FEHBlog

Happy Halloween! The FEHBlog missed the regular weekend update yesterday as he was travelling back from New York City. The FEHBlog will be back on track this weekend.

We are now 18 days from the end of the current continuing resolution funding the federal government and 23 days from the due date for the Super Committee’s deficit reduction recommendations to Congress.

Both the House and the Senate are in session this week. The Hill reports that the House majority is working on a 30 day extension of the continuing resolution.

We are two weeks away from the start of the Federal Benefits Open Season, which starts on November 14 and ends on December 12.  During the Open Season, federal and postal employees and retirees can change FEHB plans without any pre-existing condition limitation — an historic feature of the FEHBP. The Federal Times reports today that

The Office of Personnel Management, which runs FEHBP, said in an e-mail that about 10 percent of active federal employees and 4 percent of retirees change health plans each year — usually selecting a less expensive program. Those shifts help hold down premium costs by about 1 percent, OPM said. Feds in the Washington area, for example, can choose from 27 different plans, and OPM said the wide assortment of choices leads directly to movement among plans.

“One of the unique advantages of the FEHB is the large number of plans from which enrollees can choose,” Jonathan Foley, OPM’s director of planning and policy analysis, said in an Oct. 20 e-mail. “In a given open season, the net effect of enrollee movement is a reduction in total premium increase when compared to the increase that would have resulted from a static population.”

November should be an interesting month.

Govexec.com reports on the improvements to disease management and wellness programs that FEHBP expert Walton Francis is finding in the 2012 benefit packages of FEHBP plans. As mentioned in the FEHBlog earlier this week, OPM has posted information about those benefit packages on its website. Of course you can find more information on the individual plan websites.

The FEHBlog has been following the efforts to repeal the sustainable rate of growth formula that the Centers for Medicare and Medicaid Services must use to determine Medicare Part B reimbursements to doctors. If Congress does not repeal and replace the SRG by the end of this year, the statutory formula will generate a 29% cut in Medicare reimbursements to doctors. Congress has the alternative of extending the current patch but you never know what’s going to happen with the Super Committee in the mix.

Earlier this month the federal Medicare Payment Advisory Commission or MedPAC offered its proposal to replace the SRG formula with a new formula that holds reimbursements to primacy care physicians steady and cuts reimbursements to specialists 6% annually for several years according to the Hill. Needless to say the medical societies for specialists are outraged.

Whatever happens should ease the cost shift to employer sponsored plans and the disruption to Medicare that would occur if the SGR driven reduction kicks in on January 1, 2012.

CMS announced the Medicare Part B premium amounts today. The premium that most Medicare Part B beneficiaries will owe is $99.90 per month. The details for recent enrollees and high income enrollees are available here. That’s about a 3% increase over 2011 which is in line with the S&P health care index for Medicare payments that the FEHBlog tracks.

This information is very relevant to FEHB plans because there is a large cadre of retired FEHB enrollees who are Medicare eligible.

OPM announced today that it will be circulating federal benefits news on a new Twitter feed, The FEHBlog was the fourteenth follower. OPM sent out a tweet today that its web page with information about 2012 FEHBP plans is live. The website shows a map of the United States and invites the viewer to click on a state which

takes you to a list of all plans available in that state, as well as links to the plan brochures, changes for each plan from the previous year, information on plan patient safety programs, and links to the plan provider directories.

Check it out.

Kaiser Health News reports on the impending transition of many blockbuster prescription drugs, such as Lipitor, Lexapro, and Plavis, to generic status. The article warns that

While blockbuster drugs like Lipitor are sunsetting, University of Michigan business school professor Erik Gordon says pharmaceutical companies are trying to replace them with new, more targeted drugs — like Pfizer’s recently approved lung-cancer medication.

“The interesting thing is it will work in only 5 percent of lung
cancer patients. The other interesting thing is it’s going to cost
$115,000 per year, per patient,” Gordon says.

Some analysts say the growing field of costly specialty drugs could
undermine the growing savings from generics. But Gordon says drug
companies will still have their work cut out for them. It’s getting
tougher not only to come up with new drugs, he says, but also to
convince insurers and the government to pay for them — unless they make
meaningful improvements in health, at a reasonable cost.

Meanwhile the Wall Street Journal reveals that the reason for the contract dispute between the prescription benefit manager Express Scripts and the major pharmacy chain Walgreens is that Walgreens is demanding additional compensation for the patient counselling provided by its pharmacists.

Pharmacy-benefit managers are unlikely to agree to pay for extra
services like medical counseling unless their clients demand it, says
Dan Mendelson, chief executive of Avalere Health Inc., a consulting firm
for health-care companies. “If the health plan demands it, the PBM will
provide it,” he says.

But so far, the “overwhelmingly vast majority” of Express Scripts’
biggest clients don’t want to pay more and are willing to stop using
Walgreen, says a person who is familiar with Express Scripts’ thinking.

Express Scripts remains open to doing business with Walgreen if the
pharmacy accepts its terms, this person says. But support from its
clients is “fortifying” its belief that it shouldn’t budge in
negotiations. Express Scripts also says its clients’ costs would rise if
it accepted Walgreen’s current offer. Walgreen counters that its
advisory services would save Express Scripts members $180 million a
year, or $2 a prescription.

And the beat goes on.

The House return from recess this week while the Senate goes out. The Hill Finance and Economy blog projects that Congress will extend into December the current continuing resolution funding federal government operations. The CR expires on November 18, less than a month away.

Standard & Poors reported last week that

Data released by S&P Indices for the S&P Healthcare Economic Composite Index indicate that the average per capita cost of healthcare services covered by commercial insurance and Medicare programs increased by 5.73% over the 12-months ending August 2011. This is a marginal increase over the +5.69% annual growth rate posted in July 2011 and the fourth consecutive increase since the index hit its lowest annual growth rate of +5.32% in April 2011.

As measured by the S&P Healthcare Economic Commercial Index, healthcare costs covered by commercial insurance increased by 7.89% over the year ending August 2011, also increasing for the fourth consecutive month. Medicare claim costs, however, hit a new low, rising at an annual rate of 2.16% as measured by the S&P Healthcare Economic Medicare Index.

The survey illustrates the cost shifting from Medicare to the private sector.

The health care industry breathed a sigh of relief when the Department of Health and Human Services issued its final rule governing accountable care organizations (“ACOs”) in the Medicare Program last week. The AMA News reaction is here.  Kaiser Health News explains that

Also Thursday, the Justice Department and Federal Trade Commission released their final policy statement on
ACOs and antitrust issues. The new policy eliminated the mandatory
review for a new ACO, a decision applauded by the American Medical
Association. But CMS encouraged provider groups to voluntarily seek a
Justice Department opinion. The policy also puts the responsibility for
gathering market share data on the government, rather than the
providers, says David Balto, an antitrust attorney and a senior fellow a
the Center for American Progress, a progressive Washington think tank.

Nonetheless, health insurers said they are still worried that groups
of hospitals and doctors that form an ACO will gain too much clout and
that will allow them to drive up prices to private insurers.

“We remain concerned about the trend of provider consolidation that
drives up medical prices and results in additional cost-shifting to
families and employers with private coverage,” the trade group,
America’s Health Insurance Plans, said in a statement. “Doing away with
the mandatory review process raises concerns that provider market power
may not be scrutinized sufficiently, potentially increasing health care
costs for consumers and employers.”

The full AHIP reaction is here.  The FEHBlog got a kick out of this Kaiser Health News headline — Nixon’s HMO’s hold lessons for Obama’s ACOs. What goes around, comes around.

Govexec.com published a story on the budding controversy over OPM’s proposal to carve out FEHB drug benefits to a single prescription benefits manager under contract with OPM, similar to TRICARE. In addition to quoting Bob Moffit’s blog post discussed in the last FEHBlog entry, Govexec.com obtained a quote from longtime FEHBP expert Walton Francis.

Walton Francis, author of Consumers’ Checkbook Guide to Health Plans for Federal Employees,
said OPM in effect would be negotiating and managing two health
programs — one for physician and hospital care and another for pharmacy
benefits. But whether the government should decide which prescription
drugs are available to beneficiaries is up for debate, he said.

“An alternative that would save money would be to have a very
restricted formulary where they won’t pay at all for name brand drugs,”
Francis said. “The question is whether employees and retirees want to be
in the system. Plans are reluctant to limit employee choices.” 

Exactly. The current competitive model protects enrollees.

Health care policy expert Robert Moffit wrote a column discussing the downside of the Administration’s proposal to carve out FEHBP drug benefits from the carriers to OPM.  He points out that

Today, if you are in the FEHBP and you don’t like a health plan’s drug coverage, you dump that plan and get a better one. Tomorrow, if Obama’s allies in Congress are successful, you will not have that option: You will get the restricted range of drug options that government officials decide to give you. That’s the way it’s done in Medicaid, for example, the poorly performing welfare program for the poor and the indigent.

All of this disruption would produce $1.6 billion of savings over ten years (according to the Administration) in a program that currently costs $43 billion a year. You may not agree with Dr.Moffit’s employer, the Heritage Foundation, but it’s hard to argue with his reasoning.

The federal government appropriately encourages veterans to join the federal workforce. Consequently, there are a lot of veterans in the FEHBP.  In the early part of the last decade, Congress created a TRICARE for Life program that effectively “carved out” a large number of Medicare eligible military retirees from the FEHBP because the TRICARE for Life program does not charge premiums to participants. Since then, the cost of the TRICARE for Life program has grown like Topsy. Govexec.com reports that

Sens. Carl Levin, D-Mich., and John McCain, R-Ariz., last week submitted recommendations to the deficit reduction super committee in support of the Obama administration’s cost-saving proposal released last month. The plan would mandate annual fees under TRICARE-for-Life, which pays beneficiaries’ out-of-pocket Medicare costs. Fees would start at $200 in 2012 and increase annually to align with those paid by all TRICARE enrollees.

You have to watch that second bounce of the ball.

Benefits Pro reports that “new survey results from Mercer show employees are willing to take on higher ou-of-pocket costs if it means they get to keep their health benefits.

Newsy Stocks.com reports on Deutsche Bank investment analyst views on FEHB premium increases for 2012. Interesting perspective.

Modern Healthcare reports that the Express Scripts acquisition of its fellow prescription benefits manager Medco is drawing scrutiny from another Congressional committee and at least 25 State regulators. Of course, the Federal Trade Commission and the Justice Department are the actual decision makers.

HHS announced today that it was removing red tape that constrain the business practices of hospitals and doctors, as it adds red tape to insurer business practices under the Affordable Care Act.

Business Insurance reports that the Early Retiree Reinsurance Program — to which State and municipal health plans have access, but not the FEHBP — has expended 3/5s of its appropriated funding and may be tapped by the end of this year.

Finally, the AMA News discusses innovative practices to improve patient adherence to prescriptions. Get a load of this one —

Another technology that soon could be seen in clinical practice is the
so-called tattletale pill. This “smart pill” has embedded, ingestible
microchips that are activated by stomach acids once swallowed and will
then send emails or text messages to alert physicians or caregivers.
Swiss drugmaker Novartis plans to seek regulatory approval for the
technology in spring 2012. Several other firms are working on the idea.

The Los Angeles Times reports that the Congressional Joint Select Committee on Deficit Reduction (a/k/a the Super Committee has received over 175,000 suggestions from the public. The House Oversight and Government Reform Committee’s majority and minority members separately and the Senate Homeland Security and Governmental Affairs Committee’s members jointly submitted their recommendations as well. The Senate Committee and the Democrats on the House Oversight Committee endorsed OPM’s proposal to place FEHBP prescription drug benefit contracting under the agency’s control. The Republicans on the House Oversight Committee were silent on the issue. The Washington Post observes that “It’s unclear how much the avalanche of advice will help the “’super committee.’” The Super Committee’s deadline for making its deficit reduction recommendations is November 23. The current continuing resolution funding the federal government expires on November 18.

The AMA News reports on the medical profession’s efforts to convince the Super Committee to repeal the sustainable rate of growth formula for setting Medicare Part B reimbursements to doctors and to enact medical liability reform. According to the AMA News, “Overhauling the SGR actually would raise spending projections and
increase the amount of reductions the debt panel would need to find
elsewhere. But failing to account for an SGR repeal only masks future
deficit problems, the Obama administration and others have argued.” Unless Congress acts to extend the current freeze or actually reforms the SGR by the end of this year, doctors will receive a 30% cut in pay from Medicare Part B. It will be interesting to see whether the Super Committee addresses this hot topic.

Last Thursday, NCQA issued its annual state of health care quality report. The findings included

PPO performance is catching up with HMO performance. For the first time in the 15-year history of this annual
study, NCQA publicly compares HMOs with PPOs across all measures of
care. HMOs were first to embrace quality improvement, but PPOs are
gaining ground.  

Health plans’ performance has improved substantially over time.  Insurers’ commitment to measurement, transparency and accountability has made care better over long periods. 

The U.S. Office of Personnel Management’s (“OPM”) legislative proposal to carve out prescription drug benefits to a single prescription benefit manager (PBM) under contract with OPM has attracted the attention of the prescription drug industry.  AIS Health reports that

Elan Rubinstein, Pharm.D., founder and principal of consulting firm EB Rubinstein Associates, maintains that there is another proposal in the [President’s] deficit-reduction plan, one that involves the Federal Employees Health Benefits (FEHB) Program, that is an “important issue” for not only the specialty pharmacy industry but also the broader pharmacy benefits industry. The proposal, says the plan, would allow the Office of Personnel Management (OPM) to “contract directly for pharmacy benefit management services on behalf of all FEHB enrollees and their dependents.” Currently, health plans in the program contract with PBMs on behalf of FEHB enrollees.
 According to the plan, “This will allow the FEHB program to more efficiently leverage its purchasing power to obtain a better deal for enrollees and taxpayers.” Its 10-year estimated savings are $1.6 billion.

Changing from “health plan-managed to an OPM-contracted pharmacy carve-out is an important issue,” Rubinstein says, “because while evidently not on the table now, a next step could be to apply Medicaid rebates as has been proposed for Medicare Part D, leveraging the federal government’s purchasing power very significantly.”

• Aetna
• Altius (Idaho, Utah, Wyo.)
• Dean Health Plan (Wis.)
• Health Net of Arizona
• HealthPartners (Iowa, Minn., N.D., S.D., Wis.)
• Kaiser
• KPS Health Plan (Wash.)
• PacifiCare of California
• PacifiCare of Texas
• Piedmont Community Healthcare (Va.)
• United Healthcare of the Midwest (Ill., Mo.)
• United Healthcare of the River Valley (Ill., Iowa)

The FEHBlog took a few days off to tour around New England. The FEHBlog returned to a Washington Post article about the Postmaster General Patrick Donahoe attacking the FEHB Program.:

During an interview late last week, Donahoe was clearly annoyed and angry with the Obama administration and Congress for not endorsing his plans to remove USPS from FEHBP — a massive program providing an array of options for life insurance and health, dental, vision and long term care based on a worker or retiree’s occupation, labor union and geographic location.

“How do you manage 200 health care plans effectively?” Donahoe asked in reference to FEHBP’s various options. “There should be one plan for the federal government, then we’d really get — not only could we prefund, we’d probably get a refund.”

Donahoe’s mention of prefunding is in reference to a 2006 law that requires the Postal Service to pay about $5.5 billion annually to prefund future retirements of postal workers — an expense he said “that has killed us financially.”

This tirade comes on the heels of OPM”s recent announcement that FEHBP premiums will increase by 3.8% next year which is lower than the projected national average. That is a minor miracle because of the FEHBP’s demographics — one half of the enrollment is annuitants and the active enrollees are an older group, and the FEHBlog understands that Postal Service active employees are on average older than Civil Service employees. How is this accomplished? Competition among plans — not a single payer — works in the FEHBP just as it likely will work in the Affordable Care Act’s health insurance exchanges in 2014.

Last week, the Institute of Medicine released to the Health and Human Services Secretary its recommended criteria for the essential benefits package that plans operating in the ACA’s health insurance exchanges.  According to IOM’s press release

The ACA stipulates that the essential health benefits should reflect the scope of benefits covered by a typical employer plan and include 10 specific categories.  To refine the package, HHS staff should determine what is typical of small employer plans because they will be among the main customers for policies in the state-based exchanges, the report says.  HHS officials should gauge potential services and products against a set of criteria, including medical effectiveness, safety, and relative value compared with alternative options, and evaluate whether the package as a whole protects the most vulnerable individuals, promotes services that have proved effective, and addresses the medical concerns of greatest importance to the public, the report says. 

Benefits that have been mandated for insurance coverage by individual states should be subject to the same review and criteria.  Products and services that do not meet the criteria should not be included.Because the package must be affordable to the small firms and individuals who will be the principal customers for the exchanges, its comprehensiveness should be balanced with its potential cost, the committee concluded.  The report recommends that HHS determine what the national average premium of typical small employer plans would be in 2014 and ensure that the package’s scope of benefits does not exceed this amount

These are very reasonable criteria, in the FEHBlog’s view. AHIP commented that “With this thoughtful report, the IOM is urging policymakers to strike a balance between the affordability of coverage and the comprehensiveness of coverage. We agree that this balance is critical to ensuring that individuals, working families and small employers can afford health insurance. The recommendation that the initial EHB package reflect the scope of benefits and design provided under a typical small employer plan is an important step toward maintaining affordability.”

However, the Secretary must establish the benefits following a public hearing. Modern Healthcare reports that

HHS Secretary Kathleen Sebelius acknowledged the agency’s commitment to public engagement in the issue when the report was released last week. Sebelius said in a statement that she’s heard from states, insurers, patients, providers and employers about essential health benefits and that she looked forward to reviewing the IOM’s recommendations.

“But before we put forward a proposal, it is critical that we hear from the American people,” Sebelius said in her statement. “To accomplish this goal, HHS will initiate a series of listening sessions where Americans from across the country will have the chance to share their thoughts on these issues.”

Here’s the rub as explained by the Washington Post

A[n ACA] provision * * * gives the federal government authority to define “essential benefits” that will be offered on the health insurance exchanges, or marketplaces, to individuals and small businesses starting in 2014. If states mandate a benefit but it isn’t on the federal list, the states would be responsible for the cost of the coverage.

As a result, autism benefits and dozens of other state-required benefits, covering services and conditions such as infertility, acupuncture and chiropractic care, could be at risk.

Modern Healthcare adds that the IOM report appreciating this issue “sought flexibility for states in its third recommendation. That suggestion said states administering their own exchanges that wish to adopt a variant of the federal package should be allowed to do so—but only if the state-specific criteria are “actuarially equivalent” to the national package and it’s supported by a process that has included meaningful public input.”

As previously discussed, and recognized by the IOM, the FEHB Act creates broad categories of benefits to be covered and preempts state mandates — which facilitate plan competition. FEHB plans and other employer sponsored plans operating outside the exchanges would not be required to offer the essential benefits package approved by HHS, but they could not impose lifetime or annual dollar limits on any of those HHS identified benefits.