Government News
of the Week:

Medicare Compliance, HIPAA, Medicare Advantage and Part D, and Other Federal and
State Government Developments

1. The House Committee on Energy and Commerce has summoned chief executives from the nation’s four largest health insurers to testify on March 23 about claim denials relating to pre-existing conditions. In letters sent to WellPoint Inc.’s Angela Braly, UnitedHealth Group’s Stephen Hemsley, Humana Inc.’s Michael McCallister and Aetna Inc.’s Ronald Williams, Chairman Henry A. Waxman (D-Calif.) requested internal e-mails and documents related to underwriting policies; training materials for brokers, agents and producers; and all training materials regarding the payment of medical claims since Jan. 1, 2005. The committee also asked them to list their average premiums and average increases. On March 2, a class-action lawsuit was filed by Consumer Watchdog and other plaintiffs against Anthem Blue Cross, the California subsidiary of WellPoint, alleging that the insurer uses enormous rate hikes to force members into lower-benefit and higher-deductible health coverage in violation of state law. The California insurer recently informed policyholders it would hike premiums by 39%. To view one of the letters, visit http://energycommerce.house.gov/Press_111/
20100302/Braly.Letter.2010.03.02.pdf.

2. Two screening methods that hospitals have for identifying adverse events have deficiencies that could affect Medicare payments and federal initiatives to monitor the events, the HHS Office of Inspector General says in a report (OEI-06-08-00221) posted March 2. In 2008, OIG began a case study involving Medicare discharges from acute-care hospitals in two counties to determine the incidence of adverse events (i.e., harm to a patient as a result of medical care or harm that occurs in the health care setting). OIG then examined the usefulness of five screening methods used for identifying the events. Diagnosis codes were inaccurate or absent for seven of the 11 Medicare hospital-acquired conditions identified by the case study, OIG found. Also, participating hospitals did not seem to complete any internal incident reports for 112 out of 120 events, including some of the more serious ones involving patient death or permanent disability. Among its recommendations, OIG says CMS should: (1) explore opportunities to identify events while conducting medical record reviews, (2) ensure that hospitals code claims accurately and completely, and (3) provide interpretive guidelines for state survey agencies to assess hospital compliance with requirements to monitor events.

Reprinted from the March 8, 2010, issue of REPORT ON MEDICARE COMPLIANCE

3. A bill that would require greater PBM transparency within the Federal Employees Health Benefits Program (FEHBP) received some criticism during a recent hearing from the Office of Personnel Management (OPM), which says it just directed health plans to improve PBM contracting practices in order to control the program’s swelling drug costs.

Rep. Stephen Lynch (D-Mass.), chairman of the subcommittee on Federal Workforce, Postal Service and the District of Columbia, held a Feb. 23 hearing on H.R. 4489, the FEHBP Prescription Drug Integrity, Transparency and Cost Savings Act. The bill would require PBMs to pass through 99% of all rebates, prohibit drug switching without prior physician approval and cap prescription drug prices paid by FEHBP at the average manufacturer price.

During the hearing, OPM Director of Planning and Policy Analysis John O’Brien expressed concern that H.R. 4489 would restrict how OPM contracts with PBMs and create an additional administrative cost burden that would eventually be passed on to federal employees. While the bill has the right intentions, he told lawmakers, “requiring the use of specific contracting models and pricing methods via legislation will not allow the program flexibility in an industry where business practices are rapidly evolving.” He insisted that OPM is already working on fixing problems within the system and has even updated its contractual transparency requirements with PBMs.

These new transparency standards are outlined in a Feb. 22 letter that was sent to health plans administering FEHBP. The new principles include a requirement for pass-through pricing and a mandate that PBMs’ profits come from “clearly identifiable sources.” In addition, health plans should require the PBMs they’re contracting with to increase generic dispensing rates, have periodic mid-market checks and implement rebidding of PBM contracts within two to three years of the initial agreement. In the letter, OPM Associate Director for Retirement and Benefits Kathleen McGettigan says the agency will use the requirements when negotiating 2011 contracts.

During the hearing, Lynch made it clear that he is displeased with the benefit plan that federal employees are receiving, and blamed PBMs’ opaque pricing practices for the program’s escalating drug costs. He said that he was disappointed with O’Brien’s testimony, and added that “sometimes, I feel like I’m pulling you along toward the road of reform.” He asserted that OPM has “become captive” to a system that is in need of change. At a time when health care reform is at the forefront of Congress’ agenda, Lynch vowed that he will fight to ensure his bill makes it through.

View OPM’s letter at http://opm.gov/carrier/carrier_letters/2006/2006-07.pdf.

Reprinted from the March 5, 2010, issue of DRUG BENEFIT NEWS

13. Two bills to reform health plan prescribing practices have been introduced in Nebraska. The first bill, L.B. 1017, would prevent health plans from establishing specialty tiers to cover biologics, plasma-derived therapies and their recombinants as well as other expensive therapies. Meanwhile, the Physician and Patient Prescription Protection Act, L.B. 1088, would require that written communication be sent to the physician and patient before a health plan or PBM can switch the patient’s prescription. View L.B. 1017 at http://tiny.cc/OqOfr and L.B. 1088 at http://tiny.cc/rbnWG.