The U.S. Government Accountability Office (GAO) released today a report titled “Federal Employees Health Benefits [FEHB] Program: Premium Growth Has Recently Slowed, and Varies among Participating Plans” GAO-07-141. The report was prepared for Senator Daniel Akaka (D Hawaii) whose staff has announced, according to the Washington Post, that the Senator plans to examine this topic as chairman of the Senate Homeland Security and Governmental Affairs subcommittee with responsibility for the FEHB Program.

The White House has released the health care proposals that President will make in his State of the Union address tomorrow night:

The President’s Plan Includes Two Parts: Reforming The Tax Code With A Standard Deduction For Health Insurance So All Americans Get The Same Tax Breaks For Health Insurance And Helping States Make Affordable Private Health Insurance Available To Their Citizens.

1. The President’s Plan Will Help More Americans Afford Health Insurance By Reforming The Tax Code With A Standard Deduction For Health Insurance – Like The Standard Deduction For Dependents. The President’s primary goal is to make health insurance more affordable, allowing more Americans to purchase coverage. The President’s proposal levels the playing field for Americans who purchase health insurance on their own rather than through their employers, providing a substantial tax benefit for all those who now have health insurance purchased on the individual market. It also lowers taxes for all currently uninsured Americans who decide to purchase health insurance – making insurance more affordable and providing a significant incentive to all working Americans to purchase coverage, thereby reducing the number of uninsured Americans.
   • Under The President’s Proposal, Families With Health Insurance Will Not Pay Income Or Payroll Taxes On The First $15,000 In Compensation And Singles Will Not Pay Income Or Payroll Taxes On The First $7,500.
   • At the same time, health insurance would be considered taxable income. This is a change for those who now have health insurance through their jobs.
   • The President’s proposal will result in lower taxes for about 80 percent of employer-provided policies.
   • Those with more generous policies (20 percent) will have the option to adjust their compensation to have lower premiums and higher wages to offset the tax change.
2. The President’s Affordable Choices Initiative Will Help States Make Basic Private Health Insurance Available And Will Provide Additional Help To Americans Who Cannot Afford Insurance Or Who Have Persistently High Medical Expenses. For States that provide their citizens with access to basic, affordable private health insurance, the President’s Affordable Choices Initiative will direct Federal funding to assist States in helping their poor and hard-to-insure citizens afford private insurance. By allocating current Federal health care funding more effectively, the President’s plan accomplishes this goal without creating a new Federal entitlement or new Federal spending.

Currently, the health benefits tax exclusion is only available when the health insurance/benefits are purchased within the workplace. Under the President’s proposal, the deduction would be available to those who purchase insurance outside the workplace, or individually. The White House anticipates that this change if accepted by Congress will generate a significant reduction in the number of uninsured Americans. To pay for this expansion, employer provided health benefit coverage that exceeds the applicable tax would be taxable for the first time.

Earlier this week, Rep. Louise Slaughter (D NY) introduced in the House a bill that would prohibit genetic discrimination by insurers and employers (H.R. 493). The bill has 146 co-sponsors and the support of the Coalition for Genetic Fairness. Similar legislation has passed the Senate in recent years. Yesterday, the President expressed his support for such legislation:

I really want to make it clear to the Congress that I hope they pass legislation that makes genetic discrimination illegal. In other words, if a person is willing to share his or her genetic information, it is important that that information not be exploited in improper ways — and Congress can pass good legislation to prevent that from happening. In other words, we want medical research to go forward without an individual fearing of personal discrimination.

This bill has legs as they say on the Hill.

• Leading health care and technology companies have joined together to offer free electronic prescribing to every M.D. in America. The initiative known as the National ePrescribing Patient Safety Initiative will begin national deployment in a month. “Interested physicians can visit the NEPSI web site, http://www.nationalerx.com/ to register for the program.” Now there’s some very good news for everyone.
• HHS Secretary Mike Leavitt issued a statement on H.R. 4. The Secretary is not pleased: “I am disappointed that a majority of House members discounted the overwhelming success of the Medicare Part D program over the last year and voted to pass HR 4.”
• The U.S. Court of Appeals for the 4th Circuit affirmed today Judge Motz’s decision that ERISA preempts the Maryland health insurance mandate that would have required Walmart to spend at least 8% of its payroll on health benefits or contribute an equal amount to a state fund. A copy of the opinion is available here. Yesterday, OPM issued a final FEHBP regulation on discontinuance of a health plan in the event of an emergency such as Hurricane Katrina. OPM finalized its proposed rule without change. Here’s a link to the regulation.

Rep. Patrick Kennedy (D R.I.) and Rep. Jim Ramstad (R. Minn.) announced plans yesterday to reintroduce the Sen. Paul Wellstone Mental Health Equitable Treatment bill in the new 110th Congress. Since 2001, the U.S. Office of Personnel Management has required broader mental health parity for FEHB plan coverage provided that the member uses network doctors and facilities and cooperates with the plan’s medical management requirements. According to the Providence Journal story, the legislation is modeled on the FEHB Program’s mental health parity initiative. The devil will be in the details.

President Bush will be giving his State of the Union address next Tuesday January 23 to a joint session of Congress. The Wall Street Journal reports today that the President may propose capping the tax exclusion for employer provided health benefits and use the savings to fund tax credits and state pools to help cover the uninsured. The article includes this fascinating fact:

The current policy of excluding employer-provided health insurance benefits from employees’ tax returns costs the government more than any other tax policy — about $900 billion between 2006 and 2010, counting all health-related breaks. That is more than either the mortgage-interest deduction or the various breaks for retirement savings. Thus, even tinkering around the edges of the exclusion could produce large amounts of revenue for subsidizing coverage for lower-income people.

The new Congress is putting health care in the spotlight as well. Last week Senator Ted Kennedy (D Mass.), the Chairman of the Senate’s Health, Education, Labor, and Pensions Committee, proposed covering all children and adults from age 55 to 65 under Medicare.(Of course, adults aged 65 and older already are covered under Medicare.) Today, three rather strange bedfellows, the Business Roundtable, AARP, and the Service Employees International Union joined together to announce a new campaign for making health care affordable called Divided We Fail. According to the Wall Street Journal, “a bipartisan group including Sen. Jeff Bingaman (D., N.M.) and Sen. George Voinovich (R., Ohio) plans to introduce legislation [tomorrow] that would provide grants to states to craft their own plans for helping the uninsured.” The Hill newpaper reports that on Thursday “a group of healthcare-industry organizations, business interests and consumer groups will launch their Health Coverage Coalition for the Uninsured.” This should be interesting.

Prescription benefit manager Caremark and its preferred suitor CVS today announced that when their merger deal closes the company will pay a special $2 per share dividend to common stockholders and will retire 150 million shares of common stock in order to optimize its capital structure. Express Scripts questioned the dividend’s value to shareholders and it announced an exchange offer for Caremark stock on the following terms which align with Express Script’s original offer

Under the terms of the Exchange Offer, Express Scripts is offering Caremark stockholders $29.25 in cash and 0.426 shares of Express Scripts stock for each share of Caremark stock. Based on closing stock prices on Friday, January 12, 2007, the Express Scripts offer has a value of $56.87 per share, or approximately $25 billion in the aggregate, and provides Caremark stockholders with a 7% premium to the current value of the CVS proposal.

Express Script is mailing the offer to all of Caremark’s shareholders. The offer expires “at 12:00 midnight, New York City time, on Tuesday, February 13, 2007, subject to extension.” Bloomberg notes that “Shares of CVS fell 15 cents to $31.79 at 4:17 p.m. in New York Stock Exchange composite trading. Caremark dropped 58 cents to $56.25 and Express Scripts shares climbed 88 cents to $65.71 in Nasdaq Stock Market composite trading.”

The compliance date for covered entities (health plans, health care providers, and clearinghouses) to use the National Provider Identifier is about four months away (May 23, 2007). The Centers for Medicare and Medicaid Services have yet to release an NPI dissemination policy. CMS has stated that beginning on that date it require that Medicare claims include the NPI. The Workgroup for Electronic Data Interchange (WEDI) has called upon the Secretary of Health and Human Services to “allow the use of legacy identifiers for 12 months after the Centers for Medicare and Medicaid Services enables access to the National Plan/Provider Enumeration System database” according to Medical Data Management magazine. Getting action probably will require Congressional pressure on CMS.

The complex Medicare law requires annual formulaic adjustments to physician reimbursement amounts under Medicare Part B. The Centers for Medicare and Medicaid Services (CMS) described the formula as follows:

The formula compares the actual rate of growth in spending to a target rate, which is based on such factors as the growth in number of Medicare fee-for-service beneficiaries and statutory or regulatory changes in benefits. If the actual rate of growth exceeds the target rate, the update is decreased; if it is less, the update is increased.

The formula has been producing payment reductions. For the past few years, Congress has waived the mandated reduction. The Tax Relief and Health Care Act of 2006 waived the 5.0% reduction that the formula would have required for 2007.

The AMA News is reporting that

Medicare pay to physicians will be reduced about 10% next year if current law remains unchanged, the Congressional Budget Office said Dec. 28, 2006, in its final cost assessment of the legislation that averted a 5% cut this year.

Future Congressional relief from the formulaic reductions may be complicated by the Democrat’s new pay-go policy. As there are many federal annuitants with primary Medicare coverage enrolled in the Federal Employees Health Benefits Program, Medicare payment cuts are picked up by the FEHB Program for those enrollees. This should be interesting.

In his column last week, the respected Newsweek columnist Robert Samuelson criticized the selfishness and cynicism of “older boomers (say, those born by 1955).” I don’t mind being criticized as selfish or cynical (after all I live and work inside the Beltway), but I do question the older boomer label as applied to me. After all I was way to young for Woodstock! I was even surprised to learn yesterday in the Post that Grace Slick (who performed at Woodstock — I saw the movie) is alive and painting. I thought that she had met the same fate as her friends, Jim Morrison and Janis Joplin.