The health insurance trade industry AHIP has released a report on the value of health plan networks and the role of out-of-network charges in rising health care costs. This conclusion strikes me as self-evident but these are strange times when the American Medical Association is riding high. My summer reading has become the House health care reform bill (HR 3200) and the Senate Health Education Labor and Pension Committee bill. I have been struck by the fact that the bills cap health insurer underwriting profits but not healthcare provider profits. What’s good for the goose should be good for the gander. A Washington Post article on a local school district’s efforts to control the H1NI flu suggest that it’s going to be an intense flu season. The article also provided an update on the H1N1 flu vaccine:

At the University of Maryland School of Medicine in Baltimore, 66 adult
volunteers have received the first of two doses of an H1N1 vaccine. The
university is one of 10 sites for national clinical trials of the vaccine, which
started Monday. The goal of the clinical trials is to determine how strong a dose is required to protect different age groups. To that end, researchers will test for antibodies in the volunteers’ blood to assess their immunity. Once testing is complete, the vaccine is to be given to states and local governments and administered to millions of Americans, starting with vulnerable populations such as children and young adults, pregnant women and people with weak immune systems. But there is no timeline or firm idea of how the vaccinations will be administered. The H1N1 vaccine will not be a substitute for seasonal flu
vaccine, and health officials recommended that their employees and everyone else
get both.

Congress is in recess until just after Labor Day. The Washington Post reports that “Senators headed home for their August break Thursday [August 6] amid an escalating partisan battle over health-care reform, with a small band of lawmakers [the three Democrat and three Republic Senators from the Finance Committee] hoping to keep their delicately negotiated compromise alive until Congress reconvenes in September.”

Also on August 6, the National Business Coalition on Health sent the letters to the President and Congressional leaders offering five recommendations for value based health care reform —

1) measuring the comparative effectiveness and performance of health services and providers; 2) making such information easily accessible and transparent to the public; 3) reforming the fee-for-service payment system; 4) empowering consumers to make better and more informed choices along the full spectrum of their health and health care journey; and 5) creating a failsafe mechanism and establishing an
independent entity to insure that serious cost containment measures are taken in
response to escalating health care costs.

I noticed that the Coalition’s proposals resemble recommendations made in a 2008 Blue Cross Blue Shield Association report titled the Pathway to Covering America.

Speaking of reforming the fee-for-service payment system, the American Academy of Family Physicians last week posted a web site intended to held family physicians transition to a medical home centered practice.

The Centers for Medicare and Medicaid Services announced that the agency is resurrecting a pilot program to competitively bid for Medicare durable medical equipment providers in nine regions. The “rebid” will begin in October 2009.

Top management of Microsoft and Google encouraged the Obama Administration to incorporate web based solutions such as the Microsoft Healthvault and Google Health as a key part of its health information technology plan according to a Nextgov.com article.

Eric Schmidt, chairman and chief executive officer of Google, told top health
technology officials at a meeting of the President’s Council of Advisors on Science and Technology that * * * like the Google and Microsoft applications, the national health IT system should be based on Web records that patients can control. In addition,
current electronic health record systems are proprietary and don’t interoperate,
said Richard Levin, president of Yale University. “What is out there is not very
good,” he said. “The reality is dismal.”

The New York Times offered a report today on the privacy issues affecting these services.

Companies like Google, Microsoft and WebMD see a lucrative business opportunity in assembling and holding personal health records. Patients and their doctors would be able to consult the records wherever and whenever needed. But the companies themselves recognize that they have work to do to persuade consumers and physicians that records will be safe and protected.

Although as many as one in four adult Americans are currently offered an online personal health record, by a health plan or physician’s office, most have not taken up the offer.

Google, Microsoft and WebMD all say they will not show advertising alongside a person’s health records. But visitors to WebMD, Google Health and Microsoft’s site, HealthVault, see ads for drugs for diseases like osteoporosis or acid reflux as they seek information on an array of ailments.

Technology experts say identities of viewers and their health interests are often captured at the moment they click on online ads for a drug. That provides the advertiser with a prospective customer to pursue online or by mail.

“Personal health records linked to advertising, even indirectly, put them in the hands of marketers and profilers,” said Robert Gellman, an independent privacy consultant in Washington.

I find the lack of use of personal health records interesting. I think that the lack of use is more attributable to the fact that people just aren’t that interested at this point in these online records than to privacy concerns. That could change as more features are added and demographics change. Finally, it’s worth noting that the HHS rules that will trigger the 30 day implementation period for the new nationwide health information security breach notice requirement are due to be issued within the next ten days.

The Washington Post reported this morning that the bipartisan Senate Finance Committee negotiators are making progress on their version of the health care reform bill. According to that report,

The group is closer to resolving other major questions and has already
agreed to about $500 billion in changes to existing federal health programs,
including Medicare and Medicaid. For example, negotiators would require
wealthier seniors to pay more for prescription drug coverage under Medicare, and
they would charge co-payments for clinical lab procedures. The lab co-pays are
potentially lucrative, raising about $20 billion over 10 years.

Other new sources of revenue include penalties on individuals who do not obtain health insurance, and a “free-rider” provision that would require employers that
currently offer health insurance to continue to do so, or to reimburse the
federal government for workers who switch to subsidized coverage through an
insurance exchange. Both provisions could yield about $43 billion over 10 years.

The rest of the additional revenue — about $250 billion — would come from
new taxes, primarily from an excise tax of up to 35 percent on insurance
companies that sell extremely generous policies worth at least $21,000 a year
for family coverage or $8,000 a year for individuals, according to aides
involved in the discussions. About 7 percent of taxpayers hold such policies.

The Finance Committee proposal is also likely to contain a number of much smaller tax provisions, including a $2,000 cap on flexible savings accounts — which are currently unlimited — and a plan to improve tax compliance by requiring businesses to tell the Internal Revenue Service when they pay corporations for services.

I did the math and found that the the annual premium for the FEHBP’s most popular option Blue Cross FEP Standard Option is $5872 for self only and $13,447 for self and family. The self only premium is 24% below the proposed taxation threshold of $8,000, and the self and family premium is 35% below the proposed taxation threshold of $21,000.Kaiser Health News offers an interview with AHIP President Karen Ignani. Apropros to the last point:

Q. The Senate Finance Committee has been having trouble coming up with the money for the health care bill, which is the reason they’re talking now about windfall profits taxes on insurers and taxes on companies that sell high-cost policies. Since you’re opposed to both of those, what would you propose as an alternative?

A. I think the country has to get serious about bending the cost curve…We think there needs to be incentives for things to happen over the next few years that can reduce the rate of increase in health care costs, but there should be a commission, a broad commission not simply looking at Medicare, but a broad commission to monitor the progress and to make recommendations if goals are not achieved.

Q. Should there be some kind of mechanism for an across-the-board cut [in health spending]?

A. I think we have to look at those sorts of things. It doesn’t have to happen right away, but having a commission, having a mechanism, would give every stakeholder group an incentive to create more productivity, to reduce unit costs and to create more efficiency. And those are the kinds of incentives that I think the system needs.

The Wall Street Journal posed a series of questions and answers about health care reform. The first Q and partial A was this:

How would the bills impact the health insurance of members of Congress and other federal employees? What is their coverage like?

It’s likely that the bills would affect members of Congress about as much as anyone who currently has a relatively generous plan from an employer – not a great deal, at least in the short term.

The short term would end in 2019 under the House bill.

U.S. News and World Report announced today that “U.S. scientists [at the University of North Carolina, Chapel Hill] have decoded the structure of an entire HIV genome, a breakthrough which could improve understanding of how the virus infects humans and could lead to the development of new antiviral drugs.” It’s my expectation (hopefully not a pipe dream) that the decoding of the human genome and related developments such as this will lead to major healthcare advances before long. That’s why I hope that the health care reform being shaped by Congress promotes health care innovation.

AHIP President Karen Ignani came to the defense of the health care industry today. In pertinent part she said

The country is at a critical juncture. August will be the month when the country decides whether it supports reform and what shape it should take. It is crucial that the American people understand the broad consensus that exists on the essential building blocks for bipartisan reform. “With that in mind, there are five facts we believe all Americans should know:

• Health plans have proposed comprehensive health care reform to cover all Americans, make care more affordable, and improve quality.

• Health plans proposed health insurance reform last year.

• Health plans have proposed far-reaching initiatives to bend the health cost curve and make care more affordable for individuals, families, and employers.

• Health plans are advocating and advertising in support of bipartisan reform.

• Out of every dollar the nation spends on health care, one penny goes to health plan profits.

“Our community includes thousands of dedicated, conscientious Americans who are working hard across the country to try and improve health care. They are ordinary Americans from all walks of life who are raising their families and contributing to their communities. They do not deserve to be demonized or vilified as part of a campaign to distract attention away from the sinking support for a government-run program.”

My sentiments exactly.Preferred provider network vendor Multiplan announced today that it is acquiring Viant which owns the Beech Street preferred provider network. “The transaction is expected to close before the end of the year, subject to satisfaction of closing conditions including customary regulatory approvals. Financial terms were not disclosed.”

OPM has posted on the web its proposed 2010 – 2015 strategic plan. OPM currently is soliciting public comment on the plan. The plan assumes status quo for the FEHB Program.

HHS announced today that it is transferring HIPAA Security Rule enforcement authority from the Centers for Medicare and Medicaid Services to the HHS Office for Civil Rights. OCR currently enforces the HIPAA Privacy Rule. “Through a separate delegation, CMS continues to have authority for administration and enforcement of the HIPAA Administrative Simplification regulations, other than privacy and security of health information.”

Sen. Charles Schumer (D N.Y.) told reports today that “Senate Democrats won’t hesitate to forgo [the Senate Finance Committee efforts at] bipartisanship to pass a health-overhaul bill if negotiations fail in the next month.” according to a Wall Street Journal report. The Politico reports that “internal [Finance Committee] clashes about the government insurance [or public] option have begun to spill into the open — as Sen. John Rockefeller (D-W.Va.) has gone public with his case against consumer-owned health care cooperatives . . . .” The Hill reports that Sen. Charles Grassley (R Iowa), one of the Finance Committee negotiators, is predicting a final vote on health care reform in mid November, shortly before Thanksgiving.

Finally, Business Insurance reports that Aetna is buying an employee assistance program provider from Psychiatric Solutions, Inc., for $70 million. “he Wall Street Journal, citing people familiar with the matter, reported that Aetna’s PBM was being shopped by investment banks, and potential purchasers included CVS Caremark Corp., Medco Health Solutions Inc. or Express Scripts Inc.”

On Friday, the House Energy and Commerce Committee by a 31-28 vote cleared for floor consideration its version of the House health care reform bill (HR 3200). According to Modern Healthcare,

The deal, offered in a series of amendments, would ensure that public plans compete with other plans on a level playing field, allow the CMS to negotiate drug prices with pharmaceutical companies, and help lower premiums and increase subsidies for working families.

In addition, the bill’s public plan would use a drug formulary to control prices, and pharmacy benefit managers would be subjected to additional transparency requirements. * * *

A bipartisan amendment that would establish a 12-year patent exclusivity period for follow-on biologic products was approved, although [Committee Chairman Henry] Waxman didn’t support it.

The Committee rejected also by a 31-28 vote a a Republican amendment that would have opened the Federal Employees Health Benefits Program to the general public. The Chairman declined to consider on procedural grounds a proposed amendment that would have required all elected federal officials to participate in the public option created by the bill.On the Senate side, Senate Finance Committee Chairman Max Baucus advised that September 15 is the deadline for reaching agreement on a bipartisan measure according to a Politico report. “Baucus is also working to bring several governors to Washington next week to discuss the impact of expanding Medicaid on state budgets, according to a congressional source.”
While the House has recessed for the month of August, the Senate will be in session for another week to consider Judge Sonia Sotomayor’s Supreme Court nomination and the cash for clunkers extension. Kaiser Health News reports that the House majority and minority leadership sent their respective members home with talking points. The Speaker’s talking points build on her recent attack on the health care industry. The Politico reports that

“The glory days are coming to an end for the health insurance industry in our country,” Pelosi told reporters Friday afternoon. “This is about inoculating against misrepresentations and educating about what is in the bill,” she said. “We all want bipartisanship…but you’re either with the insurance companies or you’re for something new.”

The Office of Personnel Management announced today that the next federal benefits Open Season will be held from November 9 through December 14, 2009. The next step will be for OPM to announce 2010 FEHB plan premiums in mid-September. During the Open Season, federal and postal employees and annuitants can make enrollment changes in their FEHB plan coverage, FEDVIP coverage, and more.

Govexec.com reports that the Office of Management and Budget gave contracting guidance to federal agencies. The changes do not appear to impact FEHBP contracting.

The Associated Press reports that the Blue Dog Democrats and the House leadership reached a compromise today that permits the Energy and Commerce Committee to continue its mark up of HR 3200, the House health care reform bill.>

The agreement would allow a committee vote, preserving momentum on President Barack Obama’s top domestic priority.The deal calls for exempting more small businesses from a requirement to offer coverage, trimming subsidies to help people buy health insurance, and making any government-sponsored insurance plan negotiate payment rates with medical providers — instead of dictating them.

The Politico reports that liberal Democrats are upset with the deal which is at odds with the version of the bill cleared by the House Education and Labor and Ways and Means Committees. The House Rules Committee is responsible for reconciling conflicting versions of bills approved by different standing committees. No floor vote would occur until September.
Meanwhile the Wall Street Journal reports that

In the Senate, Finance Committee Chairman Max Baucus (D., Mont.) said his effort to build a bipartisan bill is advancing. He cited an estimate by the nonpartisan Congressional Budget Office that the bill in the Senate Finance Committee would cost less than $900 billion over a decade — less than other versions of the health legislation in the House and Senate — and ensure insurance coverage for 95% of Americans. Together, the developments suggested that Democrats are likely to avoid their worst-case scenario — a breakdown of talks before the August recess. But they are still far from agreement on the final contours of the legislation.

The AP reports that “Top House Democrats sought to minimize the impact of a near-certain missed deadline for health care legislation on Tuesday as the leadership struggled to ease the concerns of rank-and-file critics.”

The Government Accountability Office placed the Postal Service on its list of high risk government programs. The Federal Times notes that “GAO says the Postal Service must take a number of steps to remove itself from the high-risk list. One is reducing its labor costs, through some combination of early retirements and lower benefit costs; GAO notes that the Postal Service pays a higher percentage of employee health benefits, 80 percent, than most federal agencies, 72 percent.” What GAO evidently misses is that the Postal Service’s higher FEHBP contributions result from collective bargaining with the postal unions.

Govexec.com reports that OPM will be posting on the web its proposed strategic plan for public comment. OPM’s recent strategic plans are available here.

The FEHBlog was offline yesterday for the Weekend Update so I will try to catch up today.

Both the Hill newspaper and I misread Speaker Pelosi’s comment last Thursday about the month of August. We each thought that she, like Sen. Harry Reid, was throwing in the towel on passing the health reform legislation before the recess, but that was not the case. She continues to advocate for floor action but the House Energy & Commerce Committee mark up remains in limbo. Over the weekend, the CBO released a letter estimating that an approach to controlling Medicare costs favored by the White House and the Blue Dogs would only save $2 billion over ten years. Modern Healthcare reports that the Committee’s markup may resume on Wednesday.

The Wall Street Journal reports tonight that

In an effort to gain momentum, Democratic leaders Monday focused their
statements on insurance companies, saying insurers have made huge profits over
the last several years while Americans have been asked to pay more for their
health care. “The status quo is indefensible,” said House Majority Leader Steny
Hoyer (D., Md.).

According to Reuters, the House leadership also relied on on a CBO letter suggesting that the House bill would not have the harmful impact on employer sponsored coverage predicted by the Lewin Group study, which was updated today. Nevertheless, “[t]he latest CBO analysis also said the healthcare reform proposal would increase budget deficits in the long run.”

The Federal Times reports on the potential impact of the 1000+ page House bill on the FEHB Program. Most significantly, “Dan Adcock, legislative director for the National Active and Retired Federal Employees Association, * * * said that after a reform bill is passed, the government may have to extend FEHBP coverage to seasonal or temporary employees — who are currently ineligible for the plan — or contribute funds to cover the cost of those employees’ insurance.”

Meanwhile, the AP reports that the Senate Finance Committee continues to be engaged in a bipartisan effort.

[Anonymous officials] said any legislation that emerges from the talks is
expected to provide for a nonprofit cooperative to sell insurance in competition
with private industry, rather than giving the federal government a role in the
marketplace. The White House and numerous Democrats in Congress have called for
a government option to provide competition to private companies and hold down
costs.

One of the senators involved in the talks, Olympia Snowe, R-Maine,
confirmed that co-ops are the preferred approach. “The co-op is certainly one of
the prominent options that is on the table,” Snowe told reporters after the
group met Monday. “It’s safe to say that’ll probably remain in the final
document.”

Officials also said a bipartisan compromise would not subject companies to a penalty if they declined to offer coverage to their workers. Instead, these businesses would be required to reimburse the government for part or all of any federal subsidies designed to help lower-income employees obtaininsurance on their own.

Snowe said the idea is to discourage employers from dropping coverage because under the plan their workers could get government assistance to pay premiums. “We don’t want to undermine (employer coverage) or create a perverse incentive where employers potentially drop coverage because their employees can get subsidies,” she said.

In other Hill news, on Wednesday the Senate Homeland Security and Governmental Affairs Committee will mark up bill (S. 1507) to provide the U.S. Postal Service with financial relief from its obligation to pay employer contributions toward retiree coverage for FEHBP coverage. Govexec.com reports that Sen. Tom “Carper [(D Del.)] expects to pass the bill before Congress leaves for recess in August. The House Oversight and Government Reform Committee approved H.R. 22 on July 10, which also would afford the Postal Office some debt relief, though not as much as Carper’s bill.”

In legal news, last week Judge Patty Saris of the U.S. District Court for the District of Massachusetts approved the McKesson piece of the average wholesale price (“AWP”) fixing case, which creates a $380 million pot to be shared by third party payers, consumers, and of course lawyers. The appeal of Judge Saris’s earlier order approving the First Databank AWP rollback settlement in this case will be argued before the First Circuit tomorrow. I read the objector’s reply brief and I think that they have a strong case. Basically, the objecting pharmacies argue that the financial consequences of the rollback fall on them. Therefore, the plaintiffs were obligated by Rule 19, Fed. R. Civ. P. to join them as defendants in the lawsuit. The settlement fails because they weren’t so joined.