Association, National Active and Retired Federal Employees Association, and National Treasury Employees Union.

A copy of the letter is available here. The Wall Street Journal is reporting that

House and Senate negotiators are considering applying for the first time the Medicare payroll tax to investment income as part of a compromise to pay for a health overhaul. The extra Medicare tax would apply only to the wealthy and could allow congressional Democrats to reduce the sting of a tax on high-cost insurance plans, said Democratic aides and others briefed on the negotiations.

Govexec.com reports that

House Democratic lawmakers return to town on Tuesday [today] after nearly a month in their districts to talk about health care this evening and give leaders an idea of where to focus as they continue negotiations with the Senate. Leaders will meet Tuesday afternoon as well and have laid out a handful of priorities. But the order of importance and just how hard they will push for some provisions in their bill is expected to become clearer after Tuesday’s meetings, a senior leadership aide said. The caucus will serve to further reassure members the House will not rubber-stamp a Senate-passed version of the healthcare overhaul bill.

The Government Accountability Office released a report today on rising prescription drug costs.

From 2000 to 2008, 416 brand-name drug products–different drug strengths and dosage forms of the same drug brands–had extraordinary price increases. These 416 brand-name drug products represented 321 different drug brands. The number of brand-name drug products that had these extraordinary price increases represents half of 1 percent of all brand-name drug products.More than half of the brand-name drug products that had extraordinary price increases were in just three therapeutic classes—central nervous system, anti-infective, and cardiovascular.

Based on interviews with experts and industry representatives, a lack of therapeutically equivalent drugs—both generics and other brand-name drugs used to treat the same condition—and limited competition may contribute to extraordinary price increases.

Reuters reports that

Democratic senators Charles Schumer and Amy Klobuchar requested the GAO analysis and said it shows more must be done to make medicines affordable, including allowing the federal government to negotiate prices.

“This is further proof that Medicare should be allowed to negotiate drug prices, just as the Veterans Administration does. It would help save taxpayers a lot of money,” Klobuchar said.

PhRMA, the prescription drug manufacturers trade association, replies that

Unfortunately, the GAO report focuses only on a small number of selected brand medicines rather than the entire prescription drug market. When looking at recently released national health care spending data for 2008, there was a sharp decline in retail prescription drug spending growth, leaving medicines as one of the slower growing areas of health care expenditures.

“In fact, according to CMS, the 3.2 percent growth in prescription drug spending is the lowest growth rate in 47 years and well below the overall growth rate for health care.

Breath taking. The President of America’s Health Insurance Plans, a trade association, projects that the health care reform plan under consideration by Congress would impose fees on health insurance plans totalling $225 billion over ten years, according to a UPI report.

Meanwhile, Rick Foster, the chief actuary of the Centers for Medicare and Medicaid Services, issued a report last week, according to the Hill newspaper, finding in part that

“[H]ealthcare providers could curb their availability or increase fees to respond to a flood of new consumers the healthcare reform bill is expected to send into the market. The Senate and House bills would expand health coverage to more than 30 million uninsured citizens, creating a potential glut.

“’The additional demand for health services could be difficult to meet initially with existing health provider resources and could lead to price increases, cost-shifting, and/or changes in providers’ willingness to treat patients with low-reimbursement health coverage’”Blogger: FEHBlog – Create Post

I honestly don’t see how this plan will cut costs. Proponents point to the prospect of the 40% excise tax on high cost plans as a cost cutter according to the Hill report. But how will plans be able to cut costs if the health care reform bill restricts the ability of plans to control costs with benefit limits and other current tools? It may be feasible to do so in a single employer setting but I expect that it will be much more difficult in a setting like the FEHB Program where enrollees can switch plans annually. The Politico reports on House opposition to the excise tax and the AP reports that

Union officials say President Barack Obama plans to meet with them next week to discuss their concerns about a proposed tax on high-cost insurance plans that would help pay for his health care overhaul plan. The officials say they view the meeting Monday as a chance to forcefully make their case that the tax is bad policy and bad politics. Unions contend that taxes on so-called Cadillac plans would be passed along to workers.

I have my fingers crossed.

In other news, last Thursday, the Health and Human Services Department released “The National Health Security Strategy, the nation’s first comprehensive strategy focused on protecting people’s health during a large-scale emergency. The strategy sets priorities for government and non-government activities over the next four years.”

Joe Davidson reports in the Washington Post today that House Federal Workforce Subcommittee Chairman Stephen Lynch (D Mass) plans to introduce legislation to create greater transparency over prescription benefit manager (“PBM”) operations. PBMs, like Medco, Caremark, and Express Scripts, manage prescription drug benefits for health plans. “The legislation would strengthen the ability of the Office of Personnel Management, which administers the plan, to obtain information about the finances of making drugs available to federal employees.” I find this puzzling because the general healthcare reform legislation that Congress is considering likely will include new PBM transparency standards. Furthermore, the rising drug costs in the FEHBP principally are attributable, in my view, to the Program’s demographics (the Program is 50% annuitants) and the increasing effectiveness of drug therapy. Clamping down on drug costs will require much tighter control over prescription drug benefits, such as closed formularies like those found in Veterans Administration facilities. That’s a tough sell in an employee benefit program.

Yesterday, the Office of Personnel Management announced a major organization which involves the creation of five new branches to replace seven divisions. Responsibility for the FEHB Program will rest with the Retirement and Benefits branch, led by Deputy Associate Director Kathy McGettigan.

Also yesterday, the Centers for Medicare and Medicaid Services announced that

Nominal health spending in the United States grew 4.4 percent in 2008, to $2.3 trillion or $7,681 per person. This was the slowest rate of growth since the Centers for Medicare & Medicaid Services started officially tracking expenditures in 1960. Despite slower growth, however, health care spending continued to outpace overall nominal economic growth, which grew by 2.6 percent in 2008 as measured by the Gross Domestic Product (GDP). The findings are included in a report by CMS’ Office of the Actuary, released today in the health policy journal Health Affairs. “This report contains some welcome news and yet another warning sign,” said Jonathan Blum, director of CMS’ Center for Medicare Management. “Health care spending as a percentage of GDP is rising at an unsustainable rate. It is clear that we need health insurance reform now.”
The 4.4 percent growth in 2008 was down from 6.0 percent in 2007, as spending slowed for nearly all health care goods and services, particularly for hospitals.

Speaking of health insurance reform, the House and Senate leadership have begun meeting with the White House to hammer out a modified version of the Senate bill that would be acceptable to a House majority and sixty Senators. Reuters reports that Speaker Pelosi thinks that the negotiators are very close to the finish line. The LA Times is reporting tonight that the President is pushing for the 40% excise tax on so-called Cadillac plans in the Senate bill. The Wall Street Journal is reporting that the President also favors the more generous premium subsidies for lower income Americans in the House bill. In return, the parties may stick with the OPM administered multi state health plans in the health insurance exchanges rather than a public plan option. Alan Sloan of Fortune Magazine explains what’s wrong with the excise tax.

The problem is that they define “Cadillac” not by the benefits a plan delivers but by how much a plan costs. But as any insurance maven will tell you, costs depend more on the people being covered (old, sick, or both?) and location (high-cost New York or low-cost Montana?) than on the level of benefits. “High-cost plans aren’t necessarily generous plans,” says Beth Umland, director of research for health and benefits for the Mercer consulting firm.

Inside Health Reform reports about ongoing discussions over modifications to the 40% excise tax that would better focus the assessment. Good luck with that.

OPM announced today that its new Deputy Director Christine Griffin has taken office following Senate confirmation. Ms. Griffin had been an U.S. Equal Opportunity Commissioner. Govexec,com reports that “A wheelchair user and labor and employment law expert, [Ms.] Griffin has been a forceful advocate for federal hiring of workers with disabilities, something she has said could provide a model to help overcome discrimination against disabled employees in the private sector.”

On the health care reform front, the Baltimore Sun reports that the Congressional majority leadership continues to lean toward informal negotiations over the substance of a final bill instead of a formal conference committee. The informal negotiations would be limited to the House and Senate majority leadership and the White House. The negotiations would be based on the Senate bill rather than the House bill. The outcome of the negotiations would be presented first to the House and then to the Senate which raises a risk of “ping ponging” between the Houses. A Business Insurance report reminds us of key differences between the House and Senate bills.

Not much news since the last post due to the New Year’s holiday weekend. I’m taking a deep breath as the Congressional leaders continue their efforts to merge the House and Senate health care reform bills. The House reconvenes on January 12, and the Senate reconvenes on January 19.

January 1, 2010, was the date on which the 2008 Mental Health Parity Act’s provisions and the 2008 Genetic Information Non-Disclosure Act, Title I (“GINA”), became applicable to the FEHB Program. The mental health parity changes, which principally apply to plans with out of network coverage, can be examined in the 2010 plan brochures. The FEHB Program has provided generous in- network mental health benefits for nearly ten years under an OPM initiative.

The GINA law’s impact on the FEHB is even more nuanced because FEHB plans have never engaged in placing restrictions in enrollment, such as modifying premiums, based on member’s health status, past, current, or projected.

The FEHBlog has just returned to DC following a Christmas trip to Los Angeles. The Politico reports that the Governors of California and New York are understandably dismayed over the Senate health care reform bill‘s (H.R. 3590) financing of the Medicaid program which would impose significant unfunded mandates on their states. They are not alone. The Politico reports that thirteen Republican state attorneys general are urging the House and the Senate to delete the Senate bill’s provision that gives Nebraska a pass on these additional Medicaid expenses.

The big news today was the issuance of the long awaited definition of “meaningful use” of certified electronic health record (EHR) technology by healthcare providers, which is the touchstone for federal government funding of EHR technology expenses under the Recovery Act. According to a government press release, “A proposed rule issued by CMS [the Centers for Medicare and Medicare Services] outlines proposed provisions governing the EHR incentive programs, including defining the central concept of “meaningful use” of EHR technology. An interim final regulation (IFR) issued by ONC [Office of the National Coordinator] sets initial standards, implementation specifications, and certification criteria for EHR technology. Both regulations are open to public comment [for sixty days].”

Modern Healthcare reports that CMS is implementing the two month delay in the 21% cut in Medicare Part B reimbursement to physicians that President Obama recently signed into law as part of the FY 2010 defense appropriations act. “In a memorandum, the agency clarified that it would be instructing its Medicare contractors to hold claims for [2010] services paid under the [Medicare Part B] fee schedule for the first 10 business days of January. This will allow Medicare contractors time “to receive the new, updated payment files and perform necessary testing before paying claims at the new rates,” the CMS explained in its memo.”

AIS Specialty Pharmacy News reports on a December 8, 2009, Congressional hearing on the rising cost of prescription drugs as disclosed by an AARP study. “Specialty therapy prices increased 10.3% in the most recent period [ending in September 2009], up from the previous high of 9.3%. During the same time, AARP reported, prices for prescription nonspecialty drugs grew 9.3%.” Non-specialty drugs, typically small molecule pills, are subject to generic competion, while specialty drugs , typically biologic injectables, are not. That imbalance may change with the health care reform bill.

The New Jersey Newroom reports about a survey commissioned by Medco, a major prescripton benefits manager, finding that senior citizens have a hard time juggling their multiple prescripton medications. (Hey, it’s my job as a lawyer to belabor the obvious!) Medco has created a brochure to help folks manage their prescriptions which is available here.