FEHBlog

As previously noted in the FEHBlog, a doctor who works for Medco spoke about advances in personalized medicine at the OPM AHIP carrier conference back in March. The Wall Street Journal lead yesterday’s paper or I-pad) with a report that “New research is signaling a major shift in how cancer drugs are developed and patients are treated—offering the promise of personalized therapies that reach patients faster and are more effective than other medicines.” The FFHBlog was startled to read that “Massachusetts General Hospital and MD Anderson Cancer Center are among institutions beginning to offer routine genetic profiling of tumors for every patient, moving into clinical practice a strategy reserved only for research just a year or two ago and unheard of a decade ago.” Now, that’s progress.

The AMA News reports that the Affordable Care Act’s accountable care organization initiative is giving second life to independent practice associations or IPAs. “IPAs are organizations in which physicians retain their practice’s independent corporate status, but become part of a separate organization with other practices to contract as a group to provide services.” IPAs are becoming attractive because ACOs must treat at least 5,000 patients under the Medicare rule currently being finalized by HHS. However, the IPAs went broke in the 1990s because they could not operate successfully under HMO capitated rates. The ACO rule is much more complicated. Good luck with that.

Business Insurance reports that a McKinsey consulting survey predicts that 30% of employers who currently provide employee health benefits will cancel their plans and put their employees in the state health insurance exchanges.  Although the FEHB Program will still be here in 2014 and beyond, the FEHBlog will not be surprised if a large percentage of employers, particularly small employers drop coverage in 2014.  The ACA’s generous premium and cost sharing subsidies available to people with income under $90,000 will create plenty of opportunities for employers to [legally] game the system. While the ACA’s penalties on employers are higher for employees who are subsidized in the exchanges, the FEHBlog doesn’t think that the penalties will come close to current health plan premiums. 2014 will be a very interesting year. 

The House is holding a constitutent work week this week while the Senate is in session. The FEHBlog cannot find any committee activities of note for the coming week.

The FEHB Act, 5 U.S.C. Sec. 8902(m)(2), requires FEHB fee for service plans to expand their coverage of different types of providers in medically underserved states. Last week, OPM announced in the Federal Register that for 2012 South Carolina will leave, and Alaska will join, the list of medically underserved states. 15 states currently are on the list.

The FEHBlog was reminded last week that there are two OPM websites — the regular site and the open site.  The open website is soliciting public comments the agency’s preliminary plan for retrospective review of its existing regulations. On OPM’s review list is the similarly sized subscriber group methodology used to price community rated plans. OPM is developing a new approach based on the Affordable Care Act’s minimum loss ratio. The comment deadline is July 1.

Last week the Centers for Medicare and Medicaid Service (“CMS”) announced a final rule that 

prohibits States from making payments to providers under the Medicaid program for conditions that are reasonably preventable.  It uses Medicare’s list of preventable conditions in inpatient hospital settings as the base (adjusted for the differences in the Medicare and Medicaid populations) and provides States the flexibility to identify additional preventable conditions and settings for which Medicaid payment will be denied.  The final rule is effective July 1, 2011 but gives States the option to implement between its effective date and July 1, 2012.

Kaiser Health News reports that

Some physician groups have concerns about the new policy. “Simply not paying for complications or conditions, that, while extremely regrettable, are not entirely preventable, is a blunt approach that is not effective or wise for patients or the Medicare or Medicaid program,” Dr. Michael Maves, CEO of the American Medical Association, said in written comments to CMS in March.

He said the medical association has “grave concerns” about states extending the non-payment policy beyond the conditions considered by Medicare. The American Hospital Association expressed similar reservations.

Finally, CMS offers excellent websites that provide quality of care data on hospitals. nursing homes, home health agencies, dialysis facilities, and soon doctors. The websites are based on care rendered to both Medicare and non-Medicare patients. CMS announced on Friday “proposed rules that will enable consumers and employers to select higher-quality, lower-cost physicians, hospitals and other health care providers in their area.” More specifically,

CMS would provide standardized extracts of Medicare claims data from Parts A, B, and D to qualified entities.  The data can only be used to evaluate provider and supplier performance and to generate public reports detailing the results. ·        The data provided to the qualified entity will cover one or more specified geographic area(s).
·        The qualified entity would pay a fee that covers CMS’ cost of making the data available.
·        To receive the Medicare claims data, qualified entities would need to have claims data from other sources.  Combining claims data from multiple sources creates a more complete and accurate picture about provider and supplier performance.
·        Publicly reporting the results calculated by the qualified entity is important for transparency in health care and consumer empowerment.  To prevent mistakes, qualified entities must share the reports confidentially with providers and suppliers prior to their public release.  This gives providers and suppliers an opportunity to review the reports and provide necessary corrections.
·        Publicly released reports would contain aggregated information only, meaning that no individual patient/beneficiary data would be shared or be available.
·        During the application process, qualified entities would need to demonstrate their capabilities to govern the access, use, and security of Medicare claims data.  Qualified entities would be subject to strict security and privacy processes.
·        CMS would continually monitor qualified entities, and entities that do not follow these procedures risk sanctions, including termination from the program.  

The proposed rules will be published in the June 8 Federal Register and CMS will accept comments for six days from that date.

Earlier today, the Department of Health and Human Services announced changes to the federal pre-existing condition insurance plan administered by HHS and the Office of Personnel Management. The changes are intended to make enrollment easier and more affordable. Modern Healthcare reports 

HHS Secretary Kathleen Sebelius told members of a congressional panel May 5 that the program had about 18,000 participants. When it was launched in 2010, HHS officials said they expected it to include 200,000 people at any one time.

Federal officials blamed both the cost of the premiums and a lack of publicity for minimal enrollment in the program, “Cost is always a factor for people buying health insurance coverage,” John Berry, director of the OPM, said during the same call with reporters. Berry said there is no cost estimate for the changes but that the federal government will pay for the lowered premiums using the program’s original $5 billion appropriation.

Happy Memorial Day weekend! This is a time to remember the brave men and women who gave their lives for our country, including my cousin Army Captain Eric Paliwoda who was killed in action in Iraq in January 2004.

Business Insurance and Reuters  report on the Blue Cross Blue Shield Association’s decision to award CVS Caremark an expanded contract to provide mail order and specialty pharmacy services to its Federal Employees Plan (“FEP”) effective next year. Caremark will replace Medco as FEP’s mail order and specialty pharmacy and will continue to provide FEP with a retail pharmacy network.

The U.S. Office of Personnel Management added a page to its website with guidance on the federal employment of transgendered persons. The guidance on insurance benefits states that

Employees in [gender] transition who already have Federal insurance benefits [which of course includes the FEHBP] must be allowed to continue their participation, and new employees must be allowed to elect participation, in their new names and genders.  If the employees in transition are validly married at the time of the transition, the transition does not affect the validity of that marriage, and spousal coverage should be extended or continued even though the employee in transition has a new name and gender. 

In the FEHBlog’s view, this guidance does not run afoul of the Defense of Marriage Act  because the validity of a marriage is determined at the time when the marriage occurs. Of course, a spouse’s decision to transgender a marriage could cause a divorce but if it does not the marriage remains intact.

Modern Healthcare and Health Data Management report on the HHS Office for Civil Right’s 95 page long proposed rule to be published in the May 31, 2011 Federal Register concerning accounting for disclosures of electronic protected health information. In the preamble to the proposed rule, OCR explains that

The purpose of these modifications is, in part, to implement the statutory requirement under the Health Information Technology for Economic and Clinical Health Act (“the HITECH Act” or “the Act”) to require covered entities and business associates to account for disclosures of protected health information to carry out treatment, payment, and health care operations if such disclosures are through an electronic health record. Pursuant to both the HITECH Act [of 2009] and its more general authority under HIPAA, the Department proposes to expand the accounting provision to provide individuals with the right to receive an access report indicating who has accessed electronic protected health information in a designated record set. Under its more general authority under HIPAA, the Department also proposes changes to the existing accounting requirements to improve their workability and effectiveness.

This first purpose principally impacts health care providers who rather ironically have been financially incented to purchase electronic health record systems as recently discussed in the Federal Times. Section 13400 of the HITECH Act defines an electronic health record (“EHR”) as “an electronic record of health-related information on an individual that is created, gathered, managed, and consulted by authorized health care
clinicians and staff.” However, the unanticipated and broader second and third purposes will impact health plans too.

RAND has published a report on whether or not the Affordable Care Act will cause an increase in the number of self-funded health plans. Before Congress enacted the ERISA in 1974, most employer sponsored health plans were insured. For a number of reasons, such as the dichotomy in the scope of ERISA’s preemption of state law, ERISA caused employers to see the value in self funding their health plans. Now, over 25 years later, most employers with 500 or more employees self fund their health plans.  The Affordable Care Act imposes financial penalties (in the FEHBlog’s view) on health insurers, such as the 2% fee on health insurers that takes effect in 2014, which may cause smaller employers to consider self funding. The smallest employers likely will look to the exchanges. The report’s executive summary explains that

Stakeholders expressed significant concern about adverse selection in the health insurance exchanges due to regulatory exemptions for self-insured plans. However, our microsimulation analysis predicts a sizable increase in self-insurance only if comprehensive stop-loss policies become widely available after the ACA takes full effect and the expected cost of self-insuring with stop-loss is comparable to the cost of being fully insured in a market without rating regulations. 

The AMA News reports about the continuing confusion created by the interim final regulations governing the Affordable Care Act’s co-pay free preventive care mandate. Unfortunately, as public commenters, including the AMA and AHIP, have pointed out the rules are based on medical treatment guidelines not health plan coverage. rules. The AMA News highlights the problem as follows:

Physicians, health plans and consumer advocates hailed the new rules as a way to promote prevention and cut down on chronic illness. But so far, the reality has been mixed at best, as few patients seem to be either aware of the benefit or able to take advantage of it. Physicians also are confused about when to collect a co-pay, leaving some practices with refunds due to patients and others short on cash they could have collected rightfully.

A final rule clarifying the the ambiguities inherent in the interim rule is not expected soon.

Healthday, via the AHIP Hi Wire, reports about “a new report [in the Archive of Internal Medicine that promotes]  a “Top 5″ list of action items for each of the primary care disciplines — family medicine, internal medicine and pediatrics — to help save money and conserve health resources.” Perhaps health plans should exclude from coverage inconsistent actions as not medically necessary.

In an interesting development, Fierce Healthcare is reporting that the Mayo Clinic is now “sharing its hefty brand with health facilities around the U.S. that it doesn’t own. The Clinic already covers 70 hospitals and clinics in Minnesota, Michigan and Iowa under its Mayo Health System umbrella. Going forward, Mayo will affiliate with more centers like Altru [Health System of Grand Forks, N.D.], and eventually build a nationwide group of partners, David Herman, a medical director at Mayo, told the [Rochchester, Minnesota, Post Bulletin] newspaper“.

The Senate and the House are both back in session this week as FEHB plans scramble to complete their 2012 benefit and rate proposals which must be filed with the Office of Personnel Management at the end of this month.

Last week, Standard and Poors released its composite medical indices for March 2011 which disclosed that

Healthcare costs continue to rise, but at a declining rate. The Composite index, at +5.77%, is virtually back to the lowest annual growth rate in its six-year history, which was +5.76% in June 2007. The highest annual growth rate for the Composite index was during the 12-months ending May 2010, when it posted +8.74%. In the 10 months measured from this peak, this index has gone through a sharp deceleration,down 2.97 percentage points.

Over the year ending March 2011, healthcare costs covered by commercial insurance rose by 7.57%, as measured by the S&P Healthcare Economic Commercial Index. Medicare claim costs rose at an annual rate of 2.78%, as measured by the S&P Healthcare Economic Medicare Index. This is the lowest annual rate of growth posted for the Medicare Index in its six-year history.

Note that health care providers cost shift from Medicare to the private sector, including the FEHBP.

In response to the medical community’s cool reception to the Accountable Care Organization rule, HHS took its standard approach — throw more money at the hospitals and doctors. Last week, the Centers for Medicare and Medicaid Services announced three new ACO initiatives. Medscape explains that the principal initiative is

a plan to pay some accountable care organizations (ACOs) in part on a monthly, capitated basis, similar to how traditional health maintenance organizations (HMOs) have compensated providers.

The partially capitated ACOs would consist of hospitals and medical practices that are already adept at coordinating patient care and cutting costs through quality improvement. CMS wants to recruit such providers to form up to 30 “Pioneer” ACOs that would begin operating this year, well ahead of the January 1, 2012, kick-off for ordinary ACOs.

Speaking about low Medicare reimbursements, the American Medical News reports on the American Medical Association’s proposal to replace the sustained rate of growth formula for adjusting Medicare Part B payments to physicians with

A five-year period of positive Medicare payment updates based on practice costs.

Test and transition [during that five year period] to multiple payment models designed to enhance the coordination, quality and appropriateness of care while addressing cost concerns.

Congress has to take some legislative action on the Medicare reimbursement formula by year end or doctors will face a double digit Medicare cut. Financing the change is the big problem.

The AMA News article further reports that at a May 5 Congressional hearing,

Medicare payment reform should include an option for full private contracting between patients and physicians, said M. Todd Williamson, MD, a spokesman for the Coalition of State Medical and National Specialty Societies. Private contracting also is on a menu of pay options from the AMA.

The organizations support the Medicare Patient Empowerment Act [HR 1700], introduced by Rep. Tom Price, MD (R, Ga.), on May 3. The bill would allow patients and physicians to contract freely for Medicare services without penalty. Patients and physicians would be able to negotiate prices for most outpatient services, but Medicare rates would apply when a patient has an emergency medical condition or requires urgent care.

Medicare does not allow physicians billing the Medicare program to accept fees that are different from rates set by the Centers for Medicare & Medicaid Services. Doctors can contract privately with patients, but only if the physicians completely opt out of Medicare for at least two years and patients agree not to accept any reimbursement from the government for that care.

 The FEHBlog will keep an eye on this bill given the large cadre of Medicare eligible FEHBP participants.

HHS released today its a final rule under the Affordable Care Act that, according to its press release, allows the government “to fight” unreasonable individual and small group health insurance premium increases beginning in September 2011.  The AHIP President Karen Ignagni commented that

“Focusing on health insurance premiums while ignoring underlying medical cost drivers will not make health care coverage more affordable for families and employers.  The public policy discussion needs to be enlarged to focus on the soaring cost of medical care that threatens our economic competitiveness, our public safety net, and the affordability of health care coverage.

“Health plans are doing their part to restrain health care cost growth by partnering with providers across the country to change payment models to promote and reward safe, high-quality, cost-effective care.”

The FEHBlog wonders why there is even a need to perform this review when the Affordable Care Act requires health insurers to refund premiums when they exceed the minimum loss ratio (85% in the group market and 80%) in the individual market beginning this year. The minimum loss ratio rule applies to insured FEHB plans while the premium review rule does not. Of course, the government in the form of OPM negotiates FEHB premiums.

PwC’s Health Research Institute released its annual Behind the Numbers report which is projecting that U.S. employers will confront an 8.5% health care cost increase in 2012 as the result of increased consolidation among hospitals and physicians and increase cost shifting from Medicare and Medicaid. The report indicates that employers are mitigating the cost increase by restricting their provider networks to higher quality hospitals and specialists. In that regard, the Wall Street Journal reported that the large health insurer Wellpoint, Inc. “is raising the stakes for reimbursing about 1,500 hospitals across the country, cutting off annual payment increases if they fail to deliver on the big health insurer’s definition of quality patient care.” Now that’s how to bring down the cost curve.

Medco, Inc., a major prescription benefits manager, released its 2011 Drug Trend Report. The report indicates that the cost of cancer drugs, which often are speciality or biologic drugs, is rapidly escalating. The top sellers are diabetes, central nervous system, and diabetes drugs.

Higher generic drug dispensing helped limit prescription drug spending growth to 3.7 percent during 2010, the report also revealed. In 2010, more than 71 percent of the prescription drugs dispensed were for generics. In fact, Medco, during its second quarter earnings reported that the generic dispensing rate had reached a record 73 percent. Generic drugs had a limited inflation rate of 0.5 percent and served as a lever to control overall prescription drug costs during 2010, the report said. Drug utilization during 2010 increased 2.1 percent, which is the highest rate of growth since 2005 when it was 2.7 percent.

As previously noted in the FEHBlog, the FDA has not yet established the legal pathway for putting generic versions of specialty drugs on the market. That pathway, which the Affordable Care Act authorized, cannot come soon enough.

The FEHBlog listened to a New York Times investigative reporter Walt Bogdanich on NPR’s Fresh Air program while in the car last night. The reporter discussed his ongoing series of articles “about the medical and regulatory issues that have arisen as radiation therapies have become more ubiquitous in both dental and doctors’ offices.”  These eye opening articles, which have been running since early last year, are worth your attention as a patient and/or a parent.

Government Health IT News and Health Data Management report on the status of the HHS Office for Civil Right’s efforts to publish a final omnibus rule implementing the HITECH Act by year end.

Business Insurance reports that the IRS has released the slightly increased health savings account contribution limits and the high deductible health plan and maximum out of pocket expense cap for 2012.

Last week, the House Appropriations Committee chairman issued a schedule for consideration of FY 2012 appropriations bills. The Financial Services subcommittee will consider its bill, which includes FEHB Program appropriations, by June 13, and the full committee will consider that bill by June 23.

Last Wednesday, the Health subcommittee of the House Ways and Means Committee held a May 12 hearing on alternatives to Medicare’s sustainable rate of growth formula. The FEHBlog found the Blue Cross Blue Shield of Massachusetts testimony interesting reading. The BCBS MA representative discussed their Alternative Quality Contract (“AQC”) program.

The AQC [is] an innovative global payment model that uses a budget based methodology, which combines a fixed population-based budget (adjusted annually for health status and inflation) with substantial incentive payments for performance on a broad set of clinically important, nationally accepted measures of quality, outcomes, and patient care experiences.

First-year results show the AQC is on track achieve its original goals of improving patient care and moderating health care costs. In year-1 of the contract [2009], all AQC groups met their budgets, and  achieved a surplus.  On the quality side, the AQC groups’ first year improvements in the quality of patient care were greater than any one-year change seen previously in our provider network – well exceeding both the rates of improvement on quality measures that AQC groups were achieving prior to the contract, and exceeding rates of improvement among non-AQC physicians. 

Business Insurance reported that the House Energy and Commerce Committee approved HR 5, a medical malpractice reform bill, by a 30-20 vote.  The House Judiciary Committee approved a version of the bill on March 17. Both House committees with jurisdiction over the bill have now cleared it. 

The AHIP Coverage blog published an interesting chart about the profitability of different sectors of the health care industry. Based on Yahoo Finance data for the most recent quarter, hospitals enjoyed a  5% profit margin; health insurers 4%, and medical practitioners 3.6%. The average profit margin was 4.4%. The sectors with profit margins over 10% include drug and medical device manufacturers.

The Blogger service that the FEHBlog uses was down on Thursday and Friday. Here are the items that the FEBlog had planned to post on Thursday.

The Federal Times reported on Thursday that the Federal Postal Coalition of federal and postal employee unions and associations “pressed Senators” to reject the House budget proposal’s changes to federal employee compensation. The article notes that “Also the coalition objects to a proposal [from the White House deficit reduction commission] to turn the Federal Employees Health Benefits Program into a voucher-based system. Because that voucher would only increase by the gross domestic product plus one percentage point, the coalition said it would quickly fall behind medical inflation costs and essentially double employees’ premium costs by 2030.”  There was some talk that the White House would adopt this proposal but it hasn’t happened.

The Milliman actuarial consulting firm released its 2011 Milliman Medical Index (“MMI”).

The MMI includes an analysis of costs paid by the employer and costs paid by the employee. An increasing portion of the cost has been borne by the employee—in nine years, the total cost paid by the employee has also more than doubled. In 2002, the employee share of these costs was $3,634 and it now stands at $8,008.
Specific findings:

Between 2010 and 2011, the MMI increased by $1,319 or 7.3%.

Employees’ share of the total cost is at an all-time high, having increased from 36.8% in the first year of the MMI (2005) to 39.7% in 2011.

The annual rate of increase for the MMI is down 0.5% from 2010 to the lowest rate since the inception of the MMI, but is still in excess of spending increases for most other sectors of the economy.

Even though hospital spending is only 48% of total healthcare spending, increases in facility spending (inpatient and outpatient combined) account for over 60% of this year’s total increase in cost of healthcare.

The AP via AHIP HiWire reports on a letter that the American Medical Group Association, a trade association which represents 400 large medical groups like the Cleveland Clinic and the Mayo Clinic sent to CMS Director Donald Berwick on May 11. The trade association’s press release includes the following startling statement:

In an AMGA survey of its membership, 93 percent of respondents stated that they would not participate in the [accountable care organization] ACO program unless the requirements in the final rule reflect major modifications to the proposals. In their current form, the requirements would render the ACO program a missed opportunity to inject value and accountability into the delivery system.

The AP article notes that

Private insurers are also experimenting with versions of the accountable care idea, but successful adoption by Medicare is seen as the key to spreading it across the country. The Obama administration had estimated as much as $960 million in savings from the first three years of the program, and bigger amounts thereafter.

[Donald] Fisher, the medical association head, said he does not think the administration will easily back off its approach, because on paper it saves the government money.

The comment deadline on the ACO is June 6, 2011.

The Wall Street Journal provides an update on efforts by large health insurance companies to divesify their product offerings.

Diversification plans, touted in meetings with investors this year, include stepped up acquisitions and partnerships that will allow the companies to employ doctors directly, deliver health-information technologies, and participate in new hospital-doctor groups known as accountable-care organizations.

The AIS Reports on Patient Privacy reports on steps that HIPAA covered entities are taking to ramp up efforts to keep an eye on their business associates.