NARFE and the federal employee unions, particularly NTEU, expressed objections to the President’s FY 2008 FEHBP budget proposals according to Steve Barr’s Washington Post column and Govexec.com.

The President’s massive FY 2008 budget was released today. It includes the following Federal Employees Health Benefit Program nuggets:

From OPM’s Budget:

The Budget reflects savings from a proposed technical change to the FEHB statute that will permit the program’s Service Benefit Plan and Indemnity Benefit Plan to offer more than two coverage options and from a proposal to reduce the amount of the Government contribution for new annuitants with fewer than 10 years of Federal service. These and other cost-neutral proposals will be transmitted separately. Finally, the Budget also proposes that the PTO [Patent and Trademark Office] will fund the accruing costs associated with post-retirement health benefits for PTO’s employees.

From the OPM Inspector General’s Budget:

In 2008, the Office of the Inspector General (OIG) will continue to develop its prescription drug audit program, which includes audits of pharmacy benefit managers. It is estimated that $6 billion is paid annually for prescription drug premiums by both the Federal Government and employees combined. This represents approximately 26 percent of the total premiums for health benefit coverage for Federal employees and annuitants. By performing these audits, OIG assists FEHB recover inappropriate expenses charged in previous years, negotiate more favorable contracts, and positively affect the future costs and benefits provided to program enrollees. OIG will also continue its FEHB data warehouse initiative. This project streamlines and enhances the various administrative and analytical procedures involved in overseeing FEHB. The purpose of the project is to capture data from experience-rated insurance carriers in a data warehouse of health care information. Software tools are available to support a variety of analytical procedures, including data mining, using the data in the warehouse. The data warehouse project has facilitated more efficient and effective oversight of FEHB by enhancing the ability of our auditors and investigators to identify improper payments.

Health Data Management features an interesting article on the health plan push for their members to use computerized personal health records.

Sen. Daniel Akaka chaired a Senate subcommittee hearing on electronic health records yesterday. The Government Accountability Office presented a report concluding that the Department of Health and Human Services needs to create a stronger business plan for incorporating privacy and security milestones into their health information technology expansion plans. Dr. Robert Kolodner who testified at the hearing for HHS explained that HHS will develop those milestones once it receives a baseline report on state privacy laws in the second quarter of 2007.

Mark Rothstein, a law professor who sits on an HHS advisory board, the National Committee for Vital and Health Statistics, warned that health information technology is launching without adequate privacy and security standards built in. He complained that HHS Secretary Leavitt is not implementing the NCVHS privacy and security recommendations made in a June 22, 2006, NCVHS letter to the Secretary. Sen. Akaka appears interested in a legislative remedy, such as expanding the HIPAA Privacy and Security provisions.

Senators George Voinovich (R-Ohio) and Tom Carper (D-Del.) also participated in the hearing. They announced their plan to reintroduce a bill that would require Federal Employees Health Benefits Plan carrier to offer personal health records to their members.

URAC, a health care accreditation organization, announced earlier this week that it is making progress developing quality metrics designed for PPO (preferred provider network) plans. URAC first announced these development efforts in September 2006 and based on public comments it has prepared the metrics for beta testing.

URAC explains that

It has put forward three principles for the measures:

* Performance measures should address dimensions of health plan performance that the consumer values—specifically those that concern consumer choice;
* Performance measures should target results that health plans or care management vendors are accountable for and have the ability to influence;
* Performance measures should be based on data that can be collected and reported in a consistent fashion across the continuum of health benefit plans.

The metrics themselves will fall under three broad categories:

* Service Quality
* Consumer Protection & Empowerment / Navigation
* Satisfaction with Service

Sample measures may include tracking client or consumer satisfaction rates, complaint rates, provision of care coordination and consumer navigation tools, provision of price and quality transparency and provision of quality incentives.

These URAC metrics likely will be a useful alternative to the NCQA’s HEDIS metrics which are HMO plan oriented.

Express Scripts is withdrawing its request for Federal Trade Commission antitrust review of its proposed acquisition of its fellow prescription benefit manager Caremark. Express Scripts plans to refile early next week in order to allow the FTC more time to evaluate the antitrust implications of the proposed merger. This means that the FTC review may not be completed by the time that Caremark shareholders are scheduled to vote on the CVS merger proposal, February 20. Moreover, the Wall Street Journal notes today hat

“With Express [Script]s’ antitrust case in limbo, the company [Express Scripts] is under increasing pressure to raise its offer, which yesterday was valued at $58.87 per Caremark share. That is only about 1% greater than CVS’s transaction terms, valued at $58.19, which includes a $2 per share dividend once the deal is completed.”

What’s more CVS announced today that its fourth quarter 2006 profit was up nearly three percent on increased sales of generic drugs and that its January 2007 revenues were 24% over the previous January. It therefore appears that momentum has shifted to CVS in the the battle for Caremark.

A study by Peter K. Lindenauer, M.D., M.Sc., et al., published in last week’s New England Journal of Medicine concludes that a combination of public reporting and pay for performance programs produce a modest improvement in health care quality over public reporting programs alone. (The entire study is available at the link.) The New England Journal editorializes that pay for performance is at the tipping point.

The Centers for Medicare and Medicaid Services (CMS) have a less nuanced view of the study’s results, according to Government Health IT magazine. CMS notes that the Medicare pay for performance pilot has “saved the lives of 1,284 heart attack patients.”

• The Caremark shareholder meeting to consider the CVS merger deal will be held on February 20. (The CVS shareholder meeting is three days later.) As previously blogged, Caremark, in advance of the meeting, has sent shareholders proxy statements supporting the deal (and offering a special $2 dividend), and Express Scripts has sent them an exchange offer to those shareholders offering a different deal. This week, Caremark sent shareholders a letter commending the value of the CVS deal. Express Scripts issued a retort according to the Boston Globe.
• The Pirelli Armstrong Retiree Medical Benefits Trust brought a shareholder derivative action in federal court in Nashville, where Caremark is headquartered, challenging the CVS merger. This is the latest of several lawsuits pending over the merger. Express Scripts has filed a suit in Delaware where Caremark in incorporated challenging the breakup fee in the CVS merger deal.
• Reuters is reporting today that sixteen state legislators have written to the Federal Trade Commission warning about the anti-competitive aspects of the Express Scripts deal, which would combine the 2nd and 3rd largest prescription benefit managers. The FTC, which already has approved the CVS deal, must complete its review of the Express Scripts deal by February 2. In a related article, the Wall Street Journal reported yesterday about how shareholder votes can be swung by institutional investors borrowing shares. Much worse than hanging chads.

The first question that Steve Barr received during his Washington Post Q&A yesterday was how would the President’s healthcare proposal would affect the FEHB Program. Mr. Barr wasn’t sure and he does not think that the proposal has legs. Nevertheless, it is an interesting proposal because it is so different from the current arrangement.

The FEHB Act provides for a government contribution and an enrollee contribution toward health benefits coverage. Under the current arrangement, the government contribution is excluded from income and employment taxation (Internal Revenue Code Sections 105 and 106), and the enrollee contribution is similarly excluded for employees based on OPM’s premium conversion plan (IRC Section 125). Retirees are not eligible for this premium conversion plan, although NARFE has been pushing for a legislative fix to allow their participation.

Under the President’s proposal, if enacted, the government contribution and the enrollee contribution would be taxable to both employees and retirees. Taxpayers with self only FEHBP coverage would receive a $7,500 standard deduction, and taxpayers with FEHBP family coverage would receive a $15,000 standard deduction. The deduction would be indexed to the consumer price index when it is fully implemented in 2009. If the actual FEHBP premium is below the standard deduction, the taxpayer wins and if the actual FEHBP premium is above the standard deduction, the taxpayer loses. Of course, in the FEHB Program, enrollees have an annual Open Season during which they could do their tax planning.

On Tuesday, Julie Goon, a special assistant to the President for economic policy, explained that

What this plan would do is give a flat, standard deduction for anybody who purchases any kind of health insurance, no matter how much the health insurance costs and no matter where they get it. It would be $15,000 for people purchasing family policy, $7,500 for people purchasing single policies. So if your employer is giving you insurance through your job, you get the standard deduction. If you go buy health insurance on your own, you get the standard deduction. If your policy costs $5,000, you still get $15,000 of compensation tax-free. If your policy costs $20,000, you still get $15,000 of compensation tax-free, using the family example.

The President was on the road today in Lee’s Summit, Missouri (home of the FEHB plan, GEHA) advocating his plan.

VA Secretary James Nicholson announced at yesterday’s American Health Information Community (AHIC) meeting that the Veterans Affairs Department and the Defense Department, which both operate hospital chains, plan to implement a joint, interoperable electronic health record system. Also at that meeting, the contractor teams seeking to develop a National Health Information Network, which will link electronic health record systems, demonstrated their prototypes/works in progress. More demonstrations will occur at next week’s NHIN Forum. Finally, Secretary Leavitt officially accepted “thirty (30) consensus [health information technology interoperability] standards recommended by the Healthcare Information Technology Standards Panel (HITSP)” in September 2006.