FEHBlog

• The Senate Appropriations Committee has cleared the FY 2008 Financial Services appropriations bill (S. Rep. No. 110-129) This is the bill that includes appropriations for the FEHB Program. The Senate bill includes the FEHB Program’s cost accounting standards exemption (§ 613) and the contraceptive mandate (§ 732). The House bill which the full body approved last month also includes an abortion coverage limitation. Typically, the Senate bill does not include that limitation, but the House provision will be found in the bill that the Conference Committee approves and is enacted into law.
• The President announced his intent yesterday to veto any State Childrens Health Insurance Plan expansion beyond his $5 billion budget proposal. The Washington Post reported on this development as well as a new Justice Department Medicare fraud taskforce.
• Post your questions now for HHS Secretary Mike Leavitt who will be holding an online chat tomorrow at 3:15 pm ET.

Congress and GAO have been pressuring the Health and Human Services Department (HHS) to create privacy milestones for the National Health Information Network. At these Congressional hearings, Mark Rothstein, a law professor who is a member of the National Committee on Vital and Health Statistics, has been demanding that HHS Secretary Leavitt respond to NCVHS’s June 2006 letter of recommendations. (Of course, as NCVHS is a unit of HHS, it strikes me that silence is a form of response.)

The Report on Patient Privacy reports that last month NCVHS sent new sets of recommendations to Secretary Leavitt. What’s more, AHIC’s Confidentiality, Privacy and Security Group sent its own recommendations to Secretary Leavitt and held a meeting on “relevant HIPAA requirements,” at which Prof. Rothstein testified on the need for privacy protection beyond the HIPAA Privacy Rule.

The upshot of the Report’s article is that both advisory groups are coalescing around an approach that would scrap that the business associate provisions of the HIPAA Privacy and Security Rules in favor of Congress extending those rules directly to business associates and all health care providers and vendors who handle protected health information. However, according to the Report, HHS HIT National Coordinator Robert Kolodner may not be on board with this approach.

As previously noted in the FEHBlog, the Senate Health Education Labor and Pensions Committee approved the Wired for Health Care Act of 2007 on June 27. At the markup, according to Government HIT News:

During committee consideration, it was amended to require that AHIC recommend policies and methods “to preserve the individual’s ability to control the acquisition, uses and disclosures of individually identifiable information.”

The bill also would extend the privacy rules of the Health Insurance Portability and Accountability Act of 1996 to health records banks and exchanges.

This change does not go so far as the approach described in the Report on Patient Privacy. The NCHVS approach would impose quite an administrative burden on small businesses and government agencies.

• PriceWaterhouseCoopers recently issued its healthcare cost projection for 2008. PwC expects those costs to grow at a slower, likely single digit rate.

• Milliman presented its actuarial projection of the costs of the House mental health parity bill (HR 1424) at a House Education and Labor Committee hearing held on July 10. The Milliman study which was commissioned by a collection of mental health provider associations, finds very little increase in health plan expenses as a result of this bill. An interesting aspect of the House bill is that the bill “defines a minimum scope
  of coverage for mental health and substance-related disorders as the same range of mental
  illnesses and addiction disorders covered by the health plan with the largest enrollment of
  federal employees (under chapter 89 of title 5, United States Code, [the FEHB Act]),” which is the Blue Cross FEP Standard Option.” Also testifying at this hearing was a representative of the American Benefits Council, a trade association of large employers and insurers, who offered support for the Senate mental health parity bill over the House bill for the following reasons:
  

  First, the Senate proposal does not mandate that health plans cover specific
  mental health benefits. It leaves those decisions up to employers. In the case of
  fully insured health plans, however, the Senate bill permits States to continue to determine whether to require any particular benefits.

  Second, the Senate bill includes a provision making clear that medical
  management of mental health benefits is not prohibited and preserves flexibility for employers and health plans in the formation of networks of health care providers who deliver these services. These provisions are vitally important because they allow employers to appropriately design and manage the health coverage they offer to meet their employees’ needs.

  Finally, the Senate bill provides for a very targeted and narrow preemption of
  State insurance law (applicable to fully insured plans, as well as to self-insured
  plans) that assures a uniform federal rule for the specific parity requirements of S. 558 (e.g., treatment limits, financial requirements, cost exemption).

  Of course, as previously noted in the FEHBlog, the managers of the Senate bill have developed a “mark” that narrows the gap between the two bills while maintain broad industry support according to reports. I just hope the mental health parity law does not disrupt the FEHB Program’s successful mental health parity initiative.

• OPM announced earlier this week that the Senate has confirmed Howard Weizmann as OPM Deputy Director. Mr. Weizmann replaces Dan Blair who now serves as Chairman of the Postal Regulatory Commission.
• The Senate Finance Committee announced a tentative bipartisan compromise on the State Children’s Health Insurance Program (SCHIP) reauthorization. The compromise calls for a $35 billion increase in funding over five years which would be funded with a tobacco tax increase. The House wants a $50 billion increase which would be funded with Medicare Advantage cuts. The Washington Post reports today that the President would veto the Senate compromise. The Bush administration had proposed a $5 billion funding increase and is concerned that the Senate and House approaches will encourage people to drop their private coverage in favor of the publicly subsidized SCHIP coverage. The SCHIP authorization expires on September 30, so expect this issue to come to a head soon.
• The House passed its version of the FDA user fee reauthorization bill, which now must go to conference with the Senate version. This bill also must be enacted by the end of September.
• The San Francisco Chronicle offers an interesting report today on the biogenerics issue which Congress may take up as part of the FDA user fee reauthorization bill after a Senate bipartisan compromise approach was announced last month.
• The AP reports that adverse side effect reports on the GlaxoSmithKline (GSK) blockbuster diabetes drug Avandia tripled in the month following the release of a New England Journal of Medicine report. discussed in the May FEHBlog, suggesting that Avandia may cause heart ailments. A spokesperson remarked that “This is a very well-known phenomenon,” where news reports lead to increased reporting. It’s good that there’s awareness of the reporting system, but drawing conclusions on such data is inappropriate.” FDA hearings on the issue begin on July 30.
• U.S. News and World Report has issued its 2007 list of the top 100 hospitals in the U.S. Johns Hopkins Hospital in Baltimore, MD, leads the list followed by the Mayo Clinic in Rochester, MN, and the UCLA Medical Center in Los Angeles, CA.

Reuters reports that a newly issued study of 1.8 million doctors office visits occurring in 2003 and 2004 concludes that electronic health records, which were used in 18% of the visits, did not improve routine health care. Although experts believe that electronic health records will reduce medical errors, this is the first report study on the impact of electronic records on health care quality. According to the Reuters report,

Our findings were a bit of a surprise. We did expect practices (with electronic medical records) would have better quality of care,” said Dr. Randall Stafford of Stanford University. “They really performed about the same,” he said in a telephone interview.

In a final rule published on July 6, the Centers for Medicare and Medicaid Services (CMS) announced that based on the Deficit Reduction Act of 2005 (“DRA”), Medicaid is changing its reimbursement methodology for generic drugs from 150% of average wholesale price (“AWP”) to 250% of average manufacturers price (“AMP”) plus a dispensing fee. This anticipated change has been a very hot topic in the health care industry for the past year.

Bloomberg.com reports that

The new pricing and related changes will save $4.9 billion for the U.S. government during five years and $3.5 billion for the states, which jointly fund the program, according to Medicaid. While the new formula would affect the largest U.S. drugstore chains, including Walgreen Co. and CVS Caremark Corp., industry groups said the impact would be greatest at small pharmacies that depend more on Medicaid payments.

The National Association of Chain Drug Stores has pledged an “’All-Branches, All-Level Government Strategy’” to Fix Medicaid Reimbursement Model.” Who will be expected to pick up the slack? Private sector payers and FEHB plans.

CMS’s announcement further advises that

The DRA also makes an important change to health care purchasing by introducing transparency in Medicaid prescription drug pricing and requiring that for the first time, AMPs be publicly reported on the Internet. States will now be able to use actual AMP information as the basis for setting drug reimbursement. Drug makers will also have to report AMPs monthly, as well as quarterly, as was the practice prior to DRA. More frequent reporting will allow states to make timely adjustments to reimbursement rates.

This development could further accelerate the demise of the AWP. The rule is effective October 1, 2007.

• Govexec.com published an article this week criticizing FEHB plans for excluding so-called “routine care” associated with experimental drug trials. It was my understanding that such expenses were the financial responsibility of the drug company that was running the drug trial.
• The Chicago Tribune reported on “watchdog” concerns over the hospital prices now posted on many public and private websites. On a related note, the San Francisco Chronicle reported on the growing use of the internet by senior citizens, particularly for health care related matters.
• The HHS Secretary expressed concerns about the bipartisan Wired for Health Care Quality Act that the Senate is poised to pass, and the Government Accountability Office published a report on electronic data breaches.

• Robert Moffitt of the Heritage Foundation has published an interesting analysis comparing of the FEHB Program and state health insurance exchanges such as the Massachusetts health insurance connector.
• In the wake of the GAO and privacy advocates beating up HHS again for inadequately protecting privacy and security, the New York Times published a report yesterday about how health care providers are too restrictive in disclosing protected health information. The solution is a hearty dose of common sense on all sides.
• Google has created a health care advisory panel with a lot of heavy hitters from the health care world, but I didn’t notice any representatives from the health insurance industry.

• CMS is proposing a rule, to be published in the Federal Register on July 12, that would cut Medicare Part B payments by 9.8% in the federal fiscal year that begins October 1, 2007. FEHB plans would have to pick up the slack for its annuitant members if Congress does not take any action. Modern Healthcare.com reports that
  

  Efforts have been brewing on Capitol Hill in the meantime to revamp the [statutory sustainable growth rate formula known as] SGR. In a meeting last week, staff for the House Ways and Means and the Energy and Commerce committees shared with physician organizations a draft proposal to halt the 10% cut from taking effect next year. The proposal would replace the cut with at least a 0.5% increase in 2008 and 2009, and would repeal and replace the SGR payment system.

• Coventry Health Care closed today on its deal to acquire three FEHB plans and other group health business from Mutual of Omaha.

• Earlier this week, the President said that “States should make reforms to ensure that their citizens have access to basic private health insurance. It’s a dual responsibility. If we want a better system, the federal government has got a responsibility to reform, and so do states.” Today, the Commonwealth of Massachusetts initiated its state-wide universal health care reform plan known as the Commonwealth Connector , which has been analogized to the FEHB Program. The New York Times reports on the hurdles that the reform plan must cross, such as convincing younger adults to join the program instead of paying the nominal tax penalty and helping smaller businesses overcome the program’s cost. The report cautions that “Massachusetts’s model may not work everywhere. When the law passed, the state’s 370,000 to 500,000 uninsured represented less than 10 percent of its population, a smaller proportion than many states. And it does not have a scarcity of large employers, like Maine, or a huge number of immigrants, like California.”

• On June 21, 2007 the director of the Congressional Budget Office (CBO) testified before the Senate Budget Committee on “Health Care and the Budget: Issues and Challenges for Reform.” On June 27, the CBO director testified before the House Budget Committee about the Medicare Advantage program. CBO cautioned that
  

  The central long-term fiscal challenge facing the nation involves health care costs. Over long periods of time, cost growth per beneficiary in Medicare and Medicaid has tended to track cost trends in private-sector health markets. Many analysts therefore believe that significantly constraining the growth of costs for Medicare and Medicaid is likely to occur only in conjunction with slowing overall cost growth for health care. A variety of evidence suggests opportunities to constrain health care costs without harming incentives for innovation or Americans’ health (and perhaps even improving it). Moving the nation toward that possibility—which will inevitably be an iterative process in which policy steps are tried, evaluated, and reconsidered—is essential to putting the country on a sounder long-term fiscal path. Changes to the Medicare program should be evaluated with that broader perspective in mind.

• The Senate Health Education Labor and Pensions Committee favorably reported out the 2007 version of the Wired for Health Care Quality Act on June 27. Government HIT magazine reports that the bill would change the organizational landscape and extend HIPAA’s privacy and security rules to health care data exchanges such as the National Health Information Network.

• On June 27, HHS Secretary Leavitt and the Director of the National Economic Council discussed the State Children’s Health Insurance Program (S-CHIP) reauthorization issue now before Congress.