• The Kaiser Family Foundation’s Health Policy Report noted that the House leadership version of the State Children’s Health Insurance Program’s reauthorization bill (HR 3162) requires revised to meet pay as you go requirements before the entire House considers the bill. Congressional Quarterly reports that the Senate leadership plans a vote on the Senate bill on Monday July 30.
• Sen. Tom Coburn (R. Okla.) and four other Republican colleagues introduced the market based “Every American Insured Health Act” as an alternative to the major SCHIP expansion proposed by the House and Senate.
• The American Hospital Association News reported that House approved an amendment as part of the Labor-HHS-Education appropriations bill (HR 3043) that would delay by one year (from Oct. 1, 2007, to Oct. 1, 2008) CMS’s initiative to implement the Medicare Severity Diagnostic Related Groups classification system. CMS has projected that the new system which included a 2.4% “behavioral reduction” in payments to hospitals would save Medicare $24 billion over the next five government fiscal years. The Senate is expected to take up the bill after the August recess.
• There were several articles published this week about how college students will be facing higher prices for oral contraceptives when they return to school in the fall. These articles illustrate the arcane nature of drug pricing in the U.S. The Wall Street Journal reports that
  

  For years, drug companies sold birth-control pills and other contraceptives to university health services at a big discount. This has served as an entree to young consumers for the drug companies, and a profit center for the schools, which sell them to students at a moderate markup. Students pay perhaps $15 a month for contraceptives that otherwise can retail for $50 or more. But colleges and universities say the drug companies have stopped offering the discounts, and are now charging the schools much more. The change has an unlikely origin: the Deficit Reduction Act signed by President Bush last year. The legislation aimed to pare $39 billion in spending on federal programs, from subsidized student loans to Medicaid. And among the changes was one that, through an arcane set of circumstances, created a disincentive for drug makers to offer school discounts. The contraceptive prices offered to schools are now included in a complex calculation that determines certain Medicaid-related rebates that drug makers must pay to states. In this calculation, deep discount prices would have the effect of increasing drug makers’ payments.

  Under the 2005 Deficit Reduction Act, the discounts remain available to “safety net” providers serving the low income population.

• Today’s NY Times featured an article on cancer treatment. The article explains that
  

  [Cancer t]reatment guidelines approved by experts already exist for 70 to 80 types of cancer (http://www.nccn.org/), but the new measures are the first to be formally endorsed by cancer organizations to assess whether hospitals are performing up to par. The measures were developed by the American College of Surgeons’ Commission on Cancer, the American Society of Clinical Oncology and the National Comprehensive Cancer Network, and are available online at www.facs.org/cancer/qualitymeasures.html.

• The House leadership unveiled its State Children’s Health Insurance Program expansion proposal. This proposal plans to fund a $50 billion expansion of the Program over five years with a combination of a tobacco tax increase and payment cuts to Medicare Advantage plans. The proposal also would change the formula for reimbursing physicians under Medicare Part B. The current statutory formula requires a 9.8% reduction in those reimbursements beginning October 1, 2007. For the past few years, Congress has been overriding these cuts. The proposal would allow for a 0.5% increase in Medicare Part B reimbursements to doctors over the next two government fiscal years. According to the Wall Street Journal, “drug makers also would help pay the costs of the House bill, through a 5% increase in the rebates they pay the federal government under the Medicaid program for the poor.”
• Sen. Ted Kennedy (D Mass.) and Sen. Patrick Leahy (D. Vt) have introduced a bill that would strengthen federal privacy laws over personal health information. According to the Senators’ July 18 press release, the bill “would correct the longstanding errors in the ways in which confidential patient information is currently handled and distributed and would require the Secretary of the Department of Health and Human Services to revise the HIPAA Privacy Rules. It would give each citizen the power to decide when, and to whom, their health information is disclosed.”
• Of course, the Bush administration has been pushing for health care quality transparency. The Washington Post ran a front page article today on how health plan quality ratings allegedly can damage doctors’ reputations.

On July 18 the House Education and Labor Committee rejected the Senate version of the mental health parity bill (S. 558) by a 16 to 27 vote and approved by a 33-9 vote a substitute version of the more expansive House bill (H.R. 1424) proposed by Committee Chairman George Miller (D Calif). The bill now moves to the House floor.

• Notwithstanding the President’s veto threat, the Senate Finance Committee approved a $35 million expansion of the State Children’s Health Insurance Program this week.
• Vanessa Fuhrmans wrote an interesting report in the Wall Street Journal about how “Medicaid provides health-care coverage for millions of Americans — but a growing number of doctors won’t accept it” because Medicaid keeps cutting the fees that it pays doctors. Sever state health care reform programs, such as California’s, depend upon a Medicaid expansion. I was struck by this comment from Gary Sella on the WSJ health blog — “Who makes up the missing reimbursement? Well its like an oblong balloon. Squeeze the Medicare, Medicaid end and the private market swells.”
• The Health Information Technology Standards Panel has published a new round of standards including “Quality and Consumer Access to Clinical Information” for public comment. The deadline for submitting comments is August 17.
• U.S. News & World Report published an article on the battle between doctors and pharmacy based clinics captioned “In-store Clinics Give Doctors Heartburn”. The clinics fight with competition and the doctors attempt to use regulators to fight back.

• The Senate Appropriations Committee has cleared the FY 2008 Financial Services appropriations bill (S. Rep. No. 110-129) This is the bill that includes appropriations for the FEHB Program. The Senate bill includes the FEHB Program’s cost accounting standards exemption (§ 613) and the contraceptive mandate (§ 732). The House bill which the full body approved last month also includes an abortion coverage limitation. Typically, the Senate bill does not include that limitation, but the House provision will be found in the bill that the Conference Committee approves and is enacted into law.
• The President announced his intent yesterday to veto any State Childrens Health Insurance Plan expansion beyond his $5 billion budget proposal. The Washington Post reported on this development as well as a new Justice Department Medicare fraud taskforce.
• Post your questions now for HHS Secretary Mike Leavitt who will be holding an online chat tomorrow at 3:15 pm ET.

Congress and GAO have been pressuring the Health and Human Services Department (HHS) to create privacy milestones for the National Health Information Network. At these Congressional hearings, Mark Rothstein, a law professor who is a member of the National Committee on Vital and Health Statistics, has been demanding that HHS Secretary Leavitt respond to NCVHS’s June 2006 letter of recommendations. (Of course, as NCVHS is a unit of HHS, it strikes me that silence is a form of response.)

The Report on Patient Privacy reports that last month NCVHS sent new sets of recommendations to Secretary Leavitt. What’s more, AHIC’s Confidentiality, Privacy and Security Group sent its own recommendations to Secretary Leavitt and held a meeting on “relevant HIPAA requirements,” at which Prof. Rothstein testified on the need for privacy protection beyond the HIPAA Privacy Rule.

The upshot of the Report’s article is that both advisory groups are coalescing around an approach that would scrap that the business associate provisions of the HIPAA Privacy and Security Rules in favor of Congress extending those rules directly to business associates and all health care providers and vendors who handle protected health information. However, according to the Report, HHS HIT National Coordinator Robert Kolodner may not be on board with this approach.

As previously noted in the FEHBlog, the Senate Health Education Labor and Pensions Committee approved the Wired for Health Care Act of 2007 on June 27. At the markup, according to Government HIT News:

During committee consideration, it was amended to require that AHIC recommend policies and methods “to preserve the individual’s ability to control the acquisition, uses and disclosures of individually identifiable information.”

The bill also would extend the privacy rules of the Health Insurance Portability and Accountability Act of 1996 to health records banks and exchanges.

This change does not go so far as the approach described in the Report on Patient Privacy. The NCHVS approach would impose quite an administrative burden on small businesses and government agencies.

• PriceWaterhouseCoopers recently issued its healthcare cost projection for 2008. PwC expects those costs to grow at a slower, likely single digit rate.

• Milliman presented its actuarial projection of the costs of the House mental health parity bill (HR 1424) at a House Education and Labor Committee hearing held on July 10. The Milliman study which was commissioned by a collection of mental health provider associations, finds very little increase in health plan expenses as a result of this bill. An interesting aspect of the House bill is that the bill “defines a minimum scope
  of coverage for mental health and substance-related disorders as the same range of mental
  illnesses and addiction disorders covered by the health plan with the largest enrollment of
  federal employees (under chapter 89 of title 5, United States Code, [the FEHB Act]),” which is the Blue Cross FEP Standard Option.” Also testifying at this hearing was a representative of the American Benefits Council, a trade association of large employers and insurers, who offered support for the Senate mental health parity bill over the House bill for the following reasons:
  

  First, the Senate proposal does not mandate that health plans cover specific
  mental health benefits. It leaves those decisions up to employers. In the case of
  fully insured health plans, however, the Senate bill permits States to continue to determine whether to require any particular benefits.

  Second, the Senate bill includes a provision making clear that medical
  management of mental health benefits is not prohibited and preserves flexibility for employers and health plans in the formation of networks of health care providers who deliver these services. These provisions are vitally important because they allow employers to appropriately design and manage the health coverage they offer to meet their employees’ needs.

  Finally, the Senate bill provides for a very targeted and narrow preemption of
  State insurance law (applicable to fully insured plans, as well as to self-insured
  plans) that assures a uniform federal rule for the specific parity requirements of S. 558 (e.g., treatment limits, financial requirements, cost exemption).

  Of course, as previously noted in the FEHBlog, the managers of the Senate bill have developed a “mark” that narrows the gap between the two bills while maintain broad industry support according to reports. I just hope the mental health parity law does not disrupt the FEHB Program’s successful mental health parity initiative.

• OPM announced earlier this week that the Senate has confirmed Howard Weizmann as OPM Deputy Director. Mr. Weizmann replaces Dan Blair who now serves as Chairman of the Postal Regulatory Commission.
• The Senate Finance Committee announced a tentative bipartisan compromise on the State Children’s Health Insurance Program (SCHIP) reauthorization. The compromise calls for a $35 billion increase in funding over five years which would be funded with a tobacco tax increase. The House wants a $50 billion increase which would be funded with Medicare Advantage cuts. The Washington Post reports today that the President would veto the Senate compromise. The Bush administration had proposed a $5 billion funding increase and is concerned that the Senate and House approaches will encourage people to drop their private coverage in favor of the publicly subsidized SCHIP coverage. The SCHIP authorization expires on September 30, so expect this issue to come to a head soon.
• The House passed its version of the FDA user fee reauthorization bill, which now must go to conference with the Senate version. This bill also must be enacted by the end of September.
• The San Francisco Chronicle offers an interesting report today on the biogenerics issue which Congress may take up as part of the FDA user fee reauthorization bill after a Senate bipartisan compromise approach was announced last month.
• The AP reports that adverse side effect reports on the GlaxoSmithKline (GSK) blockbuster diabetes drug Avandia tripled in the month following the release of a New England Journal of Medicine report. discussed in the May FEHBlog, suggesting that Avandia may cause heart ailments. A spokesperson remarked that “This is a very well-known phenomenon,” where news reports lead to increased reporting. It’s good that there’s awareness of the reporting system, but drawing conclusions on such data is inappropriate.” FDA hearings on the issue begin on July 30.
• U.S. News and World Report has issued its 2007 list of the top 100 hospitals in the U.S. Johns Hopkins Hospital in Baltimore, MD, leads the list followed by the Mayo Clinic in Rochester, MN, and the UCLA Medical Center in Los Angeles, CA.

Reuters reports that a newly issued study of 1.8 million doctors office visits occurring in 2003 and 2004 concludes that electronic health records, which were used in 18% of the visits, did not improve routine health care. Although experts believe that electronic health records will reduce medical errors, this is the first report study on the impact of electronic records on health care quality. According to the Reuters report,

Our findings were a bit of a surprise. We did expect practices (with electronic medical records) would have better quality of care,” said Dr. Randall Stafford of Stanford University. “They really performed about the same,” he said in a telephone interview.

In a final rule published on July 6, the Centers for Medicare and Medicaid Services (CMS) announced that based on the Deficit Reduction Act of 2005 (“DRA”), Medicaid is changing its reimbursement methodology for generic drugs from 150% of average wholesale price (“AWP”) to 250% of average manufacturers price (“AMP”) plus a dispensing fee. This anticipated change has been a very hot topic in the health care industry for the past year.

Bloomberg.com reports that

The new pricing and related changes will save $4.9 billion for the U.S. government during five years and $3.5 billion for the states, which jointly fund the program, according to Medicaid. While the new formula would affect the largest U.S. drugstore chains, including Walgreen Co. and CVS Caremark Corp., industry groups said the impact would be greatest at small pharmacies that depend more on Medicaid payments.

The National Association of Chain Drug Stores has pledged an “’All-Branches, All-Level Government Strategy’” to Fix Medicaid Reimbursement Model.” Who will be expected to pick up the slack? Private sector payers and FEHB plans.

CMS’s announcement further advises that

The DRA also makes an important change to health care purchasing by introducing transparency in Medicaid prescription drug pricing and requiring that for the first time, AMPs be publicly reported on the Internet. States will now be able to use actual AMP information as the basis for setting drug reimbursement. Drug makers will also have to report AMPs monthly, as well as quarterly, as was the practice prior to DRA. More frequent reporting will allow states to make timely adjustments to reimbursement rates.

This development could further accelerate the demise of the AWP. The rule is effective October 1, 2007.