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Health Care Reform Memo: October 8, 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: health care  a focus of the 2012 Presidential and VP debates

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

Last Wednesday, 67 million watched the debate between President Obama and Governor Romney—the second largest debate audience on record and highest since the 1992 debate between Bill Clinton, George Bush, and Ross Perot. Its focus was domestic policy: health care was to be one of six 15-minute segments, but it consumed more than a third of the 92-minute broadcast and understandably so. It’s simple: for a policymaker, it’s hard to separate the economy and health care. Consider:

Health costs by the federal government—$872 billion in 2012—are a fourth of federal spending, and are forecast to increase at 6 percent annually for the next ten years as 8,000 seniors become Medicare eligible every day and as medical inflation increases at 3 percent. Any discussion of jobs or economic recovery necessarily intersects with health care.

The health care industry is a job creator: 16.3 million strong, with above average compensation and forecast growth of 4.2 million in the next decade. Case in point: the Bureau of Labor Statistics (BLS) Job Report Friday found that of the 114,000 jobs added in September, 44,000 were in health care—the number one industry and almost three times higher than number two, transportation and warehousing, with 17,000 jobs added. Dramatic changes to the industry might dampen its employment trends.

And Medicare reforms are centerpieces in both campaigns: the President’s embedded in the Affordable Care Act (ACA), and the Governor’s as part of a proposed voucher option for those who are 55 or younger.

No doubt, the Vice Presidential debate Thursday in Danville, Kentucky and next Tuesday’s round two between President Obama and Governor Romney will see more attention to health care. The reality is health care and the economy are both complicated and inseparable to a discussion of economic recovery.

Rarely do debates clarify policy differences or provide specifics. I am confident, however, that regardless of the election outcome 29 days from now, health cost will be a key focus in efforts to address our global competitiveness, job growth, and economic recovery. But for viewers watching the debates, it’s perhaps more simple—health care may be as much as 18 percent of their discretionary spending, complicated, and increasingly unaffordable to many. How do we solve their problem?

Paul Keckely

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

P.S. Special report: numerous think tanks and academic organizations have examined how the provisions of the ACA will impact insurance coverage. In my view, no one can know for sure: there are too many variables to consider, not the least of which is the overall trajectory of the U.S. economy and its impact on employers.

We chose to stress test eight scenarios and then determine which is more likely. They basically evolve from several moving parts—how many employers keep coverage, how timely and effective the health insurance exchanges (HIXs) are set up by the states, what states do about Medicaid expansion, and changes to the employer penalty and health costs. The result: the range of possibilities below:

A — “Intended results”: baseline D2 — Employer penalty tripled (from $2,000 to $6,000)
B1 — 5% of large and 10% of small employers drop coverage D3 — Combination of D1 and D2 with exchanges and mandates delayed until 2016
B2 — 10% of large and 25% of small employers drop coverage E1 — Six states (FL, LA, MS, SC, TX, and WI) reject Medicaid expansion
B3 — 25% of large and 50% of small employers drop coverage E2 — Twenty-nine states reject Medicaid expansion
C — Individual mandate repealed F1 — National Health Expenditures growth averages 4.5% per year through 2021
D1 — Individual penalty tripled (from 1% to 3% of income) and faster phase-in (from three years to two) F2 — National Health Expenditures growth averages 8.5% per year through 2021

Based on these scenarios, it’s our sense that:

  • Traditional employer-sponsored coverage may increase slightly or substantially decrease—cost is the issue.
  • State-run HIXs will play a large role in coverage, providing services for up to 69 million in the population through a combination of individual and small group policies. The net change in employer-sponsored coverage is the single biggest factor in gauging enrollment in exchanges.
  • Enrollment in Medicare and Medicaid is fairly predictable (despite the recent Supreme Court ruling about Medicaid expansion).
  • And the uninsured will still be a major element in the coverage scenario. Policymakers will still face this challenge.

Health insurance
market segment
Enrollment (in millions)
2021 projections under scenarios A – F
A B1 B2 B3 C D1 D2 D3 E1 E2 F1 F2 Range
Employer-sponsored: Group excluding SHOP 138 127 115 86 136 139 146 147 138 140 139 134 86-147
SHOP 12 11 9 6 12 12 13 13 12 12 12 12 6-13
Individual excluding HIX 6 7 9 13 5 6 5 5 6 6 6 6 5-13
HIX 30 37 47 69 25 31 23 24 30 30 28 33 23-69
Medicaid 54 55 56 58 53 54 55 55 51 47 54 54 47-58
Medicare 64 64 64 64 64 64 64 64 64 64 64 64 64
Uninsured 32 33 35 38 40 28 30 27 33 36 31 33 27-40

Source: upcoming Issue Brief from the Deloitte Center for Health Solutions, “The Impact of Health Care Reform on Insurance Coverage: Projection Scenario Over 10 Years – Update 2012.” This Issue Brief will be released this week and provides 10-year, annual health insurance coverage projections by market segment and the uninsured.

Also, the September 10, 2012 Monday Memo included Top Ten Myths of the Health Care Reform Debate. Stay informed about the facts throughout the election season by accessing an infographic of this information here.

The pundits and predictors will no doubt produce elegant forecasts and predictions. On our end, we’re more comfortable fine-tuning assumptions and tracking scenarios, since no one knows for sure how all this will play out.

Health care, like the U.S. economy, is on uncharted turf. The only thing we know for sure: maintenance of the status quo is neither likely nor sustainable.

Implementation update

Avoidable readmission program starts

Last Monday, the penalties for avoidable readmissions to hospitals began with 2,200 hospitals expected to be penalized $300 million due to avoidable readmissions for heart failure, heart attacks, or pneumonia. Per Section 3025 of ACA, the maximum penalties are 1 percent of the expected Medicare payment in Fiscal Year (FY) 2013, 2 percent in FY2014, and 3 percent in FY2015.

My take: the debate about avoidable readmissions remains contentious in some circles: what constitutes an avoidable readmission, and who decides? The Centers for Medicare & Medicaid Services (CMS) has a 20 percent reduction target between 2010 and 2015, and the concept makes perfect sense. The 30-day post-discharge timeframe is reasonable based on a systematic review of 7,843 citations where 30 studies of 26 models of readmission tracking were reviewed, and of these, only one study addressed preventable readmissions. (Source: Kansagra et al, “Risk Prediction Models for Hospital Readmission,” Journal of the American Medical Association [JAMA], October 19, 2011.) But legitimate questions remain about what constitutes a preventable readmission.

DOJ announces arrests for Medicare fraud

U.S. Attorney General Eric Holder announced Thursday that the Medicare Fraud Strike Force arrested 91 people in connection with over $430 million in Medicare fraud conspiracies. The arrests took place in Miami, Los Angeles, Dallas, Houston, New York City, Chicago, and Baton Rouge, within a 24-hour time period for schemes including more than $230 million in home health care fraud, $100 million in mental health care fraud, and $49 million in ambulance transportation fraud. In addition to these arrests, the U.S. Department of Health and Human Services (HHS) also suspended or took administrative action against 30 health care providers as a result of data-driven analysis and allegations of fraud.

Background: per Section 6402 of the ACA, the CMS Fraud Prevention System (FPS) began operating June 30, 2011 with a goal of detecting fraud, waste, and abuse in the Medicare program through predictive modeling technology.

Supreme Court may hear more cases challenging the ACA

Last week, the U.S. Supreme Court began its new term and announced it might review new challenges to ACA including a Liberty University petition that the individual mandate violates religious freedom and the constitutionality of the employer mandate. The Court requested input from the federal government on whether it should consider the University’s new challenges, and requested a response be submitted by October 31, 2012.

Background: in November 2010 the Fourth Circuit District Court dismissed Liberty University’s case challenging the constitutionality of the individual mandate that requires individuals to purchase health insurance. In January 2011, the Fourth Circuit Court of Appeals vacated the district court ruling and dismissed the case stating the that the individual mandate penalty was effectively a tax, therefore the Anti-Injunction Act (AIA) prohibits lawsuits seeking to block collection of a tax prior to its effective date of January 2014. The Supreme Court later ruled in June 2012 that the AIA does not apply to the mandate.

GAO report: DOD and VA ineffective in collaboration on health care

Last week, the U.S. Government Accountability Office (GAO) released a report concluding that collaboration in the provision of health care services between the U.S. Departments of Defense (DOD) and Veterans Affairs (VA) is ineffective. Areas of concern: lack of administrative coordination in sites where the two operate, lack of performance measures that assess the effectiveness and efficiency of services provided, and lack of a process for jointly planning for innovation and improvements. The GAO recommended the departments develop performance measures related to access, quality, and costs; implement information technologies to enhance administrative and clinical coordination; and address policy and workforce barriers hindering collaboration.

Background: annual costs for the health systems: VA ($53 billion) and DOD ($49 billion) for FY2013.

Commonwealth Fund analysis of health care coverage

Tuesday, the Commonwealth Fund released its analysis of three scenarios for health insurance coverage: 1) assumes ACA was not implemented, 2) ACA fully implemented including participation by all 50 states in Medicaid expansion, and 3) a block grant scenario favored by the Romney campaign.
Per Commonwealth, 72 million would be without insurance in Scenario 3 vs. 27.1 million in Scenario 2:

Non-elderly population (age 0-64) Scenario 1:
Without ACA / Pre-ACA
 Scenario 2:
ACA fully implemented
Scenario 3:
Romney proposals
Uninsured by 2022 60 million 27.1 million 72 million
Percent uninsured by 2022 21.7% 9.8% 26%
Average percent of income spent on premiums (non-group) 15% 8.4% 11.9%
Average percent of income spent on out-of-pocket health care (non-group) 3% .7% 2.2%

Source: Sara R. Collins, Stuart Guterman, Rachel Nuzum, Mark A. Zezza, Tracy Garber, and Jennie Smith, “Health Care in the 2012 Presidential Election: How the Obama and Romney Plans Stack Up,” Commonwealth Fund, October 2012.

Note: according to the report, “This comparison relies on results of microsimulation analysis of the candidates’ plans conducted by MIT economist Jonathan Gruber.” On closer review: Scenario 2 assumes every state expands its Medicaid program (despite the Supreme Court’s June 28 ruling that states could not be forced to expand and the individual mandate will add 16 million to the ranks of insured. Scenario 3 assumes block grants to states will grow at the rate of population growth plus 1 percent; states will match the lower federal rate of spending growth in their share of Medicaid spending; states will meet new limits through a 50–50 combination of cuts in Medicaid costs via lower payments to health care providers or reduced benefits, and through reduced eligibility for the program; and states will maintain existing Medicaid eligibility for the elderly and people with disabilities, so that any eligibility cuts needed to meet spending targets will come from the reduced eligibility of people who are under age 65 and not disabled.

Legislative update

ICD-10 corrections released

Last week, HHS released two corrections to the ICD-10 final rule issued last month: 1) HHS corrected the following dates for health plan identifier compliance: November 5, 2014 for most health plans, November 5, 2015 for small health plans, and November 7, 2016 for all covered entities. 2) HHS also noted that the final rule references the wrong tables for cost and savings estimates for the health plan identifier, for which the notice provides further guidance.

GOP lawmakers challenge use of funding for meaningful use

Thursday, several GOP lawmakers—Representatives Dave Camp (R-MI), Fred Upton (R-MI), Wally Herger (R-CA), and Joe Pitts (R-PA)—sent a letter to HHS Secretary Sebelius requesting suspension of incentive payments to providers in the electronic health records (EHR) program and delay of penalties to non-participants until the Office of the National Coordinator for Health Information Technology (ONC) provides clear, interoperable standards.

The letter alleges $10 billion in federal dollars may have been wasted because Stage 2 Meaningful Use program rules from the CMS and ONC are “weaker” than the Stage 1 rules released three years ago.

Background: the EHR incentive payment programs created by Congress under the American Recovery and Reinvestment Act (ARRA) of 2009 Health Information Technology for Economic and Clinical Health (HITECH) Act provide $27 billion to encourage doctors and hospitals to implement electronic medical records. Through June 2012, $7.1 billion has been spent, 294,300 physicians and other “eligible professionals” have enrolled, and 140,500 have been paid. In addition, 3,973 hospitals enrolled and 3,905 received payments. The ARRA also directly appropriated $2 billion to the ONC for information technology (IT) programs, including promotion of state-wide health information exchanges (HIEs).

State update

Study: state formularies vary widely

Last week, Avalere released its analysis of eight states’ essential health benefit (EHB) benchmark plans—California, Connecticut, Mississippi, Oregon, Rhode Island, Vermont, Virginia, and Washington—concluding wide variation in formularies across states. Per guidance from HHS, insurers must adopt at least one drug per class to participate in HIXs. Key findings:

  • Each state covered more drugs than the one drug per class minimum.
  • On average, the selected benchmark plans covered approximately 62 percent of the drugs available in the chosen classes: California covers 26 percent of drugs in chosen classes, and in some classes covers only generic drugs; four states cover more than 85 percent of applicable drugs.
  • For most of the classes in the study, most plans covered at least half of the brand-name products and half of the generic drugs available in each class.

(Source: Avalere, “Drug Coverage in Essential Health Benefits Benchmark Plans: Formulary Analysis,” October 2012.)

Note: as of today, 17 states had recommended EHB benchmark plans and eight states had preliminary recommendations. HHS recommended states submit their EHB benchmark plan by October 1, 2012 and is expected to release final regulations soon.

Background: per Section 1301 of the ACA, HIXs will certify Qualified Health Plan (QHP) issuers, who will then provide access to QHPs via a state’s HIX. Per Section 1302 of the ACA, QHPs must cover all ten statutorily required EHBs (i.e., prescription drugs). Each state is responsible for adopting an EHB benchmark plan modeled after one of the three largest small group plans in the state by enrollment, one of the three largest state employee health plans by enrollment, one of the three largest federal employee health plan options by enrollment, or the largest HMO plan offered in the state’s commercial market by enrollment. At a minimum, each QHP must adopt the identified benchmark plan to participate in that state’s HIX. QHPs may modify the EHB benchmark plan as long as the services covered are actuarially equivalent to the state’s EHB benchmark plan. For instance, if a state has identified a benchmark plan that covers 15 occupational therapy sessions and five physical therapy sessions, a QHP may choose to cover five occupational therapy sessions and 15 physical therapy sessions as long as the modification is actuarially equivalent to the designated benchmark plan.

Study: Medicaid expansion associated with reduced mortality and improved health status

New enrollees ages 20-64 were followed for five years in New York, Maine, and Arizona (new enrollees were included beginning the first full year after each state’s respective expansion). Mortality rates compared to neighboring states without expansions were 6.1 percent lower and self-reported health status increased 2.2 percent.

(Source: Sommers et al, “Mortality and Access to Care among Adults after State Medicaid Expansions,” New England Journal of Medicine [NEJM], September 13, 2012.)

State round-up

  • Partners HealthCare announced plans to award community health centers $90 million over 15 years to go toward strengthening the primary care provider workforce in Massachusetts.
  • Last Monday, District Judge Carol E. Jackson dismissed a lawsuit brought by a Missouri company against the federal government regarding the ACA contraception requirement. Judge Jackson ruled that requiring employers to cover contraception imposes no substantial burden on religious exercise.
  • Last week, California Governor Jerry Brown (D), signed several health care reform bills including: EHB requirements for health plans and insurers, new insurance regulations for small business, additional premium subsidies for individuals in high-risk groups, and several others. The Governor also vetoed Senate Bill 970 that would have established a state policy of “no wrong door” for individuals seeking information about social services and health programs. And the exchange board in the state also released a draft solicitation for QHPs to sell in the new marketplace. Comments were accepted until last Thursday, October 4 and the board expects to release a revised solicitation by mid-October.
  • Senator Charles Grassley (R-IA) wrote to several North Carolina hospitals challenging their use of the 340B Medicare Drug Pricing Program, thus inflating the price of chemotherapy drugs by two to ten times the suggested price. The Senator seeks:
    • A year-by-year summary of revenue received from the 340B program since 2008
    • Information on whether the hospitals reinvested the savings to help uninsured patients
    • The purchase and sale price of each drug
    • Information on each system’s charitable care policies

Background: the 340B Drug Pricing Program, created through the Veterans Health Care Act of 1992 and codified in Section 340B of the Public Health Service Act, is managed by the Health Resources and Services Administration (HRSA) Office of Pharmacy Affairs (OPA). Section 340B gives significant savings to the cost of covered outpatient drugs to certain federal grantees, federally-qualified health center look-alikes, and qualified hospitals. Participation in the program results in savings of 20-50 percent on the cost of pharmaceutical drugs for safety net providers.

Industry news

Solicitor General’s Office asks U.S. Supreme Court to rule on pay-to-delay

The Solicitor General’s Office, on behalf of the Federal Trade Commission (FTC), filed a petition with the U.S. Supreme Court asking it to review a ruling made by the Eleventh Circuit Court of Appeals on federal antitrust law and drug manufacturer agreements. The issue: does federal antitrust law permit a brand name manufacturer holding a patent for a drug to enter into a settlement with a prospective generic manufacturer where the generic manufacturer receives a payment and agrees to delay entry of the generic product into the market? The Eleventh Circuit ruled “absent sham [patent] litigation or fraud in obtaining the patent, a reverse payment settlement is immune from antitrust attack so long as its anticompetitive effects fall within the scope of the exclusionary potential of the patent.” If the Supreme Court agrees to review the case, the Court would be able to provide clarification for drug manufacturers and the FTC on this widely debated issue. A ruling by the Supreme Court would take precedence over lower court rulings.

Background: the “pay-to-delay” question has been litigated in several lower courts: in July 2012, the Third Circuit Court of Appeals opinion held that “pay-to-delay” must be viewed through the lens of antitrust law with “the patent holder bearing the burden of showing that the payment ‘was for a purpose other than delayed entry’ or ‘offers some pro-competitive benefit.’” In the Second, Eleventh, and Federal Circuits, “pay-to-delay” was upheld based on the federal antitrust laws as long as they do not exclude competition beyond the scope of the patent.

BPC survey: electronic health information sharing issues—interoperability, cost big issues, privacy or security not significant

Wednesday, the Bipartisan Policy Center, in partnership with Doctors Helping Doctors Transform Health Care, released a report exploring ways to accelerate electronic health information sharing to reduce costs and improve quality in health care. Its survey of clinicians found that clinicians cite the lack of interoperability between systems, the lack of an information exchange infrastructure, and the cost of both setting up and maintaining interfaces and exchanges as major barriers to sharing patient information electronically to support clinical care. Clinicians do not feel state policies limiting the exchange of health information, concerns about trusting the data, or about physician self-referral and anti-kickback laws were major barriers to exchanging information electronically:

Barrier Major barrier Minor barrier
Inability for my EHR to communicate electronically with other systems (lack of interoperability) 71% 17%
Lack of information exchange infrastructure 71%
Cost of setting up and maintaining interfaces and exchanges 69%
Concerns about the liability associated with not acting on the clinical data made available 25% 42%
Concerns about privacy and security
Concerns specifically about HIPAA 22% 36%
No business case to justify exchanging information (e.g., no financial incentive) 22% 30%
Lack of ability to use the information given limitation of time 19%
Tradition (we just haven’t done it in the past) 16% 32%
State policies which limit the exchange of health information 14% 35%
Concern that I can’t trust the data 8% 31%
Concerns about physician self-referral and anti-kickback laws 7% 25%

The report outlines several recommendations around acceleration of interoperability and electronic information sharing, improved accuracy inpatient matching, updated legislation to advance information sharing and expand safe harbors, and development of technical standards and state-federal consistency in addressing privacy and security issues.

(Source: BPC Health Information Technology Initiative, “Accelerating Electronic Information Sharing to Improve Quality and Reduce Costs in Health Care,” October 2012.)

Report: Medicaid managed care entities are hiring ineligible providers

Last week, the Office of Inspector General (OIG) released a report indicating that Medicaid managed care entities (MCEs) are employing “excluded” providers. In 2009, CMS issued a letter instructing providers to screen employees prior to hire to ensure they are not “excluded” from participation. However, providers pushed back citing costs. OIG analyzed a random sample of employees from 500 hospitals, nursing facilities, home health agencies, and pharmacies enrolled in 12 MCEs totaling 248,869 employees: 6.4 percent of employees were on the “excluded” list. While the OIG report did not include recommendations, since OIG collected the data 81 percent of the individuals who were identified as “excluded” have been terminated.

Census report: use rates for doctors, nurses down

The U.S. Census Bureau released data indicating individuals are seeing doctors less: since 2001, the average visits to see a doctor, nurse, or other medical provider by working-age adults decreased from 4.8 visits in 2001 to 3.9 visits in 2010. According to this report, Americans self-report as being healthy; 66 percent reported being in “excellent” or “very good” condition. Additional findings include:

  • Individuals are more likely to seek care from a medical provider than a dentist: 73 percent versus 59 percent, respectively
  • Age directly corresponds to the number of appointments with medical professionals
  • Women are almost 10 percent more likely to see a medical provider than men
  • Use of prescription medications is low; 57 percent reported no prescription drug use in the past year
  • Uninsured adults: 13 percent sought care in an emergency room (ER), 10 percent received care in a hospital, 20 percent received free services, 30 percent reported receiving discounted medical services in the past year

(Source: U.S. Census Bureau, “Health status, health insurance, and medical services utilization,” October 2012.)

FDA reminds generic drug facilities of requirement to self-identify

Last week, the U.S. Food and Drug Administration (FDA) announced that generic drug facilities, per the Generic Drug User Fee Amendments of 2012 (GDUFA), must self-identify by submitting information to the FDA through a new electronic process. If a facility does not self-identify, all manufacturers involved will be at risk of being deemed misbranded by the FDA. Misbranded products cannot be shipped interstate and cannot be imported in the U.S. The following facilities must self-identify:

  • Facilities that are either manufacturing or processing a generic active pharmaceutical (API) ingredient contained in a human generic drug or a finished dosage form (FDF) of a human generic drug
  • Sites and organizations that package the FDF of a human generic drug into the primary container/closure system and label the primary container/closure system are considered to be manufacturers, whether or not that packaging is done pursuant to a contract or by the applicant itself
  • Sites that are identified in a generic drug submission and pursuant to a contract with the applicant, remove the drug from a primary container/closure system, and subdivide the contents into a different primary container/closure system
  • Bioequivalence (BE)/bioavailability (BA) sites that are identified in a generic drug submission and conduct clinical BE/BA testing, bioanalytical testing of samples collected from clinical BE/BA testing, and/or in vitro BE testing
  • Sites that are identified in a generic drug submission and perform testing of one or more attributes or characteristics of the FDF or the API pursuant to a contract with the applicant to satisfy a current good manufacturing practice testing requirement (excluding sites that are testing for research purposes only)

(Source: Federal Register, “A Notice by the FDA: Generic Drug Facilities, Sites and Organizations,” October 3, 2012.)

Background: last week, Congress authorized the FDA to collect fees and information from generic drug manufacturers through GDUFA, which is included in the FDA Safety and Innovation Act (FDASIA). The goal of GDUFA is to increase access to high quality, generic drugs through a five-year program and close to $300 million in additional revenue from generic drug manufacturers. The additional revenue will provide the FDA with the resources to expedite the review process and address the backlog of generic drug applications.

Study: cost at end of life

The report, published in The Journal of General Internal Medicine analyzed data about 3,209 people who participated in the national Health and Retirement Study and who died between 2002 and 2008. The survey, sponsored by the National Institute on Aging, collects information about medical out-of-pocket spending every two years. Key findings:

  • On average, people with Medicare coverage paid $38,688 out-of-pocket for medical care in the last five years of life.
  • There was enormous variation: 25 percent of participants averaged $101,791 and 25 percent averaged $5,163 during the five-year period.
  • One-quarter of older adults incurred out-of-pocket medical expenses that exceeded the total value of their assets during this five-year period; 43 percent incurred expenses that exceeded their assets, excluding the value of their homes.
  • People with Alzheimer's disease spent more than those with any other type of illness—an average $66,155 during the last five years of life, compared with average spending of $32,129 for cancer, $37,996 for cardiovascular disease, and $38,517 for diabetes.
  • Post-acute long-term care costs (nursing home, assisted living), which aren't covered by Medicare, much to many families’ deep surprise, were the number one category of out-of-pocket spending, followed by home health care. Other categories of expense for people who have Medicare include premiums for Part B (which pays for doctors’ care and outpatient services), averaging just under $100 a month this year; premiums for Part D drug coverage, averaging about $30 a month; and premiums for supplemental coverage (which cover some, but not all, expenses not covered by Medicare), averaging about $177 a month. For those who can’t afford supplemental coverage or who don’t have retiree insurance coverage, expenses can be quite substantial.

Under Medicare, there's an initial deductible for hospital care of $1,156, with an expected payment of $289 a day after a hospital stay exceeds 60 days (until the 90th day, when rates increase again). For outpatient and doctors’ services, the initial deductible is $140 and co-payments (the consumer’s share of the bill) typically equal 20 percent of the amount billed.

(Source: Kelly et al, “Out of Pocket Spending in the last Five Years of Life,” Journal of General Internal Medicine, September 2012.)

AMGA defines high-performing health system; six attributes

The American Medical Group Association (AMGA) formalized its definition of what makes a “high-performing health system” at its Institute for Quality Leadership conference in National Harbor, Maryland last week. The trade group that represents 300 large, mostly independent medical groups recommends six attributes: quality measurement and improvement activities, team-based collaboration, meaningful use of IT, a compensation structure that encourages clinicians to improve health outcomes, shared accountability for managing health care costs, and physicians playing a key role in clinical and nonclinical functions. Note: AMGA members are 300+ medical groups representing 67,000 physicians.

Online pharmacies target of FDA global closure effort

Thursday, the FDA, working with the Department of Homeland Security and drug enforcement agencies in 100 countries, announced it has initiated legal action to shut down 4,100 online pharmacies that sell potentially unsafe, unapproved, or fake medicines. The announcement was part of the fifth annual International Internet Week of Action, a global effort to fight the online sale and distribution of potentially counterfeit and illegal medicine. The Interpol announced it had shut down 18,000 internet pharmacy websites and interdicted 6,700 shipments in 2012.

Compounding pharmacies get scrutiny as result of steroid injections

Compounding pharmacies create alternative versions of medicines to accommodate differences in how drugs metabolize in patients and/or reduce complications of traditional medicines. Per The Pharmacy Compounding Accrediting Board, 162 of the 3,000 compounding pharmacies meet its quality standards. None of the compounding pharmacies associated with the five deaths attributed to the steroid injections were accredited.


“Private insurance companies should be leading the way in the struggle to control health costs. They know about every contact a patient has with the health system and can see how much is wasteful or redundant. By altering the way they pay doctors and hospitals, they can potentially push providers to reduce costs, improve quality and even transform the whole culture of American medicine.”

Editorial, The New York Times, “How Insurers Can Help,” October 1, 2012

“While the portion of health care costs directly paid by consumers only accounts for about 12 percent of total health care spending nationally, we expect it to expand as a percentage of the total mix. Higher cost-sharing insurance plans for those covered privately, is shifting more of the cost of health care direct to the consumer.”

Standard and Poors Rating Direct, “Ratings Outlook Remain Stable for U.S. For-Profit Health Care Companies,” 2012

“Numbers tell the story. Last year, veterans filed more than 1.3 million claims, double the number from 2001. Despite having added nearly 4,000 new workers since 2008, the [VA] did not keep pace, completing less than 80 percent of its inventory.”

James Dao, The New York Times, “Veterans Wait for Benefits as Claims Pile Up,” September 28, 2012

Fact file

  • End of life costs: 5 percent (2.5 million) of Medicare beneficiaries die each year; expenditures are $125 billion (25 percent of total Medicare funds). (Source: CMS)
  • Government benefit: low income individuals—those in the bottom fifth by household income—receive $4,600 in annual income from government health services. (Source: Congressional Budget Office [CBO], July 2012)
  • Mobile payments: mobile payments will be $171.5 billion in 2012—up 62 percent from $105.9 billion in 2011. (Source: Yankee Group)
  • Redacted science: researchers analyzed 2,047 redacted papers: three of four were redacted due to misconduct of the researchers. (Source: Proceedings of the National Academy of Sciences)
  • Hip resurfacing reliability: analysis of 32,000 patients followed by the National Joint Registry of England and Wales revealed that resurfacing was less efficacious than total hip replacement except for younger men. (Source: Alison Smith et al., "Failure rates of metal-on-metal hip resurfacings: analysis of data from the National Joint Registry for England and Wales,” The Lancet, October 2012)
  • Federal budget 2012: total spending: $3.8 trillion: $709 billion defense, $773 billion social security, $872 billion health programs, $1.3 trillion deficit (24.3 percent of budget). (Source: Fiscal Year 2013 Budget of the U.S. Government, Office of Management and Budget)
  • Knee replacement market: 600,000 annually, 238,802 Medicare vs. 93,230 in 1991; 9 billion market—demand will reach 2.5 million by 2030. (Source: Peter Cram et al., “Total Knee Arthroplasty Volume, Utilization, and Outcomes Among Medicare Beneficiaries, 1991-2010,” JAMA, September 26, 2012)
National health reform: What now?

National health reform: What now?

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