The first question that Steve Barr received during his Washington Post Q&A yesterday was how would the President’s healthcare proposal would affect the FEHB Program. Mr. Barr wasn’t sure and he does not think that the proposal has legs. Nevertheless, it is an interesting proposal because it is so different from the current arrangement.

The FEHB Act provides for a government contribution and an enrollee contribution toward health benefits coverage. Under the current arrangement, the government contribution is excluded from income and employment taxation (Internal Revenue Code Sections 105 and 106), and the enrollee contribution is similarly excluded for employees based on OPM’s premium conversion plan (IRC Section 125). Retirees are not eligible for this premium conversion plan, although NARFE has been pushing for a legislative fix to allow their participation.

Under the President’s proposal, if enacted, the government contribution and the enrollee contribution would be taxable to both employees and retirees. Taxpayers with self only FEHBP coverage would receive a $7,500 standard deduction, and taxpayers with FEHBP family coverage would receive a $15,000 standard deduction. The deduction would be indexed to the consumer price index when it is fully implemented in 2009. If the actual FEHBP premium is below the standard deduction, the taxpayer wins and if the actual FEHBP premium is above the standard deduction, the taxpayer loses. Of course, in the FEHB Program, enrollees have an annual Open Season during which they could do their tax planning.

On Tuesday, Julie Goon, a special assistant to the President for economic policy, explained that

What this plan would do is give a flat, standard deduction for anybody who purchases any kind of health insurance, no matter how much the health insurance costs and no matter where they get it. It would be $15,000 for people purchasing family policy, $7,500 for people purchasing single policies. So if your employer is giving you insurance through your job, you get the standard deduction. If you go buy health insurance on your own, you get the standard deduction. If your policy costs $5,000, you still get $15,000 of compensation tax-free. If your policy costs $20,000, you still get $15,000 of compensation tax-free, using the family example.

The President was on the road today in Lee’s Summit, Missouri (home of the FEHB plan, GEHA) advocating his plan.

VA Secretary James Nicholson announced at yesterday’s American Health Information Community (AHIC) meeting that the Veterans Affairs Department and the Defense Department, which both operate hospital chains, plan to implement a joint, interoperable electronic health record system. Also at that meeting, the contractor teams seeking to develop a National Health Information Network, which will link electronic health record systems, demonstrated their prototypes/works in progress. More demonstrations will occur at next week’s NHIN Forum. Finally, Secretary Leavitt officially accepted “thirty (30) consensus [health information technology interoperability] standards recommended by the Healthcare Information Technology Standards Panel (HITSP)” in September 2006.

Reading the GAO report on FEHBP premium growth remains on my to do list but both the Federal Times and Steve Barr of the Washington Post are reporting this morning that the report criticizes OPM for declining the Medicare Part D subsidy and that Sen. Akaka plans to review the GAO report at a subcommittee hearing this Spring. In a statement released yesterday, Senator Akaka said that

“I will take a closer look at how OPM decisions affect health care premiums,” Senator Akaka said. “Although OPM did a good job in keeping premium increases down in 2006, the GAO report clearly shows that if OPM had applied for and used the subsidy, premium growth would be reduced by 2.6 percent.”

Steve Case, AOL’s founder, launched the pilot version of his Revolution Health web site yesterday while his competitor WebMD revamped its site . Both sites are consumer oriented. The Washington Post notes that WebMD already has “35 million unique visitors per month and about $170 million in annual revenue.”

Revolution plans to charge about $100 a year for membership in return for which members will receive a call a nurse service, assistance with insurance claim disputes, and assistance with picking a health plan. I found it interesting that the Revolution health site includes a directory “over 700,000 doctors, 150,000 dentists, plus over 400,000 allied health professionals” and since yesterday it has received over 2000 viewer ratings on the listed providers.

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.