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Health Care Reform Memo:
May 21, 2012

Deloitte Center for Health Solutions publication

The health care reform memos are issued on a weekly basis, highlighting news from the previous week's activities in the administration and implications for the C-suite and various stakeholder groups.

My take: informed consumers and increased transparency in the health insurance industry

From Paul Keckley, Executive Director, Deloitte Center for Health Solutions

In Section 1304 of the Affordable Care Act (ACA), a number of definitions are provided to assure that the health insurance industry is better understood:

  • The term “group market” means the health insurance market under which individuals obtain health insurance coverage (directly or through any arrangement) on behalf of themselves (and dependents) through a group health plan maintained by an employer.
  • The term “individual market” means the market for health insurance coverage offered to individuals other than in connection with a group health plan.
  • The terms “large group market” and “small group market” mean the health insurance market under which individuals obtain health insurance coverage (directly or through any arrangement) on behalf of themselves (and their dependents) through a group health plan maintained by a large employer or by a small employer.
  • The term “large employer” means, in connection with a group health plan with respect to a calendar year and a plan year, an employer who employed an average of at least 101 employees on business days during the preceding calendar year and who employs at least one employee on the first day of the plan year.
  • The term “small employer” means, in connection with a group health plan with respect to a calendar year and a plan year, an employer who employed an average of at least one, but not more than 100, employees on business days during the preceding calendar year and who employs at least one employee on the first day of the plan year.
  • The term “educated health care consumer” means one who is knowledgeable about the health care system, and has background or experience in making informed decisions regarding health, medical, and scientific matters.

Sorry, I still get confused. I barely understand my policy, and I’ve been doing health services research for 35 years. But I also confess to not really understanding my homeowners, life, auto, disability, and personal liability plans for which I pay premiums monthly. No surprise: I don’t read all the fine print when I “agree” to log into a website nor have I studied the “terms and conditions” for the credit cards I use. My bad.

One of the unintended consequences of the public debate about health reform and the ACA since 2009 has been heightened public awareness of health insurance. In some circles, the notion of “access to care” has been used synonymously with “access to health insurance” since studies have shown those with insurance tend to see physicians and use hospitals more regularly than those without. Title I of ACA sets forth a series of required changes to the industry’s business model—essential health benefits, guaranteed issue, community rating, medical loss ratio (MLR) threshold requirements, pre-existing condition considerations, and many others. Notably, in many cases, the changes to the industry were almost immediate—“within 180 days of passage” if not sooner.

And the language of ACA around its insurance provisions is quite specific to transparency—making sure people like me can understand the insurance we have and compare it to competing plans easily. But I must admit, like diagnosing and treating disease, it’s still complicated. The facts suggest the notion of health insurance is changing…

  • Fact: 84 percent of Americans have insurance in some form—Medicare, Children’s Health Insurance Program (CHIP), Indian Health Service, military, Medicaid, individual, or employer-sponsored group. (Source: U.S. Census Bureau [Census])
  • Fact: 31 percent of these are covered by a government insurance program representing 44 percent of total spending on health care. (Source: Census)
  • Fact: the percentage of non-elderly workers with employer-sponsored coverage fell from 68 percent in 2000 to 59 percent in 2010. (Source: Kaiser Family Foundation)
  • Fact: in 2000, 10.5 percent of the public was covered by Medicaid, 13.5 percent had Medicare. By 2010, both increased to 14.5 percent and 15.9 percent, respectively. (Source: Census)
  • Fact: since 2001, premiums for family coverage have increased 78 percent, vs. wage increases of 19 percent and inflation increases of 17 percent. (Source: Kaiser Family Foundation)

No surprise: the health insurance industry has evolved. Its origin is attributed to the Franklin Health Assurance Company of Massachusetts, founded in 1850, that offered insurance against injuries arising from railroad and steamboat accidents. By 1866, 60 organizations were offering accident insurance in the U.S. Until the 1920s, health insurance was synonymous with catastrophic risk—replacement of income due to a disability or accident—rather than coverage for hospitals and physicians.

As we recovered from WWI, individual hospitals began offering services to individuals on a pre-paid basis, eventually resulting in the Blue Cross organizations in the 1930s. Some employers followed: the first employer-sponsored hospitalization plan was created by teachers in Dallas, Texas in 1929, whose plan covered hospital services at a single hospital.

In the 1930s, FDR explored possibilities for creating a national health insurance program in tandem with the new Social Security system successfully passed. But it was abandoned due to opposition from physicians and the burgeoning insurance industry at the time. Then, as a direct result of wage controls imposed by the federal government in WWII, employer-sponsored insurance (ESI) took off. When the War Labor Board declared that fringe benefits, such as sick leave and health insurance, did not count as wages for the purpose of wage controls, employers responded with significantly increased offers of fringe benefits, especially health care coverage, to attract workers. Between 1940 and 1950, the total number of people enrolled in health insurance plans grew seven-fold, from 20 million to 142 million, and by 1958, 75 percent of Americans had some form of health coverage. Today, more than 160 million have insurance through an employer-sponsored plan.

Last week, the federal government provided guidance about its plans for state-run health insurance exchanges (HIXs) or, in some states, federally-run exchanges. At the heart of the exchange concept is an informed consumer, equipped with tools to compare policies based on costs and coverage. To me, the concept of an exchange makes sense, but at some point, responsibility to comparison shop and buy insurance that meets my needs boils down to my willingness to invest time in understanding what I need and what level of risk I am willing to take.

Looking at its history, it’s easy to conclude four things about the health insurance industry:

  1. Federal policy has always provided its framework: the government plays a central role in defining the parameters for the goods and services it provides.
  2. The industry is always evolving: from catastrophic, to full coverage, to defined contribution; and from group to individual.
  3. Efforts to create an educated consumer about health insurance have been only modestly successful: for most like me, it’s still confusing.
  4. The industry’s a mainstay in the health care eco-system: its focus on cost and transparency is a necessary part of health reform.

So, this week, I read my insurance policies. Not sure I fully understand but it’s a start.

Paul Keckely

Paul Keckley, Ph.D., Executive Director, Deloitte Center for Health Solutions

Implementation update

“Open market” model proposed for federally-facilitated HIXs

Wednesday, the Center for Consumer Information and Insurance Oversight (CCIIO) released guidance on its approach to implementing a federally-facilitated exchange (FFE) in states not operating a state-based exchange. Per Section 1321 of ACA, the U.S. Department of Health and Human Services (HHS) will establish and operate a FFE in states that have not shown progress toward implementing a HIX (i.e., meeting minimum functions of an exchange including enrollment, operating the Small Business Health Options Program [SHOP] program, and oversight of qualified health plans [QHP]) by January 1, 2013. In addition, states will have the option to operate a HIX in partnership with HHS. The FFE will operate around four guiding principles: 1) commitment to consumers, 2) market parity, 3) leveraging the traditional state role, and 4) engagement with states and other stakeholders.

Notably, HHS decided that any health plans meeting certification requirements as QHPs will be able to participate in the FFE, thus using an “open market” model. HHS will provide ongoing support to FFEs to support their ongoing operations by developing and implementing a system to calculate user fees from participating issuers, with details expected this fall. And, to the extent permitted by a state, a federal exchange will permit agents and brokers to enroll individuals in a QHP “through an exchange”; web-based brokers can help consumers pick health plans online.

Note: a state seeking to establish a federal-state partnership HIX per Section 1311 of ACA is required to submit a blueprint of its plan and operational capabilities by November 16, 2012. States choosing to implement a HIX through the federal partnership with HHS will be responsible for day-to-day management of plans and/or any consumer assistance functions, but HHS will be the authority over the FFE selecting state partners through which plan management and consumer assistance functions will be provided (i.e., infrastructure, operational partnerships). To date, 34 states have received planning grants from HHS to set up their own exchanges including $181 million to six last week: Illinois, Nevada, Oregon, South Dakota, Tennessee, and Washington. States anticipating operation of their own exchange must receive full/conditional approval from CCIIO by January 1, 2013 for open enrollment starting October 1, 2013.

Per Section 1031 of ACA, HHS will certify a health plan that meets all certification standards as a QHP for the FFE based on the following:

QHP Certification Process
Issuer-level Review QHP Certification Standard Summary of FFE Oversight
Licensure and good standing Confirm state licensure and compliance with state solvency and other related requirements.
Network adequacy In states meeting minimum federal standards, verify state review. Otherwise, review network adequacy data submitted in QHP Issuer Application.
Essential community providers (ECPs) Collect information on inclusion of ECPs in provider networks and review for sufficiency.
Accreditation Confirm accreditation status, depending on certification year (as described in future rulemaking).
Program attestations Ensure submission of required attestations (for example, attestation of compliance with marketing standards
Plan-level Review QHP Certification Standard Summary of FFE Oversight
Essential health benefits Confirm coverage of essential health benefits.
Actuarial value standards, including variations for cost-sharing reductions Confirm actuarial value levels of potential QHPs, including compliance with standards related to cost-sharing reductions, cost-sharing limits, and variations to cost-sharing structures.
Discriminatory benefit design Conduct plan-level analysis (such as outlier analysis) targeting areas where discrimination would most likely occur.
Meaningful difference Conduct review for meaningful difference across QHPs offered by the same issuer to ensure that a manageable number of distinct plan options are offered.
Service area Confirm that service area is at least one county or that smaller service area is necessary, nondiscriminatory, and in the interest of consumers.
Rates (new and increases) Review new rates and rate increase justifications for reasonableness, including confirmation of compliance with market rating reforms.

Source: CCIIO, “General Guidance on Federally-facilitated Exchanges,” May 16, 2012.

In its announcement, CCIIO indicated HHS will release both the QHP Issuer Application (the vehicle through which the Issuer-level Reviews will be performed) and the Rate and Benefit Data Submission (the vehicle through which Plan-level Reviews will be performed) in early 2013. In addition to QHP certification, FFEs will be responsible for QHP issuer account management, QHP oversight, and recertification and decertification for those plans that fall out of compliance with QHP certification standards.

Note: a study published last week concluded that HIXs created through the ACA would have saved adults with individual insurance an average of $280 had they been available from 2001-2008 ($589 for individuals age 55-64 and $535 for low-income individuals). The authors concluded that if HIXs had been in place, the percentage of individuals with out-of-pocket expenditures above $6,000 would have decreased by 77 percent. (Source: Steven Hill, Health Affairs, “Individual Insurance Benefits To Be Available Under Health Reform Would Have Cut Out-Of-Pocket Spending In 2001-08,” May 2012)

Reactions: “It is essential that regulatory oversight encourage private health plan participation as QHPs in exchanges, whether run by the federal government or states. Access to affordable private health insurance for individuals and employers is essential to a stable health market and necessary to controlling health costs. Rules and oversight that add costs to the provision of coverage, whether through exchanges or outside, increase premiums for employers and individuals, and ultimately drive people away from coverage altogether. The central focus should be the same for states and federal regulators, and for the health insurance industry: to increase access to affordable health insurance.”—Bill Copeland, U.S. Life Sciences and Health Care National Industry Leader, Deloitte LLP

“States are in the best position to establish exchanges because they have the experience and local-market knowledge to meet the consumers’ needs. If a state chooses not to establish its own exchange, any exchange that is implemented should seek to preserve consumer choice and avoid regulatory duplication that will add complexity and increase costs for consumers. We appreciate that the Department has prioritized minimizing administrative burdens, encouraging choice, and preserving the states’ traditional role of regulating health insurance as these exchanges are developed.”—America’s Health Insurance Plans (AHIP)

Background: HIXs are intended to provide a channel through which individuals and small employers may access affordable coverage. The concept is not new: two states, Utah and Massachusetts, currently operate exchanges.

Per Section 1311: an Exchange shall, at a minimum:

  • Implement procedures for certification, recertification, and decertification, consistent with guidelines developed by the Secretary, of health plans as QHPs.
  • Provide for the operation of a toll-free telephone hotline to respond to requests for assistance.
  • Maintain an Internet website through which enrollees and prospective enrollees of QHPs may obtain standardized comparative information on such plans.
  • Assign a rating to each QHP offered through such Exchange in accordance with the criteria developed by the Secretary.
  • Utilize a standardized format for presenting health benefits plan options in the Exchange, including the use of the uniform outline of coverage established under Section 2715 of the Public Health Service Act (PHS Act), as amended above.
  • In accordance with Section 1413, inform individuals of eligibility requirements for the Medicaid program, the CHIP program, or any applicable state or local public program and if through screening of the application by the Exchange, the Exchange determines that such individuals are eligible for any such program, enroll such individuals in such program.
  • Establish and make available by electronic means a calculator to determine the actual cost of coverage after the application of any premium tax credit under new Internal Revenue Code (IRC) Section 36B and any cost-sharing reduction under Section 1402.

Each of the two currently operated in states is unique:

  Massachusetts Health Connector Utah Health Exchange

 

Date started

 

  • Commonwealth Care: October 2006
  • Commonwealth Choice (nongroup): July 2007
  • Commonwealth Choice (small group): February 2010
  • Small group: August 2009
  • Large group pilot 50+ employees: April 2010

Enrollees

  • 175,000 members (2011) in Commonwealth Care: connects eligible uninsured low income individuals to subsidized health options
  • 41,000 members (2011) in Commonwealth Choice: connects individuals (earning above 300% federal poverty level [FPL]) and small businesses (2-50 employees) to commercial insurance options
  • 6,200 members (2011) in a single state exchange: targets small employers (2-50 employees) and large employers (50+ employees)

Goals

  • Improve consumer experience with insurance shopping and buying
  • Decrease administrative cost of buying insurance
  • Add price resistance to premium setting and insurer negotiations with providers
  • Improve transparency with standard tiered plans
  • Facilitate access to subsidy for those under 300% FPL
  • Offer Internet-based portal that connects consumers to information needed to make an informed choice about their health insurance and facilitates enrollment
  • Promote greater employee choice, transparency, and value
  • Offer employers access to defined contribution market
  • Support employee premium aggregation

Governance

  • Semi-independent public entity (separate legal entity from Commonwealth governed by board with private and public sector representatives)
  • Public agency housed in Governor’s Office of Economic Development.

Role relative to private market

  • Active purchaser for Commonwealth Care
  • Between market organizer and active purchaser for Commonwealth Choice
  • Private plans have to receive the Connector’s “Seal of Approval” to offer a range of benefits options
  • Market organizer (channel for all eligible private insurers)

Source: State Health Access Data Assistance Center, 2010. “Health Insurance Exchanges: Implementation and Data Considerations for States and Existing Models for Comparison.” Issue Brief #23. Minneapolis, MN: University of Minnesota.

For a complete review of the health exchange ruling in ACA, download Health insurance exchanges: A strategic perspective from the Center for Health Solutions website or contact Paul Lambdin.

CO-OP funds awarded in Nevada, Michigan

Last week, HHS announced funding for two new Consumer Oriented and Operated Plans (CO-OPs): $65.9 million to Hospitality Health CO-OP in Nevada and $71.5 million to Michigan Consumers Healthcare CO-OP in Michigan.

Background: ACA (Section 1322) created nonprofit health insurers, called CO-OPs that are owned, governed, and operated by their customers. The federal CO-OP program offers low-interest loans to eligible nonprofit groups to help set up and maintain these plans—to date, 12 nonprofits offering coverage in 12 states have been awarded $982 million. Starting January 1, 2014, CO-OPs, will be able to offer their plans through the Affordable Insurance Exchanges in addition to marketing outside the Exchange.

The first round of applications was due on October 17, 2011, the second round was due on January 3, 2012, and a third round was due on April 2, 2012. There will be subsequent quarterly application deadlines through December 31, 2012. Awards are announced on a rolling basis.

Related item: last week, the National Alliance for State Health CO-OPs (NASHCO) issued a response to Senate Republican inquiries that raised doubt that the $3.8 billion funding for CO-OPs would succeed in lowering costs. In its response, NASHCO indicated:

  • CO-OPs failure and taxpayer repayment: Senators loss projections are conservative (“pessimistic”) and the default rate represented includes loans that will be repaid under a revised schedule, as well as any loans made later than the scheduled date for payment.
  • Collateral for the loans and likelihood for default: CO-OPs are held to high standards and include detailed business plan requirements. Collateral cannot be required for the loans under states’ insurance regulations, the CO-OPs will be required to keep reserve funds.
  • CO-OPs selection and eligibility: HHS keeps strict guidelines for the selection criteria of CO-OPs with few awarded loans to date. Many applicants were denied loans and were required to modify aspects of their applications in order to be considered for future loans.
  • Management of CO-OPs oversight: loans will be distributed gradually, rather than in a lump sum. HHS has also implemented a rigorous oversight process with Congress continuing to monitor the progress of these initiatives.

Background: per ACA Section 1322, a CO-OP program must meet the following requirements:

  • It must be organized as a nonprofit, member corporation under state law.
  • It must not be an existing organization that provides insurance as of July 16, 2009, or an affiliate or successor of any such organization.
  • Its governing documents must incorporate ethics and conflict of interest standards protecting against insurance industry involvement and interference.
  • It must not be sponsored by a state, county, or local government, or any government instrumentality.
  • Substantially all of its activities must consist of the issuance of qualified health benefit plans (QHBPs) in the individual and small group markets in each state in which it is licensed to issue such plans.
  • Governance of the organization must be subject to a majority vote of its members (i.e., beneficiaries).
  • Profits must be used to lower premiums or improve benefits, or for other programs intended to improve the quality of health care delivered to members.

NASHCO also stated that CO-OPs will not have an advantage over traditional insurance companies, and will ultimately increase competition in the insurance marketplace as a number of studies have concluded.

IRS releases final premium tax credit rules for individuals, married couples

Friday, the Internal Revenue Service (IRS) published a final rule on the health insurance premium tax credit per ACA Section 1411 allowing couples that married in the applicable tax year to make separate income calculations for the months they were single and the months when they were married, instead of repaying the tax credits if they no longer qualify for subsidies after the marriage. The rule did not provide regulations for determining the affordability of employer-sponsored health coverage for families, noting that future regulations will provide final rules.

Chamber of Commerce encourages HHS to protect access to coverage through exchanges for small business

The U.S. Chamber of Commerce submitted comments on HHS’ federal exchange urging regulators to build protections for SHOP in each exchange per Section 1311 of ACA. It encouraged regulators to assure that…

  1. Choice rests with the employer as to which plans an eligible employee can elect to enroll through the SHOP.
  2. If a state sets up an exchange for individual coverage, it must also create a SHOP.
  3. If a state does not set up a SHOP, the federal government will set up a federally-facilitated SHOP and a FFE.

In its conclusion, the Chamber stated that: “To be clear, we do not believe that the employee choice is inherently problematic, but it must be the employer and not the Exchange/SHOP which ultimately chooses how and which plans are offered to employees.”

HHS provides details about risk adjustment methodology

Last week, HHS provided additional details about its risk adjustment methodology to be used to calculate risk scores based on a concurrent rather than a prospective model. The methodology will use a distributed data collection approach when operating a risk adjustment program in states. The alternative approach, considered in previous guidance, would have insurers calculate their own risk scores and submit them to the state or HHS instead of HHS providing underlying claims or encounter data.

Note: advocates for consumers’ rights oppose a distributed approach, advocating for a centralized place where data on enrollees could be directed.

Legislative update

CMS actuary estimates Medicare Part B costs will be 12 percent higher if physician SGR cuts set aside

The Centers for Medicare and Medicaid Services (CMS) Office of the Actuary issued projections of Medicare costs in response to the Medicare Trustees Report released last month expressing concerns that Medicare’s actual future costs will exceed those currently projected since it is unlikely that physicians will receive the scheduled 30 percent payment rate cut per the Medicare sustainable growth rate (SGR). The 2011 Trustees Report estimated Medicare Part B spending in 2012 to be $220.5 billion, however, the actual amount is now expected to be $246.9 billion—12 percent higher than last year’s estimate due to Congress overriding the 29 percent reduction in physician payment rates that would otherwise have taken effect for 2012. The actuaries’ projections also warn that “if these elements of current law are not sustained in all future years, then Medicare expenditures in 2080 could be about 50 percent greater than projected under current law, with about one-third of that difference attributable to the elimination of the SGR mechanism for physician payments.”

Note: the SGR model was created to align Medicare payments to physicians (Part B) with costs and to distribute its funding across specialties appropriately. Since 2002, its recommendations have been set aside by Congress, resulting in overpayments of $300 billion. A permanent fix to SGR would mean an additional $300 billion added to the federal deficit, thus temporary fixes have been used by Congress to set it aside—five last year alone.

GAO solicits nominations for health IT policy board; May 25 deadline

The Government Accountability Office (GAO) released a solicitation for nominations of three candidates to serve as patient or consumer advocates on the federal Health Information Technology (IT) Policy Committee. The American Recovery and Reinvestment Act of 2009 (ARRA) provides that the Committee make recommendations on the areas of meaningful use, certification/adoption, information exchange, Nationwide Health Information Network (NHIN), strategic plan, privacy and security policy, enrollment, privacy and security tiger team, governance, quality measures, and the President’s Council of Advisors on Science and Technology (PCAST) report. Nominations will be accepted by GAO until this Friday, May 25, 2012.

State update

  • HHS approved Oregon’s $1.9 billion Medicaid demonstration plan that allows the state to deliver care by establishing community-based coordinated care organizations (CCOs). The CCOs will take the previously separated medical, mental health, and dental services and coordinate care efforts for beneficiaries. The new plan is expected to save the state $11 billion over the next ten years and reduce cost by two percentage points over the next two years. The state has received 14 applications to date, covering 90 percent of the 600,000 beneficiaries of the program.
  • Tuesday, Maine legislators in the Senate (19-16) and House (74-69) passed a budget cutting $38 million from MaineCare, the state’s Medicaid program, causing an estimated 24,000 people to lose access to the program. MaineCare spends an average of $1,895 per enrollee, as compared to the national average of $1,187.
  • Mayor Vincent Gray (D) of the District of Columbia (DC) and city council members came to an agreement Wednesday that avoided cuts to the HealthCare Alliance public health insurance program that primarily serves illegal immigrants living in DC. Earlier this year, Mayor Gray recommended hospital cuts to save $20 million in the budget. The program covers 19,000 people, mostly illegal immigrants. The mayor and council agreed after talks to preserve the program instead and make changes to other health programs in DC and increase funding for emergency treatment.
  • The Utah Department of Health released a report last week that high obesity rates cost the state $485 million in 2008: 9.7 percent of public elementary school children are obese, 8.6 percent of public high school students, and 23.2 percent of adults. If these rates continue, the state will spend a projected $2.4 billion by 2018. The study relied on data from the Medical Expenditure Panel Surveys (MEPS) that does not capture all costs, so the estimate is considered lower than actual costs. (Source: Utah Department of Health, “Utah Health Status Update: Economic Impact of Obesity,” May 2012)
  • The Department of Human Services in Arkansas will create a web portal for collecting information from physicians after the state Rules and Regulations Subcommittee Legislative Council gave the proposed rule a favorable review, to assist the state in transforming from a fee for service (FFS) to a value-based payment system. State health care providers will use the portal to submit results of care for targeted areas such as upper respiratory infections, prenatal care, congestive heart failure, hip and knee replacements, and attention deficit hyperactivity disorder.
  • The Arizona Department of Insurance will review health insurance rates in the state to determine whether or not they should be labeled as “unjustifiably high.” It will not have the authority to approve or deny the rates, but it can require insurers who have been flagged to post on their website that their increases in rates were determined to be unjustifiably high by the state.
  • The Massachusetts state Senate passed a bill (35-2) projected to cut spending by $150 billion over the next 15 years. The state currently spends 40 percent of its budget on health care—15 percent more per person than the rest of the U.S. The bill establishes a statewide health care cost growth goal, requiring state-funded health care programs to transition to new payment methodologies, creating a certification process for health providers dedicated to cost reduction, and reorganizing the Division of Health Care Finance and Policy to become an independent state agency.
  • Thursday, the New Hampshire House approved a new database that will track the prescribing and dispensing of pharmaceuticals of drugs that are often abused. The system will allow physicians and pharmacies to see if patients have filled multiple prescriptions for the same medication. Missouri is currently the only other state with a similar database.
  • An HHS Office of the Inspector General (OIG) report of New York’s Medicaid program released last week found that the state received $701 million in overpayments from the federal government. In addition, the services provided to residents of a privately-operated independent care facility were comparable to services provided in a nearby developmental center; the developmental center’s Medicaid reimbursement rate was almost ten times that for the private facility.

Industry news

OIG report: questionable billing at retail pharmacies prevalent

Monday, the OIG released a report about billing practices in retail pharmacies finding that 4 percent of retail pharmacies (2,600) have questionable billing practices—the majority independent pharmacies. The National Community Pharmacists Association (NCPA) countered that 96 percent of all pharmacies participating in Part D do not have questionable billing, and independent pharmacies serve a disproportionately high number of long-term care and other patients who require more medications than the average Medicare beneficiary. Pharmacies billed Part D about $1,500 per beneficiary and $1,800 per prescriber on average, according to the OIG in a report released Thursday, May 10. But 778 pharmacies billed over $4,050 per beneficiary and 850 billed more than almost $6,000 per prescriber.

AHA survey: ICD-10 delay helps hospitals, smaller hospitals face implementation challenges

An American Hospital Association (AHA) survey of 1,000 hospitals found that 70 percent thought a short-term delay of no more than 12 months would make the transition to ICD-10 easier by giving the providers a chance to handle different and often competing priorities. Key findings:

  • Larger hospitals are having an easier time with the transition than small hospitals due to staff and capital requirements resulting from the transition.
  • The majority hospitals surveyed said they could not support a delay longer than a year. Only a little more than 11 percent of the hospitals surveyed said they were not confident in their ability to be ready by October of 2013.
  • Only 1 percent of hospitals are ready to transition to ICD-10 but 60 percent are underway and were on track vs. 14 percent that have not yet started their preparations.
  • 90 percent cite training physicians on how to use ICD-10 as their top concern followed by coder training.

Related: last week, the American Medical Association (AMA) sent a letter to CMS urging it to delay ICD-10 compliance dates an additional year, to October 1, 2015. The letter was in response to a CMS proposal released in April which would delay implementation from October 1, 2013 to October 1, 2014. AMA states the two-year delay would “provide CMS with adequate time to pursue a much needed cost-benefit analysis of the full ICD-10 move that covers the administrative and financial impact of the ICD-10 move on physician practices.” The letter also encouraged CMS to engage all relevant stakeholders including physicians to assess whether an alternative code set approach is more appropriate than the full implementation of ICD-10.

Resources: Contact Christine Armstrong or David Biel for more information on ICD-10.
Sources: AHA, AMA.

White House releases final Alzheimer’s national plan

Tuesday, the White House released its national Alzheimer’s plan per the National Alzheimer’s Project Act signed into law in January 2011. The bill requires HHS to establish a National Alzheimer’s Project to focus research, development of treatments, diagnosis, and care on ethnic and racial minorities. The project will also focus on coordination with international efforts to fight against Alzheimer’s disease (AD). In February of this year, the administration announced a $156 million investment in the disease, which includes $130 million for research, and $26 million to improve public awareness, provider education programs, caregiver support, and data collection.

The plan addresses the following AD challenges:

  • No pharmacological treatments currently exist to prevent, treat, or cure the disease.
  • Current quality measures for assessing care and training of the health care workforce to treat the disease leave room for improvement.
  • Those who care for individuals with AD are in need of support as most with the disease live in the community.
  • Stigma and misconceptions continue to proliferate throughout the U.S.
  • There is need for more coordination and tracking on behalf of both public and private sector.

Source: HHS, “National Plan to Address Alzheimer's Disease,” May 2012.

Reaction: the Alzheimer’s Association released a statement in response to the national plan: “This is a strong plan that promises important progress when implemented. For all Americans—not just the more than 5 million living with Alzheimer’s and their 15 million caregivers today—this plan is an historic achievement.”

Senators propose amendment to FDA user fee

Tuesday, Senators Tom Harkin (D-IA) and Mike Enzi (R-WY) introduced the U.S. Food and Drug Administration (FDA) Safety and Innovation Act to amend the FDA user fee bill passed by the Senate Health, Education, Labor, and Pensions (HELP) committee. Proposed changes include:

  • Mobile device applications: require the FDA to work with stakeholders, the Office of the National Coordinator (ONC) for Health Information Technology, and the Federal Communications Commission (FCC) to submit a proposed strategy and recommendations on an appropriate, risk-based regulatory framework pertaining to medical device regulation and health IT software, including mobile applications, no later than 18 months after the enactment of the bill.
  • Pediatric therapies: require FDA to hold a public meeting to encourage and accelerate the development of treatments for rare pediatric diseases, and create a strategic plan relating to this issue.
  • Orphan product grants program: extend the program for five years.
  • Patient involvement in product development: instruct the FDA to produce better strategies for involving patients in the development of medical products. These strategies would include participation of a patient as a special government employee to attend agency, sponsor, and investigator meetings.

Reactions: the White House issued a statement in support of the bill: “Promoting innovation, safety, and access to medicines and devices is critical to the Nation’s health, and the Administration supports this bipartisan legislation that contributes to this goal.” (Source: Executive Office of the President, Office of Management and Budget (OMB), “Statement of Administration Policy: S. 3187 – Food and Drug Administration Safety and Innovation Act,” May 17, 2012)

Members of the Health IT Now coalition: “This provision helps to assure that there will be a full assessment of the implications of regulating medical software as `devices...’ The public interest requires a regulatory framework that accommodates this beneficial evolution. Soliciting input from patients, consumers, manufacturers, payers and providers, and assuring that FDA collaborates with other agencies that work daily with such technology, will help to ensure a comprehensive view of the challenges and opportunities moving forward.”

ONC reorganizes, creates CMO office

Wednesday, ONC issued a notice that it has reorganized to create the Office of the Chief Medical Officer (CMO) to address physician affairs and “work with private sector medical organizations to achieve widespread use of health information technology by physicians.” “Activities coordinated through the office will include meaningful-use policy development, quality metrics and measurement development as well as patient safety, health IT usability and clinical decision-support initiatives.” (Source: Joseph Conn, ModernHealthcare.com, “ONC adds CMO office,” May 16, 2012)

VA seeks comments on VLER system to increase interoperability in military, veterans’ health; privacy central issue

The Department of Veterans Affairs (VA) released notice of a new privacy policy for the Virtual Lifetime Electronic System (VLER). The President ordered the creation of VLER in 2009 in an effort to combat the interoperability issues experienced between the U.S. Department of Defense (DOD) Military Health System’s and VA’s Veterans Health Administration’s electronic health records (EHR) systems. The policy will allow more cohesive sharing of information between the systems and outside the systems through the NHIN. Records in the VLER system will remain subject to Health Insurance Portability and Accountability Act of 1996 (HIPAA) laws. In addition, privacy laws will be more strict surrounding disclosure of information for treatment for drug or alcohol abuse, HIV/AIDS, and sickle-cell anemia—requiring providers to obtain consent from veterans before release of this information. The VA will accept comments until June 11, 2012.

Study: EHR use did not improve quality of care for diabetes patients

Researchers from the Robert Wood Johnson Medical School at the University of Medicine & Dentistry of New Jersey published findings that suggest use of EHRs for patients with diabetes do little to improve care. The study followed 800 patients in 42 physician practices for three years, and found that there was no link between EHR use and better adherence to clinical guidelines for processes of care or recommended treatments. In addition, practices that treated patients without the use of EHR systems were more likely to meet outcomes-based targets (e.g., blood pressure, A1c levels) at two-year follow-ups than those who did use EHRs. (Source: Jesse C. Crosson, et al, Annals of Family Medicine, “Typical Electronic Health Record Use in Primary Care Practices and the Quality of Diabetes Care,” 10(3), 2012)

Note: this study contradicts another conducted by Better Health Greater Cleveland published in late 2011 in the New England Journal of Medicine (NEJM), which found that adults with diabetes receiving treatment in physician practices who implemented EHRs were more likely to have positive health outcomes that aligned with accepted standards than for those who saw physicians utilizing paper records. This study followed 27,000 individuals across 46 practices in the Cleveland, Ohio area over a three-year period. This study emphasized the importance of sharing of best practices and coaching through collaborations. (Source: Randall Cebul, et al, NEJM, “Electronic Health Records and Quality of Diabetes Care,” September 1, 2011)

AHA revises billing and collecting practice guidance

The AHA made changes to its policies regarding billing and debt collection after recent reports of hospitals using aggressive tactics to encourage patients to pay their bills. The new guidelines emphasize a hospital’s role in helping patients with payment for care is to communicate effectively (e.g., providing financial counseling for patients, using a clear and concise billing process), to help patients qualify for financial assistance (required through ACA that hospitals have a written financial assistance policy), and to ensure hospital policies are applied accurately and consistently.

House committee considers industry consolidation and competition

Friday, the House Committee on the Judiciary held a hearing entitled, “Health Care Consolidation and Competition after PPACA” in which leaders in health policy offered testimony:

  • Scott Gottlieb, M.D., the American Enterprise Institute: emphasized the need to create proper incentives for innovation in the delivery of health care. He testified that, under the current setting, “where government agencies and not consumers choose what is covered, and where profits are punished, it leaves little room for entrepreneurship in how health care services are delivered."
  • Edmund F. Haislmaier, The Heritage Foundation: testified that new conditions under ACA will reduce competition in the health insurance sector, through federal regulation of commercial health insurers, both in scope and in detail. This will come through the provisions of ACA that “standardize coverage, increase premiums, raise barriers to market entry, and encourage industry consolidation.”
  • Thomas Greaney, Saint Louis University School of Law: testified that ACA depends on and promotes competition in provider and insurance markets. He emphasized that ACA does not regulate the price for insurance or within markets, rather it relies on “competitive bargaining between payers and providers and [on] rivalry within each sector to drive price and quality levels that best serve the public.”

Quotable

“An Irish adage says: `When you come to a wall that is too high to climb, throw your hat over the wall, and then go get your hat.’ That’s what Massachusetts started with its 2006 law requiring just about everyone to get coverage and arranging to make that coverage affordable. Now, it’s time to get the hat. Legislation to contain costs is the necessary sequel.”

— Dr. Donald M. Berwick, Boston Globe, “In health care, cheaper can mean better,” May 14, 2012

“As President, I have made advancing gender equality in health care a top priority. Through the historic Affordable Care Act, we are reversing many of the worst abuses of the health insurance industry. Beginning in 2014, many insurers will no longer be allowed to charge women higher premiums simply because of their gender, and it will be illegal for most insurance companies to deny coverage to women because they have a pre-existing condition, including cancer or pregnancy. Health plans will also be required to cover maternity care. The law already enables women in new insurance plans to see any primary care provider or OB-GYN, or bring their children to any pediatrician in their health plan’s network without a referral, and it prevents most insurance companies from denying coverage to children with pre-existing conditions.”

— President Obama, White House Proclamation for National Women’s Health Week, May 14, 2012

“Our economy continues to struggle, and the president’s health care law is making things worse—raising health costs and making it harder for small businesses to hire workers. The only way to change this is by repealing ObamaCare in its entirety. We voted to fully repeal the president’s health care law as one of our first acts as a new House majority, and our plan remains to repeal the law in its entirety. Anything short of that is unacceptable.”

— Speaker John Boehner (R-OH), May 17, 2012

Fact file

  • Health care costs: consumer prices for hospital services increased by 0.6 percent in April, after increasing 0.2 percent in March. In addition, the price for in-patient and out-patient services increased in April, by 0.5 percent and 0.6 percent, respectively. (Source: Bureau of Labor Statistics [BLS], U.S. Department of Labor, “Consumer Price Index – April 2012,” May 15, 2012)
  • Health vs. junk food: researchers have found that, when calculated based on the price of edible weight and the price of an average portion vs. the more commonly used price per calorie, healthy food costs less than unhealthy food (i.e., foods that are high in saturated fat, added sugar, and/or sodium, or that contribute little to meeting dietary recommendations). (Source: Andrea Carlson & Elizabeth Frazao, U.S. Department of Agriculture, “Are Healthy Foods Really More Expensive?” May 2012)
  • ACA boost to insurance industry: $1 trillion over the next eight years if the U.S. Supreme Court determines ACA to be constitutional. (Source: Alex Wayne, Bloomberg, “Insurers Face $1 Trillion Revenue at Stake in Health Law,” May 14, 2012)
  • Health care costs for a family of four covered by a preferred provider organization (PPO) plan: a record high of $20,728 while the rate of increase slowed last year to 6.9 percent, the first time in 12 years it has fallen below 7 percent. (Source: Lorraine Mayne, Chris Girod, & Scott Weltz, Milliman, “2012 Milliman Medical Index,” May 15, 2012)
  • Drug-resistant bacteria: each year Europe spends €1.5 billion in health costs and lost productivity due to evolving bacteria. From 1983-1992, regulators approved 30 new antibiotics; 2003-present only seven have been approved. (Source: The Economist, “The path of least resistance,” May 12, 2012)
  • Domestic partner benefits: in 2010 31 percent of U.S. businesses offered domestic partner health benefits, which rose to 52 percent in 2011. (Source: Mercer, “Employee benefits for same-sex spouses and other life partners – 2012 update,” 2012)
  • Hospital costs in Medicare: in a recent study of the top-ranked hospitals, according to U.S. News & World Report, the average cost to Medicare for a patient was $17,808 for a “top” hospital admission (1 percent below the national median spending of $17,988), and the least expensive of these hospitals had patients who, on average, cost Medicare 5 percent below the median. The most expensive hospital had patients who, on average, cost Medicare 3 percent above the median. (Source: Kaiser Health News, “How Much Do The Nation’s Pre-Eminent Hospitals Cost Medicare?” May 14, 2012)
  • Physician e-prescribing: at the end of 2011, 36 percent (190,000) of office-based physicians were using e-prescribing services. This is up from the 4 percent (2,500) of physicians that were e-prescribing in 2004. (Source: Surescripts, “The National Progress Report on E-prescribing and Interoperable Health Care,” 2011)
  • FDA review time for applications: from 2001-2010, 510 applications for novel therapeutic agents were approved: 225 by the FDA, 186 by the European Medicines Agency (EMA), and 99 by Health Canada. Median time for completion of the first review was shortest for the FDA (303 days) followed by Health Canada (352 days) and EMA (366 days). (Source: Nicholas Downing, et al, NEJM, “Regulatory Review of Novel Therapeutics—Comparison of Three Regulatory Agencies,” May 16, 2012)
  • Hospital capital spending: survey of hospitals indicated that 45 percent anticipate increasing their spending on capital over the next five years, 19 percent indicated they would decrease spending in that area. In addition, the survey found that nonprofit hospitals consistently ranked heath IT spending as their top priority. (Source: Fitch Ratings, “Capital Expenditure Trends Among Nonprofit Hospitals,” May 17, 2012)
  • Ethnicity: U.S. births in 2011: 50.4 percent non-Caucasian, 49.7 percent of Americans under 5; median age 27.6 Hispanic, 42.3 non-Hispanics; 11 percent of 3,143 counties have majority non-white. (Source: Census)
  • Obesity rate: 42 percent in 2030 (up from 36 percent in 2010)—11 percent morbidly obese; $147B annual expenditures (9 percent of medical costs). (Source: Centers for Disease Control and Prevention [CDC])
  • ESI coverage: 65 percent of U.S. population covered through ESI in 2000 vs. 55.3 percent in 2010. (Source: BLS)
  • Blockbuster update: 19 blockbuster drugs will lose losing patent protection in 2012 representing $7.1 billion in revenues, on market 15 years. (Source: PhaRMA)
National health reform: What now?

 

 

 

National health reform: What now?

National health reform is here. The health reform bills (HR3590 and HR4872) are now law and will trigger sweeping changes and disruptions – some rather quickly and some over many years. The industry is asking, “What now?” At Deloitte, we continue to explore and debate the key questions facing the industry, and we look forward to helping our clients find and implement the right answers for their organizations. To learn more, visit www.deloitte.com/us/healthreform/whatnow today.

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