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Health Care Reform Memo: July 19, 2010

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.

Stage One meaningful use regulations for 2011-2012 announced

Tuesday, the U.S. Department of Health and Human Services’ (HHS) Office of the National Coordinator (ONC) for Health Information Technology provided long-awaited criteria for hospitals and physicians to access $27.3 billion in stimulus funds to encourage implementation of electronic health records (EHRs). ONC released meaningful use Stage One criteria: Eligible physicians and eligible hospitals must meet the requirements of a core set of requirements and demonstrate performance in several others. The ONC rules also stipulate that for a period of 90 days in the first year of the program (2011), a minimum of 30 percent of physician and hospital medication orders be entered via a computerized physician order entry system. Subsequent rules for Stages Two (publication in 2013) and Three (publication date TBD) will be forthcoming. A hospital eligible under the Medicare HITECH meaningful use program is not required to meet additional criteria imposed by state for Medicaid EHR incentive program participation.

Note: Physicians are eligible for as much as $44,000 through Medicare and $63,750 through Medicaid. Hospitals are eligible for grants based on volume and discharges starting at $2 million and going up. Requirements for hospitals and physicians include mandatory quality reporting on core measures.

In addition to funding for adoption of EHRs by physicians and hospitals, the HITECH Act includes several new funding opportunities for information technology adoption including:

  • Workforce training programs to train up to 45,000 health care workers in use of health information technology (HIT)—$118 million.
  • Strategic health information technology advanced research projects (SHARP)—$60 million.
  • 70 regional extension centers (RECs)—$643 million.
  • State health information exchanges—$564 million.
  • Grant for up to 15 Beacon communities to illustrate community-wide use of HIT—$235 million.
  • Nationwide Health Information Network (NHIN) and national standards for certification of EHRs—$64.3 million.

Lew named OMB successor; deficit reduction a major focus

Jacob J. Lew, current Deputy Secretary of State and Chief Operating Officer in the Department of State working under Secretary Clinton, will step into the Office of Management and Budget (OMB) Director role succeeding departing Peter Orszag. He previously served as OMB Director 1998-2001 during the Clinton administration. Meanwhile, the Treasury Department reported the federal deficit for the first 9 months of FY10 is $1 trillion and estimated it will reach $1.3 trillion at year end. As OMB chief, Lew will be responsible for the FY12 budget due in February which is likely to target reduction of the annual deficit from 9 percent of gross domestic product (GDP) to 3 percent by 2015. Note: Cuts in growth rates for Medicare, Medicaid and Social Security are likely. At current rates, Medicare will increase 7 percent annually through 2018, consuming 4 percent of the overall GDP ($878 billion).

New normal for health insurance plans: Oversight role of HHS significant per PPACA

In 2014, each state is required to set up a health insurance exchange to accommodate individuals and small businesses under 10 employees. The Patient Protection and Affordable Care Act (PPACA) retained the role state departments of insurance play in health insurance oversight but adds a layer of federal oversight via new requirements:

Transparency and reporting— Effective July 1, 2010, HHS opened its website that will be the primary vehicle whereby individuals and employers will get access to information about health insurance plans. The detail on the site will be enhanced as plans and states provide data per requirements of PPACA. The goal is to provide easily comparable data about plans’ coverage, pricing, provider relationships, et al. Two examples of plan data that will be accessible through the site:

  • HHS will issue standardized benefits and coverage requirements for plans by March 23, 2011. No later than March 23, 2012, plans must submit compliance documentation in standard format—no more than four pages; minimum 12 point font; standardized definitions of key terms; easily understandable explanations of cost-sharing requirements, exceptions, reductions, limitations to coverage, et al.
  • Starting March 23, 2012, plans must implement financial incentives for providers that reward quality (i.e., health outcomes, avoidable hospital readmissions, adherence to preventive health and wellness guidelines, safety, et al). Plan specific data of these results must be reported to HHS and subsequently to enrollees and employers through

Caps on Medical-Loss Ratios, Rebates for Excess. For plan years starting after September 23, 2010 (or January 1, 2011 for plans that run on a calendar year), health plans, including grandfathered plans through employers, must report medical loss ratios (MLRs) to HHS. The MLR for individual plans must be at least 80 percent of premium revenue; for group coverage 85 percent. Plans that fall below these thresholds are required to pay rebates to enrollees.

Premium reviews, controls. Effective in the next plan year, HHS is required to create a formal review process of “unreasonable” increases in premiums and plans are required to justify the increase publicly by posting a disclosure on the plan’s website prior to initiating the increase process. Note: Starting January 1, 2014, premiums in the individual and group markets may vary by family structure, geography, age (with no variance greater than 3 to 1) and tobacco use (with no variance greater than 1 ½ to 1) per PPACA. Other variables previously considered in premium setting (i.e., health status) may not be used thereafter.

When the exchanges are operational, an additional set of regulations kick in related to marketing practices, disclosures of business practices and appeals process.

HHS budget increase gets appropriations committee nod

The HHS proposed FY11 budget passed the appropriations subcommittee Wednesday. Notably, it includes a $1 billion increase for the National Institutes of Health (NIH) and 80 percent increase to $561 million for fraud surveillance.

Republican lawmakers ask for Berwick hearing

Last week, 15 Republican members of the House Ways and Means Committee sent a letter to Chairman Sander Levin (D-MI) requesting a hearing for Centers for Medicare and Medicaid Services (CMS) nominee Don Berwick, MD, MPP, FRCP.

FCC broadband funding for rural health providers announced

Thursday, the Federal Communications Commission (FCC) announced a $400 million program to enhance broadband connectivity for rural health care providers. The FCC will pay for 50 percent of monthly broadband access charges at eligible health care facilities including acute care facilities, renal dialysis clinics and health care data centers.

Alzheimer’s guidelines change; expand diagnostic and therapeutic approaches

Tuesday, new diagnostic guidelines for Alzheimer’s treatment were unveiled in Hawaii featuring earlier detection and recommended use of genomically-based drugs for the 5.3 million sufferers in the U.S. The guidelines use a three-stage assessment for treatment planning:

  1. Preclinical disease
  2. Mild cognitive impairment due to Alzheimer’s disease and
  3. Alzheimer’s dementia.

Using biomarkers, MRI scans and spinal taps, it is expected that Alzheimer’s detection might result in a three-fold increase in prevalence and a growing market for targeted therapeutics and companion diagnostics.

Q and A

Q: How will decisions about preventive health and wellness requirements be made? Who decides what plans and employers must provide?

A: Per PPACA, the determination of required services is at the discretion of the Secretary of HHS, who is required to review the A and B guidelines recommended by the U.S. Preventive Services Task Force (USPSTF). USPSTF includes 16 members, including primary care physicians and health services researchers, and meets three times annually to review recommendations based on clinical studies and population-health data. It is sometimes at odds with specialty societies since it is precluded from specialty representation to avoid conflicts of interest. Provisions for full coverage of preventive health services (such as well baby visits, counseling for child/adolescent obesity, hearing tests) without co-payments is required by PPACA for health plans and is expected to add 1.5 percent to premiums (Source: America’s Health Insurance Plans, Centers for Disease Control and Prevention).

Q: What is the difference between comparative effectiveness research and traditional research methods?

A: Comparative effectiveness research (CER) is defined by the Federal Coordinating Council for Comparative Effectiveness as “the conduct and synthesis of research comparing the benefits and harms of different interventions and strategies to prevent, diagnose, treat and monitor health conditions in `real world’ settings. The purpose of this research is to improve health outcomes by developing and disseminating evidence-based information to patients, clinicians and other decision-makers, responding to their expressed needs, about which interventions are most effective for which patients under specific circumstances” (Source: Report to the President and the Congress, June 30, 2009). By definition, CER used methodologies to compare and contrast efficacy and effectiveness under normal circumstances (i.e., across a variety of patient populations). By contrast, traditional studies on which Food and Drug Administration (FDA) decisions have been made historically were based on comparisons of a compound to a tightly controlled group under experimental factors. CER uses a broader lens in comparing what works for patient populations while traditional efficacy research is more narrowly applied.


“By sidestepping the normal Senate confirmation process, the administration denied Republicans not only a forum for maintaining their assault on the reform law, but also the opportunity to question Berwick about his admiration of the British National Health Service and his views about reining in the unsustainable costs of the U.S. health care system.”

 – Source: “Facing the Wild West of Health Care Reform—Donald Berwick, Pioneer,” New England Journal of Medicine, July 14, 2010

“As I tell my kids, dessert is not a right.”

 – Source: Michelle Obama speech to NAACP, Kansas City, MO, July 13, 2010, promoting her campaign against childhood obesity

“Most health care costs do not show up in the Consumer Price Index right away, because it ignores employer health care expense and assigns only a 6% weight to the part employees pay themselves.”

 – Source: “Where Inflation Lurks,” Forbes, July 19, 2010, p. 30

“(Cuts to National Health Service funding) will cause significant disruption and loss of jobs…but it has rapidly become clear to us that the NHS simply cannot afford to support the costs of the existing bureaucracy; and the government has a moral obligation to release as much money as possible into supporting front line care.”

 – Source: “U.K. Will Revamp Its Health Service,” The Wall Street Journal, July 13, 2010, report of announced $30 billion cuts to National Health Service (NHS) budget including 45 percent reduction in administrative overhead costs

“For the first time in history, the 60% of the population is 80% of the population.” 

 – Source: Stephen Colbert, comedian referring obesity rates in the U.S.

“Why is it so easy for me to manage a 7,000 song music collection, yet so hard for me to keep track of my kids’ vaccinations? We now do almost everything online: banking, travel planning, shopping. But when we go to the doctor we still do things pretty much the way we did them a half century ago. Too much still gets done on paper. Even when your medical information is stored digitally, the data often can’t be shared among providers.”

 – Source: “The Health Geeks; Microsoft’s bid to fix medical care,” Newsweek, July 19, 2010

“So the Alzheimer’s field is poised at an agonizing point — ready to move forward with new methods of diagnosis and drugs that might modify the course of the disease but without proof that blocking amyloid actually makes a difference.”

 – Source: “Drug Trials Test Bold Plan to Slow Alzheimer’s,” The New York Times, July 17, 2010, referencing new guidelines proposed last week by the National Institute on Aging and the Alzheimer’s Association

“Americans will always do the right thing…after they’ve exhausted all the alternatives.”

 – Source: Winston Churchill

Fact file

  • 46 physicians—40 Republicans and 6 Democrats— are currently running for Congressional seats. (Source: Roll Call)
  • 45 percent with high blood pressure have it under control; 29 percent with high cholesterol monitor the condition and of the 20 percent of smokers who get help to quit, 2 percent get medication. (Source: Centers for Disease Control and Prevention)
  • 17 percent of the doctors surveyed have direct, personal knowledge of an impaired or incompetent physician in their workplaces. One-third of those doctors did not report the matter to authorities such as hospital officials or state medical boards. (Source: Catherine M. DesRoches, PhD, Harvard Medical School. Journal of the American Medical Association, July 14, 2010)
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 today.

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