Copyright 2000 Federal News Service, Inc.
Federal News Service
June 13, 2000, Tuesday
SECTION: PREPARED TESTIMONY
LENGTH: 3841 words
HEADLINE:
PREPARED TESTIMONY OF STEPHEN W. GAMMARINO SENIOR VICE PRESIDENT FEDERAL
EMPLOYEE PROGRAM AND INTEGRATED HEALTH RESOURCES BLUECROSS BLUE SHIELD
ASSOCIATION AN ASSOCIATION OF INDEPENDENT BLUE CROSS AND BLUE SHIELD PLANS
BEFORE THE HOUSE COMMITTEE ON GOVERNMENT REFORM
SUBCOMMITTEE ON CIVIL SERVICE
SUBJECT - THE FEDERAL EMPLOYEES
HEALTH BENEFITS PROGRAM: THE OFFICE OF PERSONNEL MANAGEMENT'S POLICY GUIDANCE
FOR 2001
BODY:
Good morning. I am Steve
Gammarino, Senior Vice President, Federal Employee Program and Integrated Health
Resources, at the Blue Cross and Blue Shield Association. On behalf of the
Association, I thank you for the opportunity to appear before you today to
comment on the Office of Personnel Management's policy guidance for 2001.
As you know, BlueCross BlueShield Plans jointly underwrite and deliver
the Government-wide Service Benefit Plan in the Federal Employees Health
Benefits Program. This Service Benefit Plan has been offered in the FEHBP since
its inception in 1960 and is the largest plan in the Program. The Service
Benefit Plan currently covers approximately four million federal employees,
retirees, and their families, or about 48 percent of the enrolled population.
In your letter of invitation you requested our views on how the various
proposals and recommendations contained in the 2001 call letter would affect the
costs and quality of health care coverage offered through the FEHBP, and any
other issues that are important to the continued viability and stability of the
Service Benefit Plan. In addition, you requested that I discuss efforts by Blue
Cross and Blue Shield Service Benefit Plan to restrain prescription drug costs
and various options to manage the rising costs of prescription drug costs.
As a general role, the Blue Cross and Blue Shield Association opposes
federal mandates and believes that they have a long-term adverse effect on the
ability to provide affordable health care coverage. However, the level of impact
can vary significantly depending on the degree of flexibility health plans are
given to develop, implement, and manage these federal initiatives. This year,
the call letter prescribes two major initiatives that are likely to impact
quality of health care and costs of the Service Benefit Plan: Achieving Mental
Health and Substance Abuse Parity, and Improving the Quality of Healthcare by
Reducing Medical Errors and Increasing Patient Safety.
My testimony
today will focus on these two initiatives, as well as other issues and trends
that are important to the Blue Cross and Blue Shield Service Benefit Plan.
Mental Health and Substance Abuse Parity
Blue Cross and Blue
Shield Association (BCBSA) has been working closely with OPM to develop and
enhance Mental Health and Substance Abuse benefits (MHSA). We have appreciated
OPM's ongoing involvement of FEHBP carders and leaders in the managed behavioral
health field to better understand the implications of enhanced MHSA benefits for
FEHBP. We have valued the opportunity to learn from other experts and to share
with OPM the Local Blue Cross and Blue Shield Plans' experience with managed
behavioral health in a Preferred Provider Organization (PPO) environment. As we
continue to work with OPM and other leaders in the industry on developing a MHSA
benefit, we'd like to emphasize that it is our understanding, from conversations
and meetings with OPM that our implementation strategy will meet OPM's expressed
intent of enhancing MHSA benefits for 2001.
Blue Cross and Blue Shield
Association and the local Blue Cross and Blue Shield Plans that participate in
the Service Benefit Plan have devoted, and continue to devote, considerable
effort to making this challenging federal mandate a reality.
In order to
comply with this mandate and control the benefit and administrative cost
increases, BCBSA is developing a benefit proposal that utilizes a care
management strategy. The Service Benefit Plan intends to build upon existing
local Blue Cross and Blue Shield Plans' managed behavioral health (MBH)
capacity. A large number of Blue Cross and Blue Shield Plans contract with
managed behavioral health vendors to provide coverage for both mental health and
substance abuse services. Our proposed delivery model will include a two-tier
behavioral health network with enhanced MHSA benefits when provided by
Preferred/in-network providers; and a toll-flee number to explain 1) the benefit
implications for in- and out-network services, 2) inform the member of
in-network providers, and 3) encourage use of the most appropriate setting of
care and provider type.
We are prepared to work closely with OPM to
ensure that enrollees use benefits in the context of a care management strategy
designed to promote appropriate use of those benefits. However, as the Service
Benefit Plan is primarily a PPO program and typically doesn't use HMO- type
techniques, we also face the additional challenge of educating our enrollees and
our providers to make sure they understand the administrative process of
obtaining MHSA benefits. In addition, significant adverse selection and higher
utilization than anticipated could cause costs to be significantly higher than
anticipated. Moreover, it is unlikely that we will know the true costs of this
new benefit for three to five years, as it will take time to for members and
providers to understand the program, for inherent delivery patterns to change,
and for members to avail themselves of the enhanced mental health/substance
abuse benefits available to them.
Patient Safety
Patient Safety
is a critical and sensitive problem that demands the respect and attention of
all stakeholders. Even one death as a result of a preventable medical error is
one too many. We support the President and the Agency's initiative to reduce
medical errors and increase patient safety in all health care settings. However
it is important to understand that it is the physician and hospital communities,
not local health Plans, who must devise the clinical strategies to address
patient safety concerns. Physicians and hospitals must be free to craft legal
and administrative solutions to these challenges without the burden of external
requirements. They must tell us how local Plans can lend support to their
efforts. The primary role of the local Plan must be to respond to physician and
hospital initiatives and to then support their needs with our own resources. We
are committed to working with providers, independent accreditation agencies, and
others to implement patient safety programsWith this thought in mind, Blue Cross
and Blue Shield's Service Benefit Plan has developed, and shared with OPM, a
number of initiatives that focus on improving health care quality and patient
safety. Some of these initiatives are as follows:
PPO Performance
Measurement Under this initiative, we will pilot a new approach to enhance
patient safety that supports quality health care decisions and measure
performance in PPOs. This will include a regular assessment of claims data
against a set of clinical algorithms to identify members at risk for adverse
events, and provide information to physicians for their consideration and
action.
The pilot program will include testing of programs to enhance
patient safety, quality of care and the development of performance measures
(i.e. examining how well we identify high-risk members). While still in the
planning stages, we plan to implement the first pilot program at the Empire Blue
Cross and Blue Shield Plan of New York this summer. Moreover, we also anticipate
that three to five Local Plans in various geographic locations will be involved
in piloting this initiative.
Local Care Management
Local Care
Management has been defined as programs implemented in the local Plans which are
intended to provide Service Benefit Plan members with information and resources
which will have the desired outcomes of improved health and quality of life.
Examples are disease management programs, prenatal programs, mammogram
reminders, and immunization programs. The Local Care Management program concept
was developed to provide us with a unique opportunity to:
-- Focus on
diseases relevant to the Plans' populations;
-- Maximize greater
physician acceptance; and Provide the local Plans with the opportunity to
quickly implement programs for Service Benefit Plan members that demonstrate
safety, effectiveness and efficiency.
Pharmacy Quality Initiatives
The Service Benefit Plan has in place a number of pharmacy programs that
focus on improving patient safety and quality. For example, the Concurrent Drug
Utilizationprogram provides the pharmacist with an alert message at the time a
prescription is filled. The alert provides information that identifies potential
drug interactions, drug duplications, compliance issues, and precautions. Other
programs include the Prior Authorization Program, the Senior Drug Utilization
Program, the Retrospective Drug Utilization Review, and Fraud and Abuse
Programs.
Prescription Drugs
In the letter of invitation, the
Subcommittee asked BlueCross BlueShield Association to focus on prescription
drug cost trends and how prescription drugs have contributed to the overall cost
of health insurance. I appreciate the opportunity to comment on this critical
issue.
Making drug coverage affordable to our members and keeping
premiums stable continues to be one of the most difficult challenges facing the
Service Benefit Plan. Prescription drug cost trends continue to be nearly three
times greater than all other benefit cost trends. The Blue Cross Blue Shield
standard option plan has drug costs that are approximately 30 percent of total
benefits. These cost trends continue to be driven by the rapid development of
new, expensive drug therapies which often substitute for less expensive existing
therapies, rising prices for existing drugs, and heightened demand and
utilization of prescription drugs fueled by ever expanding direct-to-consumer
advertising.
In addition, it is important to realize that the Federal
Employees Health Benefits Program is dealing with an aging population in the
Federal government. As illustrated in a May 7th Washington Post article,
"Retirement Wave Creates Vacuum," one-half of federal government workers fall
between the ages of 45 and 60 and only 5 percent are ages 29 or younger. The
average BlueCross BlueShield Service Benefit Plan member is 60 years old and the
average FEHBP member is 54 years old. Data has shown that the quantity of
medical resources and specifically prescription drugs increases as individuals
age. Thus,it is important that the Federal government and its employees
understand that demographics and increased federal mandates will result in
premium increases.
It is important to understand that the drug cost
trends that the Service Benefit Plan is experiencing are not dissimilar to those
experienced industry-wide. Prescription drugs are the fastest growing- area of
health spending. National spending on drugs is growing three times as fast as
overall health spending. According to a University of Maryland study
commissioned by Blue Cross Blue Shield Association and the Health Insurance
Association of America, spending on prescription drugs is estimated to increase
annually by 15-18 percent from 1999- 2004 and will double from
$105 to $212 billion during these years. A new
study, by the Brandeis University Schneider Institute for Health Policy and PCS
Health Systems, Inc., found that prescription drugs costs grew at an annual rate
of 24 percent per year from 1996-1999. Between 1993 and 1999, BCBS Plans'
aggregate spending on outpatient drugs increased an estimated 92 percent, from
$7.6 billion to $14.6 billion.
For the
most part, the Blue Cross BlueShield Service Benefit Plan's prescription drug
benefit is structured similar to what one might see in a traditional large
employer or union plan. It maintains an open formulary, has an extremely broad
network of over 51,000 pharmacies, requires a minimal list of products that
require pre-authorization, and requires low to moderate cost-sharing by members.
Members get access to significant discounts because the Blue Cross and Blue
Shield Service Benefit Plan obtains significant pharmacy and manufacturer
discounts with Pharmacy Benefit Managers.
As you are probably aware,
last year, Blue Cross Blue Shield Association made changes to our prescription
drug benefits to keep premiums at a competitive level. After careful
consideration and with great concern for the effects of such a change on our
older members, we decided it was necessary to take some action to offset our
ever- increasing drug costs. For instance, to help manage prescription drug
costs, the 2000 copayment amount for mail service increased, and the copayment
for Medicare Part B members is no longer waived.However, even with last year's
changes, our prescription drug costs continue to increase, requiring us to
explore additional methods to contain costs with minimal impact on our members.
This year, we are exploring additional changes that further encourage the use of
generic drugs. We believe that these changes will result in increased savings.
We are also exploring other administrative changes to the delivery of our
pharmacy benefits to reduce drug costs and trends. We are hopeful that we can
work in a cooperative and beneficial way to manage our prescription drug
benefits and find ways to reduce costs that will not harm the member.
It
is important to understand that health plans and employers must make a trade-off
between providing their employees the choice and access to a wide variety of
drugs and controlling costs. Our population in the Service Benefit Plan expects
the freedom to choose with minimal restrictions. However, as a responsible plan,
we need to balance these expectations with managing rising prescription drug
costs and keeping overall premiums at an affordable level.
New Blue
Cross Blue and Blue Shield Association Pharmacy Initiatives
In addition
to the Service Benefit Plan's numerous pharmacy initiatives and new efforts to
manage costs in the Federal Employees Health Benefit Program, the Blue Cross
Blue Shield Association is dedicated to finding solutions to this growing
crisis. As part of an effort to constrain growing prescription drug costs, Blue
Cross Blue Shield Association is a founding member of the RxHealth Value
Coalition, a coalition of more than 30 consumer groups, private employers,
purchasers, providers, labor unions, and academicians. This coalition seeks to
establish a credible system for analyzing and determining the health and
economic value of prescription drugs. It is committed to: sponsoring research to
inform and educate consumers, providers, employers and government about the
benefits and costs of drugs as they contribute to overall health; proposing
solutions in the market for drugs that encourage competition and foster
appropriate and safe utilization of drugs; and encouraging the creation of
independent scientific-based entities to conduct clinical research regarding the
value of specific drugs.
In addition, BCBSA has recently launched an
independent non-profit pharmaceutical evaluation program known as Rx
Intelligence. Scheduled to become operational by June 30, this new independent
company will alert employers, insurer, and consumer groups to new drugs nearing
regulatory approval, provide quick analyses of medicines once they are on the
market and conduct in depth reviews and cost-benefit analyses of new and
existing drugs. The focus is to give physicians, patient, employers, and plans
unbiased information about the value and efficacy of new and existing drugs and
discourage inappropriate use or overuse of certain drugs.
In addition,
the Blue Cross Blue Shield Association believes that there are a number of steps
that the Federal Government can explore to help improve the affordability of
drugs without resorting to price controls or increased cost-shifting to
consumers. For example:
1. Examine and Revise Federal Policies
Contributing to Escalating Drug Costs: BCBSA believes that a vigorous
competitive market - rather than price controls - is the best way to improve the
affordability of prescriptions. To ensure vigorous competition, however, the
United States will have to eliminate any market protections that do not have a
clear benefit for consumers and foster actions that promote competition.
The government should conduct a careful review of the vast array of
prescription drug policies throughout the federal government to identify those
areas thatcontribute to accelerating drug costs. This review should recommend
appropriate regulatory or legislative policy changes in such areas as: Current
and proposed legislative initiatives to extend market exclusivity protections
for prescription drugs. Whether, and in which cases, federally subsidized
research should be made available to private pharmaceutical companies to develop
prescription drugs with no economic advantages to the federal government.
Patent extensions for individual drugs, such as the legislation
now pending before Congress, which would extend the patent for Claritin, and
several other drugs. Granting Claritin a 3-year patent
extension would cost consumers up to $5.3 billion from
2002 to 2007, according to researcher Stephen Schondelmeyer. The current rules
governing the movement of a prescription drug to over-the-counter status.
2. Support the Focus of All Purchasers on Prescription Drug Value: It is
critical that consumers, clinicians, government and private payers have
information to make wise choices, and to assure that scarce health care dollars
are not spent for drugs that are high cost alternatives to equally effective,
existing drugs.
The federal government should support efforts of
independent private sector entities to evaluate the relative value of competing
new drug therapies, and should: Support research to assure that consumers,
physicians, and purchasers have adequate information to evaluate the value of
prescription drugs (the benefits, risks, cost of a drug) and the relative value
of alternative therapies. Ensure that direct-to-consumer advertising is
accompanied by clear and understandable information for consumers of the risk of
the prescription drug advertised; and that consumers and physicians have access
to unbiased information on the cost of the drug, and the benefit, risk and cost
of alternative drug therapies (prescription or over-the-counter).
DoD/FEHBP Demonstration Project
I would also likely to briefly
comment on the three-year demonstration project permitting Medicare-eligible
retirees and their dependents to enroll in health benefits plans in the FEHBP.
From the beginning, the BlueCross Blue Shield Association has been committed to
working with OPM and DoD on the demonstration project to determine whether FEHBP
participation is a viable option for the retired military community and to
inform and educate the eligible population about the demonstration project.
We are aware of the expansion of the demonstration project to two
additional sites Adair and Coffee sites - and have notified the local Blue Cross
and Blue Shield plan serving those areas. We are also aware of additional
changes included in legislation making its way through Congress that would
eliminate most geographical restrictions and extend the time of the
demonstration. We hope that these changes will aid in creating a larger
enrollment base so that the demonstration project may indeed be a fair test of
the FEHBP as an option for the uniformed service retirees.
We look
forward to continuing to assist in these efforts once again. However, we urge
OPM and DoD to enhance its education and outreach efforts to this community. A
lesson learned from the past Open Season is that these retirees, unfamiliar as
they are with the FEHBP, require a greater degree of engagement than civilian
annuitants. Many more opportunities for these individuals to discuss in person
the FEHBP and the health plans available to them are required so that these
retirees begin to feel comfortable with their choices.
Cost Accounting
Standards (CAS)Your letter of invitation asked that we also address any other
issues that are important to the continued viability and stability of the
Service Benefit Plan. We remain concerned about the Administration's continued
efforts to impose the cost accounting standards on carrier contracts in the
FEHBP. These standards, developed primarily for contractors doing business with
the Department of Defense, are promulgated by the Cost Accounting Standards
Board. This Board is an entity within the Office of Management and Budget.
As you know, upon the request of this Subcommittee and full Committee,
Congress passed in both the fiscal year 1999 and 2000 Appropriations Acts a full
statutory waiver of the requirement to apply the CAS to contracts under FEHBP.
Blue Cross Blue Shield Association has actively sought the exemption for the
past two years, after an exhaustive analysis determined that the cost accounting
standards are fundamentally incompatible with, and inappropriate for, our health
insurance systems. Despite the clear will of Congress, and the overwhelming
strength of the arguments against imposing the CAS on carrier contracts in the
FEHBP, the Administration continues to oppose this statutory exemption.
The FEHBP accounts for only about 5 percent of the typical BlueCross
BlueShield Association Plan's business. But because our federal enrollees use
the same benefits and provider networks as do our private sector subscribers,
they and the government obtain the benefit of the deep discounts that our Plans,
collectively, are able to negotiate on behalf of more than 75 million people.
Because discounts and provider agreements are not separately negotiated
by our Plans for the FEHBP population, nor are operational systems segregated as
such, it would not make sound business sense for our Plans to redo their entire
accounting systems simply to install the CAS. Not only would applying CAS not
add any value to the FEHBP, but it would degrade the commercial capabilities on
which our Plans' core business depends. Therefore, for these reasons, the Blue
Cross and Blue Shield Association, as the agent for our Plans, cannot sign any
contract with OPM that contains the CAS clause or that otherwise seeks to
implement the standards currently exempted by law. We very much appreciate the
Committee understanding the gravity of this issue and your continued support for
our position.
Conclusion
The Federal Employees Health Benefits
Program is widely admired throughout the country as a model of efficiency and
effectiveness due to private sector competition and consumer choice. It is often
used as an example of what the private and public sector hopes to replicate. The
Blue Cross and Blue Shield Association is very proud of the role Blue Cross and
Blue Shield Plans have played in helping to make the Federal Employees Health
Benefits Program the success it is today. We look forward to finding ways to
preserve and improve the strength and stability of the program for all federal
workers, annuitants, and their family members.
Again, thank you for the
opportunity to appear before you today. I will be pleased to answer any
questions you may have at this time.
END
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