OPM just publicly releases the following information:

U.S. Office of Personnel Management has selected the companies that will offer supplemental dental and vision benefits under the new Federal Employee Dental and Vision Insurance Program which will begin December 31, 2006. Following a review of proposals, OPM has selected MetLife, GEHA, United Concordia, Aetna, GHI, CompBenefits, and Triple-S to offer dental benefits and Vision Services Plan, BCBS Vision, and Spectera to offer vision benefits.

Earlier today, the USPS Board of Governors proposed to increase the price of a first class stamp from 39 cents to 42 cents in 2007. In its press release, the Board blamed the increase on rising fuel costs and on FEHB premiums: “Like other businesses, the Postal Service has also experienced significant growth in health benefit payments for more than 621,000 current employees and 445,000 retirees. In 2005 alone, these costs increased by $437 million, reaching a total of $6.6 billion.” But that’s only a 7.1% increase, which is pretty reasonable these days.

The Washington Post reports that Rep. Tom Davis (R-VA), who chairs the House Government Reform Committee, immediately criticized the decision in a press release “I am disappointed the Board of Governors did not see fit to wait until comprehensive postal reform legislation becomes law before making a decision on whether to seek rate increases,” he said. “The bill that emerges from the House-Senate conference will most likely significantly alter the Postal Service’s costs and may alter the process by which rate cases are decided.” The proposal now goes to the Postal Rate Commission for review. Given Rep. Davis’s reaction, I think that we can expect a Congressional hearing on this.

I am interested in the Medicare Program for FEHBlog purposes because there are hundreds of thousands of Medicare eligible enrollees in the FEHB Program. Generally, Federal employees who have had five years of FEHBP coverage immediately preceding retirement carry their FEHBP coverage into retirement with the full government contribution. Federal employees who retired after 1982 are eligible for Medicare Part A and can subscribe for Medicare Part B.

The Wall Street Journal (subscription required) reported on Tuesday that “Medicare beneficiaries will see a big jump in the premiums they pay for physician and other outpatient care, under the portion of the program known as Part B. Medicare officials said yesterday that premiums would increase next year by 11%, to $98.20 a month from $88.50, partly because of a surge in the volume and intensity of Part B services and a decision by Congress to override a reduction in physician payment that was scheduled to occur this year.”

Also in 2007, the Medicare Modernization Act of 2003 requires CMS to means test Part B premiums. The baseline is the 75% subsidy for beneficiaries with a taxable income of $80,000 (single) or $160,000 (couple). Above those income levels the subsidy will decrease thereby raising the Part B premium as follows:

• 65% premium subsidy for beneficiaries between $80,000 & $100,000
• 50% premium subsidy for beneficiaries between $100,000 & $150,000
• 35% premium subsidy for beneficiaries between $150,000 & $200,000
• 20% premium subsidy for beneficiaries over $200,000

These increases will be phased over a five year period. The change is expected to affect only 3% of Medicare beneficiaries. What’s more according to the Journal and the Washington Post , the Medicare Trustees now are projecting that Part A Trust Fund will run out of money in 2018, which is “two years sooner than predicted a year ago and 12 years sooner than had been anticipated when President Bush first took office.” This report has an immediate Congressional ramification according to the Wall Street Journal report: “Under a requirement passed with the Medicare drug benefit, legislative action is supposed to occur if Medicare’s trustees predict that, within the first seven years of their annual 75-year projections, general revenues fund more than 45% of total Medicare spending for two years in a row. Yesterday’s report said that threshold would be reached in 2012. That means the trigger for action would occur in 2007 if projections hold. President Bush would be required to propose legislative changes, and Congress would have to give them fast-track consideration.”That will be an interesting development shortly before the next Presidential election.

The HHS semi-annual regulatory agenda published on April 24, 2006, informs us that HHS expects to release the final HIPAA electronic claims attachment standard (proposed Sept. 23, 2005, 70 Fed. Reg. 55,989) in September 2008 (No. 1035) and that HHS has withdrawn the rulemaking for the HIPAA standard health plan identifier (No. 1051). Previous agendas indicated that a proposed rule on the standard health plan identifier would be released in November 2005 (e.g., 70 Fed. Reg. 26,865). So we are down to two standard identifiers, employer and health care provider, from the four originally anticipated (employer, provider, health plan, and patient).

Yesterday, I attended a DC Bar Health Information Technology (HIT) Overview. The speakers were Mark Mantooth, an HHS attorney with the Office of the National Coordinator, Dr. Bill Braithwaite of the e-health Initiative, and Ben Butler, a partner with Crowell & Moring.

Mr. Mantooth reviewed the many HHS initiatives underway, and he described how the initiatives interact. Of particular interest to me was his discussion of the work of the American Health Information Community because the OPM Director sits on that FACA committee. The Community has four workgroups — BioSurveillance, Chronic Care, Consumer Empowerment, and Electronic Health Records. The OPM Director is the co-chair of the Consumer Empowerment workgroup.

Each of the workgroups has established a “breakthough objective” upon which they are focusing their attention. All of the breakthroughs involve making recommendations to the Community so that within one year the objective can be achieved. The workgroups are preparing the recommendations now and draft letters to the HHS Secretary are posted on the website.

Bio-surveillance — Essential ambulatory care and emergency department visit, utilization, and lab result data from electronically enabled health care delivery and public health systems can be transmitted in standardized and anonymized format to authorized public health agencies within 24 hours.

Chronic care — Widespread use of secure messaging, as appropriate, is fostered as a means of communication between clinicians and patients about care delivery.

Consumer Empowerment — A pre-populated, consumer-directed and secure electronic registration summary is made available to targeted populations and a widely available pre-populated medication history linked to the registration summary is deployed.

Electronic Health Records — Standardized, widely available and secure solutions for accessing current and historical laboratory results and interpretations is deployed for clinical care by authorized parties.

Dr. Braithwaite spoke primarily about regional health information organizations (RHIOs which he wants to call RHINOs — similar to Hippos with HIPPA) and the Connecting for Health Initiative. In April 2006, Connecting for Health, a Markle Foundation project, released a common framework for a national health information network. The framework would link frequently interacting health care providers into SNOs which would be connected into a national health information network using a SNO-Bridge and a Record Locator service. I am no technology expert but the framework clearly looks like a step in the right direction to me.

Dr. Braithwaite also mentioned a peer-reviewed study titled “Systematic Review: Impact of Health Information Technology on Quality, Efficiency, and Costs of Medical Care” to be published in the May 16, 2006 issue of the Annals of Internal Medicine. The study draws the following sobering conclusions:
“This review suggests several important future directions in the field. First, additional studies need to evaluate commercially developed systems in community settings, and additional funding for such work may be needed. Second, more information is needed regarding the organizational change, workflow redesign, human factors, and project management issues involved with realizing benefits from health information technology. Third, a high priority must be the development of uniform standards for the reporting of research on implementation of health information technology, similar to the Consolidated Standards of Reporting Trials (CONSORT) statements for randomized, controlled trials and the Quality of Reporting of Meta-analyses (QUORUM) statement for meta-analyses. Finally, additional work is needed on interoperability and consumer health technologies, such as the personal health record. “The advantages of health information technology over paper records are readily discernible. However, without better information, stakeholders interested in promoting or considering adoption may not be able to determine what benefits to expect from health information technology use, how best to implement the system in order to maximize the value derived from their investment, or how to direct policy aimed at improving the quality and efficiency delivered by the health care sector as a whole.”Ben Butler provided the attendees with excellent guidance on various privacy/security and intellectual property issues.

In its recent call letters, OPM has placed the FEHB Program squarely in the forefront of the consumer driven health plan movement. OPM was the first large employer to promote health savings accounts in December 2003, and the current call letter requires plans to empower consumers through, for example, price and quality transparency.

Last week, the consulting firm Watson Wyatt Worldwide released a report with these interesting — but not very surprising — findings:

“[A]ccording to the analysis of health benefit plan expenditures, the 4 percent of participants with serious health conditions account for nearly half of health benefit spending in any given year. This group is unlikely to be won over by financial incentives or plan design features, such as high-deductible health plans paired with health savings accounts, which allow employees to save for health care expenses on a tax-advantaged basis. Such plans are likely to be attractive only to healthier employees. “Those who are not as sick — the roughly 25 percent of participants in the early stages of chronic conditions or with acute health episodes — account for 40 percent of spending. In contrast, those who are healthiest — 72 percent of participants — account for just 11 percent of health care spending.” (I wonder if those percentages would vary materially in the FEHB Program because it tends to be a demographically older group.)
Watson Wyatt draws the conclusion that high deductible health plans alone will not control health care spending. According to the company’s analysis, “It’s up to employers to understand the varying needs of employees and to respond with targeted consumerism — an approach that uses different strategies to engage different segments of the population covered by health benefit plans.” For example, promote continuing good health for the 72% who do not use much health benefits and direct plan members who are high utilizers to obtain the best care for their chronic conditions, even if those providers are higher priced than others.

Albert B. Crenshaw writing in today’s Washington Post analyzes the Watson Wyatt report. He encourages workers to take advantage of preventive care and disease management programs offered by their health plans. Of course, OPM has been pushing the same message through, for example, its healthierfeds campaign.

The Crenshaw article includes a Watson Wyatt suggestion that employers examine the relationship between absenteeism and health care. I recall attending an OPM carrier conference in the late 1990s where a health care provider encourged OPM to adopt mental health parity because it would reduce employee absenteeism. Of course, OPM did mandate mental health parity (subject to managed care requirements) in 1999 (effective with the 2001 contract year). In March 2006, a study of the FEHBP mental health parity initiative was published in the New England Journal of Medicine. The study focused on whether managed mental health parity materially increased FEHB Program costs (it didn’t). The study did not consider whether managed mental health parity improved worker attendance at federal agencies. The study promotes the interests of the mental health community that wants expanded mental health parity, but it does not really help the federal government as an employer, in my view.

I live and work inside the Beltway, which skews my perspective on many matters. I am always interested to read the Federal Government’s semi-annual regulatory agenda or unified agenda. The Semiannual Regulatory Agenda is, of course, published twice a year (usually in April and October) in the Federal Register, and it summarizes the rules and proposed rules that each Federal agency expects to issue during the next six months.

The most recent sem-annual regulatory agenda was published on Monday April 24, 2006. The agenda included no noteworthy FEHBP or Federal Acquisition Regulation (FAR) developments. The agenda did disclose that OPM is developing an interim rule for the new Federal Employees Supplemental Dental and Vision Benefits Program. OPM expects to issue the interim rule this December when the Program kicks off.

Last week, OPM published its 2005 edition of the Fact Book on the Federal civilian workforce which “contains statistics on employee demographics; compensation, payroll, and work years; performance management and the Senior Executive Service (SES); retirement and insurance programs; and student employment programs.”

In 2004, there were 2,713,200 federal employees (basically flat employment this decade). 767,700 of this group were US Postal Service employees (number of USPS employees down approximately 100,000 this decade). The average age of a federal employee was 46.8 in 2004 (vs. 46.3 in 2000) . (The average age of a FEHB enrollee is about ten years older because 1/2 of FEHBP enrollees are annuitants.) In 2004 56% of federal employees were men, and 44% were women (roughly the same gender mix over the past decade). 42% of federal employees had college degrees; 23% were veterans, and 5% were military retirees. The average base salary of a federal employee was $61,714; in the DC metro area, it was almost $80,000. 33% were white collar administrative; 24% were white collar professional; 32% were other white collar, and 11% were blue collar.

In 2004, 2,202,543 employees, 1,842,489 annuitants, and 4,006,295 dependents (est.) were enrolled in the Federal Employees Health Benefits Program (FEHBP). There were approximately 500,000 federal employees who were not enrolled in the FEHBP. The Fact Book indicates that there were 244,188 temporary federal employees (9% of the total workforce) who may not be eligible to enroll in the FEHBP. But it appears that approximately 10% of the federal workforce may have decided not to enroll in the FEHBP.

FEHBP premiums totalled $29,140,000,000 in 2004. This report is just chock full of fun facts to know and tell.OPM

The recent OPM call letter for 2007 benefit and rate proposals encouraged carriers “to pursue the advantages of specialty pharmacy programs aimed at reducing the high costs of infused and intravenously administered drugs.” Specialty drugs are now a huge market, approximately $40 billion in 2005, and all of the major PBMS, e.g, Caremark, Medco, offer specialty drug programs.

Medicare has a new specialty drug program. Medicare generally covers specialty drugs through the Part B program (rather than Part D) because they are physician administered. The Medicare Modernization Act modified Medicare’s reimbursement methodology for Part B drugs — switching from average wholesale price to average sales price. This week, CMS announced that it has entered into a contract with “BioScrip as the vendor for the initial phase of the new Competitive Acquisition Program (CAP) for certain Part B drugs and biologicals that begins on July 1, 2006. The CAP is a voluntary program that offers physicians the option to acquire many drugs they use in their practice from an approved CAP vendor thus reducing the time they spend buying and billing for drugs.”

CMS released this week Medicare Part D enrollment figures by plan. It turns out the United Healthcare, which had purchased Pacificare, a major Medicare Advantage player, and then teamed with AARP, and Humana, another major Medicare Advantage player that relied heavily on grassroots marketing at Walmart Stores, gobbled up nearly half of the market.

OPM prepares an FEHBP enrollment report by plan as of March 31, which is used to calculate the following year’s government contribution (72% of the enrollment-weighted average premium capped at 75% of the plan’s actual premium for civil service employees and all annuitants pursuant to 5 U.S.C § 8906 / a higher Postal Service contribution is negotiated for actively employed USPS employees) . The 2006 report should be issued in the second quarter of 2006. Anyone who wants a copy of the 2005 report can email me.