• As I have been blogging about FEHBP contribution news, you may want to read this San Francisco Chronicle article about the Kaiser Health Plan’s “steep” 2007 FEHB premium increase.

• Next week is the OPM / AHIP FEHBP carrier conference. At last year’s conference, the OPM Director shared with the attendees her experiences in shopping for LASIK treatment to correct her vision. Last month, Health Affairs published an article by two researchers from the Center for Studying Health System Change which concludes as follows:
  

  An analysis of the LASIK market revealedlimited shopping overall, despite the fact that patients paythe full cost. For other self-pay procedures, consumers shopeven less, for reasons ranging from urgency, to costs of obtainingprice quotes, to quality concerns that prompt many consumersto rely on word-of-mouth recommendations. Given that consumershopping is not prevalent in most self-pay markets, we expectthe extent of shopping to be even more limited for many servicescovered by insurance.

  It seems to me that the researchers are jumping the gun on their conclusion as time is required for consumers to change their habits.

• In an accompanying article, the Center’s President “cautions that simply giving consumers a price list of ‘a la carte” services does little to help them make informed choices about which providers will cost less for an episode of care, let alone which providers offer the best value—or the optimal combination of the lowest cost and highest quality.”

• In a battle for Caremark follow-up, Express Scripts has appealed the Delaware Court’s decision denying Express Script’s an injunction against a Caremark shareholder vote on the CVS merger proposal. Express Scripts argues that Caremark has failed to provide its shareholders with the full disclosures about the CVS deal required by that court.

• Florida Blue Cross has opened a “store” in Jacksonville, Florida, to sell health, dental, and life insurance and provide consumer seminars, which the organization describes as a “a new concept in retailing geared to assist consumers’ navigation of the health insurance market.

• Following up law that Congress passed in December 2006 modifying the health savings account (HSA) law (Internal Revenue Code § 223), the Internal Revenue Service issued guidance for employers to transition employees from health reimbursement arrangements (“HRA”) and flexible spending arrangements (“FSA”) to HSAs.

• Finally, the New York Times reported on a CBS News / New York Times survey which finds health care to be the number one concern of Americans. According to this report, “Nearly two-thirds said the federal government should guarantee health insurance for all Americans and half said they would be willing to pay as much as $500 more in taxes a year for universal coverage.” If anyone believes that $500 in taxes will provide universal health coverage, I will offer them the Brooklyn Bridge. I attended an ABA Emerging Healthcare Issues conference last week where I heard a German lawyer explain that their universal healthcare system is funded with a 15% payroll tax (capped at $4600 per month). That’s more than what U.S. taxpayers currently pay for Social Security and Medicare.

The AMA News reports (subscription required) on a United Healthcare policy to be implemented tomorrow that will “fine” network doctors $50 or more whenever they fail to refer patients to United’s exclusive network laboratory, Labcorp. According to the AMA News,

“United’s decision to penalize doctors has its roots in a deal the plan executed as of Jan. 1. On that date, it began a 10-year agreement with Laboratory Corp. of America that made the Burlington, N.C.-based company United’s exclusive national supplier of lab services. Left out is the company with which LabCorp is fighting for the largest share of the $40 billion clinical lab market — Lyndhurst, N.J.-based Quest Diagnostics.“

Needless to say the medical community is not pleased with this decision and for example the Connecticut State Medical Society is soliciting the State Attorney General’s assistance.

Govexec.com reports that House Majority Leader Steny Hoyer (D Md.) plans to reintroduce a bill that would increase the Government contribution toward FEHB plan coverage from 72% of the enrollment weighted average capped at 75% of the actual plan premium to 80% of the enrollment weighted average capped at 83% of the actual plan premium.

Steve Barr reports in his Washington Post column this morning that the Congressional Budget Office released a Budget Options report that identifies as an option (p. 162) basing the Government contribution toward annuitant coverage on years of Government service, similar to the President’s budget proposal. Mr. Barr doubts that this proposal will have traction on Capitol Hill.

Interestingly, the Budget Options report also identifies as an option for Congress replacing the current government contribution formula with a voucher. The current Government contribution formula is 72% of the enrollment weighted average premium capped at 75% of the actual FEHB plan premium selected by the enrollee. Under the CBO’s approach, an enrollee would receive a voucher that he or she could use to pay for his or her FEHB plan coverage. The report explains (p. 160) that

This option would offer a flat voucher for the FEHB program that would cover roughly the first $3,600 of premiums for individual employees or retirees or the first
$8,400 for family coverage. Those amounts, which are based on the government’s average expected contribution in 2007, would increase annually at the rate of inflation rather than at the average weighted rate of change for premiums in the FEHB program.

* * * Insurers would have greater incentive to offer more-efficient and lower-cost plans to attract participants, because enrollees would pay nothing for plans costing the same as or less than the amount of the voucher.

This option would have several drawbacks, however. First, the average participant would probably pay more for his or her health insurance coverage. Second, large
private-sector companies currently provide better health benefits for employees (although not for retirees) than the government does; that discrepancy would increase under this option, making it harder for the government to attract highly qualified workers. Third, in the case of current federal retirees and long-time workers, this option would cut benefits that have already been earned. Finally,
it could strengthen existing incentives for plans to structure benefits so as to disproportionately attract people with lower-than-average health care costs. That “adverse selection” could destabilize other health care plans.

CBO projects that this option “would reduce discretionary spending (because of lower payments for current employees and their dependents) by $100 million in 2008 and by a total of $5.1 billion over five years. It would also reduce mandatory spending (because of lower payments for retirees) by $100 million in 2008 and by $4.6 billion over five years.”

Please bear in mind that CBO is offering options in this report, not making recommendations, according to the Report’s introduction.

Paul Feldman, deputy director of the Health Privacy Project, resigned as co-chair of the AHIC confidentiality, privacy and security workgroup in protest of the group’s allegedly slow pace. Public reaction to this resignation was mixed according to Modern Healthcare.

Govexec.com reported yesterday that over 400,000 federal employees and annuitants enrolled in the new supplemental dental program and over 300,000 enrolled in the new supplemental vision program. “Of the dental insurance, MetLife was by far the most popular, with more than 250,000 enrollees. BCBS took the lead for vision insurance with more than 198,000, according to OPM data.” Rep. Tom Davis (R Va.) wrote a letter to OPM Director Linda Springer encouraging her to “identify ways that the federal government can leverage this large pool to ensure that participants are receiving the best dental and vision products and services at the lowest cost to the participants.”

Yesterday, a Delaware state court judge refused to block a vote on the CVS – Caremark merger proposal although he did require Caremark to notify shareholders of their rights to vote no or ask a Delaware court to appraise the CVS proposal. Businessweek observed that the court’s “determination that Caremark shareholders are due appraisal rights means they can seek court intervention if they don’t think they’re getting fair value for their holdings. The result, [plaintiff’s attorney] Grant said, is that CVS will be pressured to match Express Scripts in making an attractive offer.”

This morning, Caremark issued the required notice to its shareholders and set March 16 as the date for a shareholder meeting and vote on the CVS merger proposal. Express Scripts, the other competitor in the Battle for Caremark, again offered to sit down with Caremark to discuss its proposal.

Meanwhile, Medco, which reported strong 4th quarter 2006 results, offered the following CEO comments on the battle for Caremark:

Snow said in an interview that Medco, which handles prescriptions for 60 million Americans, should benefit whoever acquires the industry’s No. 2 — Caremark Rx Inc. It is weighing competing bids from another rival, Express Scripts Inc., and drugstore chain CVS Corp. Other pharmacy chains wanting to partner with a neutral prescription benefit manager now are negotiating attractive deals with Medco, Snow said, adding some current Caremark clients may defect. Should Express Scripts win out, he said, the combination would be bigger than Medco. But Snow said Caremark’s customer service has been suffering since it acquired AdvancePCS in 2004. CVS has been telling Caremark shareholders that a Caremark-Express Scripts deal would likely cost the merged company $8 billion in annual revenue from dissatisfied customers bailing out. Speller said Medco can grab those “crumbs” and if the battle is prolonged, will be “in the catbird seat” for picking up business from plans wanting to avoid uncertainty at Caremark and Express Scripts.

President Bush held another roundtable discussion on health care issues in Chattanooga, TN today. HHS Secretary Leavitt and Tennessee’s governor participated in the meeting. On a related note, CMS researchers published a report in Health Affairs concluding that as a result of Medicare Part D, the government is now picking up 45% of the Nation’s health care tab, which is expected to double by 2016. The abstract reads as follows:

Growth in national health spending is projected to slow slightly from 6.9
percent in 2005 to 6.8 percent in 2006, marking the fourth consecutive year
of a slowing trend. The health share of gross domestic product (GDP) is
expected to hold steady in 2006 before resuming its historical upward trend,
reaching 19.6 percent of GDP by 2016. Prescription drug spending growth is
expected to accelerate to 6.5 percent in 2006. Medicare prescription drug
coverage has dramatically changed the distribution of drug spending
among payers, but the net effect on aggregate spending is anticipated to be
small.

Fun fact to know and tell — At a healthcare conference that I attended last week at American University, a speaker said that Medicaid’s prescription drug costs are only 10% of the total expenses due to the statutorily mandated price controls. The prescription drug expenses in FEHB plans and ERISA plans tend to range from two to three times higher. Quite a difference.

GCN.com reports that the Office of Management and Budget plans to grade OPM on how well the Federal Employees Health Benefits Program provides heath care quality and pricing information to FEHB plan members under the President’s August 21, 2006, Executive Order. Karen Evans, OMB’s administrator for e-government and ITtold GCN.com that “We will use a scorecard-like approach, starting in our June 30 President’s Management Agenda scorecard, to measure their progress against price and transparency in using health IT.” The Defense Department, the Veterans Affairs Department, and the Health and Human Services Department also will receive a report card.

According to Govexec.com, Rep. Tom Davis (R. Va.) reintroduced a bill last week that would allow federal and military retirees the right to make their health plan contributions with pre-tax dollars (H.R. 1110). Currently, this right is restricted to active employees by the federal tax code. The bill was referred to the House Oversight and Government Reform Committee, which favors the bill, and the House Ways and Means Committee. Former House Ways and Means Chairman Bill Thomas had actively opposed this bill, but he is no longer in Congress and the Ways and Means Committee is now chaired by a Democrat, Charlie Rangel of NY. As this bill would produces a loss in tax revenues, the new “pay go” rule may present an obstacle, but this is a major legislative initiative for NARFE and the Military Coalition.