Weekend Update

The Senate and the House are both back in session this week as FEHB plans scramble to complete their 2012 benefit and rate proposals which must be filed with the Office of Personnel Management at the end of this month.

Last week, Standard and Poors released its composite medical indices for March 2011 which disclosed that

Healthcare costs continue to rise, but at a declining rate. The Composite index, at +5.77%, is virtually back to the lowest annual growth rate in its six-year history, which was +5.76% in June 2007. The highest annual growth rate for the Composite index was during the 12-months ending May 2010, when it posted +8.74%. In the 10 months measured from this peak, this index has gone through a sharp deceleration,down 2.97 percentage points.

Over the year ending March 2011, healthcare costs covered by commercial insurance rose by 7.57%, as measured by the S&P Healthcare Economic Commercial Index. Medicare claim costs rose at an annual rate of 2.78%, as measured by the S&P Healthcare Economic Medicare Index. This is the lowest annual rate of growth posted for the Medicare Index in its six-year history.

Note that health care providers cost shift from Medicare to the private sector, including the FEHBP.

In response to the medical community's cool reception to the Accountable Care Organization rule, HHS took its standard approach -- throw more money at the hospitals and doctors. Last week, the Centers for Medicare and Medicaid Services announced three new ACO initiatives. Medscape explains that the principal initiative is

a plan to pay some accountable care organizations (ACOs) in part on a monthly, capitated basis, similar to how traditional health maintenance organizations (HMOs) have compensated providers.

The partially capitated ACOs would consist of hospitals and medical practices that are already adept at coordinating patient care and cutting costs through quality improvement. CMS wants to recruit such providers to form up to 30 "Pioneer" ACOs that would begin operating this year, well ahead of the January 1, 2012, kick-off for ordinary ACOs.

Speaking about low Medicare reimbursements, the American Medical News reports on the American Medical Association's proposal to replace the sustained rate of growth formula for adjusting Medicare Part B payments to physicians with

A five-year period of positive Medicare payment updates based on practice costs.

Test and transition [during that five year period] to multiple payment models designed to enhance the coordination, quality and appropriateness of care while addressing cost concerns.

Congress has to take some legislative action on the Medicare reimbursement formula by year end or doctors will face a double digit Medicare cut. Financing the change is the big problem.

The AMA News article further reports that at a May 5 Congressional hearing,

Medicare payment reform should include an option for full private contracting between patients and physicians, said M. Todd Williamson, MD, a spokesman for the Coalition of State Medical and National Specialty Societies. Private contracting also is on a menu of pay options from the AMA.

The organizations support the Medicare Patient Empowerment Act [HR 1700], introduced by Rep. Tom Price, MD (R, Ga.), on May 3. The bill would allow patients and physicians to contract freely for Medicare services without penalty. Patients and physicians would be able to negotiate prices for most outpatient services, but Medicare rates would apply when a patient has an emergency medical condition or requires urgent care.

Medicare does not allow physicians billing the Medicare program to accept fees that are different from rates set by the Centers for Medicare & Medicaid Services. Doctors can contract privately with patients, but only if the physicians completely opt out of Medicare for at least two years and patients agree not to accept any reimbursement from the government for that care.

 The FEHBlog will keep an eye on this bill given the large cadre of Medicare eligible FEHBP participants.