FEHBlog

• On Wednesday, the Senate Finance Committee will walk through a set of policy options outlined in this white paper to create funding for health care reform. All sorts of tax changes have been placed on the table. According to the Committee, “The policy options focus on increasing payment accuracy and reducing disparities in payment and spending amounts among different geographic regions across the country. Additionally, tax provisions are included that promote wellness and healthy lifestyle choices, as well as proposals President Obama included in his budget.”
• Congress has sent to the President for his anticipated signature the Fraud Enforcement and Recovery Act of 2009 (S. 386) which bolsters the False Claims Act. The False Claims Act protects the federal government against contractor fraud. Modern Healthcare explains that “The changes to the False Claims Act come in response to a perception among some lawmakers that recent federal court decisions potentially restrained the law from achieving what Congress intended. False claims lawsuits often target hospitals, physicians and pharmaceutical companies because their businesses receive massive sums of federal dollars.”
• The Federal Times reports that “The executive branch will grow [by 140,000 new employees] to more than 2 million civilian employees for the first time in 15 years, under President Barack Obama’s 2010 budget plan.” That’s 140,000 potential new FEHBP enrollees.

• On Thursday, the AP reported that House Democrats are developing a health care reform plan that would create universal coverage.
  

  The plan by the House Energy and Commerce Committee would build on the current system in which employers, government and individuals share responsibility for health insurance. But it would make major changes: Individuals and employers would face new obligations to help pay for coverage. Insurers would operate under stricter consumer protections. And the government would take added responsibilities for setting insurance rules and providing financial help to low- and middle-income families. * * *
  The House plan also includes a government insurance program to compete with private companies. It would be financed by premium payments, not taxpayer dollars. * * *
  Individuals would be required to get coverage, either through an employer or government plan, or on their own. Employers would be required to provide coverage or pay the government a percentage of payroll. Individual subsidies for health insurance would be offered on a sliding scale to those earning up to four times the federal poverty level, or $88,200 for a family of four, according to the document.

  The AP article also states that “Momentum for a health care overhaul built this week after Obama obtained a pledge from medical providers to help find $2 trillion in savings over 10 years to help pay for his plan.” However, according to a New York Times article also published on Thursday,

  Health care leaders who attended the [“pledge”] meeting [with the President] have a different interpretation. They say they agreed to slow health spending in a more gradual way and did not pledge specific year-by-year cuts. “There’s been a lot of misunderstanding that has caused a lot of consternation among our members,” said Richard J. Umbdenstock, the president of the American Hospital Association. “I’ve spent the better part of the last three days trying to deal with it.” * * *
  The Washington office of the American Hospital Association sent a bulletin to its state and local affiliates to “clarify several points” about the White House meeting.In the bulletin, Richard J. Pollack, the executive vice president of the hospital association, said: “The A.H.A. did not commit to support the ‘Obama health plan’ or budget. No such reform plan exists at this time.”Moreover, Mr. Pollack wrote, “The groups did not support reducing the rate of health spending by 1.5 percentage points annually.” He and other health care executives said they had agreed to squeeze health spending so the annual rate of growth would eventually be 1.5 percentage points lower.

• Government HIT News reported that
  

  A high-level committee set up to advise the Office of the National Coordinator for Health Information Technology pledged Friday to concentrate on forming health IT standards that support the practical daily work of physicians and hospitals.

  Members of the Health IT Standards Committee, in its first meeting since being created by the economic stimulus law, said it would create three work groups to pursue that agenda in the areas of clinical operations, clinical quality, and privacy and security.
• President Obama appointed New York City Health Commissioner Dr. Thomas Frieden to head the U.S. Centers for Disease Control and Prevention. This appointment does not require Senate confirmation. Modern Healthcare reports that the appointment has received plaudits from public health advocacy groups.
• The IRS announced on Friday the maximum health savings account contribution amounts and high deductible health plan minimum deductibles and out-of-pocket ceilings for 2010 according to Business Insurance.

• The Senate Finance Committee held a closed meeting today on its white paper about expanding health care coverage. Modern Healthcare reports that “’There are a lot of questions, not a lot of concrete answers,’ committee Chairman Max Baucus (D-Mont.) told reporters after the 8-1/2 hour ‘walkthrough.’ But the senator also said that the purpose of the meeting was to spur conversation, not hammer out a deal.” Meanwhile the Washington Post reports that House Republicans have asked for a health care reform meeting with President Obama. And Reuters reports that John Lechleiter the CEO of drug manufacturer Lilly advised that
  

  some proposals under discussion in Congress “will have unintended side effects” that could discourage development of new medicines. “The encouragement of innovation does not even seem to be on the table in today’s policy discussions,” he said. Lechleiter said allowing Medicare to negotiate drug prices and having the government offer its own insurance plan to compete with private insurers could be harmful.

  I agree that the current rush to health care reform could wind up impairing innovation.

• Prescription drug benefit manager Medco issued its 2009 Drug Trends report.
  

  As predicted, specialty drug trend accelerated dramatically, from 12.4% in 2007 to 15.8% in 2008. In addition, the price inflation of branded pharmaceuticals increased more than 8%. Despite these trends, Medco clients in 2008 realized an average drug trend of 3.3%—a small increase from our all-time low in 2007.

  Among the insights revealed in this year’s report:

  • The weak economy drove renewed interest in generics, as the generic dispensing rate increased 4.4% to 64.1%.

  • About 30% to 40% of the medicines currently in the pipeline are specialty drugs, with nearly 25% of those targeting very rare conditions.

  • Biologic or protein-based drug therapies account for about 16% of prescription drug spending and are growing at a much faster rate than other drug categories.

  • Branded drug price inflation and unit-cost growth will be moderated by the wave of first-time generics in high-cost categories, which is expected to peak after 2011.

  It’s always fun reading. And while on the topic of PBM’s, Business Insurance reports that CIGNA may tear a page out of Wellpoint’s playbook and sell off its own PBM. Aetna and United Healthcare also have their own PBMs.

• Finally, AHIP released its annuals census on health savings account owners. The census disclosed that “Eight million Americans are covered by Health Savings Account (HSA)-eligible insurance plans, an increase of more than 31 percent since last year.” AHIP also released a report on the income characteristics of HSA owners. According to the AHIP press release,
  

  Key findings from the census include:

  There was an increase of approximately 1.9 million Americans enrolled in an HSA plan since January 2008. Previous AHIP census reports found that 6.1 million were enrolled in January 2008, 4.5 million were enrolled in January 2007, 3.2 million were enrolled in January 2006, and 1.0 million were enrolled in March 2005.

  30 percent of individuals covered by an HSA plan were in the small group market, 47 percent of individuals covered by an HSA plan were in the large-group market, and the remaining 23 percent were in the individual market.

  A majority of HSA enrollees are covered by Preferred Provider Organization (PPO) products (83 percent) and Health Maintenance Organization (HMO) products (10 percent). In the individual market, almost 92 percent of enrollees in HSA plans were in PPO products, while approximately 85 percent of enrollees in large-group and 76 percent of enrollees in small-group HSA plans were in PPO plans.

  States with the highest levels of HSA/HDHP enrollment were California (854,000), Florida (524,000), Illinois (497,000), Texas (476,000), Ohio (464,000), and Minnesota (388,000).

  Key findings from the income characteristics analysis include:

  Households with a wide range of incomes hold HSA accounts, with
  almost half (49 percent) of accountholders living in neighborhoods with median
  incomes under $50,000 (incomes based on 2000 Census data).

  Average total deposits (including personal deposits, employer contributions, and interest) for all HSA accounts were $1,634 and average total withdrawals
  (including fees) were $1,063.

• The White House press office announced today that “the President will direct the Office of Personnel Management to work with the Office of Health Reform, the National Economic Council, the Department of Labor, and the Office of Management and Budget to examine successful employer wellness and prevention practices that lower health care costs and improve employees’ health and to explore the feasibility of developing such a plan for federal employees and their workplaces.” OPM already has created the healthierfeds program.
• The Medicare Program trustees announced today that the Medicare Part A trust fund will be exhausted in 2017, two years earlier than the 2019 projection made last year. Medicare Part A funds hospital benefits. According to a summary of that report,
  

  The Medicare Report shows that the [Medicare Part A / Hospital Insurance or HI] Trust Fund could be brought into actuarial balance over the next 75 years by changes equivalent to an immediate 134 percent increase in the payroll tax (from a rate of 2.9 percent to 6.78 percent), or an immediate 53 percent reduction in program outlays, or some combination of the two. Larger changes would be required to make the program solvent beyond the 75-year horizon. The projected exhaustion of the HI Trust Fund within the next eight years is an urgent concern. Congressional action will be necessary to ensure uninterrupted provision of HI services to beneficiaries. Correcting the financial imbalance for the HI Trust Fund—even in the short range alone—will require substantial changes to program income and/or expenditures.

  Medicare Part B which funds medical benefits and Part D which funds prescription drug benefits are not at risk because those programs can tap into general tax revenues.

• The Senate Finance Committee held a round table discussion today on financing comprehensive health care reform. Business Insurance reports that experts testifying at the hearing encouraged the Committee to consider capping the tax exclusion on employer furnished health benefits as well as increasing taxes on alcoholic and carbonated beverages and fatty and salty foods.
• The Politico reports that on Thursday the Senate Finance Committee will consider a Committee white paper on proposals for expanding health care coverage in the U.S.
  

  The paper refers to the requirement to buy insurance not as a mandate but as “a personal responsibility” to own health coverage.

  Obama opposed an individual mandate during the campaign — and frequently criticized his primary election opponent, Hillary Rodham Clinton, for proposing one. But since taking office, he has declined to rule out any specific proposals.

  In addition, the committee will weigh three options for a public health insurance plan that would allow all Americans to buy coverage through the government for the first time.

  But the committee might also reject the public plan all together, and rely instead on a “reformed and well regulated private market” to expand access to health insurance — a move that could help a sweeping health overhaul draw some Republican support.

• Finally the San Francisco Chronicle, the Hartford Courant, and the New York Times reported skepticism in certain quarters about the promise that major stakeholders made to the President yesterday on controlling health care costs.

The trade associations for American’s health insurers (AHIP), hospitals (AHA), doctors (AMA), pharmaceutical manfacturers (Phrma), and medical device manufacturers (Advamed) and a major labor union for health care workers (SEIU) met with President Obama today to promise “to do our part to achieve your Administration’s goal of decreasing by 1.5 percentage points the annual health care spending growth rate—saving $2 trillion or more” over the next decade. The organization acronym links to each organization’s press release about today’s activities.

The groups explain that

We are developing consensus proposals to reduce the rate of increase in
future health and insurance costs through changes made in all sectors of the
health care system. We are committed to taking action in public-private
partnership to create a more stable and sustainable health care system that will
achieve billions in savings through:
• Implementing proposals in all sectors of the health care system, focusing on administrative simplification, standardization, and transparency that supports effective markets;
• Reducing over-use and under-use of health care by aligning quality and efficiency
incentives among providers across the continuum of care so that physicians,
hospitals, and other health care providers are encouraged and enabled to work
together towards the highest standards of quality and efficiency;
• Encouraging coordinated care, both in the public and private sectors, and
adherence to evidence-based best practices and therapies that reduce
hospitalization, manage chronic disease more efficiently and effectively, and
implement proven clinical prevention strategies; and,
• Reducing the cost of doing business by addressing cost drivers in each sector and through common sense improvements in care delivery models, health information technology, workforce deployment and development, and regulatory reforms. These and other reforms will make our health care system stronger and more sustainable. However, there are many important factors driving health care costs that are beyond the control of the delivery system alone. Billions in savings can be
achieved through a large-scale national effort of health promotion and disease
prevention to reduce the prevalence of chronic disease and poor health status,
which leads to unnecessary sickness and higher health costs. Reform should
include a specific focus on obesity prevention commensurate with the scale of
the problem. These initiatives are crucial to transform health care in America
and to achieve our goal of reducing the rate of growth in health
costs.

The President was pleased. According to a White House press release,

These are important steps toward comprehensive health care reform both for the savings identified and the improvements these efforts will make to health care delivery in our country. Moreover, if groups as disparate as – AHIP, AMA, AHA, PhRMA, SEIU, and AdvaMed – can come together around the cause of cost-cutting and greater affordability, the possibility for fundamental reform in the weeks ahead is great.

• The House Ways and Means Committee has added a post about its health care reform conversation with HHS Secretary Sibelius held on May 6. There will be another health care reform round table before the Senate Finance Committee on May 12. The topic will be Financing Comprehensive Health Care Reform. The AP ran a story early this afternoon on the difficulty of financing reform. “The chairman of the Senate Finance Committee, Sen. Max Baucus, said ‘it’s clear that the financing of this is not going to be easy.’ Baucus, D-Mont., says the basic approach to health care must become more economically efficient.” In a possible answer to the Chairman’s prayers, the AP reports tonight that “Hospitals, insurance companies, drug makers and doctors planned to tell Obama on Monday [tomorrow] they’ll voluntarily slow their rate increases in coming years in a move that government economists say would create breathing room to help provide health insurance to an estimated 50 million Americans who now go without it.” This will be interesting.
• The New York Times featured an interesting story last week on the opposing viewpoints on the new comparative effectiveness movement.
  

  For now, proponents and critics are warily circling one another, as the first
  administrative steps of the process unfold.
  A panel of government health experts is holding a series of public hearings at which people can suggest medical conditions for comparative effectiveness reviews. Then, in late June, that federal panel and the Institute
  of Medicine, a part of the National Academies of Science, will issue reports
  recommending priorities for comparative research. Past combatants expect the fighting to start as soon as such studies start identifying winners and losers.

• Business Insurance reported on possible health insurer M&A activity in the offing spurred by health care reform.
• The Federal Times reports that “A bill that would provide four weeks of paid leave for new parents [who are federal employees] was approved by the House Oversight and Government Reform Committee on Wednesday [May 6]. HR 626, the Federal Employees Paid Parental Leave Act, was passed by a voice vote. It will now head to the full House, but a vote has not been scheduled.”

• The Obama Administration released its FY 2010 budget proposal on Thursday. Here’s what the OPM budget section says about the FEHBP:
  

  [OPM’s Human Resources and Products Services Division] HRPS operates the Federal Employees Health Benefits Program (FEHBP), which offers comprehensive and competitive benefits choices for Federal employees,
  annuitants, and family members, and helps the Federal government recruit and retain a high quality workforce. Through FEHBP, OPM will continue to
  provide customers with a variety of resources to make more informed
  health insurance decisions, including health plan brochures and
  website postings, health plan customer satisfaction survey results,
  web-based comparison/decision tools, and performance results
  for managed care health plans. OPM will work aggressively with
  health insurance plans to hold down premium costs while at the
  same time negotiating expanded coverage.

  The OPM budget section also discusses the Inspector General’s FEHBP related activities:

  In 2010, OIG will continue to develop its prescription drug audit program, which includes audits of pharmacy benefit managers. OPM estimates that approximately 26 percent of FEHBP expenses, or between $10 and $11 billion in 2010, will be for prescription drugs. Through these audits, OIG helps the FEHBP recover inappropriate charges, negotiate more favorable contracts,
  control future cost growth, and improve benefits provided to program
  enrollees.

  OIG will also continue its FEHBP data warehouse initiative in 2010. This project streamlines and enhances the various administrative and
  analytical procedures involved in the oversight of FEHBP. The purpose of the
  project is to capture data from experience-rated insurance carriers in a
  data warehouse of health care information. The system’s software tools support a variety of analytical procedures, including data mining, using the data in the warehouse. The project has facilitated more efficient and effective oversight of FEHB by enhancing the ability of auditors and investigators to identify improper payments.

  Finally, the section includes a projection of participants, which is extremely interesting, because it shows very little growth in active employees / federal employment (note that about 15% of eligible active employees do not enroll for FEHB coverage):

  Numbers of participants at the end of each fiscal year are as follows:

  2008 actual 2009 est. 2010 est.
  Active employees ………………………………………………….. 2,159,000 2,143,000 2,148,000
  Annuitants …………………………………………………………….. 1,867,713 1,896,000 1,923,000
  Total ……………………………………………………………………….4,026,713 4,039,000 4,071,000

• On May 5, The Senate Finance Committee held another health reform roundtable meeting. This meeting was on the topic of expanding healthcare coverage, and it featured testimony from the Blue Cross Blue Shield Association, AHIP, the Business Roundtable, and the Heritage Foundation, among others. Blue Cross and the Heritage Foundation support expanding coverage through state based health insurance exchanges established under federal guidelines, similar to the FEHBP. Stuart Butler of the Heritage Foundation explains that
  

  A national exchange may seem attractive but it is accompanied by many problems. In particular, there could be a mismatch between national rules and the pooling, risk pool and even existing exchanges (e.g. in Massachusetts) at the state level. It would also be difficult for states to explore creative approaches for delivering efficient coverage if they always had to comply with national rules.

  The Heritage Foundation also recommended a federal fallback plan to the state exchanges similar to the Medicare Part D setup. The Heritage Foundation also suggested flexibility in benefit package design similar to the FEHBP.

  The Federal Employees Health Benefits Program (FEHBP) not only does not
  include a public plan, but it also does not have a standard benefits
  package. Instead it simply requires plans to include broad categories of
  coverage, such as emergency care and major medical, and allows plans to
  offer a variety of benefits within these categories. This approach can and
  should be the basis of any subsidized benefits package developed
  by Congress.

• In a speech to the United Nurses of America today, HHS Secretary Kathleen Sibelius discussed “two new HHS reports on the quality of health care in America and challenged hospitals to work to reduce health care associated infections. Published by the Agency for Healthcare Research and Quality, the annual 2008 National Healthcare Quality Report and 2008 National Healthcare Disparities Report indicate that patient safety measures have worsened and that a substantial number of Americans do not receive recommended care. Upon issuing the reports, Sebelius also announced the availability of $50 million in Recovery Act resources to fight health care associated infections and improve patient safety.”
• At the end of March, 2009, a federal district court judge in Massachusetts approved a settlement in the First Databank average wholesale price fixing class action that will disrupt prescription benefit management contracts and cause grief for pharmacies. In a companion settlement, McKesson has agreed to create a settlement fund of $350 million which will benefit consumers and third party payers. The objectors to the First Databank settlement, principally pharmacies and pharmacy trade associations, have noticed an appeal to the U.S. Court of Appeals for the First Circuit. The district court judge denied the objectors’ motions to stay the settlement pending appeal. The objectors can ask the court of appeals for a stay. Most likely the appellate court will accelerate a decision on the appeal so that the decision is made before the settlement is implemented. Come on, common sense. In any event, the AWP, an outdated yardstick for setting drug prices, will be history in about two years. In that respect, the lawsuit produced a positive result.

I recall hearing Medco CEO David Snow speak at an OPM AHIP carrier conference in 2007 about the promise of personalized medicine. Personalized medicine creates genetic therapies thanks to the mapping of the human genome. He explained that Medco was supporting a study of genetic test that would help doctors prescribe the proper dose of the blood thinner Coumadin or warfarin. More info here. Mr. Snow’s speech rang my bell because I do think that hopefully my children will be laughing at our health care expense woes because personalized medicine will have blossomed.

The New York Times reported yesterday that “In a setback for the fledgling field of personalized medicine, Medicare has decided not to pay for genetic tests intended to help doctors determine the best dose of the blood thinner warfarin for a particular patient.” CMS did agree to cover the cost of clinical trials of the tests. Maybe next year.

• Congress passed an FY 2010 budget resolution that applies the budget reconciliation process to health care reform, according to this New York Times report. The budget reconciliation process would allow the Senate to avoid a filibuster over health care reform. Now the Sen. Arlen Spector has switched parties from Republican to Democrat, the Senate majority has inched closer (59 votes) to the magic 60 votes required for cloture, and the Minnesota election dispute to date favors the Democrat Al Franken who would provide the 60th vote. But of course Senators pride themselves on independence so no one should count their chickens before they hatch.
• Speaking of such independence, Sen. Max Baucus, the powerful Senate Finance Committee chairman made some interesting comments at a hearing last week according to the Kaiser Foundation daly health policy report for April 30:
  

  During a confirmation hearing for William Corr, President Obama’s choice for deputy secretary of HHS, Baucus said, “There are some very, very thoughtful people in health care who really, seriously, wonder if CMS is up to the job,” adding that “there’s some question whether they are able to develop the designs and putting new programs together as opposed to just implementing old programs.” He raised the prospect of creating a separate entity to work alongside CMS that would be tasked with designing possible changes such as bundling payments for services, or developing accountable care organizations and the medical home concept. Corr said, “It begins also with leadership and I think Secretary Sebelius intends to bring in outstanding leaders to the department, to CMS,” continuing, “I hope within several months that when you make that assessment again, you will be able to say different things about the direction CMS is moving in” (Norman, CQ HealthBeat,
  4/30).

  I suggest that the problem is not CMS but rather the hideously complicated Medicare program.

• Modern Healthcare reports that “U.S. health officials are cautiously optimistic that the new swine flu isn’t as dangerous as first feared, but urged people on Sunday to keep taking commonsense precautions — and they can’t predict if it will roar back in the fall.” Modern Healthleaders offered a report on how “the onset of swine flu has reignited the debate about whether retail-based, walk-in healthcare clinics are an appropriate venue for treating people with highly communicable diseases.” Aren’t these people going the pharmacy anyway?
• On May 1, CMS released a proposed rule setting Medicare’s inpatient acute and long term care hospital payments for discharges occuring on or after October 1, 2010, the next federal fiscal year. “CMS is proposing to update acute care hospital rates by 2.1 percent for inflation less an adjustment of 1.9 percentage points to remove the effect of increases in aggregate payments due to changes in hospital coding practices that do not reflect increases in patient’s severity of illness.” CMS also announced new quality measures.
• Also on May 1, OPM announced the award of a seven year long term care insurance contract to John Hancock as insurer and Long Term Care partners as administrator. “Premium rates for current enrollees with automatic compound inflation (ACI) protection will increase between 5 percent and 25 percent. The program has not had an increase in the last seven years and another increase is not expected until 2016. There is no premium increase for enrollees with Future Purchase Option.”
• AHIP released a report on private sector health plan strategies to control expenses and improve quality, such as pay for performance.
• The new health information technology czar David Blumenthal announced according to Government HIT News that “he expects to start meeting shortly with members of health IT advisory panels set up under the economic stimulus law and take first steps on how to use some of the $2 billion health IT war chest it funded. HHS also rolled out a new HIT website.
• In the April 28 Federal Register, HHS, the Labor Department, and the IRS sought public comment on issues affecting the implementation of the new federal mental health parity law which takes effect next year. The comment deadline is May 28, 2009.
• The Federal Trade Commission announced a three month delay in implementaion of new identity theft prevention requirements imposed on creditors and financial institutions. Doctors have been screaming bloody murder about these rules. You can therefore imagine my consternation when I discovered that lawyers also are subject to these Red Flag rules. The new implementation date is August 1, 2009.