The President released his deficit reduction proposals to the Super Committee yesterday. There was one FEHBP related proposal (p. 43) — one that was first raised in the President’s FY 2012 budget

Streamline Federal Employee Health Benefit (FEHB) pharmacy benefit contracting. The Administration is committed to the efficient administration of the FEHB program in order to get the best deal for Federal employees and their families, as well as for taxpayers. The FEHB program pays $40 billion per year for health coverage, and drugs represent about 30 percent of claims expenditures. Under current law, health plans participating in the FEHB program contract with pharmacy benefits managers who negotiate prices with drug manufacturers and pharmacies on behalf of their enrollees. This fragmented purchasing strategy does not take full advantage of the combined purchasing power of the nearly eight million enrollees in the FEHB program. Under the Administration proposal, the Office of Personnel Management would contract directly for pharmacy benefit management services on behalf of all FEHB enrollees and their dependents. This will allow the FEHB program to more efficiently leverage its purchasing power to obtain a better deal for enrollees and taxpayers. This proposal is projected to save $1.6 billion over 10 years.

In the FEHBlog’s opinion, the Federal Times misinterprets this proposal to mean that OPM plans to directly contract with drug manufacturers and pharmacies. As the FEHBlog reads the proposal, OPM would contract with one prescription benefits manager similar to the practice in TRICARE which uses Express Scripts. A 2009 GAO report compared the approaches that the FEHB, TRICARE, and Medicare Part D take in contracting for prescription drugs.

The FEHBlog notes that while prescription drug costs represent 30% of the FEHBP’s benefit spend, that’s a result of the fact that there is a large cadre of FEHB annuitants with Medicare primary coverage. Medicare pays the hospital bills for those enrollees while the FEHBP pays their drug costs. If the FEHB was responsible for those hospital expenses, the FEHBP’s drug spend percentage would be more in line with other employer sponsored programs.

Speaking of Express Scripts, Modern Healthcare reports on today’s House Judiciary subcommittee hearing on that company’s deal to acquire Medco Health Solutions.

Getting back to the President’s recommendations, the Administration did offer its approach to helping out the Postal Service. That approach did not adopt the Postmaster General’s proposal to withdraw for the FEHBP which is good news for the FEHBP. The Federal Times discusses the Administration’s approach here.

Kaiser Health News reports that four major health insurers — Aetna, Humana, Kaiser Permanente, and United Healthcare — have agreed to provide their claims data to the brand new Health Care Cost Institute  

The Health Care Cost Institute (HCCI) is a new non-profit research
institute and a unique and unprecedented health research partnership.
Its mission is to promote independent research and analysis on the
causes of rising US health spending, to provide policy makers,
consumers, and researchers with better, more transparent information on
what is driving health care costs, to help ensure that, over time, the
nation is able to get greater value from its health spending.

The Kaiser Health News article adds that

To avoid violating patient privacy laws, anti-trust rules and
confidentiality provisions between insurers and providers, the institute
will not release data so detailed that anyone could identify specific
hospitals, doctors’ groups and, of course, patients. And because it’s
insurance data, it doesn’t necessary capture what’s really going on
medically for patients to the degree that electronic medical records do,
some audience members said.

Still, many of the researchers found
the allure of the new data, well, dreamy. “The usefulness of this data
is only going to be limited by the imagination,” said Harvey Fineberg, president of the Institute of Medicine. 

There’s a good chance that OPM will announce the 2012 FEHBP premiums and the change in the government contribution this coming week.

Of course, Congress is in session this week. The House will consider a continuing resolution (H. J. Res. 79) to fund federal government operations from October 1, 2011, the beginning of the new federal fiscal year, until November 18, 2011.  Section 124 of the continuing resolution would extend from September 30, 2011, to November 18, 2011, the payment date for the $5.5 billion that the Postal Service owes to pre-fund its retiree health care obligations. The OPM Director informed Congress that the Administration’s proposal to assist the Postal Service would be included in the President’s deficit reduction proposal to the Super Committee which is expected this week.

The prescription benefit manager’s trade association, the Pharmaceutical Care Management Association (PCMA), recently sent the Super Committee a set of recommendations to reduce prescription drug spending by $100 billion over the next decade. The recommendations include expediting the approval of bio-generic drugs and eliminating the tax deduction for direct to consumer marketing.

GAO issued a report (No. 11-711) on early experiences with the minimum loss ratio which found that

From 2006 through 2009, traditional MLRs on average generally exceeded  PPACA MLR standards. This is even without the additional components in the new PPACA MLR that will generally increase MLRs. However, traditional MLRs  also varied among insurers. Traditional MLRs within the individual market varied  more than those within the small and large group markets, and a larger proportion of individual market insurers generally had lower MLRs. Additionally, traditional MLRs varied more among smaller insurers than among larger insurers in all three markets. Some components of the PPACA MLR requirements may mitigate the implications of some of these variations. 

FEHB plans fall into the large group market.

Last Thursday, Standard and Poors released its health care economic indices for the 12 month period ending July 2011

Data released today by S&P Indices for the S&P Healthcare Economic Composite Index indicate that the average per capita cost of healthcare services covered by commercial insurance and Medicare programs increased by 5.71% over the 12-months ending July 2011. This index has seen a modest acceleration in annual growth rates for three consecutive months – with readings of +5.34%, +5.55% and +5.59% in April, May and June, respectively.

As measured by the S&P Healthcare Economic Commercial Index, healthcare costs covered by commercial insurance increased by 7.73% over the year ending July 2011. Medicare claim costs rose at an annual rate of 2.35%, as measured by the S&P Healthcare Economic Medicare Index. With July’s data, the Medicare index reached yet another low in its six-and-one-half year history. The index is 5.67 percentage points below its high annual growth rate of +8.02%, recorded in November 2009.

The Washington Post reports on the activities of the Super Committee’s work to craft a package of budget cuts totalling $1.5 trillion before Thanksgiving.. The Federal Times reports that the Federal Workers Alliance, which is composed of 22 labor unions, has prepared a white paper for the Super Committee opposing the Deficit Commission’s proposal to shift the FEHBP to a premium support or voucher program.

The Healthcare Leadership Council is recommending Medicare changes to the Super Committee that include creating a Medicare exchange, gradually raising the Medicare eligibility age from 65 to 67, means testing Medicare’s beneficiary cost sharing structure, and legislating medical malpractice reforms — as opposed to taking the traditional approach of cutting provider reimbursements.  The Washington Post observes that

There’s a pretty simple explanation for why hospitals and some insurers would favor raising the eligibility age: Hospitals receive higher payments from private insurance than they do from Medicare. The payments that hospitals receive from private insurers are 28 percent above the break-even point for providing treatment, according to a recent report from the Blue Cross Blue Shield Association. Medicare pays only 91 percent of what it costs a hospital to provide care.

As discussed here, the Medicare Part B reimbursement patch expires at the end of this year, threatening doctors with a 29% pay cut from Medicare. The Ways and Means Health Subcommittee will hold a hearing about this big dollar issue next Wednesday at 2 pm. Medicare reimbursement policy and Medicare eligibility issue directly impact the FEHBP because of the large cadre of Medicare eligible folks participating in the FEHBP.

Kaiser Health News reports that Medicare Advantage premiums will fall by 4% on average for 2012. FEHB premiums for 2012 and the government contribution change likely will be announced next week.

This means that the Federal Employee Open Season is right around the corner. Yesterday, it was announced that ADP has acquired Asparity Decision Solutions which offers federal and postal employees and annuitants an online tool to compare FEHB plans during Open Season.

Following up on last Sunday’s post, the House Judiciary Committee’s website does show that a hearing on “The Proposed Merger between Medco and Express Scripts” is scheduled for September 20th at 3:30 pm before the Subcommittee on Intellectual Property, Competition, and the Internet.” The Wall Street Journal accurately observes that “Members of Congress have no role in deciding whether the proposed merger is granted antitrust approval, but they can shape the public debate about the deal.”

HHS Secretary Sebelius announced that she has appointed Leon Rodriguez to be the new director of HHS’s Office for Civil Rights. This Office is responsible for enforcing the HIPAA Privacy and Security Rules. Mr. Rodriguez “most recently served as chief of staff and deputy assistant attorney general for the Department of Justice Civil Rights Division.”

Government Health IT reports that the National Coordinator for Health Information Technology has launched a campaign to encourage patients to use available technology to get more involved with their own health care. For example, HHS issued a proposed rule that would modify the federal laboratory regulations and the HIPAA Privacy Rule to permit laboratories to release test results to patients — not just doctors — upon request.  The National Coordinator and the Federal Trade Commission has released a template for a model privacy notice for electronic personal health records. The article also explains that

Many healthcare organizations that hold patient data like hospitals and payers are pledging to make the information more easily available.
“Many are using Blue Button and others are using secure health email through the Direct protocols to deposit individuals’ information into their secure accounts,” Mostashari said.
Blue Button is a method for individuals to download their health information in simple ASCII text format into their personal health records. It has been available to military, veteran and Medicare beneficiaries. The Direct Project uses standards and services for secure email.
“Among those prepared to make Blue Button available are payers Aetna and UnitedHealthcare. Other healthcare organizations said they would continue to improve the sharing of health information through their patient portals and PHRs, including Kaiser Permanente, Children’s Hospital of Boston, Cleveland Clinic, and Palo Alto Medical Foundation Clinic.”

HHS, “with several key
initial partners, today launched Million Hearts, an initiative that aims
to prevent 1 million heart attacks and strokes over the next five
years.” AHIP stated that the “Initiative builds on findings that a concerted focus
on four interventions called the ABCS – Aspirin Use, Blood Pressure
Control, Cholesterol Control and Smoking Cessation – could save hundreds
of thousands of lives per year.” The FEHBP has been active in promoting these interventions.

Congress remains in session. Focus will now turn to a continuing resolution to fund federal government operations, including the FEHBP, in the new fiscal year which begins on October 1. It is expected that Congress will reach a bipartisan agreement on at least the first continuing resolution without rancor.

The U.S Court of Appeals for the Fourth Circuit issued opinions last week favoring the Administration’s position supporting the Constitutionality of the Fourth Circuit’s individual mandate — here and here.  The Fourth and Sixth Circuits have ruled in the Administration’s favor and the Eleventh Circuit has ruled against the Administration. The appellants in the Sixth Circuit case already have asked the Supreme Court to review the decision. In the FEHBlog’s view, it’s likely that the Supreme Court will take the case in time for it to render a decision before next July.

The Health Subcommittee of the House Ways and Means Committee held a hearing last Friday on consolidation in the health care industry, which is a necessary outcome of Affordable Care Act initiative’s such as accountable care organizations or ACO’s. Modern Healthcare reports that “Although healthcare experts testifying at the hearing generally agreed
that provider consolidation is increasing, they differed over whether
ACOs will exacerbate it.”

On October 18, America’s Health Insurance Plan is holding a conference about health plan efforts to create ACOs that are more flexible and inviting to healthcare providers than the Teutonic model created by CMS. AHIP reports that “New health care delivery and payment models in the private sector are
being shaped by active collaboration between health insurance plans and
providers, according to a new study by AHIP that appears in the September edition of Health Affairs.”

The September issue of Health Affairs focuses on rising healthcare costs. Kaiser Health New reports that “The culprits, many of the studies conclude, are hospitals and doctors
more than insurers or patients, despite the political rhetoric to the
contrary.”  What a surprise. The following paragraph in a recent Wall Street Journal article did surprise the FEHBlog:

An analysis released in 2010 and performed for the Medicare Payment
Advisory Commission, or MedPAC, a Congressional watchdog, calculated how
much American doctors would make if all their work was paid at Medicare
rates. It found that the primary-care category did the worst, at around
$101 an hour. Surgeons were at $161. Specialists who did nonsurgical
procedures, such as dermatologists, did the best, averaging $214;
radiologists would make $193.

Although the FEHBlog touted watching the Senate Homeland Security and Governmental Affairs Committee hearing on the internet, it turned out that the live streaming was quite choppy at least on my computer. Fortunately, the New York Times filled in the gaps for me with this article and the Committee posted all of the Senator’s statements and the prepared testimony on its website during the course of the three and a quarter hour long hearing.

The OPM Director in his testimony stood up for the FEHB Program. He explained that the Postal Service’s proposal to withdraw from the FEHB Program requires careful study. He advised the Committee that the Administration’s plan for helping the Postal Service with of its current financial problems would be included with the President’s deficit reduction proposal to be submitted to Congress in the next two weeks.

Also in the next two weeks, OPM should release the 2012 premiums for the FEHB Program, including the change in the government contribution which currently is the 72% of the enrollment weighted average premium capped at 75% of the selected plan’s premium.

Happy Labor Day!  The Senate Homeland Security and Governmental Affairs Committee has posted an updated witness list for tomorrow’s hearing that will address, among other important topics, the Postal Service’s ill-advised proposal to withdraw from the FEHB Program. The first panel now includes the OPM Director John Berry, a GAO representative, the Segal Group’s chief actuary, and the Postmaster General.  The second panel includes the American Postal Workers Union’s President Cliff Guffey, the National Association of Postal Supervisors :President Louis Atkins, and two mailer representatives. The hearing starts at 2 pm ET and can be viewed on the Committee’s website. A New York Times article previewed the hearing.

When the FEHBlog read last week that the Justice Department had filed an anti-trust action to block the merger of two large cell phone companies, AT&T and T-Mobile, his first thought was whether this aggressive action dooms the pending Express Scripts acquistion of Medco. Bloomberg reports that Express Scripts is continuing to trumpet the competitive benefits of the acquisition. However, Bloomberg and the Wall Street Journal report that the Federal Trade Commission;”has asked for more input from the companies, issuing what is known as a second request for information, according to a filing by Express. The request doesn’t indicate that the government will necessarily challenge a deal, but it suggests there are substantive antitrust issues that warrant further investigation. Around 4% of transactions received a second request in 2010, according to figures from the antitrust agencies.”

The Wall Street Journal reports that United Healthcare’s Optum unit is purchasing the management arm of Monarch Healthcare, a multi-specialty medical group with 2300 physician members located in Southern California. This is Optum’s third acquistion of a Southern California medical group’s management arm. According to the article, “Through various structures, Optum owns a physician group in Nevada and holds stakes in others elsewhere in the country. Optum, a fast-growing arm of United that provides services such as pharmacy-benefit management and data services to help improve care, is separate from United’s own health-insurance operation.” The Optum groups contract with “an array of insurers,” not exclusively United Healthcare.

The AMA News features an interesting article on Medicare’s new bundled payment initiative.

Under the initiative, created by the health system reform law,
physicians and hospitals would come up with a plan and submit a bid to
participate. Two of the bundled payment models focus on inpatient stays,
a third involves postdischarge services only, and a fourth combines
inpatient and postdischarge services. The earliest a group submitting a
winning bid could get started with the first inpatient-only model is
January 2012, said Richard Gilfillan, MD, acting director of the CMS
Innovation Center.

The AMA is studying the initiative.

The Senate Homeland Security and Government Affairs Committee will be holding a hearing on the U.S. Postal Service in Crisis – Proposals to Prevent a Government Shutdown at 2 pm next Tuesday September 6. The first panel will include the Postmaster General and OPM’s Director of Planning and Policy Analysis. The second panel includes the President of the American Postal Workers Union who according to the Postal Reporter will speak on behalf of all four Postal Unions. This hearing will give us an idea about Congressional receptiveness to the Postal Service’s proposal to withdraw from the FEHB Program. Live video of the hearing will be available on the Committee’s website.

One of OPM’s recent call letter initiatives was to ask FEHB plans to offer programs to combat the problem of childhood obesity. The National Business Group on Health recently announced that “it has updated its employer toolkit, Childhood Obesity: It’s Everyone’s Business, to include examples of family-focused wellness programs that four forward-thinking companies are doing to fight childhood obesity. The toolkit also includes a new section on how employers can design their benefit programs to ensure that they are in accordance with new screening guidelines required by PPACA and support obesity treatment options for children.”

Another focus of OPM concern has been patient safety. AHIP announced this week the release of a white paper called “Innovations in Patient Safety” This white paper “highlights 16 health plans’ efforts to prevent healthcare-acquired conditions, help patients transition smoothly from hospital to home, and manage chronic conditions effectively to avoid complications and preventable readmissions. In some cases, these innovations involve funding for hospital-based patient safety initiatives; in others, plans’ transitional care programs work directly with patients and their families to help reduce complications and hospital readmissions.”  Virtually all of those 16 health plans participate in the FEHB Program.

Tomorrow marks 15 months after the last day (May 31, 2010) that unemployed people could become eligible for the federal subsidy covering  65% of COBRA continuation coverage (or in the FEHBP TCC) premiums, a program that began in 2009. Because the subsidy last for 15 months, the subsidy generally will be sunsetting tomorrow. The Labor Department has posted FAQs about this change.

Health Data Management has posted a slide show on the bundled payment initiatives that the Centers for Medicare and Medicaid Services announced to health care providers last week. Meanwhile Kaiser Health News reports on a newly published study that casts doubt on the efficacy of accountable care organizations and a recent survey that indicates that employees don’t have much stomach for health plan changes such as narrow networks that would generate lower premiums. Time will tell.

On the health care fraud front, the Federal Times reports that “New government statistics show federal health-care fraud prosecutions in the first eight months of 2011 are on pace to rise 85 percent over last year due in large part to ramped-up enforcement efforts under the Obama administration.” The FEHBlog is in the process of rewatching the Sopranos on HBO GO, and the early episodes of that program makes it clear that health care fraud was around in 1999. Also the AMA News raises the alarm that an Affordable Care Act initiative is causing CMS gradually to send out “revalidation requests by mail to more than 1.4 million health professionals — more than half of whom are doctors — between now and March 23, 2013,”  According to the article, this revalidation process is cumbersome and time consuming and may be overkill at least with respect to doctors. The industry-supported Council for Affordable Quality Care has a common credentialling database for private sector health plans to reduce these headaches.

Congress is entering into its final week of the August recess. The Washington Post is reporting that “The Senate Homeland Security and Governmental Affairs Committee plans to hold a hearing on the postal proposals [to withdraw from the FEHB Program, etc.] Sept. 6.” No information on the hearing has been posted on the Committee’s website yet. 


The federal government has launched a new website performance.gov . The site provides a handly link to OPM’s performance and accountability report which the FEHBlog discussed last year when the report was issued. According to Govexec.com,  “the performance.gov site faces major performance challenges of its own. A last-minute deal between the Obama administration and House Republicans to avert a government shutdown in April cut fiscal 2011 funding for online open government initiatives by more than three quarters to just $8 million.”

Kaiser Health News featured a lengthy report on the efforts of self-insured employers and health plans to control the high cost of specialty or biologic drugs. Interestingly, the article does not discuss the Food and Drug Administration’s delay in creating the pathway to less expensive bio-similar drugs that the Affordable Care Act