I don’t know what depressed me more yesterday — the Redskins’ woeful performance against the Eagles or Senate Majority Leader’s support for the public option. Needless to say, my day brightened today when I read that independent Senator Joe Lieberman, from Connecticut, who caucuses with the Democrats, is opposed to the public option. The Wall Street Journal reports that

“I think that a lot of people may think that the public option is free. It’s not,” Mr. Lieberman said. “It’s going to cost the taxpayers and people that have health insurance now, and if it doesn’t, it’s going to add terribly to our national debt.”

I completely agree with the Senator. Perhaps that’s because I grew up in Connecticut. Perhaps that because I have watch how over the past 25 years how the statutory pricing in Medicare and Medicaid have shifted costs to the private sector without really controlling the costs of those Programs.

The AP further notes that “The reaction from moderate Democrats — they fear a public plan could drive insurers out of business and take over the marketplace — ranged from muted to skeptical. The one Republican who has so far lent her support to Democratic health overhaul proposals, Sen. Olympia Snowe of Maine, said she was “deeply disappointed” by Reid’s decision.” Stay tuned.

Govexec.com reports on the upcoming Open Season, noting that “a provision in the health care reform bill crafted by the Senate Finance Committee would levy a 40 percent tax, beginning in 2013, on the overall value of health insurance plans that cost more than $8,000 for individuals and $21,000 for families. By some calculations, FEHBP plans already are above the threshold designated for the excise tax, should it be enacted.” That tax would be imposed on the premiums that exceed the threshold, not the entire premium. And it faces a great deal of opposition in the House of Representatives.

In worrisome contrast, the Senate Finance Committee bill would allocate to the FEHB Program a large chunk of a $6.7 billion annual fee on health insurers. That assessment may add 1% to FEHB premiums because self-insured employers and traditional Medicare, Medicaid, and TRICARE are exempted. What’s more, it would smack the Program next year, not 2013, if enacted. Rising prescription drug costs are the least of the FEHB Program’s problems. At least prescription drugs improve peoples’ health.

Speaking of healthcare reform, the Chief Actuary of the Centers for Medicare and Medicaid Services has issued an analysis of the House leadership’s bill, H.R. 3200. This analysis indicates that the bill would cause national health care expenses to increase by $750.3 billion over the next decade. Wellpoint is offering its own analytical reports on how health care reform would impact premiums in each of the states that it offers health insurance, including New York and California.

I don’t have to suffer with the Redskins until Monday night. Bloomberg has a good story on where Congress stands with the efforts to create health care reform bills for floor consideration. Also this week in Congress, the FY 2010 defense authorization bill was approved. As reported in the Federal Times and mentioned earlier in the FEHBlog, that bill includes a bevy of federal retirement benefit changes.

Govexec.com reports that OPM has extended until February 15, 2010, the window for making Federal Long Term Care Insurance changes.

Yesterday, the National Committee for Quality Assurance (NCQA) issued a report on 2008 HEDIS results for health plans. HEDIS measures the success of health plan efforts to improve health care quality for their members. NCQA found that “ the quality of U.S. health care was virtually stagnant in 2008, a disturbing slowdown after a decade of improvements. The across-the-board trend was seen in care provided to people with private insurance coverage as well as in Medicare and Medicaid.” There were a few bright spots, “such as keeping heart attack patients on life-saving beta blocker drugs and delivering flu shots. But there were disquieting declines in several measures related to mental health, diabetes care, the overuse of imaging for low back pain and breast cancer screening.”

Earlier today, the Senate voted 53-47 against a motion to proceed to consider an American Medical Association (AMA) backed bill (S. 1776) to repeal the Medicare sustainable growth rate formula for controlling Part B payments to doctors. The Politico observed that

The vote was a bigger loss than supporters expected. The fact that Democrats, who hold a 60-vote majority, could not muster even 51 votes for the bill is a sign of rocky sledding ahead for health care. It is a warning shot that even popular legislation — most lawmakers support the doc fix — could be easily bogged down if it is viewed as a deficit busting vote. And comprehensive health care reform is anything but widely popular in Congress.

The size of the failure was also surprising given how hard the AMA had lobbied for passage. The AMA has always been seen as a major lobbying force, but today’s vote calls into question its effectiveness.

Govexec.com reports that two Virginia Congressmen, Jim Moran and Gerry Connelly, have sent Speaker Pelosi a letter objecting to the application of the Senate Finance Committee’s so-called Cadillac Plan tax to FEHB plans. The minority staff of the Congresional Joint Economic Committee recently produced a projection of when nationwide FEHB plans would reach the proposed premium threshold for this excise tax, which is imposed on plans, not directly on employees. It’s not a pretty picture to begin with, and it becomes even uglier when you consider that the Senate Finance Committee bill also would allocate to the FEHB Program a large chunk of its $6.7 billion annual fee on health insurers. The Dynamic Chiropractor cheerfully reports that “following months of negotiations” the American Chiropractic Association has achieved its goal of restoring chiropractors to physician (as opposed to allied health professional) status under the BCBSA FEHBP plan known as the Federal Employees Plan. This change takes effect next year. Earlier this year, Wellpoint, one of the largest Blues organizations, sold its prescription benefit management unit to Express Scripts, one of the three big PBMs. Reports then circulated that Aetna and CIGNA were contemplating the sale of their PBM units. Reuters reports today that “Cigna Corp (CI.N) has decided to keep its pharmacy benefit manager unit after failing to attract viable takeover offers, a source familiar with the situation said.

I missed the weekend update because I was travelling back from an enjoyable weekend in beautiful Madison Wisconsin. (Go Badgers!) There is no better day for second guessing than Monday (particularly when you are a Redskins fan like me), and Federal Times took the cue with its lead article on “What OPM isn’t Doing to Control Health Rates.” According to the Federal Times,

Some experts point to recent successes other plans have had in holding down increases, in part by using tactics OPM has not used or used only sparingly. They are:

• Encouraging and incentivizing enrollees to take better care of themselves through wellness programs, using preventive care, and better managing chronic conditions such as diabetes.

• Saving money on prescription drugs by pushing enrollees to use generic drugs instead of more expensive brand-name drugs whenever possible.

• Discouraging enrollees from getting excessive imaging scans, tests, emergency room visits or other treatments that are not necessary.

This benefit cost containment responsibility principally falls on the FEHB plans, not on OPM. Plan carriers, not OPM, hold the financial risk in this Program.

In my experience, FEHB plans have been engaging in these measures, particularly generous preventive care benefits, disease management programs and generic drug incentives, for many years in my experience. OPM for the past several years has been pushing federal employees to improve their health. Today, for example, the OPM Director announced “the launch of FedsGetFit, a Wellness Awareness campaign over the coming months in preparation for our Campus Worklife Program early in the New Year.” The fundamental problem facing the the FEHB Program is demographics — 50% of FEHB Plan enrollees are annuitants and the active employees tend to be older than the private sector. Older people use more health care services. Although I’m not an actuary, my gut tells me that premium increases would be higher without the Plan’s active benefit management practices.

Healthcare reform has moved back to the smoke filled rooms as the House and Senate craft the bills that will be presented on the respective floors of those bodies likely early next month. The National Underwriter reports that AHIP President Karen Ignani offered an olive branch to Senate Majority Leader Harry Reid. AHIP and the Blue Cross and Blue Shield Association released an Oliver Wyman actuarial report on the bills under development. According to an AHIP release, the Oliver Wyman report “is consistent with a recent [PriceWaterhouseCoopers] analysis released by AHIP that found that current health care reform proposals will cause health care costs to increase far faster and higher than they would under the current system.” AHIP and BCBSA also posted a copy of their letter to Senate Finance Committee Chairman Max Baucus on the Oliver Wyman report. This portion of the letter grabbed my attention because the $6.7 billion annual fee on insurers would fall on the FEHB Program:

The revised Chairman’s Mark includes a $6.7 billion excise tax described as an “annual fee on health insurance providers.” This tax would make health insurance much less affordable for all Americans, regardless of whether they currently have coverage or are uninsured. This outcome would stem from both the direct impact of this tax and its interaction with other provisions in the Chairman’s Mark, as well as existing federal and state taxes.

In its September 22, 2009 letter, the Congressional Budget Office (CBO) estimated that this excise tax would have the effect of increasing premiums by roughly 1 percent. By our estimates, however, the effect of this tax would be much more significant, since the tax would only apply to fully insured health insurance and excludes self-funded coverage. In addition, unlike most excise taxes, this new tax would be non-deductible and would have the interactive effect of increasing other federal and state taxes which raises significantly the overall effective rate of the tax.

Overall, we estimate that the effect of this tax would be to raise coverage costs as much as three times CBO’s estimate in most instances. It also is important to note that the effect of these new taxes would be borne principally by those obtaining individual coverage in the exchange and by small businesses. These new taxes would not apply to employers providing coverage on a self-insured basis, which would
lead more employers to self-insure, as was reported by Joint Tax Committee staff in Tuesday’s walk-through of the modified Mark. This would encourage a vicious cycle, whereby the taxes are ultimately borne by an increasingly narrow group of consumers, including those purchasing coverage through the exchange.

RAND published an assessment of the idea of opening the FEHB Program to all comers, an idea which as far as I can tell is not under active consideration. Wide open enrollment is incompatible with the employee benefit nature of this Program.

OPM Director John Berry appeared on Capitol Hill today to support Sen. Joe Lieberman’s bill (S. 1102) to extend FEHB Program coverage to the same sex domestic partners of federal employees. According to a Senate Homeland Security and Governmental Affairs press release,

[Director] Berry testified at the [HSGA Committee] hearing that the cost in 2010 would be about $56 million, just two-tenths of a percent of how much employee health insurance costs the entire federal government. Lieberman said at the
hearing that the cost is well worth the benefits that will accrue in recruiting
and retaining the best people to serve as federal employees.

Govexec.com reports that

Lieberman said the Homeland Security and Governmental Affairs Committee would
mark up the legislation in November with the goal of bringing it to the Senate
floor in December for action in 2010. In July, the House Oversight and
Government Reform Federal Workforce Subcommittee passed the bill by a 5-3 vote
and forwarded it to the full committee.

I feel the fog lifting. Yesterday, Speaker Pelosi announced that a revised H.R. 3200 would only include a one year fix to Medicare’s physician payment formula. I suggested that the American Medical Association, which wants a permanent fix, was betting on the come. Boy was I wrong. Modern Healthcare reports that “The American Medical Association, the American College of Surgeons and about a half-dozen more physician groups met with Senate and White House leaders to support a legislative effort to wipe away the current Medicare payment formula.” A bill introduced by Sen. Debbie Stabenow would replace formula with a freeze. “Under [this] legislation, the Sustainable Growth Rate formula—which annually accounts for steep, double-digit physician pay cuts—would be removed, according to a source who attended the meeting. At some point, a new payment formula would be implemented.” The AMA works fast. Is it any wonder that Medicare is going bankrupt?

The Wall Street Journal reports that “Employees will pay $4,023 on average in [employer sponsored health plan] premiums and out-of-pocket charges next year, up 10% from 2009, according to a projection from Hewitt Associates , a benefits-consulting firm. In dollar terms, it’s the biggest boost since the firm started keeping track of the data a decade ago.” This report puts in perspective the 2010 increase in the employee share of FEHB plan premiums == 8.8%. And as I have pointed out the FEHB Program has unenviable demographics.

A Senate Homeland Security and Governmental AffairsCommittee announced that the conference report to the FY 2010 Defense authorization act includes several changes to the federal employee retirement programs.

The provisions – three of which were reported out of HSGAC as stand-alone
legislation and all of which are similar to provisions included in unsuccessful
Senate amendments to the Family Smoking Prevention and Tobacco Control Act in
June and to the National Defense Authorization Act in July – would:

• Replace the cost of living increases that federal employees in Hawaii, Alaska, and U.S. territories receive with locality pay that federal employees in the contiguous 48 states receive. COLAS are neither taxed nor applied toward retirement benefits. Locality pay is taxed and applies to retirement. This provision was approved by HSGAC as S.507

• Allow federal employees participating in the Federal Employee Retirement System (FERS) to apply their unused sick leave to their length of service for the purposes of computing the amount of retirement benefit. Federal employees under the older Civil Service Retirement System (CSRS) are already allowed to do so. This would bring equity to the two groups of employees and help reduce the absenteeism that results from the current “use it or lose it” FERS policy.

• Correct an injustice in calculating the retirement benefits and dates for
non-judicial employees of the D.C. courts system. When these employees were converted to federal employees in the late 1990s, they had to start over in accumulating eligibility for retirement and retirement benefits. The provision would direct that the time served before these employees became federal employees counts towards their federal retirement eligibility.

• Allow former federal employees under the FERS who withdrew their contributions to the retirement trust fund, thereby waiving retirement credit for those years of service, to redeposit their earlier contributions, plus interest, upon reemployment with the federal government.

• Remove a retirement penalty that is imposed on long-time federal employees who choose to switch to part-time work at the end of their careers. The
retirement annuity for these employees is determined based on the amount of
salary they receive, which drops when they switch to part-time work. This
leaves employees with little incentive to stay in a part-time role and many
retire. The provision would direct annuities for these employees to be
determined using the rate of salary, not the amount. This provision was
approved by HSGAC as S.469.

• Authorize federal agencies to reemploy retired federal employees under certain
limite conditions, without offset of an employees’ annuity against their salary, and requires the Comptroller General to report on the use of this authority. This provision was approved by HSGAC as S.629 The DoD conference report must still be approved by both the House and Senate and signed by the President.

The Senate HSGA Committee’s Subcommittee on Oversight of Government Management and the Senate Special Committee on Aging held a joint hearing on Federal Employee Long Term Care Insurance Program changes today. Govexec.com reports that Democrat and Republican Senators “found common ground on Wednesday afternoon blasting premium increases in the Federal Long-Term Care Insurance Program.”

The Senate Finance Committee cleared the Baucus healthcare reform proposal this afternoon by a 14-9 vote. Sen. Olympia Snowe (R Maine) was the only Republican to vote with the majority. Senate Majority Leader Harry Reid is planning to spend the next week or so completing the merger of the Finance Committee bill with the more liberal Health Education Labor and Pensions Committee bill and bring that bill to the Senate floor around October 26 according to a Wall Street Journal report.

The House leadership also plans to bring a consolidated health care reform bill to the House floor by the end of this month. Interestingly, Modern Healthcare reports that

House Democrats have made further adjustments to their sweeping healthcare
legislation, adding a measure that would expand coverage for young adults while
taking steps to remove an expensive “fix” to Medicare’s physician payment
formula.

At a news conference, House Speaker Nancy Pelosi (D-Calif.) announced the addition of a new provision that would enable young adults between the ages of 19 and 26 to remain under their parent’s healthcare coverage.

The American Medical Association can be none too pleased about the first change, but the House leadership appears to be ripping a page out of the Baucus playbook. That proposal received favorable scoring from the Congressional Budget Office because it only includes a one year fix to the Medicare formula, and asks the medical community to bet on the come so to speak. The Medical Management Group Association just released a survey indicating that medical practices’ favorite payer in terms of administrative processes – not payment rates — is Medicare Part B. Doctors, be careful of what you wish for. Increasing the FEHB Program’s dependent children limiting age from 22 to 25 has been an objective of Congressman Danny Davis (D Ill.), among others, for the past two years.

The U.S. Supreme Court today agreed to review the U.S. Court of Appeals for the Seventh Circuit’s March 2009 opinion in Pollitt v. Health Care Service Corp. The case raises the following questions:

1. Whether the Federal Employees Health Benefits Act (“FEHBA”), 5 U.S.C. §§ 8901-14, completely preempts — and therefore makes removable to federal court — a state court suit challenging enrollment and health benefits determinations that are subject to the exclusively federal remedial scheme established in FEHBA.

2. Whether the federal officer removal statute, 28 U.S.C. § 1442(a)(1), which authorizes federal removal jurisdiction over state court suits brought against persons “acting under” a federal officer when sued for actions “under color of [federal] . . . office,” encompasses a suit against a government contractor administering a FEHBA plan, where the contractor is sued for actions taken pursuant to the government contract.

This hearing will require the Supreme Court to consider the scope of its 2006 decision in Empire Blue Cross v. McVeigh. In that case, the Supreme Court by a 5-4 vote affirmed a Second Circuit U.S. Court of Appeals decision authored by then Judge and now Supreme Court Justice Sonia Sotomayor. I am hopeful that the Supreme Court will answer these questions in the affirmative because these cases which concern federal employee benefits should be heard in federal court.

I was surprised to learn today from a Boeing radio ad that Colorado was the first state to adopt Columbus Day as a state holiday. Colorado doesn’t even have a sea coast.

In any event, the health insurance trade assocation, AHIP, released a PriceWaterhouseCoopers report on four aspects of the Baucus health care reform plan, which is the subject of a Senate Finance Committee vote tomorrow. Business Insurance reports that the report did not please either the White House or Senate Finance Committee Chairman Max Baucus.

This portion of the report particularly troubled me as it confirmed my suspicions:

As Congress seeks to finance coverage subsidies for low income individuals and small business, some bills are now targeting specific sectors of the health industry. The Senate Finance Committee legislation imposes new fees on certain providers: a $6.7 billion annual fee on health insurance companies, a $2.3 billion annual fee on pharmaceutical manufacturers, and a $4 billion annual fee on medical device companies. All of these assessments would increase the underlying cost structure of each of these segments in the health sector and, as CBO has indicated, will likely be passed back to enrollees in the form of higher premiums.

We estimate that these fees will raise annual insurance premiums by 2.5 percent for individual, small group, and large group plans over the 2010 to 2019 period, assuming they are fully passed through to patients. Self-insured employers would avoid the tax on health insurers since it is based on insurance premiums and thus self-insured plans would see a 0.3 percent increase in costs. As the fees are fixed in nominal terms, the percentage impact would decline each year. The average cost of a family plan would increase by almost $487 each year, while costs in the self-insured market would increase by $64 per year on average.

The FEHB Program falls into the insured segment for purposes of the $6.7 billion fee assessment. That’s a big hit. I was pleased to read that the National Institutes of Health have awarded Kaiser Permanente $54 million to study personalized medicine according to a Government Health IT report.

The largest of the 22 awards provides $24.8 million to study the influence of genes and the environment on health, disease and longevity over time and across diverse groups of people. The grants will fund genotyping of 100,000 Kaiser members in Northern California. The University of California in San Francisco is also a partner in the research. The analysis will link genetic information with historical clinical data taken from health surveys and Kaiser’s electronic health record database, according to Raymond Baxter, senior vice president for Kaiser. Researchers will add to the study environmental information, such as air and water quality and proximity to parks and healthy foods.Dr. Richard Hodes, NIA director of the National Institute on Aging, said genetic information generated by the project may help researchers discover genetic factors that explain differences between people in response to medications. “This would help doctors provide patients with the best medicines for them individually,” he said.

Cool. Hopefully, Kaiser will make great discoveries, like Christopher Columbus.