FEHBlog

The House and Senate remain in session this week as the House and Senate leadership, together with the President, focus on raising debt ceiling. While scanning the internet to prepare this FEHBlog entry, I noticed articles in Govexec.com and the Federal Times reporting that the Federal Aviation Administration has furloughed 4,000 employees because the House and Senate cannot agree on a funding law for the agency.

Business Insurance reported on consumer advocacy groups’ negative reactions to the Express Scrips – Medco merger discussed in Friday’s FEHBlog entry.

Antitrust regulators could well take a hard look at how many options big companies have when they look for a pharmacy benefits contractor, said this expert [who asked not to be named].
“The question is how many alternatives do large companies have?” this person asked. “When a large company goes out to bid its (drug) plan, how many options do they have?”

The expert is overlooking the fact that many major health insurers, including U.S. Healthcare, Aetna, and CIGNA, have their own prescription benefit manager units.  Although these companies do not insure the health plans of large companies, they do administer those plans and certainly would be willing to provide PBM services too. As noted in the FEHBlog there is another rapidly growing PBM, Catalyst Health Solutions, which recently purchased Walgreen’s PBM unit. Plus as noted in Friday’s FEHBlog entry, the Express Scripts – Medco acquisition agreement includes divestment provisions intended to address anti-trust regulators concerns. Anti-trust regulator approval of this transaction is not a slam dunk but changes are reasonably good, in the FEHBlog’s gut reaction view.

Last week, Standard and Poors released its updated healthcare economic indices. U.S. healthcare costs rose 5.58% over the 12 months ended May 31, 2011.

Over the year ending May 2011, healthcare costs covered by commercial insurance increased by 7.35%, as measured by the S&P Healthcare Economic Commercial Index. Medicare claim costs rose at an annual rate of 2.64%, as measured by the S&P Healthcare Economic Medicare Index. The Commercial and Medicare Indices are respectively 0.25 and 0.16 percentage points above their April 2011 annual rates.

Kaiser Health News featured a roundtable of expert opinions who identified trends that have the potential to lower the healthcare cost curve.

The AMA News reported that beginning August 1, FAIR Health, the New York non-profit that now managed Ingenix’s usual reasonable and customary databases for pricing out-of-network provider claims, will unveil its online tool to help consumers project health care bills for out-of-network services by geographic region. According to the AMA news article,

The goal is to give patients an idea of what they will be billed if they choose to see an out-of-network physician, so they can better prepare to meet out-of-pocket expenses or select a physician who charges a lower-than-average fee. The information is free and based on independent data. 

August 1 is also the deadline for public comment on the Health and Human Services Department’s May 31 proposed rule broadly expanding the HIPAA accounting for disclosures rule to include so-called access reports. 87 comments already have been filed on this proposed rule at regulations.gov. The FEHBlog was impressed by the comments submitted by the College of Healthcare Information Management Executives, strongly opposing the access report requirement.

Yesterday, a blockbuster merger of two of the three largest prescription benefit managers — Express Sripts and Medco — valued at $29.1 billion was announced.

Under the agreement, Medco shareholders will receive $71.36 per share in cash and stock, or $29.1 billion, based on yesterday’s closing price. Medco shareholders will receive $28.80 in cash and 0.81 shares for each Medco share they own upon closing of the transaction. The agreement has been unanimously approved by the boards of directors of both companies.

Medco also disclosed that its $11 billion contract with United Healthcare will not be renewed after December 31, 2012. Assuming that this merger clears federal antitrust review, the big three PBMs in 2013 in order would be ESI-Medco, Caremark CVS, and United Healthcare.  United Healthcare’s decision to go its own way may help the merging parties obtain anti-trust approval.

The New York Times has an interesting story about the efforts that the merging parties are making to clear anti-trust hurdles.

In Express Scripts’ case, the parties’ acquisition agreement requires Express Scripts to take substantial steps to obtain antitrust clearance. The primary requirement is that the newly combined Express Scripts-Medco must undertake the following steps to satisfy the F.T.C. if it legally makes such a request (this is Section 5.8(e) of the merger agreement):
1) The divestiture of one mail-order dispensing facility anywhere except St. Louis, where Express Scripts is based.
2) The divestiture of specialty pharmacy dispensing or infusion facilities having a net book value no more than $30 million outside of Indianapolis.
3) The divestiture of contracts that generated collectively earnings before interest, taxes, depreciation and amortization, or Ebitda, not in excess of $115 million during the last 12 months.
The agreement also states that in no event shall Express Scripts be required to divest get more than 35 million individual prescription drug claims

Investors evidently are hedging their bets about anti-trust approval because

Shares in Medco rose again on Friday, up nearly 2.8 percent at $65.61 as of early afternoon. But that’s still well below the $74.98 that Express Scripts’ stock-and-cash offer is now worth.

To be clear, Express Scripts has also reaped some benefits from its offer as well. Its shares were up nearly 3 percent at $57.01 by Friday afternoon.

But there remains significant concern about whether the deal would survive antitrust scrutiny. Express Scripts and Medco are two of the three biggest pure-play pharmacy benefit managers, and such horizontal mergers tend to be looked at more skeptically than other kinds of deals. (Deal aficionados remember that Express Scripts’ attempt to buy Caremark Rx was scuttled largely because of antitrust fears.)

Other analysts believed the deal can still win regulatory approval. 

The anti-trust review process lead by the Federal Trade Commission and the Justice Department is expected to take six months.

OPM has posted a new page on its website announcing that

Beginning this Open Season [which starts in November 2011], paper copies of health plan brochures will not be automatically mailed to Federal Employees Health Benefits (FEHB) Program members.

You can quickly and easily view your health plan’s brochure online, anytime by visiting the FEHB website, or visit your health plan’s website. During the next several months, your FEHB health plan will contact you to offer you the option of obtaining your benefit brochure online or requesting a paper copy of the benefit brochure. If you want your health plan to mail a paper copy of your brochure to you for the next Open Season (November 14 through December 12, 2011), follow the instructions your health plan provides you. (For those of you who change plans this Open Season, your new health plan will mail you a paper copy of its brochure.)

You will continue to receive the Open Season package your plan normally mails to you, and this package will include an explanation of benefit changes for the next year and your new premium rate, but will exclude the health plan brochure.

The brochure is the FEHB plan’s contract statement of benefits so it’s a good idea for Plan members to download a copy for reference.

The National Institute of Medicine released today a report recommending that the Department of Health and Human Services treat the following services provided to women as preventive care that non-grandfathered health plans must cover in-network at no cost to the plan member under the Affordable Care Act:

• screening for gestational diabetes
• human papillomavirus (HPV) testing as part of cervical cancer screening for women over 30
• counseling on sexually transmitted infections
• counseling and screening for HIV
• contraceptive methods and counseling to prevent unintended pregnancies
• lactation counseling and equipment to promote breast-feeding
• screening and counseling to detect and prevent interpersonal and domestic violence
• yearly well-woman preventive care visits to obtain recommended preventive services

The House of Representatives and the Senate remain in session this week as their leaders continue to meet with the Administration in an effort to raise the national debt limit by August 2. The Federal Times offers various perspectives on the impact of a default situation on federal employees and annuitants. The Washington Post reports that on July 15, the Federal Postal Coalition sent a letter to the Office of Management and Budget Director and the Treasury Secretary inquiring about the impact of a default on the continuity of government operations.  One of the Coalition’s questions was

Will federal employees become subject to release through furloughs, and how will their wages and benefits be affected?

Good question.

A month or so ago, the FEHBlog noted that the Walgreen’s pharmacy chain was squabbling with prescription benefits manager Express Scripts. Chicago Business provides an update on the squabble and interesting background on the pharmacy chain and its CEO Gregory Wasson. Meanwhile, Investor Place.com compares and contrasts Walgreen’s with its competitor CVS which owns Caremark, one of the big three PBMs. (Caremark, Express Scripts, and Medco). CVS bought Caremark a few years ago, while Walgreen’s sold its PBM unit to Catalyst Health Solutions earlier this year.

This year OPM required all FEHB plans to offer enhanced smoking cessation programs. The Washington Post reports today on the alternative approaches that some large employers are using to discourage smoking among their employees.

On July 1, according to Bloomberg BusinessWeek, Macy’s began charging smokers $420 more a year in health coverage, something PepsiCo and Gannett already do (albeit at even steeper premiums). Last year, Whole Foods started giving non-smoking employees bigger discounts in their stores. And employers ranging from Scotts Miracle-Gro to the Cleveland Clinic to, now,Humana, are not hiring smokers at all, either company-wide or in certain states.

The article discusses the pros and cons of the carrot and stick approaches.

While the debt limit negotiations continue, the White House has issued a formal warning that it may veto the Fiscal Year 2012 financial services and general government appropriations that the House passed last month. According to the statement, “The funding level provided by the bill would limit OPM’s ability to implement and administer new statutory responsibilities.” The Senate has not passed its version of this appropriations bill yet.

Companies have won marketing approval so far this year for 20 innovative medicines that work differently or better than existing drugs, or tackle ailments lacking good treatments, according to the Food and Drug Administration. “New molecular entities,” the FDA calls them. There were just 21 such approvals all last year.

Recently approved are the first therapy shown to extend life for people with advanced melanoma, the deadly skin cancer; the first new treatment for lupus in over 50 years; and two drugs for hepatitis C that are far more effective than current care.

That’s good news that should help the pharmaceutical manufacturers recoup revenue that will be lost when many blockbuster drugs like Lipitor go generic later this year and next year. The country needs productive research efforts like this.

Healthleaders Media reports about a Senate Homeland Security and Governmental Affairs subcommittee hearing on Tuesday at which the Centers for Medicare and Medicaid Services were “battered” about the ineffectiveness of Medicare anti-fraud measures.

A cornerstone of the nearly two-hour hearing included the release of a particularly negative report from the U.S. Government Accountability Office, which said CMS had allowed only 42 of 639 analysts to undergo training to use a database that was tailored to identify fraud and questionable claims worth $21 billion over 10 years. 

Additionally, CMS has not incorporated any data from Medicaid claims, a major potential source of healthcare fraud and abuse, into the system, GAO charges.

Yesterday, the Department of Health and Human Services released proposed rules intended to create a flexible framework for state health insurance exchanges and the federal fall back exchange under the Affordable Care Act (“ACA”). The HHS press release is titled  “HHS and states move to establish Affordable Insurance Exchanges, give Americans the same insurance choices as members of Congress.” While the FEHBlog believe that this title is an homage to the FEHB Program, the fact of the matter is that the ACA pushes members of Congress out of the FEHB Program and into the exchanges in 2014. (The President stays in the FEHB Program.)

The ACA requires that these exchanges offer health insurance options to members of Congress, other individuals, and businesses with less than 100 employees in 2014. Modern Healthcare reports that

Joel Ario, who serves as the director of the office of health insurance exchanges at the Office for Consumer Information and Insurance Oversight, said there are two main priorities this year for states to establish exchanges. The first is to adopt some form of governance structure, which he said 10 to 12 states have done already. “A second important step early on is the development of the IT infrastructure toward the exchanges,” Ario said. “Thirty states have started that process and are moving forward at varying levels.

The House and the Senate are in session this week as the leadership of the two bodies work with the President to cut a deal on raising the debt limit. The Washington Post reports that the White House negotiations ended tonight after 80 minutes. The discussions will continue tomorrow. The President has said that the negotiators have 10 days to reach an agreement in order for Congress to enact the required legislation before August 2. That is the day according to the Administration that the federal government will begin to default on its obligations according to Reuters..

Kaiser Health News reports that major health insurers are pressing the Department of Health and Human Services to exempt ex-patriate plans from the minimum loss ratio rules because plans covering overseas members necessarily have higher administrative costs “as a result of having to cover emergency evacuations, lining up providers in other countries and paying claims in a variety of currencies.”  A temporary exemption expires at the end of this year. While there are no FEHB plans that are limited to overseas members, there are FEHB plans, such as the Foreign Service Benefit Plan, that cater to federal employees and annuitants working and living overseas.

HHS announced on Friday that nearly 4,500 organizations, including over 2,000 hospitals, have joined the Partnership for Patients, a public-private coalition launched earlier this year to improve health care quality and safety.

The Federal Government issued its Spring 2011 semi-annual regulatory agenda today. The semi-annual regulatory agenda gives readers a heads-up on the Government’s regulatory plans. The agenda tells us that OPM has two FEHBP regulations in mind — one to implement the Affordable Care Act’s requirement to expand FEHBP coverage to employees of Indian Tribes and the other evidently to conform OPM’s disputed regulations (5 C.F.R. Sec. 890.105) to conform with the Affordable Care Act’s requirement that governmental plans comply with ERISA’s claim and internal appeal rules as enforced by the ACA regulators. This second requirement actually took effect at the beginning of 2011.

OPM requires carriers to report on NCQA’s Healthcare Effectiveness Data and Information Set measures. OPM explains that HEDIS is “a set of standardized performance measures designed to ensure that consumers have the information they need to reliably compare the performance of healthcare plans.” FEHBP HMOs report on all of the measures while FEHBP fee for service plans report on measure that are strictly based on claims data. This week NCQA announced HEDIS changes for 2012:

New MeasuresThe two new measures in the HEDIS 2012, Volume 2: Technical Specifications publication are:

• Human Papillomavirus Vaccine for Female Adolescents—This measure assesses the percentage of 13-year-old females who had three doses of the human papillomavirus (HPV) vaccine. The measure evaluates compliance with Centers for Disease Control and Prevention and Advisory Committee on Immunization Practices immunization guidelines.

• Medication Management for People With Asthma—This measure assesses the percentage of people 5–64 years of age who were identified as having persistent asthma and who received and remained on appropriate medications during their treatment period.

Retired Measure

The obsolete measure, which will be removed from HEDIS 2012, Volume 2, is Relative Resource Use for People With Acute Low Back Pain.

Back pain can be difficult to treat. Medscape reports this week that “Massage therapy may effectively reduce or relieve chronic back pain for 6 months or more, according to the results of a parallel-group, randomized controlled trial reported in the July 5 issue of the Annals of Internal Medicine  and “Spinal manipulative therapy is only minimally effective for chronic low back pain, according to the results of an update of a Cochrane review reported in the June 1 issue of Spine.”

The Department of Health and Human Services, in accordance with Congress’s desire to ramp up HIPAA privacy and security rule enforcement, has contracted with the Big 4 accounting firm KPMG to perform compliance audits of covered entities (health care providers who engage in electronic transactions, health care clearinghouses, and health plans) and their business associates. Health Data Management reports that “Under the contract, OCR expects KPMG to conduct 150 audits by the end of 2012.”  Any violations that KPMG finds could result in heavy penalties under the HITECH Act’s revised civil penalty scheme.

The Wall Street Journal reports about a study published in the AMA Journal finding that

About 600,000 angioplasty procedures, which almost always involve placement of a tiny metal tube called a stent, are done in the U.S. each year [at an average cost of $20,000 per procedure]. Roughly 70% of these procedures are performed on patients suffering symptoms of a heart attack and aren’t medically controversial. But the remainder are done on stable patients who are suffering mild symptoms or no symptoms at all. Of those, 50% are deemed appropriate, 38% uncertain and 12% inappropriate, the report says.
“One in eight is probably higher than we would like,” said Paul Chan, a cardiologist at Saint Luke’s Mid America Heart and Vascular Institute, Kansas City, Mo., and the study’s lead author.

The good news is that the cardiologists are studying their own practice patterns in order to improve them.

Because the FEHBlog adheres to Dirty Harry’s dictate, “a good man knows his limitations,” he has decided not to delve into the Avastin or Chantix controversies, but they are worth noting..

The AMA News (whose website is refreshed on Mondays) reports on the AMA legislative body’s views on health care reform.

Issue: The federal government is working to define what it will call essential health care benefits that must be covered by plans for sale in the state-based health insurance exchanges.

Proposed action: Rather than recommend a list of specific benefits, reaffirm existing policy stating that the coverage offered by the Federal Employee Health Benefits Program should be used as a “reference” when identifying whether a plan offers meaningful coverage for adults. [Adopted]

Yeah FEHBP!

The AMA News also reports on a Goldman Sachs investors conference that many health insurance executives attended.

Aetna’s President, CEO and Chair Mark Bertolini, speaking at the conference, said the economy is succeeding where insurers have not: cutting costs. “As much as we like to say we do really good work, as a company and as an industry, a good majority — more than half — of the decrease in utilization is associated with externalities versus what we’re doing.” In early 2011, he said, the company saw members return to doctors — normal for the winter cold and flu season — but not fill the prescriptions doctors wrote for them. He said that was probably because they couldn’t afford the out-of-pocket drug costs. “That’s an unusual trend,” he said.

Interesting observation.

Happy Fourth of July Weekend! Both the House and the Senate will be in session this week following the holiday.

On Friday, the Centers for Medicare and Medicaid Services issued three proposed rules concerning updates to Medicare payment policies for physicians, hospital outpatient departments and ambulatory surgical centers and dialysis centers for 2012. CMS projects the Medicare Part B payments to doctors will drop by 29.5% under the current statutory formula unless Congress acts before the end of the year. Interestingly, as it is the subject of litigation out in California,

CMS is also proposing some changes in how it adjusts payment for geographic variation in the cost of practice.   The Affordable Care Act made some temporary adjustments that would be in place for two years while CMS and the Institute of Medicine study these issues.  As part of this initiative, CMS is replacing some of the data sources—such as using data from the American Community Survey (ACS) in place of HUD rental data and also using ACS data in place of the data currently used for non-physician employee compensation—as well as making other adjustments called for in prior year public comments.  Although these proposals result in very little change to the indices, they show that the data Medicare has used in the past and is proposing to use in the future produce consistent results—suggesting past year adjustments have accurately reflected geographic variations in the cost of practice. 

The California litigation alleges that the geographic variation is unfair to rural providers. On average, CMS will increase hospital outpatient departments payment rates by 1.5%, ambulatory surgical center payment rates by 0.9%, and dialysis center payment rates by 1.8%.

The Washington Post and Kaiser Health News reports today on the trend that the FEHBlog has been following — health insurer acquisition of medical providers. While the FEHBlog thinks that this trend is driven by the Affordable Care Act which encourages integration and caps insurer profits and could bend the cost curve down which is an expressed objective of the ACA, the article’s reporters seem to consider this trend to be the end of the world.

The Las Vegas Sun reports that

A Las Vegas physician has agreed to pay $5.7 million plus interest to settle allegations that he submitted false claims to federal health care programs for various radiation oncology services, the Justice Department announced Thursday.

The government accused Rakesh Nathu of submitting improper claims to Medicare, TRICARE and the Federal Employees Health Benefits Plan from 2007 through 2009.