Tuesday Tidbits

President Obama released his Fiscal Year 2012 budget yesterday. In the reductions and savings section, you will find the following proposal under the heading Reductions: Health Care (Pharmaceutical Proposals):

FEHB Program Pharmacy Benefit Contracting.  Under current law, health plans participating in
the Federal Employee Health Benefits (FEHB) program contract with pharmacy benefits managers who negotiate prices with drug manufacturers and pharmacies on behalf of their enrollees.  Under the current contracting arrangement, prescription drug costs have risen significantly and now consume roughly 30 percent of total FEHB program expenditures.  Under the Administration proposal, the Office of Personnel Management would be given authority to streamline pharmacy benefit contracting within the FEHB program and leverage enrollees' purchasing power to reduce costs and obtain greater value for enrollees.

With all due respect to the Government, the FEHBlog notes that drug costs are a significant percentage of all health plan costs. In particular, the FEHB Program sees a particularly high percentage because 1/2 of FEHBP enrollees are annuitants and a large percentage of those annuitants are over age 65 and have primary health insurance coverage under Medicare Part A (hospital care) or Medicare Part A and B (physician and other health care provider services). FEHB Program annuitants typically do not opt for Medicare Part D prescription drug coverage. For these people, perhaps 25% of the total enrollment (the FEHBlog needs to track down that figure), Medicare pays the lion's share of their hospital bills while the FEHB plans pay the lions share, if not all, of their pharmacy bills. It's the demographics. The FEHBlog thinks that the plans are doing a good job providing prescription drug coverage to enrollees at a reasonable cost considering the demographics.

Here's a link to the Administration's discussion of OPM's proposed FY 2012 budget.

The FEHBlog recently noticed that the OPM Inspector General has posted its semi-annual report to Congress for the period ended September 30, 2010.

Business Insurance discusses an interesting bounce of the Affordable Care Act ball. While the ACA amended the Internal Revenue Code to exclude from an employee's income the cost of covering children up to age 27, that tax exemption does not automatically find its way into all tax codes. The FEHBlog found this Arlen Group report identifying the states, including California, with a disconnect. The Business Insurance report concludes

Employers with employees in nonconforming states will have to decide what approaches to take, consultants say. Some may wait and hope their states take action to bring state law into line with federal law on the issue.
“There is still sufficient time for states to act for 2011,” Aon Hewitt's Mr. Piro said.

One such employer is the U.S. Government. Federal employees are not exempt from state income taxes on their federal salaries.

This AMA News article is fun reading, at least to the FEHBlog.

Physicians who are outside big insurers' networks in several states can expect health plans to pay even less of the cost of their services as Medicare rates replace fee schedules based on "usual, customary and reasonable" rates, doctors organizations say.

The AMA danced on the grace that it dug for the Ingenix usual reasonable and customary databases. Be careful what you wish for. In the FEHBlog's view, insurer reliance on the Medicare resource based relative value fee schedules make perfect sense. What's more, doctors offices are familiar with those schedules which have been around since the early 1990s. That's bending the cost curve down.