Weekend Update

The House return from recess this week while the Senate goes out. The Hill Finance and Economy blog projects that Congress will extend into December the current continuing resolution funding federal government operations. The CR expires on November 18, less than a month away.

Standard & Poors reported last week that

Data released by S&P Indices for the S&P Healthcare Economic Composite Index indicate that the average per capita cost of healthcare services covered by commercial insurance and Medicare programs increased by 5.73% over the 12-months ending August 2011. This is a marginal increase over the +5.69% annual growth rate posted in July 2011 and the fourth consecutive increase since the index hit its lowest annual growth rate of +5.32% in April 2011.

As measured by the S&P Healthcare Economic Commercial Index, healthcare costs covered by commercial insurance increased by 7.89% over the year ending August 2011, also increasing for the fourth consecutive month. Medicare claim costs, however, hit a new low, rising at an annual rate of 2.16% as measured by the S&P Healthcare Economic Medicare Index.

The survey illustrates the cost shifting from Medicare to the private sector.

The health care industry breathed a sigh of relief when the Department of Health and Human Services issued its final rule governing accountable care organizations ("ACOs") in the Medicare Program last week. The AMA News reaction is here.  Kaiser Health News explains that

Also Thursday, the Justice Department and Federal Trade Commission released their final policy statement on ACOs and antitrust issues. The new policy eliminated the mandatory review for a new ACO, a decision applauded by the American Medical Association. But CMS encouraged provider groups to voluntarily seek a Justice Department opinion. The policy also puts the responsibility for gathering market share data on the government, rather than the providers, says David Balto, an antitrust attorney and a senior fellow a the Center for American Progress, a progressive Washington think tank.

Nonetheless, health insurers said they are still worried that groups of hospitals and doctors that form an ACO will gain too much clout and that will allow them to drive up prices to private insurers.

"We remain concerned about the trend of provider consolidation that drives up medical prices and results in additional cost-shifting to families and employers with private coverage," the trade group, America's Health Insurance Plans, said in a statement. "Doing away with the mandatory review process raises concerns that provider market power may not be scrutinized sufficiently, potentially increasing health care costs for consumers and employers."

The full AHIP reaction is here.  The FEHBlog got a kick out of this Kaiser Health News headline -- Nixon's HMO's hold lessons for Obama's ACOs. What goes around, comes around.

Govexec.com published a story on the budding controversy over OPM's proposal to carve out FEHB drug benefits to a single prescription benefits manager under contract with OPM, similar to TRICARE. In addition to quoting Bob Moffit's blog post discussed in the last FEHBlog entry, Govexec.com obtained a quote from longtime FEHBP expert Walton Francis.

Walton Francis, author of Consumers' Checkbook Guide to Health Plans for Federal Employees, said OPM in effect would be negotiating and managing two health programs -- one for physician and hospital care and another for pharmacy benefits. But whether the government should decide which prescription drugs are available to beneficiaries is up for debate, he said.

"An alternative that would save money would be to have a very restricted formulary where they won't pay at all for name brand drugs," Francis said. "The question is whether employees and retirees want to be in the system. Plans are reluctant to limit employee choices." 

Exactly. The current competitive model protects enrollees.