Interesting insider observations on healthcare reform
are found in this AIS Health Business Daily report.
David Ermer
I am an attorney who practices law in Washington DC. My practice has involved the Federal Employees Health Benefits Program since 1983.
Tuesday Tidbits
The Centers for Medicare and Medicaid Services (CMS) actuaries issued their report on 2007 healthcare spending, which continued to outpace the CPI-U. CMS explained in a press release that
“Retail prescription drug spending grew 4.9 percent in 2007, slower than the 8.6 percent growth in 2006. The deceleration in 2007 was the result of several factors, including sustained growth in the generic dispensing rate, slower growth in prescription drug prices, and growing consumer concerns for drug safety. “The generic dispensing rate continued to climb in 2007 as several major blockbuster drugs lost patent-protection; this continued growth in the use of generics contributed to both a deceleration in total expenditures as well as prices. “Prescription drug prices, as reflected in the National Health Expenditure Accounts, grew 1.4 percent in 2007, much slower than the 3.5 percent growth in 2006. This lower price growth was not only driven by the increased use of generics, but also by the introduction and continuation of generic drug discount programs by large retail chain stores. “Increased safety concerns for certain prescription drugs in 2007 also likely influenced the drug spending trend, as the Food and Drug Administration issued sixty-eight “black-box” warnings (indication that the drug carries a significant risk of serious or even life-threatening effects), compared to fifty-eight in 2006 and twenty-one in 2003. “With the exception of prescription drugs, spending for most other health care services grew at about the same rate or faster than in 2006.”
Speaking of prescription drug spending, CMS announced today that it will be putting the squeeze on Medicare Part D plans next year. The CMS press release explains that
CMS currently allows Part D sponsors that contract with a PBM to report to the CMS the amount paid to the PBM (the lock-in price) or the amount the PBM paid to the pharmacy (the pass-through price). Under the lock-in approach, a Part D plan agrees to pay a PBM a set rate for a particular drug. The PBM then negotiates with pharmacies to obtain the lowest possible price for the drug, which often is lower than the amount the PBM receives from the plan. Under the new rule, plans may continue to use the lock-in model with their PBMs, but they must report to CMS the price actually paid to the pharmacy as the negotiated price. Any difference between the price paid by the plan to the PBM and the price paid by the PBM to the pharmacy must be reported as an administrative cost. This requirement helps ensure that sponsors’ administrative costs are not included in the drug costs used to determine how much the beneficiary will pay, as well as reinsurance and risk corridor payments made by CMS. This will also create a uniform definition of drug costs for all Part D sponsors. “For patients whose plan used the lock-in model, this regulation will reduce what they pay at the pharmacy counter because their copayment will no longer be based on a higher negotiated price,” said CMS Acting Administrator Kerry Weems. “The current lock-in approach also moves beneficiaries through the Part D benefit more quickly, bringing them to the ‘coverage gap’ sooner than under the pass-through pricing model.
Finally, Healthcare IT News reports that “Four healthcare industry organizations — The Council for Affordable Quality Healthcare (CAQH), the Healthcare Information and Management Systems Society (HIMSS), the Integrating the Healthcare Enterprise (IHE) Initiative and the Blue Cross and Blue Shield Association (BCBSA)– are collaborating with the Centers for Medicare and Medicaid Services on a 5010 testing project of the new X12 HIPAA 5010 transactions.” HHS is expected to promulgate in the near future the final rule requiring health plans, providers, and clearinghouses to begin using those standards for their HIPAA regulated transactions by a deadline that will be set in the rule.
Weekend update / Miscellany
The 111th Congress convenes on Tuesday, January 6, at noon. I expect that the most pressing health care items on its agenda will be reauthorizing the State Children’s Health Insurance Program, which otherwise expires on March 31, 2009, and providing up to $25 billion in funding for interoperable electronic medical records in the anticipated economic stimulus bill.
Speaking of Congress, Modern Healthcare.com reports that “Democratic leaders on Capitol Hill have named Douglas Elmendorf, a former Clinton administration economist, to head the Congressional Budget Office. He will replace Peter Orszag, who resigned in November to head incoming President Barack Obama’s White House budget office.”
On the Medicare front, CMS announced on December 29 the publication of a final regulation requiring certain durable medical equipment suppliers to post a $50,000 surety bond by October 2, 2009 (May 4 for new suppliers). According to CMS, “[t]his requirement was due in part to the large number of improper and potentially fraudulent payments to medical equipment suppliers for furnishing medical equipment and devices to people with Medicare. The 2007 Medicare error rate report found approximately $1 billion in improper payments for medical equipment and supplies.”
The Drug Benefit News featured an interesting article on health insurer funding of clinical drug trials. “[M]ore and more health plans are covering medical expenses of members participating in clinical trials, as well as the experimental drugs. Some insurers urge all plans to develop clear policies around clinical trials as a way to benefit both members and themselves.”
CAQH announced on December 30 the continuing expansion of it CORE initiative. CORE is “an all-payer solution that enables provider access to patient insurance information before or at the time of service using the electronic system of their choice. [CAQH] has brought together more than 100 industry stakeholders to collaborate on a multi-phase set of uniform business rules to achieve that goal.”
Another CAQH initiative is its “Save Antibiotic Strength” campaign. “Through the program, CAQH and our partners – including the U.S. Centers for Disease Control and Prevention (CDC) – are educating Americans about the importance of using antibiotics safely, and providing physicians with information and tools to deliver this message to their patients. Together, we are addressing one of America’s most pressing public health concerns.” Last week, Giant Food, a DC metro area grocery chain, and its sister company Stop & Shop, a New England grocery chain, announced that their pharmacies will supply 14 days of generic antibiotics at no charge with a prescription during the period January 2 through March 21, 2009. I think that the trend of charging $4 generics is good for everyone, but I’m not so sure about free antibiotics.
HIPAA transaction and code set conversion update
HHS has been pushing this year to promulgate final rules implementing the new 5010 electronic transaction and ICD-10 code sets on a rapid schedule. Cooler heads, including the American Medical Association, the Blue Cross Blue Shield Association, and other provider groups and health plans, are advocating a three year extension of HHS’s proposed full conversion deadline — October 2013. Even the American Hospital Association which favors rapid conversion called for an extension in its formal comments to HHS albeit shorter than others. Healthcare IT News reports that hospital CIOs are “anxious” about the ICD-10 conversion, which is perfectly understandable.
I discovered on the reginfo.gov website that HHS submitted the final regulations for Office of Management and Budget review on December 12. It’s possible therefore that those final rules may be published before January 20. Stay tuned.
Happy Holidays!
I hope that everyone is enjoying the long holiday weekend and is looking forward to the new year.
Many years ago, I recall helping a client respond to an appeal over the medical necessity of a monitoring belt worn by women experiencing difficult pregnancies. I learned from the medical reviewer that the belt was valueless but the expectant mothers were aided by the daily contact with the monitoring nurse. That was a good lesson about the importance of human communication in the medical process. While that remains true, I learned from a report in the Oregonian that home health monitoring devices have improved dramatically over the years. Kaiser Permanente is using them successfully with chronically ill members to reduce the number of outpatient visits.
At the 2006 OPM carrier conference, Medco CEO David Snow spoke about value of personalized medicine. According to a report in the MercuryNews.com
[P]ersonalized medicine broadly represents the promise of delivering more effective, efficient medical care through genomics and other science that probes an individual’s makeup at the molecular level. The trend also includes secure Web portals that empower patients with greater knowledge.Personalized medicine, biotech pros say, is poised for dramatic progress in 2009, both in clinical practice and the lab.
Also on a tap for 2009, according to a Reuters interview with Teva North America Pharmaceutical’s CEO is a new federal law creating a regulatory pathway for biological follow-ons also known as biogenerics or biosimilars. Reuters reports that
Israel-based Teva, the world’s largest generic drug maker, has added to its biogeneric capabilities with its $7.46 billion acquisition of New Jersey-based Barr Pharmaceuticals. The deal closed on Tuesday [December 23].
These developments will lead to significant cost savings over time. FYI, the 2009 OPM AHIP carrier conference has been scheduled for March 16 – 17 at the Capital Hilton here in Washington, DC.
Medicare vs. FEHBP
I read in the BNA Health Care Policy Report that Rep. Pete Stark (D Calif), the Chairman of the Health Subcommittee of the House Ways and Means Committee, predicts that comprehensive health care reform will be enacted in 2010. Last week, Govexec.com reported on a Berkley School of Law Briefing Paper arguing that Medicare is a better model for health care reform than FEHBP because it “controls costs better than any of its competitors.” As I have pointed out, Medicare controls costs by statutory price controls that shift costs onto private sector plans. Robert Moffitt of the Heritage Foundation rode to the FEHBP’s defense today in a cogent background paper.
Weekend update / Miscellany
Fabulous weekend. UConn defeated Gonzaga 88-83 in overtime yesterday, and the Redskins pulled out a surprise 10-3 victory over the Eagles today.
The Federal Workforce subcommittee published a press release about the resolution of the Blue Cross FEP out-of-network surgery issue as did Sen Ben Cardin (D Md). The Federal Workforce Subcommittee’s chair Danny Davis (D Ill.) has been nominated to serve on the Ways and Means Committee. Rep. Davis has stated that he has requested a waiver to continue serving as the Federal Workforce subcommittee’s chair.
The Federal Workforce subcommittee is part of the Oversight and Government Reform Committee. In the next Congress, Rep. Ed Towns (D NY) and Rep. Darrell Issa (R Calif) will serve as the Committee’s chair and ranking minority member respectively.
On December 18, the Congressional Budget Office release reports on budget options for health care and key issues in analyzing major health reform proposals. The Galen Institute provided an interesting overview of these reports as did the Kaiser Foundation.
Also on December 18, CMS released quality ratings on the Nation’s 16,000 nursing homes that participate in Medicare or Medicaid.
On December 19, the Washington Post’s Federal Diary column discussed the issue of whether federal annuitants with FEHB coverage should sign up for Medicare Part B. Joe Davidson, the Federal Diary columnist, interviewed Tammy Flanagan for his report. Ms Flanagan has had three columns in Govexec.com on the same issue.
First Databank settlement update
Yesterday, U.S. District Judge Patti Saris held a fairness hearing on the (unfair) First Databank class action settlement in the AWP rigging case pending in Massachusetts. The judge did not issue a decision. Instead she continued the hearing to January 29, 2009, which presumably will allow her to consider the briefing in the proceedings over the McKesson settlement in the same case. I’ll keep following the fun.
Round up of reports on the resolution of the out-of-network surgery issue
Yesterday, OPM announced that Blue Cross FEP had modified its out-of-network surgery benefit for non-participating providers in response to an invitation from the agency. Here’s a round up of the press reports and releases: