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that would remain at or near pre-parity levels. We emphasized the importance of education for plan members and medical providers.

Últimately, these negotiations resulted in a parity design that expands mental health benefits in an affordable way. When provided through the health plans network under an approved treatment plan, coverage for mental health illnesses is identical to coverage for other medical conditions.

From the standpoint of costs, parity implementation resulted in an average premium increase of 1.3 percent in 2001. In terms of that impact on individuals, those whose enrollment is for self only pay about 50 cents more every 2 weeks for that coverage. Families pay about a dollar more every 2 weeks.

Now, I should mention that costs to participants in the Federal Employees Health Benefits Program represent just over a quarter of the total cost. As the employer, the Government pays the remaining premium, an average of 72 percent.

Early indications are that parity implementation is going well. We have addressed a few problems quickly, all having to do with planned administration of the benefit. In our policy guidance for next year, 2002, we clarified a few areas based on questions that have arisen since the 1st of this year.

For the future, we are collaborating with the Department of Health and Human Services in a 3-year evaluation of the parity initiative, and will continue our liaison with stakeholders such as the Mental Health Liaison Group, the Washington Psychiatric Society, and the American Psychiatric Institute for Research and Education. Additionally, we will encourage cooperative efforts between health plans and accrediting organizations to develop standards and measures in this important area of health care.

In summary, Mr. Chairman, the introduction of parity in 2001 culminated a careful, step-by-step effort characterized by extensive collaboration with experts, practitioners and others. While we met our goal, we remain open to suggestions to improve for the future.

That concludes my statement, Mr. Chairman, and I would be happy to try and answer any questions you may have.

The CHAIRMAN. Thank you very much, Mr. Flynn. I saw that your figures on the premium increase was 1.3 percent, and it was 1.64 for fee-for-service and .03 percent for HMOs. Is that right?

Mr. FLYNN. That is correct, Mr. Chairman.

The CHAIRMAN. Now, have you been able to assess the economic benefits of parity beyond the confines of premium costs, for example, on productivity or absenteeism?

Mr. FLYNN. Mr. Chairman, as you know, the introduction of parity occurred on the 1st of January this year. In the Federal Employees Health Benefits Program, there is typically a 6- to 12month lag as claims come in and get paid and as information is available about the effect of that change.

So we have not had any ability to do an early assessment, particularly in terms of other economic benefits. I think, however, the one thing I would say is that much independent research in the public and private sector points to exactly those kinds of thingsincreased productivity, less absenteeism, fewer disabilities, and so on and so forth.

The 8.5 million people covered by Federal Employees Health Benefits Program, while there are differences between them and the American public in general, they are not so great as to suggest that we wouldn't see similar benefits in the Federal Government as well.

The CHAIRMAN. Well, of course, you covered substance and alcohol abuse, which are not included in this. So this would have to be considered to be less costly, would it not?

Mr. FLYNN. I think, Mr. Chairman, that because we extended this to alcohol and substance abuse conditions, it would be logical to say that there was an element of additional cost because of that. Overall, it was not a significant increase in premium, so I think the portion that might be attributable to alcohol and substance abuse would be even smaller.

The CHAIRMAN. You are inviting us to include those as well. I know we will hear more about that.

Let me ask you, how do you assess whether all of the programs are complying with the requirements? Give us some idea about the totality of all the programs. I think generally there are 30 or so in each region. Remind me of this.

Mr. FLYNN. In its entirety, we have about 250 health plans that are in the Federal Employees Health Benefits Program. The overwhelming majority of them are health maintenance organizations that serve limited geographic areas. So you are correct, Mr. Chairman. In most urban areas, Federal employees will have a dozen, perhaps a few smaller than that or a few larger than that, health plans from which to choose each year.

The scope of the program is nationwide, in fact worldwide, though mostly focused in the United States, and we contract with these health plans. They are our business partners in providing comprehensive, affordable health care to Federal employees, retirees, and members of their family. They are bound by the terms of those contracts.

We have a process in place where, if they are not abiding by them, we can enforce their cooperation. We also hear directly from individual members in the Federal Employees Health Benefits Program when they feel their health plan is not providing them benefits that they believe they are entitled to.

We engage in extensive information efforts, Web sites, written materials, and so on and so forth. So I think we have a well-rounded way of ensuring compliance by all of those 250 health plans, and we certainly have tools at our disposal when problems arise.

The CHAIRMAN. It hasn't been brought to your attention that some plans are not conforming? You have developed a process or a system to either audit or survey in some way make sure that they are all being covered?

Mr. FLYNN. I wouldn't say, Mr. Chairman, that it is clear that there is overwhelming compliance, and has been since the 1st of January. We have had a few cases, as I mentioned, brought to our attention. They were quickly resolved by the plan. It was really more a matter of misunderstanding and confusion, not any outright denial of the benefit or anything like that.

The CHAIRMAN. Well, I thank you, Mr. Flynn. I think for all of us as we are dealing with policy matters, you rarely have an example as we have here. Cost is going to be a principal factor in terms of the opposition, as it has been in the past, and we have an extraordinary reality check with the Federal employees and what is happening and what is being done.

We have several studies that estimate the cost at 1 percent, including your own testimony. We also have the experiences of several States that have implemented parity—these states have shown even lower cost than that in a number of circumstances. So we ought to be able to put that issue, I think, hopefully to bed. I know it is easier said than done, but I think your comments and testimony on this are enormously helpful in that area.

Senator Jeffords?

Senator JEFFORDS. I appreciate your testimony very much, and it is certainly exciting as to what you have been able to ascertain.

I would like your view on the role of managed care in controlling the cost under a parity law and what happens to costs when managed care is not available. Do you have any information on that?

Mr. FLYNN. In terms of just the health benefit itself or managed care in general?

Senator JEFFORDS. Mental health.

Mr. FLYNN. As I said to the chairman, our experience so far is quite young. We have had this in place now for 7 months and we have got a long-term evaluation underway. But I think that based on the research that we did and the discussions we have had it is clear that, just as in physical medicine, effective care management is an important component of controlling costs and achieving healthy outcomes.

The fact that fewer and fewer differences in fact, some would argue there are no differences at all exist between treating mental illnesses versus the typical physical illnesses, you would come to the conclusion that the success of managed care that you have seen in the broader area of physical medicine will apply in this area as well.

So I guess I would say, Senator Jeffords, that many of the lessons learned from the introduction of managed care in physical medicine will have been learned already by managed behavioral health care organizations, things like telephone answering, good information when people call in and need services, and things like that.

So I think the evidence is clear that managing care effectively, and I would say to you that that can be done in a variety of ways and has been done in a variety of ways in the Federal Employees Health Benefits Program—is an important component of a successful parity effort.

I think the evidence would suggest that in nonmanaged environments, not just in mental health but in physical health and in other arenas, if you don't pay attention to what it is you are doing and manage the processes and techniques effectively, it will cost you more, and those costs are largely wasted costs.

Senator JEFFORDS. What issues will you raise with FEHBP carriers to strengthen the parity requirement in your benefit negotiations for next year?

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Mr. FLYNN. Well, as I mentioned, we clarified a couple of areas in our guidance for 2002 and we are in the midst of those negotiations right now. I would not characterize either of them as major.

First, in our guidance last year we emphasized that parity benefits needed to be undertaken in a situation where an approved treatment plan had been developed and the individual was following that treatment plan. Our guidance was interpreted by some as meaning that benefits could be denied if an individual didn't follow his or her approved treatment plan.

So in our clarification this year, we wanted to ensure that in no case should any individual be denied medically necessary care simply because they weren't following the specific procedures under an approved treatment plan. We want healthy people and if they need medical care in acute situations, we want to make sure that they get it. So that was one area.

The second area that we clarified had to do with provision of rehabilitative services and just to make sure that they were being provided consistently, irrespective of their origin, but not big changes in part because we want to give ourselves some time and give the Department of Health and Human Services and others some time to evaluate the effectiveness of what we have done so far so that we can see more clearly if there are other things that we need to do for the future.

Senator JEFFORDS. Thank you very much.
The CHAIRMAN. Senator Frist?
Senator FRIST. Thank you, Mr. Chairman.

On page 4 of your testimony, you cite various research findings showing that “most mental health illnesses have well-established biological bases, that diagnoses are reliable, and that treatments are effective and available." As I said in my opening comments, one of the key reasons I believe Congress should consider action in this overall area is because private sector coverage has lagged behind our scientific advances and our medical evidence on both the diagnosis and treatment of mental health issues.

You say that most mental illnesses have well-established biological bases, and that effective and available treatments are available for most mental illnesses. Based on what I said in my opening statement and what you have said, I think it is important for us to take it one step further.

As I understand from your testimony, the FEHBP program requires parity for all mental illnesses contained in the Fourth Edition of the Diagnostic and Statistical Manual. Are there illnesses listed in the DSM-IV that do not have well-established biological bases?

Mr. FLYNN. Senator Frist, you are asking me a question over which I personally will profess ignorance. If you don't mind, I would like to take that back and provide an answer for the record.

I think the point that I was trying to make, however, in general, was that, as is true of medicine generally, there are diseases, be they physical or mental, for which the sort of foundations and diagnoses and treatment plans are not known. Medicine evolves, and it evolves in physical areas as well as mental.

What we wanted to do was to make sure that our health plans were providing for coverage for mental illnesses in a manner the same as or similar to the way that occurs in medicine generally. In that regard, typically we don't cover experimental treatments and things of that nature, so we wanted to apply in broad terms the same standard.

But in response to your specific question, I think I would like to prepare something more precise for the record.

Senator FRIST. Well, thank you. I am interested in that in terms of how far we go and what the relationship of science is. Also, I guess a follow-up question would be are there illnesses listed in the DSM-IV for which effective treatments have not yet been demonstrated or clinically proven. I think that is important for us to understand especially when we ultimately have to make a decision on how far to go in particular pieces of legislation which come forward.

Thank you very much.
Mr. FLYNN. Thank you.
The CHAIRMAN. Senator Wellstone?
Senator WELLSTONE. Thank you, Mr. Chairman.

I wanted to say to you, Mr. Flynn, I think part of the issue here is that there are physical illnesses that we don't know how to diagnose and we don't know how to treat. People die of cancer, people die of other illnesses, but we make sure that people are able to see a doctor and that that is covered. I think we don't want to have a kind of distinction here which then generates yet a whole new kind of discrimination. I mean, I think that is part of the issue and I think that is part of what you were trying to get to.

I just want to, first of all, repeat what the chairman has said. I so appreciate the fact that you all have done the evaluation. It does, as Senator Kennedy said, give us a reality factor. Again, I think the cost increase of 1.3 percent—it is important for us to know that, but, of course, low cost is actually not the ultimate goal of parity. The ultimate goal of parity is improved treatment of people with mental illness.

I wanted to ask you what mechanisms you all employ at OPM to make sure that you are able to achieve that balance between cost-effectiveness and quality of care.

Mr. FLYNN. Senator Wellstone, in general, we have a number of mechanisms in place to make sure that people are getting the treatment they need and that that care is of high quality, and what I am going to mention to you applies to all aspects of the Federal Employees Health Benefits Program, not just mental health benefits specifically.

First, when we contract with our health plans, we contract with them not only for the provision of services, but increasingly for an agreement, a consensus on the quality of services they will provide accreditation by a national accrediting organization, healthy outcomes, ensuring that appropriate standards of treatment where they exist are applied throughout the health plan's network of providers, and so on and so forth. So the first vehicle that we have is the contract and the performance expectations that we lay out and agree to with the health plans that participate in the program.

The second area that I would point to is the fact that we do have strong oversight. We have not only our contracting officers who are in day-to-day contact with the health plans and monitoring their

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