Last week, OPM issued an updated Benefit Administration Letter (No. 06-405) announcing significant plan changes for 2007 Federal Employees Health Benefits (FEHB) Program Open Season. These changes principally pertain to the health maintenance organizations participating in the FEHB Program, which may have joined, expanded or reduced their service areas, added an option, or dropped out for 2007. This letter is always interesting reading.
From an AP report about a recent Pricewaterhouse Coopers report on rising health care costs:
American workers have been shielded from the rising cost of health care for decades, with the burden of rising medical costs borne largely by employers and the government, according to the report. Americans spent six percent of their personal budgets on medical costs in 1960, the same percentage of consumer spending as in 2004, it said.
The report notes that in recent years the Government and private sector employers have been shifting costs onto consumers. The report predicts the employer health care costs will climb by more than 10% in 2007 unless further plan changes are made. Business Insurance reported today about a Council of Insurance Agents and Brokers (CAIB) reports that supports PwCs predictions. (Of course, as noted in the FEHBlog, the Federal Employees Health Benefits Program had a 1.8% average premium increase for 2007. The FEHB Program’s Open Season began on Monday November 13 and ends on December 11. )
The CAIB survey report relates that 70% of responding brokers had sold a health savings account product to an employer client for the 2006 or 2007 plan year. The Wall Street Journal reported earlier this week that banks are now actively marketing HSAs as well:
Nearly 1,100 banks now offer the tax-favored spending accounts, more than triple the number at the end of 2005, according to market-research firm Information Strategies Inc.
The U.S. Court of Appeals for the District of Columbia Circuit ruled today that Teva Pharmaceuticals Ltd of Israel and Ranbaxy Laboratories Ltd of India have the exclusive right to sell the generic version of the anti-cholesterol statin drug Zocor (simvastatin) for 180 days following the expiration of the Merck patent in June 2006. Teva and Ranbaxy had been the first companies to apply for Food and Drug Administration approval of their generic versions of Zocor (the companies applied for different dosage levels). The FDA had argued to the Court that the six month exclusivity period is only available to generic drug manufacturers that challenge the name brand manufacturer’s patent rights in court. In this case, the FDA had approved Merck’s application to delist their Zocor patents from the FDA’s database.
The Court disagreed with the FDA, holding that
the FDA’s requirement that a generic manufacturer’s patent challenge give rise to litigation as a condition of retaining exclusivity when a patent is delisted is inconsistent with the Act, which provides that the first generic manufacturer to file an approved application is entitled to exclusivity when it either begins commercially to market its generic drug or is successful in patent litigation.
The six month exclusivity period is lucrative for generic manufacturers particularly in the case of a blockbuster drug like Zocor. Merck continues to sell brand name Zocor at a price that is lower than that charged before its patent expired. Merck also has made a contract with Dr. Reddy’s Laboratories Ltd. of India to sell a so-called authorized generic version of Zocor.
A copy of the opinion in Ranbaxy Laboratories v. Leavitt, No. 06-5154 is available here.
America’s Health Insurance Plans, the trade association for U.S. health insurers and health maintenance organization, released a set of legislative proposals intended to expand health benefits to all Americans. According to AHIP’s press release,
The AHIP plan calls for enactment of federal legislation that provides significant financial incentives to states and makes changes to federal tax policy to make health coverage more affordable.Key elements of the AHIP plan include:
- Expanding the State Children’s Health Insurance Program (SCHIP) to make eligible all uninsured children from families with incomes under 200 percent of the Federal Poverty Level (FPL).
- Improving and expanding Medicaid to make eligible all uninsured adults, including single adults, with incomes under 100 percent of the Federal Poverty Line.
- Establishing a Universal Health Account (UHA) to allow all individuals to purchase any type of health care coverage and pay for qualified medical expenses with pre-tax dollars, with federal matching grants for contributions made by working families to the UHA.
- Establishing a health tax credit of up to $500 for low-income families who secure health insurance for their children.
- Establishing a new $50-billion Federal Performance Grant to assist states in expanding access to coverage.
The plan is designed to expand access to health insurance coverage to all children within three years and 95 percent of adults within 10 years. AHIP estimates that full implementation of this proposal would cost the federal government approximately $300 billion over a 10-year period.
AHIP also conducted an opinion survey whose results supports its proposed solution.
The Democrats did win control of the Senate, and the conventional wisdom about a brief lame duck session that I mentioned on Wednesday has proven to be wrong. The Washington Post reports this morning that the new sense of bipartisanship will lead to a longer lame duck session of the 109th Congress. During the lame duck session, Congress may reverse the statutorily mandated 5% cut in Medicare reimbursement to physicians before that cut takes effect on January 1.
Govexec.com continues to prognosticate about the 110th Congress. According to Govexec.com, NARFE‘s wish list is that the new Congress block any expansions of Health Savings Accounts in the FEHB Program. As you may recall, OPM sent a legislative proposal to Congress last May recommending that Congress amend the FEHB Act to permit the government wide service benefit plan to offer a third HSA option. NARFE also hopes that the new Congress will amend the federal tax code to permit federal and postal annuitants to make their FEHB plan contributions on a pre-tax basis. That proposal has budget ramifications.
NARFE reportedly is banking on the likelihood that Rep. Steny Hoyer will become the Majority Leader in the 110th Congress. Congressman Hoyer, who currently is the minority whip, also has been a proponent of increasing the Government contribution toward FEHB plan coverage (H.R. 633), a proposal which obviously has its own.
The Internal Revenue Service annually adjusts the maximum dollar amount that may be contributed to a health savings account (HSA) and related high deductible health plan (HDHP) minimum deductible and out of pocket expense limits for Consumer Price Index – Urban changes from August to August. Business Insurance reports that the IRS officially released the 2007 changes today.
The changes, which vary depending upon whether the individual has self only or self and family HDHP coverage, are as follows:
| 2006 | 2007 | |
|---|---|---|
| HSA contribution max. (self only) | $2,700 | $2,850 |
| HSA contribution max. (family) | $5,450 | $5,650 |
| HDHP Out-of-pocket expense max (self only) | $5,250 | $5,500 |
| HDHP Out-of-pocket expense max (family) | $10,500 | $11,000 |
| Minimum HDHP deductible (self only) | $1,050 | $1,100 |
| HDHP Minimum deductible (family) | $2,100 | $2,200 |
The IRS explains that individuals 55 and older who are covered by an HDHP can make additional catch-up contributions each year until they enroll in Medicare. The additional “catch-up” contributions to HSA allowed for 2006 is $700 and for 2007 it will be $800.
The mid-term elections results are in for the most part, and of course the Democrats will control the House of Representatives in the 110th Congress, and they may wind up controlling the Senate as well. Reporters at Govexec.com have begun to prognosticate about the impact that the new House leadership will have on federal employees.
There likely will be plenty of time for prognostication as the common wisdom is that the lame duck session of Congress will be very brief, e.g., simply extending the current continuing resolution funding the federal government into January. This would allow the new Congress to take up the appropriations issues as well as many other issues discussed in this blog == health information technology, Medicare, and the Food & Drug Administration’s drug review process. For example, likely House Speaker Nancy Pelosi (D Cal.) is a major advocate for CMS directly negotiating drug prices with the drug manufacturers in the Medicare Part D program. Also Rep. Nancy Johnson (D Conn.) who was a major force behind the push to accelerate implementation of the ICD 10 not only lost her Ways and Means Health Subcommittee chair, but she also lost her seat in Congress.
On Monday, I gave a talk about U.S. healthcare to 25 Turkish government members. It was the first time that I ever gave a talk through a translator. A very enjoyable experience. In preparing for the talk, I ran across two very useful health care policy resources on the web:
Health United States 2005 by the U.S. Centers for Disease Control
Health Care Industry Report by the U.S. Bureau of Labor Statistics
Tidbits from the BLS report:
- Health care is the largest U.S. industry providing 13.5 million jobs in 2004 out of a total labor force of 150 million
- 40% of healthcare employees work at hospitals
- Over 85% of nonhospital health services establishments employ fewer than 20 workers.
On November 1, 2006, the Centers for Medicare and Medicaid Services announced its final 2007 Medicare Part B physician fee schedule rule. Medicare Part B reimburses physicians based on a resource based relative value schedule (RBRVS). In August CMS published a proposed rule calling for a 5.1% reduction in physician reimbursement levels based on a statutory formula. The final rule reduces that reduction slightly to 5.0%. That change will go into effect on January 1, 2007, unless Congress amends the Medicare law to reverse the reduction as it did earlier this year to reverse the 2006 reduction.
CMS made significant payment policy changes in order to increase payments for direct patient care and for expanded preventive care:
The hallmark of this rule is a stronger emphasis on the physician-patient relationship. The final rule increases significantly the work component for the [relative value units] RVUs for the face-to-face visits (evaluation and management or “E&M services”) during which the physician and patient discuss the patient’s health status and the steps that can be taken to maintain or improve the patient’s health. For example, the work component for RVUs associated with an intermediate office visit, the most frequently billed physician’s service, is increasing by 37 percent. The work component for RVUs for an office visit requiring moderately complex decision-making and for a hospital visit also requiring moderately complex decision-making are increasing by 29 percent and 31 percent respectively. Both of these services rank in the top 10 most frequently billed physicians’ services out of more than 7,000 types of services paid under the physician fee schedule. * * *
“We believe this increase in the work component will encourage physicians to spend more time with their patients, assessing their health status, and educating them about how to live longer, healthier lives,” said [CMS Acting Administrator] Ms. [Leslie] Norwalk. Beginning January 1, Medicare will expand its preventive services benefits, as provided for in the Deficit Reduction Act of 2005 (DRA). Medicare will pay for preventive ultrasound screening for abdominal aortic aneurysms (AAA) for at risk beneficiaries as part of the Welcome to Medicare physical. AAA refers to a weakening in the wall of the large artery that takes blood from the heart to the body. Caught early, there are a number of treatment options, but if the AAA ruptures, it can be fatal. AAA affects 6-9 percent of men over 65 and is the 10th leading cause of death for men over 55. The screening will be available to men aged 65 to 75 who have smoked at least 100 cigarettes in their lifetimes, individuals with a family history of AAAs and any other individuals recommended for screening by the United States Preventive Services Task Force. The rule expands the number of beneficiaries who qualify for bone mass measurement due to long term steroid therapy. For these beneficiaries, the rule reduces the dosage equivalent required for eligibility by one-third, from an average of 7.5 milligrams per day of prednisone for at least three months to 5.0 milligrams. The final rule also exempts the colorectal cancer screening benefit from the Part B deductible, eliminating a potential financial barrier to using this benefit. Colorectal cancer is the second leading cause of cancer deaths, and survival is closely related to the stage of the disease at diagnosis. The five-year survival rate when the cancer is detected early approaches 90 percent. Unfortunately, approximately 65 percent of patients present with advanced disease. Once the lymph nodes are involved, chances of survival drop to a range of 35 to 60 percent and with metastatic disease, less than 10 percent.
Also on November 1, CMS announced its final 2007 Medicare Part A outpatient hospital prospective payment system (OPPS) rule.
Hospitals would receive an estimated $32.5 billion in CY 2007 under the final rule that revises policies and payment rates under the OPPS for outpatient services provided to Medicare beneficiaries. The final rule affects outpatient services furnished by general acute care hospitals, inpatient rehabilitation facilities, inpatient psychiatric facilities, long-term acute care hospitals, children’s hospitals, and cancer hospitals. As provided by statute, the rule includes a 3.4 percent market basket update to Medicare payment rates for services paid under the hospital OPPS for CY 2007. After taking into account other factors that affect the level of payments, CMS estimates that hospitals will receive an overall average increase of 3.0 percent in Medicare payments for outpatient department services in 2007 due to the changes in this final rule. While the market basket update accounts for increases in the costs of providing a service, much of the growth in outpatient spending results from increases in utilization and complexity (volume and intensity). CMS estimates that between 2005 and 2006, hospital outpatient expenditures increased by nearly 12 percent, mainly due to growth in the volume and intensity of services. CMS projects that the expenditures under the OPPS in CY 2007 will be approximately 9.2 percent higher than the estimated CY 2006 expenditures. That rate of growth in expenditures is of great concern to CMS, not only because of its impact on all taxpayers, but especially on beneficiaries whose monthly premiums cover 25 percent of Part B expenditures. In order to promote greater value in the purchase of hospital outpatient services for Medicare beneficiaries, the final rule ties OPPS rate increases to the reporting of quality measures beginning in 2009. The final rule announces CMS’ plans to develop additional quality measures that are specifically appropriate for hospital outpatient care, and will require hospitals to report the outpatient-specific measures beginning in CY 2009.
The final Medicare OPPS rule is scheduled to be published in the Federal Register on November 9, 2006, and the final PFS rule is scheduled to be published there on December 1, 2006.