FEHBlog

Because the President has put taxes on the radar screen, it’s worth noting that a fleet of new Affordable Care Act tax regulations along with less formal IRS guidance have arrived. The Internal Revenue Service’s ACA page highlights the new regulations which concern the following assessments that kick in next month

• The 2.3% excise tax imposed on the sale of many medical devices, and 
• The 3.8% net investment tax imposed on the passive income of, and the additional 0.9% Medicare tax imposed on the salary and wage income of individuals with adjusted gross income over $200,000 for an individual and $250,000 for a married couple. 

Reuters explains that “The [medical device] tax applies mostly to devices used and implanted by medical professionals, including items as complex as pacemakers or as simple as tongue depressors.” The tax does not apply to over the counter items or prosthetics. The medical device industry is pushing hard to repeal this tax, and the House of Representatives passed a repeal bill in June 2012. But the Senate has not taken up that bill and the Obama administration has threatened to veto it. The Administration’s logic is that the ACA creates access to 30 million new customers for the medical device industry according to the Reuters article. Assuming for the moment the truth of this statement, that expansion will not occur until 2014. By that time, the weight of this new gross income tax may have sunk many medical device manufacturers.

America’s Health Insurance Plans, the health plan trade association, released a new actuarial study about the ACA fee on health insurers that starts in 2014. This fee  is $8 billion in 2014 and goes up from there to $14.3 billion in 2018.  The fee is allocated to insurers based on their fully insured plan premiums, including FEHB plans. The fee is not deductible from the federal income tax that insurers pay. Like the medical device tax, this is an excess profits tax. The AHIP press release explains that

These Oliver Wyman reports are consistent with previous analyses on
how the health insurance tax will impact the cost of coverage:

• According to the Joint Committee on Taxation:
  “For those insurance premiums that are subject to the fee, we estimate
  that the premiums, including the tax liability, would be between 2.0 and
  2.5 percent greater than they otherwise would be.” 

• In a November 30, 2009 letter,
  the Congressional Budget Office stated that “New fees would be imposed
  on providers of health insurance and on manufacturers and importers of
  medical devices.  Both of those fees would be largely passed through to
  consumers in the form of higher premiums for private coverage.” 

For
health care reform to work, coverage needs to be affordable and there
needs to be broad participation in the health care system.  The health
insurance tax undermines the goal of affordability.

Well, we are heading into the final week of this year’s Federal Benefits Open Season which ends one week from tomorrow on December 10.  The Hill’s Floor Watch blog notes that “Congress returns to work [tomorrow] under the same circumstances it has faced for the last few weeks — no sign of a deal on the fiscal cliff, and no real sense that either party will back down on taxes (Republicans) or spending (Democrats).”


Bloomberg reports that on Friday the American Psychiatric Association approved a new edition (the fifth) of its Diagnostic and Statistical Manual, which is used to diagnose mental illnesses. Not surprisingly, the vote was controversial. This was the first revision since 1994.  “Among the revisions is a decision to collapse several conditions,
including Asperger’s syndrome and child disintegrative disorder, into a
single autism diagnosis.”  DSM diagnosis codes, however, are not HHS approved HIPAA code sets for electronic claims transaction purposes. Instead providers must use the diagnosis codes found in the ICD which align with the current DSM-IV. The new DSM V will be published in May 2013.

AHIP, the health plan trade association, announced that it filed with the U.S. Court of Appeal for the Sixth Circuit a friend of the court brief supporting the Federal Trade Commission’s antitrust challenge to a Toledo Ohio hospital merger. Tit for tat, the AMA, the doctors’ trade association, released its annual report on health plan consolidation according to Medical Economics. The AMA’s position strikes the FEHBlog as weak considering the fact that health plans reimburse health care provider bills and the ACA caps insurer profits.

But the FEHBlog is not without sympathy for the medical profession. The following squib from the AMA News about the government’s new emphasis on patient satisfaction is telling:

A study of more than 50,000 U.S. adults found that patients who grade
their care the highest are likelier to have worse health outcomes and
rack up more medical expenses than the least-satisfied patients, even
after adjusting for factors such as age, income, illness severity and
insurance coverage.

Today, OPM’s proposed rule to implement the multi-state plan program was released. The Affordable Care Act authorizes OPM to contract for at least two plans that eventually will participate in all of the state based health insurance exchanges beginning in 2014. According to the regulation, the plan carriers will have to adhere to both federal and state laws. In contrast FEHB plans generally adhere to federal laws. OPM also is asking the MSPs to offer a child only option.

The Health and Human Services Department released an even larger ACA rule today. The rule provides more guidance on the transitional reinsurance fee. The ACA requires all insurers and self funded health plan sponsors to contribute towards a reinsurance fund for plans participating in the health insurance exchanges, presumably including the multi-state plans. The assessment will be imposed in the years 2014 through 2016. The 2014 assessment will be $63 per “bellybutton” per year. Cost curve up.

On Wednesday, the prescription benefits manager Express Scripts issued its first Drug Trend Quarterly finding that the gap between the price of brand and generic drugs is growing and that the FDA needs to get off its butt and start approving biosimilars (as authorized by the ACA) in order to help control the skyrocketing costs of specialty drugs.

Also on Wednesday, the HHS Office of Civil Rights which enforces the HIPAA Privacy and Security Rules released guidance on the Privacy Rule’s provision governing de-identification of protected health information. This is important guidance because properly deidentified protected health information is not subject to the Privacy and Security Rules.  The guidance confirms my longstanding impression that de-identification is easier said than done.

Yesterday, the Congressional Budget Office released a report finding the greater prescription drug use by Medicare beneficiaries lowers Medicare’s spending on medical services. Needless to say the National Community Pharmacists Association was elated.

The Washington Post reports that the Congressional Budget Office issued a report yesterday on S. 1910, a Senate bill that would offer FEHBP and Federal Employees Group Life Insurance Program coverage to the same sex domestic partners of federal employees. CBO expects that less than one percent of federal employees would apply for same sex domestic partner benefits and that the expansion “would increase the cost to the government by $133 million over 10 years. That is a net figure, consisting of $243 million in added premium costs, partly offset by savings from requiring the program to recover payments when a third party is liable for the health care costs of an enrollee.” The Senate Homeland Security and Governmental Affairs cleared the bill last Spring but it has not been considered by the full Senate or the House.

The U.S. Supreme Court on Friday November 30 will consider whether to hear the cases challenging the constitutionality of the Defense of Marriage Act (DOMA). DOMA prohibits OPM from extending FEHBP and FEGLI coverage to the same sex spouses of federal employees and annuitants. S. 1910 would provide a coverage option for gay federal employees who live in States that don’t recognize same sex marriage. The Supreme Court is expected to announce its decision on whether to hear the DOMA cases next Monday. For more details on the DOMA cases, you can consult the Scotusblog here.

Today, OPM posted its 2012 health information technology report for the FEHBP. OPM also named 39 FEHB plans who “have demonstrated their commitment to efficiency, safety and quality through computer system enhancements that offer PHRs, quality information, and price/cost transparency decision support tools.”

Recently, the FEHBlog noted a U.S. Preventive Services Task Force draft report proposing expanded HIV testing for the adult U.S. population with no cost sharing. Today, the FEHBlog notes a Kaiser Health News article reporting that the PSTF now has issued a draft report proposing expanded Hepatitis C testing for the Baby Boomer population (which includes the FEHBlog). Any preventive services that the PSTF green lights with an A or B rating must be offered by group health plans, including FEHB plans, with no enrollee cost sharing. Like the HIV testing proposal, this Hepatitis C proposal would apply to the FEHBP in 2014 if finalized.  

The FEHBlog hopes that everyone has been enjoying the Thanksgiving holiday weekend. Congress returns to work yesterday after a Thanksgiving break. The Hill has its closer look at the week ahead column. One of the expiration of the Medicare Part B doctor reimbursement fix on December 31 confronts the lame duck Congress. The Hill reports that the latest CBO projection ups the cost of a one year fix from $18.5 billion to $25 billion. This may lead Congress to enact a shorter fix, e.g., to the end of March 2013 which would align with expiration of the continuing resolution funding the federal government.

The Federal Benefits Open Season continues through December 10, 2012. The Washingotn Post’s Federal Diary column discussed Open Season last week.

Healthcare.gov now has working websites with fact sheets about the proposed rules on essential benefits  market reforms, and wellness programs issued last week. Modern Healthcare predicts more controversy over the essential benefits rule.

The FEHBlog is on record opposing federal laws dictating technology standards and rules in healthcare.  Another example of adverse consequence is found in the Kaiser Health News report about a study finding that offering patients online access to doctors — a requirement of a 2009 federal law — has increased the number of office visits. If this weren’t a law, it would be easy to tweak the policy.

Another headscratcher is the AP report that “Mammograms have done surprisingly little to catch deadly breast cancers before they spread, a big U.S. study finds. At the same time, more than a million women have been treated for cancers that never would have threatened their lives, researchers estimate.” The article notes that “Men have heard a similar message about PSA tests to screen for slow-growing prostate cancer, but it’s relatively new to the debate over breast cancer screening.” Medicine remains as much as art as a science. Here’s a link to the NCI’s fact sheet on mammography which recognizes a risk of overdiagnosis but on balance recommends a screening mammogram every other year for women over 40 years old.

The FEHBlog wishes everyone a very Happy Thanksgiving (and hopes that the Redskins lead by RG3 beat the Cowboys.)

HHS issued a torrent of proposed Affordable Care Act regulations yesterday that will govern prohibition on pre-existing condition exclusions, essential benefits, and market reforms / wellness programs in 2014, once finalized. This development gives the FEHBlog something to do over the long holiday weekend.

The Washington Post reports that the U.S Preventive Services Task Force is considering making an HIV test co-payment free for all people between 15 and 65, not just those at high risk which is currently the case. The PSTF wants to remove any stigma from the testing. This change, if finalized would be implemented for 2014 in the FEHBP.

The For Your Benefit show on Federal News Radio has been featuring Open Season reports. You can catch up on those reports here.

OPM released the 2012 Federal Employee Viewpoint survey results today. You can view those results here.

As we head into the second week of the Federal Benefits Open Season, Congress begins to buckle down to work on avoiding the fiscal cliff created by the end of the Bush tax cuts on December 31, 2012 and the default sequestrations created by last year’s deficit reduction law. The Federal Times reports that leaders are upbeat.  Govexec.com reports that retiring Sen. Daniel Akaka (an alumni of the FEHBlog’s law school George Washington) is warning Congress against adopting the Simpson Bowles proposal to place the FEHB Program on a voucher system. This squib caught the FEHBlog’s eye:

Walton Francis, an independent consultant and author of Consumer’s Checkbook  Guide to Health Plans for Federal Employees,
said the federal government currently pays 70 percent of its employees’
health care premiums, which is “right square in the middle” of what
large, private sector employers pay their for their employees’ care.
“It would be an arbitrary cut,” Francis said. “There’s no reason per se to make that reduction.”

Francis added that while some may favor such a cut, it could have the
unintended consequence of motivating lower income federal workers to opt
out of FEHBP in favor of the open-market exchange, which could in turn
increase costs to the government. 

The FEHBlog agree but notes that federal employees who opt out in favor of the exchanges would not receive the government contribution unless Congress allowed the voucher to be used for exchange coverage. However, Congress in 2011 repealed an ACA provision that created such a free choice voucher for all employees in limited circumstances as a destabilizing measure.

On Friday, the Centers for Medicare and Medicaid Services released notices in the Federal Register (no press release) about Medicare Parts A and B premiums and beneficiary cost sharing for 2013. Oddly the announcements were made one month after the Medicare open season began on October 15. In a blog post, the CMS Acting Administrator explained that the monthly Medicare Part B premium will increase $5 to $104.90 for most beneficiaries.  Boston.com explains that for higher income beneficiaries (income over $85,000) the laddered premium (which already is substantially higher) will increase by “$42 to $230.80 a month, depending on income.” The Acting CMS administrator also announced that

Medicare Part A Premium: Part A
covers inpatient hospital stays, care in a skilled nursing facility,
hospice care, and some home health care. Only about 1 percent of people
with Medicare pay a premium for Part A services—you need to have paid
Medicare payroll taxes for 40 quarters of employment or be married to
someone who did. For those few affected, the 2013 Part A premium is
decreasing to $441, down from $451 in 2012.

Medicare Part A Deductible: This
deductible is the cost to people with Medicare for up to 60 days of
Medicare-covered inpatient services in the hospitals for each benefit
period (a benefit period starts the day a patient is admitted and ends
when the patient has been out of the hospital for 60 days in a row.) 
This will increase to $1,184 in 2013, up from $1156 this year (an
increase of 2.4%).

Medicare Part B Deductible: The deductible will increase to $147 in 2013, from $140. This is still $15 below the deductible in 2011.

HHS did issue a press release about a new consolidated government anti-tobacco website called betobaccofree.gov 

Business Insurance reports “Aided by the move of more employees into lower-cost consumer-driven
health care plans, group plan costs increased by just over 4% in 2012,
the smallest increase in 15 years, according to a survey of more than
2,800 employers released Wednesday by Mercer L.L.C. in New York.”  This is in line with the recent FEHBP increases which also are driven in part by enrollees moving to lower premium plans.

Standard & Poors released its latest healthcare cost indices late last week:

All nine S&P Healthcare Economic Indices posted a deceleration in their annual growth rates in September 2012. Professional Service Medicare and the Hospital Index posted their lowest annual rates since January 2005; additionally, the Hospital Commercial Index hit a new recent low with an annual growth rate of +5.12% – its lowest since May 2010. As measured by the S&P Healthcare Economic Commercial Index, healthcare costs covered by commercial insurance plans increased by 7.05% over the year ending September 2012, down from the +7.81% reported for August 2012. Annual growth rates in Medicare claim costs rose by 2.04%, according to the S&P Healthcare Economic Medicare Index, down from the +2.48% recorded in August 2012. The Professional Services Index annual growth rate was +6.13% in September 2012, down from the +6.67% August 2012 print. The Hospital Index’s growth rate fell to its seven-and-a-half year historic low of +3.84% in September from +4.54% recorded in August 2012.

OPM recently asked FEHB plans for data on hospital readmissions.  Policymakers think that reducing readmissions is a key to improving health care quality, as reflected in this new NCQA report. As the FEHBlog has noted Medicare began to penalize hospitals for high readmission rates last month. Psychcentral reports on a new readmissions study conducted by the University of Wisconsin

The study found some significant associations between social environmental factors, and suggested some pathways by which these effects occur. Patients’ functional ability — their ability to take care of themselves — was influenced by their living arrangements and by the type and frequency of informal care they received. The greater the difference between the patients’ clinical condition and functional status, the greater the risk of rehospitalization.

Shocker. Family and other informal support systems help patients avoid hospital readmissions.

The AMA News reports that

A study in the Fall edition of Perspectives in Health Information Management found that of those who were willing to use a personal health record, 65% self-reported a high health literacy level. For those who were not willing to use a PHR, 38% self-reported a high level of health literacy.

Shocker. Only 7% of patients use a PHR, according to this study.

Doctors are interested in this study because PHR use is a factor that the government considers in deciding whether doctors and hospitals have lived up to bargain that they cut when they took free electronic health records from the government.

Under stage 2 of the Medicare incentive program for the meaningful use of electronic health records [which kicks in next year], physicians must ensure that at least 5% of their patients access, download or transmit their medical records. [Can you say Blue Button?] For stage 1, physicians were required to provide electronic copies of health records to at least 50% of those who requested them. Seventy percent of physicians who received incentive payments for stage 1 said they did not have any patient requests for records.

Personal health records containing actual medical records no doubt will be more useful than personal health records containing health plans claims data. The FEHBlog notes that his internist has a new electronic medical records system but he does not recall being offered a personal health record. The FEHBlog will inquire.

On a related note, Modern Healthcare reports that “the American Hospital Association T wants to work with the government to
ensure that the sellers of electronic health-record systems are
producing systems that comply with federal law and don’t lead healthcare
providers to submit bills that later get them in trouble.” Government Health IT reports on a Congressional hearing held today that was trigged by news reports about perceived hospital abuse of their free electronic medical record systems.

Happy Veterans’ Day (observed).  The Federal Benefits Open Season begins today, November 12, and will end on December 10, 2012 (subject to OPM’s right to extend the Open Season to account for unusual circumstances).

On Friday, OPM posted an immediate effective interim final rule  (“IFR”) that “allows agencies such as the Federal Emergency Management Agency (FEMA) to apply to OPM for authorization to offer FEHBP coverage to intermittent employees engaged in emergency response functions.” This IFR closes the loop on the IFR  released last summer extending FEHBP coverage to temporary federal employees who fight forest fires for the Interior Department. That IFR solicited suggestions on further expanding coverage to other first responders. Govexec.com also credits an online petition but the FEHBlog thinks that the wheels were in motion for this IFR before the online petition coinciding with last month’s “super storm” and its timing is attributable to the start of Open Season.

The AMA News reports on the Centers for Medicare and Medicaid Services final rule on Medicare Part B reimbursement to physicians for the 2013 calendar year. This rule is obviously a big deal to doctors as it features the doctor’s “fiscal cliff” — a 26.5% reimbursement cut attributable to the statutory sustainable rate of growth formula that Congress is expected to address in the lame duck session that begins tomorrow. The rule also includes a number of other features stemming from the ACA that will take effect in January:

The fee schedule includes other rate cuts to some physicians, such as
lower payments for multiple advanced imaging scans and penalties for not
submitting quality measurements to the Centers for Medicare &
Medicaid Services. But CMS also finalized additional hardship exemptions
the doctors can use to prevent pay reductions for not reporting
electronic prescribing activity, and it further limited the number of
physicians who will have their rates adjusted according to quality and
cost scores by a value-based payment modifier in 2015.

Finally, the FEHBlog was interested to read (in a Pittsburgh Post Gazette article) that a Pennsylvania state court judge on Friday granted Highmark a preliminary injunction against the West Penn Allegheny Hospital System restoring for the time being the affiliation agreement between health insurer Highmark and the hospital system. Back in August the hospital system walked away from the deal which had not yet closed (although Highmark had invested a lot of money in the facility.) The FEHBlog knows that the law establishes a high bar for obtaining this relief. The hospital system can appeal even though the case is not over.

Although it’s the FEHBlog’s job as a lawyer to belabor the obvious. the FEHBlog sees no reason in recounting yesterday’s election results. The upshot from the FEHBP’s perspective is that implementation of the Affordable Care Act continues full speed ahead. For the FEHBP, that means that Congress and their personal staff members will leave the FEHBP for the exchanges in 2014. Perhaps then the FEHBP will not be treated like a political football. (Query is that necessarily a bad thing.) The other change is that a plethora of ACA required taxes and fees will rain down the FEHBP necessarily leading to premium increases for 2014 above the low levels of the past two years.

Modern Healthcare compiled healthcare leader reactions to the election results here.

On Sunday, the FEHBlog noted a campaign to extend FEHBP coverage to first responders who work for FEMA as temporary employees. Earlier this year, OPM extended FEHBP coverage to first responders who work for the Forest Service as temporary employees and in the interim final rule implementing that change OPM solicited public input about adding other groups of first responders. Thus it did not come as much of a surprise to me when a colleague pointed out the following entry on reginfo.gov :

The FEHBlog ran across press releases about Humana’s acquisitions of Metropolitan Health Networks, a southern Florida company that owns 35 medical centers, and Certify Data Systems, a healthcare technology systems vendors to hospitals and other health care providers. These acquisitions are further examples of how health insurers are branching out into other related businesses where the government has not capped profits.

Finally, because the FEHBlog has been interested in the Walgreen’s / Express Scripts saga, here is a link to a story from Investor Plan that brings you up to date. (Spoiler alert: CVS came out on top.)  The article notes that Walgreen’s recently has dipped its toe back into the prescription benefit manager business by acquiring an interest in a  United Kingdom based PBM called Alliance Boots.