Govexec.com reports that House Majority Leader Steny Hoyer (D Md.) plans to reintroduce a bill that would increase the Government contribution toward FEHB plan coverage from 72% of the enrollment weighted average capped at 75% of the actual plan premium to 80% of the enrollment weighted average capped at 83% of the actual plan premium.

Steve Barr reports in his Washington Post column this morning that the Congressional Budget Office released a Budget Options report that identifies as an option (p. 162) basing the Government contribution toward annuitant coverage on years of Government service, similar to the President’s budget proposal. Mr. Barr doubts that this proposal will have traction on Capitol Hill.

Interestingly, the Budget Options report also identifies as an option for Congress replacing the current government contribution formula with a voucher. The current Government contribution formula is 72% of the enrollment weighted average premium capped at 75% of the actual FEHB plan premium selected by the enrollee. Under the CBO’s approach, an enrollee would receive a voucher that he or she could use to pay for his or her FEHB plan coverage. The report explains (p. 160) that

This option would offer a flat voucher for the FEHB program that would cover roughly the first $3,600 of premiums for individual employees or retirees or the first
$8,400 for family coverage. Those amounts, which are based on the government’s average expected contribution in 2007, would increase annually at the rate of inflation rather than at the average weighted rate of change for premiums in the FEHB program.

* * * Insurers would have greater incentive to offer more-efficient and lower-cost plans to attract participants, because enrollees would pay nothing for plans costing the same as or less than the amount of the voucher.

This option would have several drawbacks, however. First, the average participant would probably pay more for his or her health insurance coverage. Second, large
private-sector companies currently provide better health benefits for employees (although not for retirees) than the government does; that discrepancy would increase under this option, making it harder for the government to attract highly qualified workers. Third, in the case of current federal retirees and long-time workers, this option would cut benefits that have already been earned. Finally,
it could strengthen existing incentives for plans to structure benefits so as to disproportionately attract people with lower-than-average health care costs. That “adverse selection” could destabilize other health care plans.

CBO projects that this option “would reduce discretionary spending (because of lower payments for current employees and their dependents) by $100 million in 2008 and by a total of $5.1 billion over five years. It would also reduce mandatory spending (because of lower payments for retirees) by $100 million in 2008 and by $4.6 billion over five years.”

Please bear in mind that CBO is offering options in this report, not making recommendations, according to the Report’s introduction.

Paul Feldman, deputy director of the Health Privacy Project, resigned as co-chair of the AHIC confidentiality, privacy and security workgroup in protest of the group’s allegedly slow pace. Public reaction to this resignation was mixed according to Modern Healthcare.

Govexec.com reported yesterday that over 400,000 federal employees and annuitants enrolled in the new supplemental dental program and over 300,000 enrolled in the new supplemental vision program. “Of the dental insurance, MetLife was by far the most popular, with more than 250,000 enrollees. BCBS took the lead for vision insurance with more than 198,000, according to OPM data.” Rep. Tom Davis (R Va.) wrote a letter to OPM Director Linda Springer encouraging her to “identify ways that the federal government can leverage this large pool to ensure that participants are receiving the best dental and vision products and services at the lowest cost to the participants.”

Yesterday, a Delaware state court judge refused to block a vote on the CVS – Caremark merger proposal although he did require Caremark to notify shareholders of their rights to vote no or ask a Delaware court to appraise the CVS proposal. Businessweek observed that the court’s “determination that Caremark shareholders are due appraisal rights means they can seek court intervention if they don’t think they’re getting fair value for their holdings. The result, [plaintiff’s attorney] Grant said, is that CVS will be pressured to match Express Scripts in making an attractive offer.”

This morning, Caremark issued the required notice to its shareholders and set March 16 as the date for a shareholder meeting and vote on the CVS merger proposal. Express Scripts, the other competitor in the Battle for Caremark, again offered to sit down with Caremark to discuss its proposal.

Meanwhile, Medco, which reported strong 4th quarter 2006 results, offered the following CEO comments on the battle for Caremark:

Snow said in an interview that Medco, which handles prescriptions for 60 million Americans, should benefit whoever acquires the industry’s No. 2 — Caremark Rx Inc. It is weighing competing bids from another rival, Express Scripts Inc., and drugstore chain CVS Corp. Other pharmacy chains wanting to partner with a neutral prescription benefit manager now are negotiating attractive deals with Medco, Snow said, adding some current Caremark clients may defect. Should Express Scripts win out, he said, the combination would be bigger than Medco. But Snow said Caremark’s customer service has been suffering since it acquired AdvancePCS in 2004. CVS has been telling Caremark shareholders that a Caremark-Express Scripts deal would likely cost the merged company $8 billion in annual revenue from dissatisfied customers bailing out. Speller said Medco can grab those “crumbs” and if the battle is prolonged, will be “in the catbird seat” for picking up business from plans wanting to avoid uncertainty at Caremark and Express Scripts.

President Bush held another roundtable discussion on health care issues in Chattanooga, TN today. HHS Secretary Leavitt and Tennessee’s governor participated in the meeting. On a related note, CMS researchers published a report in Health Affairs concluding that as a result of Medicare Part D, the government is now picking up 45% of the Nation’s health care tab, which is expected to double by 2016. The abstract reads as follows:

Growth in national health spending is projected to slow slightly from 6.9
percent in 2005 to 6.8 percent in 2006, marking the fourth consecutive year
of a slowing trend. The health share of gross domestic product (GDP) is
expected to hold steady in 2006 before resuming its historical upward trend,
reaching 19.6 percent of GDP by 2016. Prescription drug spending growth is
expected to accelerate to 6.5 percent in 2006. Medicare prescription drug
coverage has dramatically changed the distribution of drug spending
among payers, but the net effect on aggregate spending is anticipated to be
small.

Fun fact to know and tell — At a healthcare conference that I attended last week at American University, a speaker said that Medicaid’s prescription drug costs are only 10% of the total expenses due to the statutorily mandated price controls. The prescription drug expenses in FEHB plans and ERISA plans tend to range from two to three times higher. Quite a difference.

GCN.com reports that the Office of Management and Budget plans to grade OPM on how well the Federal Employees Health Benefits Program provides heath care quality and pricing information to FEHB plan members under the President’s August 21, 2006, Executive Order. Karen Evans, OMB’s administrator for e-government and ITtold GCN.com that “We will use a scorecard-like approach, starting in our June 30 President’s Management Agenda scorecard, to measure their progress against price and transparency in using health IT.” The Defense Department, the Veterans Affairs Department, and the Health and Human Services Department also will receive a report card.

According to Govexec.com, Rep. Tom Davis (R. Va.) reintroduced a bill last week that would allow federal and military retirees the right to make their health plan contributions with pre-tax dollars (H.R. 1110). Currently, this right is restricted to active employees by the federal tax code. The bill was referred to the House Oversight and Government Reform Committee, which favors the bill, and the House Ways and Means Committee. Former House Ways and Means Chairman Bill Thomas had actively opposed this bill, but he is no longer in Congress and the Ways and Means Committee is now chaired by a Democrat, Charlie Rangel of NY. As this bill would produces a loss in tax revenues, the new “pay go” rule may present an obstacle, but this is a major legislative initiative for NARFE and the Military Coalition.

Business Insurance reports that the Senate Health Education Labor and Pensions Committee braved the snow in DC today and voted 18-3 in favor of the improved mental health parity (S 558) billed discussed in the FEHBlog last Monday. This is not yet posted on the Thomas web site.

Sen. Ron Wyden (D. Ore.), who has proposed universal health coverage, and a bipartisan group of nine other Senators have written a letter to the President offering to cooperate on the development of legislation to control surging heath care costs. The letter proposes that the Administration and Congress work together to pass laws that would

1) Ensure that all Americans would have affordable, quality, private health coverage, while protecting current government programs. We believe the health care system cannot be fixed without providing solutions for everyone. Otherwise, the costs of those without insurance will continue to be shifted to those who do have coverage. 2) Modernize Federal tax rules for health coverage. Democratic and Republican economists have convinced us that the current rules disproportionately favor the most affluent, while promoting inefficiency. 3) Create more opportunities and incentives for states to design health solutions for their citizens. Many state officials are working in their state legislatures to develop fresh, creative strategies for improving health care, and we believe any legislation passed in this Congress should not stymie that innovation. 4) Take steps to create a culture of wellness through prevention strategies, rather than perpetuating our current emphasis on sick care. For example, Medicare Part A pays thousands of dollars in hospital expenses, while Medicare Part B provides no incentives for seniors to reduce blood pressure or cholesterol. Employers, families, and all our constituents want emphasis on prevention and wellness. 5) Encourage more cost-effective chronic and compassionate end-of-life care. Studies show that an increase in health care spending does not always mean an increase in quality of outcomes. All Americans should be empowered to make decisions about their end of life care, not be forced into hospice care without other options. We hope to work with you on policies that address these issues.

According to Business Insurance, “White House economic adviser Al Hubbard said the president was ‘pleased’ by the invitation to work on health care legislation. ‘We agree with these senators—we want to fix health care now,’ said Mr. Hubbard, director of the National Economic Council, in a statement.”

Finally, the Wall Street Journal reports tonight that Rep. Louise Slaughter’s genetic information non-discrimination bill (H.R. 493) may be enacted this quarter. “The bill was approved by the House Committee on Education and Labor yesterday and is expected to pass the full House. The Senate, which previously passed the legislation twice, is expected to vote on it within two weeks, and President Bush has indicated he will sign it.” The Thomas web site summarizes the bill as follows:

Genetic Information Nondiscrimination Act of 2007 – Amends the Employee Retirement Income Security Act of 1974 (ERISA) and the Public Health Service Act to expand the prohibition against discrimination by group health plans and health insurance issuers in the group and individual markets on the basis of genetic information or services to prohibit: (1) enrollment and premium discrimination based on information about a request for or receipt of genetic services; and (2) requiring genetic testing. Sets forth penalties for violations. Amends title XVIII (Medicare) of the Social Security Act to prohibit issuers of Medicare supplemental policies from discriminating on the basis of genetic information. Extends medical privacy and confidentiality rules to the disclosure of genetic information. Makes it an unlawful employment practice for an employer, employment agency, labor organization, or training program to discriminate against an individual or deprive such individual of employment opportunities because of genetic information. Prohibits the collection and disclosure of genetic information, with certain exceptions. Establishes a Genetic Nondiscrimination Study Commission to review the developing science of genetics and advise Congress on the advisability of providing for a disparate impact cause of action under this Act.

The FEHB Program falls under the Public Health Service Act for purposes of this bill.

Yesterday, a Delaware state court in a suit by a Louisiana municipal police retirement fund ordered prescription benefit manager Caremark to delay its shareholder vote on the CVS merger proposal at least until March 9. That date is the Federal Trade Commission’s current deadline for issuing a Hart-Scott-Rodino Act pre=merger decision on whether or not the Express Scripts merger proposal is acceptable from an anti-trust law standpoint. (The essentially vertical CVS merger proposal already has cleared that hurdle, but the horizontal Express Scripts merger obviously raises greater antitrust issues.) The court reasoned that Caremark shareholders need more time to evaluate the merger proposals. According to press reports, the Delaware court was puzzled by the fact that the Caremark board has not negotiated with Express Scripts or solicited other offers.

Caremark publicly announced continuing support for the CVS deal and that it “will inform shareholders as promptly as possible regarding the new date of the special meeting to approve the CVS merger.” Express Scripts was pleased with the decision.

In wake of four major independent proxy advisory firms advising against the CVS merger proposal, CVS yesterday increased its special Caremark merger closing dividend from $2 to $6 per Caremark share. CVS also postponed its February 23 shareholder meeting on the Caremark merger proposal.

The Wall Street Journal reports today that “at the close of trading yesterday [and the increased CVS dividend was considered], the CVS deal was worth $59.53 for each Caremark share, while Express’s cash-and-stock offer was valued at $61.37. In 4 p.m. New York Stock Exchange composite trading, Caremark traded higher than both offers, at $62.88, up $1.97.”