One of the first items for Ms. Burwell is to consider is a June 4, 2014, letter from her advisory group WEDI urging an the adoption of an industry roadmap for implementing the ICD-10 code set now set for October 1, 2015. Heallthcare Data Management reports that

Last week, the Centers for Medicare and Medicaid Services announced that the partial code freeze for ICD-9-CM and ICD-10 will continue through October 1, 2015. And, last month, CMS canceled limited end-to-end testing that had been scheduled for late July, when a small sample group of providers were to have been given the opportunity to participate in end-to-end testing with Medicare Administrative Contractors and the Common Electronic Data Interchange contractor.
“We believe the canceling of the limited July ‘end-to-end’ testing sent the wrong message to the industry. Rather than delay this critical form of testing until 2015, we recommend expediting and expanding this form of trading partner testing,” states [WEDI Chairman Jim] Daley.

Agreed.

Sun Life Financial, an insurance company, released yesterday an interesting report on its health plan stop loss claims experience.

The U.S. business group of Sun Life Financial, Inc. (NYSE: SLF, TSX: SLF) today reported a tenfold rise in the number of individual $1 million or more catastrophic claims paid by the company over the past four years. These findings are based on a study released today by Sun Life Financial U.S., the largest independent writer of stop-loss insurance in the U.S., with $915 million of in-force premium as of December 31, 2013.

The most significant rise related to complications surrounding dependent infants, including premature births, failure to thrive newborns and congenital anomalies, according to Sun Life. While there was no single explicit driver for the increase in these particular complications, Sun Life continues to monitor the underlying business, specific claims, and potential trends related to health care costs and demographics. The Company also notes that these diagnoses often stemmed from normal pregnancies that unexpectedly turned into catastrophic claims, reinforcing the need for protection against “unpredictable” catastrophic claims.

Agreed again.

The Hill reports that the Senate will vote today on whether to end debate on Sylvia Burwell’s nomination to serve as HHS Secretary.

On Monday, at the annual Health Datapalooza HHS announced the internet release of 2012 hospital charge data. 

The data include information comparing the average charges for
services that may be provided in connection with the 100 most common
Medicare inpatient stays at over 3,000 hospitals in all 50 states and
Washington, D.C. Hospitals determine what they will charge for items and
services provided to patients and these “charges” are the amount the
hospital generally bills for those items or services. With two
years of data now available, researchers can begin to look at trends in
hospital charges. For example, average charges for medical back problems
increased nine percent from $23,000 to $25,000, but the total number of
discharges decreased by nearly 7,000 from 2011 to 2012.

Kaiser Health News offers a consumer perspective on the data release. A Fierce Health Finance editor, Ron Shrinkman, cogently observes that 

Hospitals have resisted price transparency in small and large ways. That makes sense, because being opaque about what you charge presents specific business advantages–such as the ability to charge whatever you want, particularly in the case of patients who lack insurance and have virtually no bargaining power.

As I noted a couple of weeks ago, price transparency is slowly taking place in the hospital sector. But reference pricing could become a threat to price opacity, and possibly the greatest threat to opacity of them all.

Speaking of costs, a Reuters article offered an FDA official’s informal perspectives on expensive specialty drugs.  Here the upshot which rings true with the FEHBlog:

By law, Dr. Richard Pazdur, the U.S. Food and Drug Administration’s cancer drug czar, is not allowed to consider the cost of treatments his agency reviews, only whether they are safe and effective.

But Pazdur is not blind to escalating drug prices and the growing debate over how to place an appropriate value on cancer drugs, which can cost $100,000 a year or more a year.

“It’s very difficult for me to talk about,” Pazdur said in an interview at the American Society of Clinical Oncology meeting in Chicago, where the issue of value has been a consistent theme among the world’s top cancer doctors.

Instead, he recounts a story about buying his first house in Detroit in 1982. “I was very nervous. I asked the realtor if I was paying the correct price. She said to me, ‘Rick, the price is what anybody is willing to pay for it.'” In his view, the same applies to cancer drugs.

“Everybody knows that these are expensive drugs,” he said. “Obviously, we can’t just continue going on with escalating prices of drugs. That’s not a regulatory decision or anything profound from the FDA. It’s just the reality of the situation.”

Pazdur said the solution will likely take “a national dialog” involving all stakeholder – insurers, patients, doctors, lawmakers.

An FDA regulatory pathway to biosimilar drugs also would help.

The Senate is in session at the Capitol this week while the House has a district work session according to the Hill’s Floor Watch blog. OMB Director Sylvia Burwell’s nomination to serve as HHS Secretary will be taken up later this coming week.

The Hill also has an article about the Sovaldi pricing battle. The article notes that the health insurance trade association’s (AHIP) spokesperson, Robert Zirkelbach, has moved over to be the spokesperson for the prescription drug trade association, PhRMA.  AHIP has hired Brendan Buck, a former spokesperson for the House Speaker, to be its new spokesperson.

In a bit of good news, the New York Times reports that the Food and Drug Administration on Friday approved a generic version of the anti-inflammatory painkiller Celebrex. “Teva [Pharmaceuticals now] has exclusive marketing rights to three doses of the drug for 180 days. Mylan received approval for the lowest dose of the drug, 50 milligrams. Celebrex was Pfizer’s fourth-best-selling drug last year with sales of $2.92 billion.” According to the Times article, generic drugs are priced 30% to 60%  lower than the brand name drugs. It has been over four years since Congress in the Affordable Care Act authorized the FDA to create a regulatory pathway for generic versions of specialty drugs known as biogenerics or biosimilars. Fierce Biotech reports that in mid May, the FDA broke its silence on the issue with nonbinding draft guidance on such a regulatory pathway. The article notes that “the industry is hardly standing pat. In the four years since Congress authorized the agency to sort out an approval pathway for biologic copies, many makers of proprietary drugs have started investing in their own biosimilar operations, including Amgen, Merck, and Biogen Idec.”  The European Union started approving biosimilars early in the last decade.

The FEHBlog can’t call it a TGIF update because the 2015 FEHBP benefit and rate proposals technically are due tomorrow May 31 and carriers must be busy tying up loose ends on those proposals.

It is not an easy time to be a health plan. The Affordable Care Act and related federal laws are causing providers and consumer groups to really feel their oats. For example, BNA reports about a class action lawsuit filed by “Psych Appeal Inc.” against United Healthcare contending that the insurer applied its medical necessity limitation to residential treatment facility care and nutritional counselling in a manner that violates ERISA and the federal mental health parity law. UPI reports that a consumer advocacy group has filed an ACA Section 1557 discrimination complaint against several Florida insurers contending that they structured their prescription drug copays to discriminate against people with AIDS/HIV. These are examples of a multitude of complaints.

In defense of the insurers, the federal mental health parity act is extremely complicated. For example, it is entirely possible to violate the implementing parity rule by simply mirroring the cost sharing arrangements for medical surgical and mental health benefits. What’s more the current rule (that will change in this respect next year) permits the difference that the lawsuit appears to challenge.   The consumer groups are testing the ACA’s expanded individual non-discrimination provision. Also on the horizon is the ACA regulator’s proposed rule implementing Section 1557.

The FEHBlog noticed an interesting 2013 pharmacy market analysis on Drug Channels.net. Here are the highlights:

•     Total outpatient prescription growth was 0.2% in 2013, a slowdown from the 1.2% growth in 2012.
•     Chains rebounded, in the biggest single-year market share increase in at least 10 years.
•     Supermarkets continued their comeback, returning this format’s share to 2005 levels.
•     Mail prescriptions took their biggest dive ever, shrinking sharply in both absolute size and market share.
•     Independents experienced another year of small declines, but the format’s share now equals that of mail pharmacy.

• Buck Consultants projects that cost increases for all types of medical plans are anticipated to be down by between 0.1 and 0.5 percent in 2014. 
• Milliman released its 2014 Medical Index (MMI) which had similar findings:

As measured by the 2014 MMI, the total annual cost of healthcare for a typical family of four covered by an employer-sponsored preferred provider plan (PPO) is $23,215 (see Figure 1). Key observations are:

• The MMI has more than doubled over the past 10 years (107% increase from 2004 to 2014), growing from $11,192 in 2004 to $23,215 in 2014.
• Although healthcare costs continue to rise, the overall annual rate of increase in the cost of care for the family of four is at its lowest level since we first calculated the MMI in 2002. During those years, the annual increase in cost ranged from a high of 10.1%, in both 2003 and 2004, to a low of 5.4% in 2014. The rate of increase dropped by nearly a full percentage point, from 6.3% in 2013 to 5.4% in 2014. As discussed later in this report, this significant decline was likely due to a confluence of forces rather than any single event.
• In almost every year of the past 10, growth rates have decelerated. Figure 2 shows the most recent five years of that deceleration.
• In each of the past four years, employees have assumed an increasing percentage of the total cost of care. The total employee cost (payroll deductions plus out-of-pocket expenses) increased by approximately 32% from 2010 to 2014, while employer costs (premium contributions) increased by 26%.

Of course the outlier is specialty drug costs. Reuters reviews insurer efforts to control those costs.  The Wall Street Journal reported today that a large Blue Cross insurer Wellpoint is planning to reward oncologists with a $350 payment for each patient maintained on an Anthem approved (not developed) treatment protocol or pathway. “The new WellPoint payments are supposed to ensure that ‘best drugs and best protocols will be compensated,’ said Sam Nussbaum, the insurer’s chief medical officer. ‘We’re creating revenue neutrality so better care can be given.'”

The FEHBlog trusts that all of his readers have enjoyed the long weekend. The Hill’s Floor Action blog reports that while the Senate is out this week, the House will be in session for one day —  Wednesday — to consider appropriations bill, among other measures. The Hill also suggests five reasons why OMB Director Sylvia Burwell is sailing through the confirmation process which should wrap up on the Senate floor next week.

CNBC reports that the major prescription benefits manager Express Scripts is pulling together a coalition to spur competition against hideously expensive drugs like Sovaldi. Express Scripts’ “strategy is to leverage [the coalition’s] buying power to push Gilead to lower the price by letting the drugmaker know they’re prepared to drop Sovaldi when rival drugs come onto the market over the next year.” Good luck.

Finally, on a topic of general interest, the ACA’s employer shared responsibility mandate, the New York Times reports on new IRS guidance explaining that if employers with 50 or more full time employees contribute toward individual health insurance coverage for their employees (inside or outside the exchange) – a common practice that the IRS had condoned as lawful and tax exempt for over fifty years — the employer would be liable for a $36,000 annual penalty for each employee who buys employer subsidized individual coverage. In the IRS’s view the subsidy constitutes unlawful group coverage which is subject to a $100 per employee per day of violation penalty under the ACA.  

Here we are at the Friday which ends the great annual holiday drought! (There are no Monday holidays from President’s Day until Memorial Day — no offense to Easter, Passover, etc.).

On Wednesday, the Senate Finance Committee approved the President’s nomination of current Office of Management and Budget Director Sylvia Mathews Burwell to serve as Secretary of Health and Human Services as reported in the Federal Times.  Federal News Radio reports this morning that the President plans to nominate the current Housing and Urban Development Secretary Shaun Donovan to replace Ms. Burwell as OMB Director. Here’s a link to Mr. Donovan’s bio from the HUD website.

America’s Health Insurance Plans Karen Ignagni was in the news this week. According to the Hill, she warned at a roundtable with her counterparts from the prescription drug manufacturing and the PBM industries that the private sector needs to control skyrocketing specialty drug prices before the federal government steps in. Here’s a link to her comments from the AHIP website captioned No Blank Check for Drug Manufacturers.

Ms. Ignagni makes a valid point but as the FEHBlog has pointed out there already is a crazy quilt of federal price controls on drug manufacturers. That’s why, for example (Wall Street Journal report), federal prisons get a big price break on the wildly expensive Hepatitis C drugs, but most state prisons don’t. The federal price controls that understandably benefit the Defense Department, the Veterans Administration (but not the FEHBP) incent drug manufacturers to stick it to the private sector. Now that the customer is screaming, the drug manufacturers have to dial back their prices. Otherwise they will wind up recognizing that they have choked the last golden egg out of the goose.

The Unitedhealth Foundation funded America’s Health Rankings just issued their 2014 health rankings reports on American seniors. A link to the report is here. You can download the full report or create a custom report. Enjoy the long weekend.

HHS Secretary Sylvia Mathews Burwell is expected to be confirmed the week after next. Next week Congress will be on a Memorial Day recess. The Senate Finance Committee will vote on her nomination tomorrow according to the Hill.

The OPM Director Katherine Archuleta touted the success of the Blue Cross multi-state plan in her blog yesterday.  OPM does deserve credit for getting this ACA mandated program off the ground.

A federal judge in Pennsylvania today legalized same sex marriage in that State.  According to the New York Times, “In the last several months, judges have struck down marriage limits in seven states: Utah, Oklahoma, Virginia, Texas, Arkansas, Idaho and, on Monday, Oregon.”  Most of these courts have stayed their decisions pending appeal. The significance of these decisions is that within two years this issue will reach the U.S. Supreme Court. Of course this decision would expand the number of FEHBP covered spouses in states that currently ban same sex marriage.

Fierce Heathcare Payer reports on an interesting Commonwealth Fund study suggesting four ways that insurers can combat the rising prices associated with healthcare provider consolidation. Thanks!

Finally, the FEHBlog noticed this Modvive.com article about a study projecting cancer trends over the next 15 years or so. “Presently, lung cancer is already the top killer overall, but pancreatic and liver cancer will surpass the current 2nd (breast and prostate cancer for women and men respectively) and 3rd (colorectal cancer) most deadly cancers.” On the bright side, “the Recalcitrant Cancer Research Act signed into law by President Obama last year is expected to provide more attention and resources. Recalcitrant cancers are those with a 5-year survival rate lower than 50%, and include liver and pancreatic cancer.”

Speaking of finances, Kaiser Health News reports that Medicare reversed a decision to deny a beneficiary’s prescription for the expensive Hepatitis C cure, Sovaldi. A recent Wharton School of Business blog discusses the factors behind Gilead’s pricing of that drug.

Speaking of healthcare literacy, Insurancenewsnet.com reports that United Healthcare received a health care literacy award for its Happiness Counts kits provided to Medicare beneficiaries. “The brightly colored kit includes daily journals, postcards and other information to help seniors take actions and create a stronger mind-set for staying upbeat even in the face of illness.”  The award illustrates how insurers do try to work cooperatively with members to improve health care literacy.

Turning to the core claims administration side of the business, Healthdata Management reports that Aetna is seeking to transition all of its network doctors from paper to electronic benefits statements / remittance advice and payments.

Aetna in recent years has been increasingly offering EFT payments but with Medicare’s recent move to mandate EFT, Aetna knew the time was right to make its own move. Employees routinely are electronically paid these days and personal electronic banking is common, [Jay] Eisenstock [Aetna’s head of provider e-solutions] notes. While payers are required to offer EFT and ERA and benefit from it, the bulk of benefits come when providers take advantage of it.  For now, Aetna’s plan for EFT and ERA includes no penalties for non-compliance, Eisenstock says. But the insurer is changing its payment policy and at some point providers not going electronic will have to decide whether to keep their relationship with Aetna.

Smart move.

ACA FAA XIX’s discussion of the reference pricing strategy has agitated the consumer advocates according to this AP article. The article explains that

The new strategy works like this:
Your health insurance plan slaps a dollar limit on what it will pay for certain procedures, for example, hospital charges associated with knee and hip replacement operations. That’s called the reference price.
Say the limit is $30,000. The plan offers you a choice of hospitals within its provider network. If you pick one that charges $40,000, you would owe $10,000 to the hospital plus your regular cost-sharing for the $30,000 that your plan covers.
The extra $10,000 is treated like an out-of-network expense, and it doesn’t count toward your plan’s annual limit on out-of-pocket costs.
That’s crucial because under the health care law, most plans have to pick up the entire cost of care after a patient hits the annual out-of-pocket limit, currently $6,350 for single coverage and $12,700 for a family plan. Before the May 2 administration ruling, it was unclear whether reference pricing violated this key financial protection for consumers.

The strategy also works with prescription drug benefits. The article goes on to discuss the critics but the FEHBlog likes this upside.

Forbes writes about the increasing connections between hospital systems and pharmacies / PBMs, especially to support the pharmacies’ in-house clinics.

Finally, Congress is in session this week according to the Hill’s Floor Watch blog. The Senate may confirm the HHS Secretary nominees Sylvia Mathews Burwell.

The non-profit Health Care Cost Institute announced today that beginning next year it will make available to the public a free web-based health care cost and quality transparency tool based on claims data provided by Aetna, Humana, and United Healthcare (and hopefully others). Forbes reports that

“Consumers, employers and regulatory agencies  will now have a single source of consistent, transparent health care information based on the most reliable data available, including actual costs, which only insurers currently have,” David Newman,  the Health Care Cost Institute’s executive director said in a statement issued this morning.

There will be three tiers of information provided. In one tier, any consumer will get average price information for an “episode of care” such as a knee replacement or heart surgery based on complex coding and claims data submitted to and analyzed by the Institute.

In another tier, consumers with coverage from Aetna, Humana or UnitedHealth Group will get more detailed price information given the health plan subscribers in their plans already have a relationship with the companies and therefore more specific information on their network of medical care providers that are part of the data set used by the Institute.

Meanwhile, employers will have access to even more “granular” information to help them customize information for employees, Newman said.

Continuing the FEHBlog’s focus on healthcare costs,

• Kaiser Health News reports on Medicare’s struggles with the expensive new Hepatitis C drugs. 

Researchers estimate that 3 to 5 million Americans carry the insidious hep-C virus. The biggest concentration is among those born between 1945 and 1965.

Many got hep-C from injecting street drugs in their youth. Other baby boomers got the virus from transfusions before 1992, a period when blood wasn’t screened. Some got it from sharing razors or toothbrushes, or from contaminated tattoo needles or hospital equipment. For some, transmission was sexual, although fortunately this isn’t the highest-risk route.

The timing of these infections spells trouble for Medicare, which insures Americans over 65 [and the FEHBP which is 50% annuitants] Hepatitis-C is a slow-acting virus. Over a period of 20 to 40 years, it causes liver damage in about 70 percent of people it infects.

A growing number of people who got infected in the 1960s through the 1990s have now “used up” the infection’s latency period, notes Dr. Camilla Graham of Beth Israel Deaconess Hospital in Boston, “which is why we’re now seeing this dramatic increase in the number of people developing complications and dying of hepatitis. And we expect this to continue to increase for the next 10 years.”

• Reuters reports that the new low dose CT scans for persons with a history of heavy smoking recommended by the U.S. Preventive Services Task Force will cost Medicare $9.5 billion over five years in unanticipated testing and early treatment costs. As the FEHBlog has noted the Medicare program may not pay for these tests, but the ACA requires FEHB plans to do so with no cost sharing beginning next year.