Happy Memorial Day weekend, everyone.

• Following up last Thursday’s post, the AP expanded on Senator Baucus’s health care reform comments to report that “the health overhaul would cover nearly everyone _ 94 percent to 96 percent of the population _ but not undocumented workers. The current system covers 86% according to the same article. Also the American Hospital Association weighed in with Sen. Baucus’s Finance Committee on the public plan option under consideration. According to Modern Healthcare,
  

  A chief concern, the AHA letter states, centers on a history of government
  underpayments in programs such as Medicare and Medicaid. According to a 2007 AHA survey, 58% of U.S. hospitals, or 2,840, said they were not paid their cost for providing care to Medicare patients. With Medicaid, hospitals lost some $10.4 billion in 2007 due to payment shortfalls.

• The American Hospital Association also wrote to the Justice Department raising antitrust concerns about health plan consolidation. America’s Health Insurance Plans (AHIP) retorted in a press release that
  

  “A recent letter from American Hospital Association to the Department of
  Justice (DOJ) asks the department to take a ‘more aggressive role in
  understanding how health plan market power and consolidation harm hospitals and other providers.’ This letter uses erroneous data to draw an erroneous
  conclusion that, unfortunately, is being used today by advocates for creating a
  public program in health care reform to justify their position.

  “We are forwarding today to the DOJ a letter reiterating our concerns with hospital consolidation through merger and affiliation, and its effect on costs for
  consumers. As the nation pursues health care reform, our public discourse
  must be based on the facts and must be focused on what the outcome of our
  discussion will mean for consumers and the economic health of our nation.”

• Also speaking of hospitals, the New York Times reported on a new trend in hospital construction to utilize private rather than semi-private rooms. That will have an interesting impact on health plan benefits which are based on semi-private room coverage. In that regard, the actuarial consulting firm Milliman released its fifth annual Medical Index. According to a Milliman press release,
  

  Key MMI findings include:

  The total 2009 medical cost for a typical American
  family of four is $16,771, compared with the 2008 figure of $15,609. This is a
  7.4% increase from 2008 to 2009.

  This is the third straight year of decreasing cost trends. Even so, the $1,162 increase is the highest since the 2006 increase of $1,169, when cost trends were at 9.6%.

  Every category of costs except inpatient and outpatient facility care experienced lower cost trends than last year.

  This is the third consecutive double-digit percentage increase in the amount that employees spend for healthcare services. This is primarily due to increased employee contributions, as out-of-pocket cost-sharing trends were more modest.

  The current economic environment has significant implications for healthcare costs. The consequences of employers’ lost business, consumer insecurity, and provider revenue pressures affect healthcare utilization, charges for healthcare services, and who pays for the healthcare. The unprecedented uncertainty has accelerated cost increases in some ways and at the same time has reduced certain categories of utilization (e.g., electiveprocedures).

• The American Medical Association and the American Association of PPOs partnered on a health care provider contracting toolkit, an encouraging development. According to the AMA press release,
  

  The toolkit provides quick reference documents on several key issues that arise during the contracting process, including:

  Responsibilities of PPNs/Payers
  Physicians Contracting with PPNs
  Assessing Network Value
  Primary/Secondary Network Matrix
  Understanding Silent PPOs

  The toolkit is available in hard copy, or can be accessed online at AAPPO and AMA Web sites.

• Government HIT News reports that “The Office of the National Coordinator for Health Information Technology (ONC) has proposed developing a Web site containing facts about personal health record (PHR) systems and the privacy policies related their use to help consumers make informed decisions.

According to the Hill, Senate Finance Committee chairman Max Baucus is predicting 75% to 80% chance of passing health reform this year. I think that the chances of health care reform are high, and President Obama certainly has learned from his Secretary of State’s mistakes in 2003, but it is risky to count your chickens before they hatch. I am puzzled by the fact that the Medicare trustees’ recent announcement of the impending collapse of the Medicare Part A trust (indeed before I’m eligible) is not raising more alarms. The Administration is arguing that universal health care will solve the Medicare trust problem. “Just as families, communities and businesses are struggling under the crushing burden of skyrocketing healthcare costs, so too are our Medicare Trust funds,” said [HHS Secretary Kathleen] Sebelius. “This isn’t just another government report. It’s yet another sign that we can’t wait for real, comprehensive health reform.” I can’t see the connection. The Financial Times offers an interview with OMB Director Peter Orzag who said “’We have been very clear that a deficit-increasing healthcare reform is neither practical nor desirable.’” A senior administration official told the FT that health reform would have to be deficit-neutral over 10 years and in the tenth year, and promise substantial savings over the longer term.” That obviously is easier said than done, and I expect that in the end the medical community will get jittery over reform. Of course, the health insurance industry already is.

• Senator Joe Lieberman (I Ct), who chairs the Senate committee with FEHBP oversight responsibility, announced today that he, joined by “Ranking Member Susan Collins, R-Me., and Reps. Tammy Baldwin, D-Wisc., and Ileana Ros-Lehtinen, R-Fla., Wednesday introduced legislation to give the domestic partners of federal employees the same benefits – and require of them the same obligations – as the spouses of federal employees.” Sen. Lieberman has introduced this bill in several past Congresses, but it appears to me that the bill can succeed in this Congress because it has an Administration which supports it.
• Recently, the President urged OPM to ramp up healthier fed initiatives. Many large employers have been requiring employees to complete health risk assessments as a precondition to participating in its health plan. Last year, according to CCH, federal regulatory agencies recognized that this practice does not violate HIPAA’s non-discrimination rules for group health plans. “These requirements do not violate HIPAA nondiscrimination provisions because enrollment is not conditioned on the employee’s health status or on attaining specified health outcomes (such as lowering cholesterol to a certain level or reducing weight to a certain target).” However, I noticed today that the EEOC General Counsel’s office has advised informally that this precondition violates the Americans with Disabilities Act:
  

  Title I of the Americans with Disabilities Act (ADA) limits when an employer
  may obtain medical information from applicants and employees. Before a job offer is made, the ADA prohibits all disability-related inquiries (i.e., questions
  likely to elicit information about a disability) and medical examinations, even
  if they are related to the job. After a conditional offer is made, an employer
  may ask disability-related questions and require medical examinations as long as it does so for all entering employees in the same job category. Once employment begins, an employer may make disability-related inquiries and require medical examinations only if they are job-related and consistent with business necessity. See 42 U.S.C. § 12112(d); 29 C.F.R. §§ 1630.13, 1630.14; EEOC Enforcement Guidance on Disability-Related Inquiries and Medical Examinations of Employees Under the ADA, 8 Fair Empl. Prac. Man. (BNA) 405:7701 (“Enforcement Guidance”). (This document is available on our website at http://www.eeoc.gov/policy/docs/guidance-inquiries.html.)

  Although the Commission has not taken a formal position on the question you
  have asked, requiring that all employees take a health risk assessment that
  includes disability-related inquiries and medical examinations as a prerequisite
  for obtaining health insurance coverage does not appear to be job-related and
  consistent with business necessity, and therefore would violate the ADA. A
  disability-related inquiry or medical examination of an employee may be
  job-related and consistent with business necessity when an employer “has a
  reasonable belief, based on objective evidence, that: (1) an employee’s ability
  to perform essential job functions will be impaired by a medical condition; or
  (2) an employee will pose a direct threat due to a medical condition.” Id.
  Q&A 5, at 405:7708. The Enforcement Guidance further notes that an employer may seek disability-related information or require a medical examination that follows up on a “request for reasonable accommodation when the disability or need for accommodation is not known or obvious,” id. Q&A 7 & 10, at 405:7711, 7713; or where the examination or other monitoring is conducted under specific circumstances not applicable here (e.g., where periodic medical examinations are required of employees in positions affecting public safety). Id. Q&A 14-20, 405:7715-18.

• On the health care reform front, Modern Healthcare reports that the Senate Finance Committee members had a productive eight hour session discussing how to finance universal coverage, but no decisions were reached. Meanwhile, Senate and House Republicans introduced a healthcare reform bill called the Patients’ Choice Act of 2009.

• On Wednesday, the Senate Finance Committee will walk through a set of policy options outlined in this white paper to create funding for health care reform. All sorts of tax changes have been placed on the table. According to the Committee, “The policy options focus on increasing payment accuracy and reducing disparities in payment and spending amounts among different geographic regions across the country. Additionally, tax provisions are included that promote wellness and healthy lifestyle choices, as well as proposals President Obama included in his budget.”
• Congress has sent to the President for his anticipated signature the Fraud Enforcement and Recovery Act of 2009 (S. 386) which bolsters the False Claims Act. The False Claims Act protects the federal government against contractor fraud. Modern Healthcare explains that “The changes to the False Claims Act come in response to a perception among some lawmakers that recent federal court decisions potentially restrained the law from achieving what Congress intended. False claims lawsuits often target hospitals, physicians and pharmaceutical companies because their businesses receive massive sums of federal dollars.”
• The Federal Times reports that “The executive branch will grow [by 140,000 new employees] to more than 2 million civilian employees for the first time in 15 years, under President Barack Obama’s 2010 budget plan.” That’s 140,000 potential new FEHBP enrollees.

• On Thursday, the AP reported that House Democrats are developing a health care reform plan that would create universal coverage.
  

  The plan by the House Energy and Commerce Committee would build on the current system in which employers, government and individuals share responsibility for health insurance. But it would make major changes: Individuals and employers would face new obligations to help pay for coverage. Insurers would operate under stricter consumer protections. And the government would take added responsibilities for setting insurance rules and providing financial help to low- and middle-income families. * * *
  The House plan also includes a government insurance program to compete with private companies. It would be financed by premium payments, not taxpayer dollars. * * *
  Individuals would be required to get coverage, either through an employer or government plan, or on their own. Employers would be required to provide coverage or pay the government a percentage of payroll. Individual subsidies for health insurance would be offered on a sliding scale to those earning up to four times the federal poverty level, or $88,200 for a family of four, according to the document.

  The AP article also states that “Momentum for a health care overhaul built this week after Obama obtained a pledge from medical providers to help find $2 trillion in savings over 10 years to help pay for his plan.” However, according to a New York Times article also published on Thursday,

  Health care leaders who attended the [“pledge”] meeting [with the President] have a different interpretation. They say they agreed to slow health spending in a more gradual way and did not pledge specific year-by-year cuts. “There’s been a lot of misunderstanding that has caused a lot of consternation among our members,” said Richard J. Umbdenstock, the president of the American Hospital Association. “I’ve spent the better part of the last three days trying to deal with it.” * * *
  The Washington office of the American Hospital Association sent a bulletin to its state and local affiliates to “clarify several points” about the White House meeting.In the bulletin, Richard J. Pollack, the executive vice president of the hospital association, said: “The A.H.A. did not commit to support the ‘Obama health plan’ or budget. No such reform plan exists at this time.”Moreover, Mr. Pollack wrote, “The groups did not support reducing the rate of health spending by 1.5 percentage points annually.” He and other health care executives said they had agreed to squeeze health spending so the annual rate of growth would eventually be 1.5 percentage points lower.

• Government HIT News reported that
  

  A high-level committee set up to advise the Office of the National Coordinator for Health Information Technology pledged Friday to concentrate on forming health IT standards that support the practical daily work of physicians and hospitals.

  Members of the Health IT Standards Committee, in its first meeting since being created by the economic stimulus law, said it would create three work groups to pursue that agenda in the areas of clinical operations, clinical quality, and privacy and security.
• President Obama appointed New York City Health Commissioner Dr. Thomas Frieden to head the U.S. Centers for Disease Control and Prevention. This appointment does not require Senate confirmation. Modern Healthcare reports that the appointment has received plaudits from public health advocacy groups.
• The IRS announced on Friday the maximum health savings account contribution amounts and high deductible health plan minimum deductibles and out-of-pocket ceilings for 2010 according to Business Insurance.

• The Senate Finance Committee held a closed meeting today on its white paper about expanding health care coverage. Modern Healthcare reports that “’There are a lot of questions, not a lot of concrete answers,’ committee Chairman Max Baucus (D-Mont.) told reporters after the 8-1/2 hour ‘walkthrough.’ But the senator also said that the purpose of the meeting was to spur conversation, not hammer out a deal.” Meanwhile the Washington Post reports that House Republicans have asked for a health care reform meeting with President Obama. And Reuters reports that John Lechleiter the CEO of drug manufacturer Lilly advised that
  

  some proposals under discussion in Congress “will have unintended side effects” that could discourage development of new medicines. “The encouragement of innovation does not even seem to be on the table in today’s policy discussions,” he said. Lechleiter said allowing Medicare to negotiate drug prices and having the government offer its own insurance plan to compete with private insurers could be harmful.

  I agree that the current rush to health care reform could wind up impairing innovation.

• Prescription drug benefit manager Medco issued its 2009 Drug Trends report.
  

  As predicted, specialty drug trend accelerated dramatically, from 12.4% in 2007 to 15.8% in 2008. In addition, the price inflation of branded pharmaceuticals increased more than 8%. Despite these trends, Medco clients in 2008 realized an average drug trend of 3.3%—a small increase from our all-time low in 2007.

  Among the insights revealed in this year’s report:

  • The weak economy drove renewed interest in generics, as the generic dispensing rate increased 4.4% to 64.1%.

  • About 30% to 40% of the medicines currently in the pipeline are specialty drugs, with nearly 25% of those targeting very rare conditions.

  • Biologic or protein-based drug therapies account for about 16% of prescription drug spending and are growing at a much faster rate than other drug categories.

  • Branded drug price inflation and unit-cost growth will be moderated by the wave of first-time generics in high-cost categories, which is expected to peak after 2011.

  It’s always fun reading. And while on the topic of PBM’s, Business Insurance reports that CIGNA may tear a page out of Wellpoint’s playbook and sell off its own PBM. Aetna and United Healthcare also have their own PBMs.

• Finally, AHIP released its annuals census on health savings account owners. The census disclosed that “Eight million Americans are covered by Health Savings Account (HSA)-eligible insurance plans, an increase of more than 31 percent since last year.” AHIP also released a report on the income characteristics of HSA owners. According to the AHIP press release,
  

  Key findings from the census include:

  There was an increase of approximately 1.9 million Americans enrolled in an HSA plan since January 2008. Previous AHIP census reports found that 6.1 million were enrolled in January 2008, 4.5 million were enrolled in January 2007, 3.2 million were enrolled in January 2006, and 1.0 million were enrolled in March 2005.

  30 percent of individuals covered by an HSA plan were in the small group market, 47 percent of individuals covered by an HSA plan were in the large-group market, and the remaining 23 percent were in the individual market.

  A majority of HSA enrollees are covered by Preferred Provider Organization (PPO) products (83 percent) and Health Maintenance Organization (HMO) products (10 percent). In the individual market, almost 92 percent of enrollees in HSA plans were in PPO products, while approximately 85 percent of enrollees in large-group and 76 percent of enrollees in small-group HSA plans were in PPO plans.

  States with the highest levels of HSA/HDHP enrollment were California (854,000), Florida (524,000), Illinois (497,000), Texas (476,000), Ohio (464,000), and Minnesota (388,000).

  Key findings from the income characteristics analysis include:

  Households with a wide range of incomes hold HSA accounts, with
  almost half (49 percent) of accountholders living in neighborhoods with median
  incomes under $50,000 (incomes based on 2000 Census data).

  Average total deposits (including personal deposits, employer contributions, and interest) for all HSA accounts were $1,634 and average total withdrawals
  (including fees) were $1,063.

• The White House press office announced today that “the President will direct the Office of Personnel Management to work with the Office of Health Reform, the National Economic Council, the Department of Labor, and the Office of Management and Budget to examine successful employer wellness and prevention practices that lower health care costs and improve employees’ health and to explore the feasibility of developing such a plan for federal employees and their workplaces.” OPM already has created the healthierfeds program.
• The Medicare Program trustees announced today that the Medicare Part A trust fund will be exhausted in 2017, two years earlier than the 2019 projection made last year. Medicare Part A funds hospital benefits. According to a summary of that report,
  

  The Medicare Report shows that the [Medicare Part A / Hospital Insurance or HI] Trust Fund could be brought into actuarial balance over the next 75 years by changes equivalent to an immediate 134 percent increase in the payroll tax (from a rate of 2.9 percent to 6.78 percent), or an immediate 53 percent reduction in program outlays, or some combination of the two. Larger changes would be required to make the program solvent beyond the 75-year horizon. The projected exhaustion of the HI Trust Fund within the next eight years is an urgent concern. Congressional action will be necessary to ensure uninterrupted provision of HI services to beneficiaries. Correcting the financial imbalance for the HI Trust Fund—even in the short range alone—will require substantial changes to program income and/or expenditures.

  Medicare Part B which funds medical benefits and Part D which funds prescription drug benefits are not at risk because those programs can tap into general tax revenues.

• The Senate Finance Committee held a round table discussion today on financing comprehensive health care reform. Business Insurance reports that experts testifying at the hearing encouraged the Committee to consider capping the tax exclusion on employer furnished health benefits as well as increasing taxes on alcoholic and carbonated beverages and fatty and salty foods.
• The Politico reports that on Thursday the Senate Finance Committee will consider a Committee white paper on proposals for expanding health care coverage in the U.S.
  

  The paper refers to the requirement to buy insurance not as a mandate but as “a personal responsibility” to own health coverage.

  Obama opposed an individual mandate during the campaign — and frequently criticized his primary election opponent, Hillary Rodham Clinton, for proposing one. But since taking office, he has declined to rule out any specific proposals.

  In addition, the committee will weigh three options for a public health insurance plan that would allow all Americans to buy coverage through the government for the first time.

  But the committee might also reject the public plan all together, and rely instead on a “reformed and well regulated private market” to expand access to health insurance — a move that could help a sweeping health overhaul draw some Republican support.

• Finally the San Francisco Chronicle, the Hartford Courant, and the New York Times reported skepticism in certain quarters about the promise that major stakeholders made to the President yesterday on controlling health care costs.

The trade associations for American’s health insurers (AHIP), hospitals (AHA), doctors (AMA), pharmaceutical manfacturers (Phrma), and medical device manufacturers (Advamed) and a major labor union for health care workers (SEIU) met with President Obama today to promise “to do our part to achieve your Administration’s goal of decreasing by 1.5 percentage points the annual health care spending growth rate—saving $2 trillion or more” over the next decade. The organization acronym links to each organization’s press release about today’s activities.

The groups explain that

We are developing consensus proposals to reduce the rate of increase in
future health and insurance costs through changes made in all sectors of the
health care system. We are committed to taking action in public-private
partnership to create a more stable and sustainable health care system that will
achieve billions in savings through:
• Implementing proposals in all sectors of the health care system, focusing on administrative simplification, standardization, and transparency that supports effective markets;
• Reducing over-use and under-use of health care by aligning quality and efficiency
incentives among providers across the continuum of care so that physicians,
hospitals, and other health care providers are encouraged and enabled to work
together towards the highest standards of quality and efficiency;
• Encouraging coordinated care, both in the public and private sectors, and
adherence to evidence-based best practices and therapies that reduce
hospitalization, manage chronic disease more efficiently and effectively, and
implement proven clinical prevention strategies; and,
• Reducing the cost of doing business by addressing cost drivers in each sector and through common sense improvements in care delivery models, health information technology, workforce deployment and development, and regulatory reforms. These and other reforms will make our health care system stronger and more sustainable. However, there are many important factors driving health care costs that are beyond the control of the delivery system alone. Billions in savings can be
achieved through a large-scale national effort of health promotion and disease
prevention to reduce the prevalence of chronic disease and poor health status,
which leads to unnecessary sickness and higher health costs. Reform should
include a specific focus on obesity prevention commensurate with the scale of
the problem. These initiatives are crucial to transform health care in America
and to achieve our goal of reducing the rate of growth in health
costs.

The President was pleased. According to a White House press release,

These are important steps toward comprehensive health care reform both for the savings identified and the improvements these efforts will make to health care delivery in our country. Moreover, if groups as disparate as – AHIP, AMA, AHA, PhRMA, SEIU, and AdvaMed – can come together around the cause of cost-cutting and greater affordability, the possibility for fundamental reform in the weeks ahead is great.

• The House Ways and Means Committee has added a post about its health care reform conversation with HHS Secretary Sibelius held on May 6. There will be another health care reform round table before the Senate Finance Committee on May 12. The topic will be Financing Comprehensive Health Care Reform. The AP ran a story early this afternoon on the difficulty of financing reform. “The chairman of the Senate Finance Committee, Sen. Max Baucus, said ‘it’s clear that the financing of this is not going to be easy.’ Baucus, D-Mont., says the basic approach to health care must become more economically efficient.” In a possible answer to the Chairman’s prayers, the AP reports tonight that “Hospitals, insurance companies, drug makers and doctors planned to tell Obama on Monday [tomorrow] they’ll voluntarily slow their rate increases in coming years in a move that government economists say would create breathing room to help provide health insurance to an estimated 50 million Americans who now go without it.” This will be interesting.
• The New York Times featured an interesting story last week on the opposing viewpoints on the new comparative effectiveness movement.
  

  For now, proponents and critics are warily circling one another, as the first
  administrative steps of the process unfold.
  A panel of government health experts is holding a series of public hearings at which people can suggest medical conditions for comparative effectiveness reviews. Then, in late June, that federal panel and the Institute
  of Medicine, a part of the National Academies of Science, will issue reports
  recommending priorities for comparative research. Past combatants expect the fighting to start as soon as such studies start identifying winners and losers.

• Business Insurance reported on possible health insurer M&A activity in the offing spurred by health care reform.
• The Federal Times reports that “A bill that would provide four weeks of paid leave for new parents [who are federal employees] was approved by the House Oversight and Government Reform Committee on Wednesday [May 6]. HR 626, the Federal Employees Paid Parental Leave Act, was passed by a voice vote. It will now head to the full House, but a vote has not been scheduled.”

• The Obama Administration released its FY 2010 budget proposal on Thursday. Here’s what the OPM budget section says about the FEHBP:
  

  [OPM’s Human Resources and Products Services Division] HRPS operates the Federal Employees Health Benefits Program (FEHBP), which offers comprehensive and competitive benefits choices for Federal employees,
  annuitants, and family members, and helps the Federal government recruit and retain a high quality workforce. Through FEHBP, OPM will continue to
  provide customers with a variety of resources to make more informed
  health insurance decisions, including health plan brochures and
  website postings, health plan customer satisfaction survey results,
  web-based comparison/decision tools, and performance results
  for managed care health plans. OPM will work aggressively with
  health insurance plans to hold down premium costs while at the
  same time negotiating expanded coverage.

  The OPM budget section also discusses the Inspector General’s FEHBP related activities:

  In 2010, OIG will continue to develop its prescription drug audit program, which includes audits of pharmacy benefit managers. OPM estimates that approximately 26 percent of FEHBP expenses, or between $10 and $11 billion in 2010, will be for prescription drugs. Through these audits, OIG helps the FEHBP recover inappropriate charges, negotiate more favorable contracts,
  control future cost growth, and improve benefits provided to program
  enrollees.

  OIG will also continue its FEHBP data warehouse initiative in 2010. This project streamlines and enhances the various administrative and
  analytical procedures involved in the oversight of FEHBP. The purpose of the
  project is to capture data from experience-rated insurance carriers in a
  data warehouse of health care information. The system’s software tools support a variety of analytical procedures, including data mining, using the data in the warehouse. The project has facilitated more efficient and effective oversight of FEHB by enhancing the ability of auditors and investigators to identify improper payments.

  Finally, the section includes a projection of participants, which is extremely interesting, because it shows very little growth in active employees / federal employment (note that about 15% of eligible active employees do not enroll for FEHB coverage):

  Numbers of participants at the end of each fiscal year are as follows:

  2008 actual 2009 est. 2010 est.
  Active employees ………………………………………………….. 2,159,000 2,143,000 2,148,000
  Annuitants …………………………………………………………….. 1,867,713 1,896,000 1,923,000
  Total ……………………………………………………………………….4,026,713 4,039,000 4,071,000