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Health Care Reform Memo: June 20, 2011

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 

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

This weekend, I watched a young Irish golfer run away with the U.S. Open. I followed his entourage at Congressional Country Club as it swelled through the day. He lapped the field in workman-like fashion with his father in the gallery on Father’s Day.

I am a golf fanatic. I dreamed of being a touring pro, winning the Masters, but the reality is that I am not very good. The closest I get is an occasional round with my sons and artifacts of big tournaments like this. My nickname at my home course is “crash” due to my tendencies to hit errant shots frequently.

At Congressional, I paid $6.50 for hot dogs and $3.50 for bottled water. Parking was $70 per day, a ticket $500 for the week, and the merchandise priced equally steep. But I spent the money willingly because I valued the experience. Each time I wear my over-priced U.S. Open shirt or drink from my U.S. Open coffee mug, I will recall the experience and faintly remember its cost.

In our Consumer Surveys since 2008, a stunning finding has been the lack of value Americans ascribe to the world’s most expensive, advanced health system. In our 2010 survey, 48 percent said more than 50 percent of health care spending is wasted and 25 percent gave it an overall performance grade of “A/B” versus 35 percent who graded it “D/F.” It would appear the U.S. system, at 17.6 percent of our Gross Domestic Product (GDP) and more than $9,000 per capita, might be suspect of a gap between what’s paid and what’s received…a value gap.

In the Affordable Care Act (ACA), value is a prominent element to describe ways the health delivery system might be encouraged to deliver better results. It references:

  • Value-based purchasing program for inpatient acute hospitals (Section 3001)
  • Value-based purchasing for post-acute hospitals and hospices (Section 3004)
  • Value-based purchasing for nursing facilities and home care agencies (Sections 3006/10301)
  • Value-based purchasing for physicians (Section 3007)

It encourages providers to become clinically integrated and share risk for outcomes in accountable care organizations (ACOs) (Section 3022), episode-based payments (Section 3023), and medical homes (Section 3502) and discourages providers that are not willing to share results publicly (Section 3002) or take responsibility for avoidable readmissions (Section 3025).

Not to be overlooked, it challenges health insurers to justify their use of premiums for appropriate medical care (Section 2718), and requires medical device and pharmaceutical companies to improve the efficacy and effectiveness of their innovations in new ways (Sections 6301-6303).

It would be awesome if our system performed at a level that Americans saw its value. It is regrettable that a dollar spent on an over-priced coffee mug is intrinsically more highly valued than a system of care, the mission of which is more noble and impact more far reaching.

Golf is optional. Health care is essential. Its value can be measured; pursuit of demonstrating and improving its value should be the principal aim of health reform.

Paul Keckely

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

Note: on June 21, 2011, findings from the Deloitte Center for Health Solutions’ fourth annual Survey of Health Care Consumers will be released—the 2011 study includes more than 15,000 consumers in 12 countries. Deloitte will host a live Webinar on this topic on Tuesday, June 21 at 2:00 p.m. ET. Click here to register.

Implementation update

CMS announcement: end to mini-med waivers

Friday, the Centers for Medicare & Medicaid Services (CMS) announced that after September 22 it will no longer consider new requests from health insurers offering limited benefit, or “mini-med,” plans for waivers of restrictions on annual coverage limits, according to Steve Larsen, director of the Center for Consumer Information and Insurance Oversight (CCIIO). Existing waiver recipients that want to renew their waivers through 2013 must submit renewal requests to CMS by September 22.

Note: per ACA, starting in 2014, health plans are prohibited from imposing any annual coverage limitations. Leading up to 2014, CMS placed increasingly higher dollar limitations on annual coverage limits starting at $750,000. After September 23, the annual coverage limit may not be below $1.25 million and after September 23, 2012, the annual coverage limit may not be lower than $2 million. The limit is $2 million until January 1, 2014, when annual coverage limits may no longer be applied. As of June 17, 1,433 plans had received waivers and 100 health plans had been denied.

Republican governors, Senator Hatch ask for Medicaid “management of effort” flexibility

Monday, the 29 GOP governors asked Energy and Commerce Committee Chairman Representative Fred Upton (R-MI) and Finance Committee ranking member Senator Orrin Hatch (R-UT) to “provide states and territories a general health care framework where we can make necessary adjustments without constantly seeking permission from the federal government for changes that we already know work.” The governors also note that the first step for a successful Medicaid transformation is the full repeal of ACA.

In addition, Wednesday, Senator Orrin Hatch (R-UT) announced support for the State Flexibility Act (S. 868) that would allow states to restrict Medicaid eligibility.

Senate bill aims to repeal FSA and HSA reforms from ACA

Last week, Senator Kay Bailey Hutchison (R-TX) introduced an amendment to the Economic Development Act to repeal ACA Sections 9005 and 9003, which limit contributions to health flexible spending arrangements (FSAs) to $2,500 and require patients to obtain a prescription to pay for over-the-counter medications with their health savings accounts (HSAs) or FSAs.

HHS announces the National Prevention Strategy

Thursday, members of the National Prevention, Health Promotion, and Public Health Council—including U.S. Department of Health and Human Services (HHS) Secretary Kathleen Sebelius and Surgeon General Regina Benjamin—along with Senator Tom Harkin (D-IA) and Domestic Policy Council (DPC) Director Melody Barnes announced release of the National Prevention and Health Promotion Strategy called for under ACA Section 4001. The council is composed of the heads of 17 federal agencies and is chaired by the Surgeon General. The 122-page plan outlines four strategic directions:

  1. Building Healthy and Safe Community Environments: prevention of disease starts in our communities and at home; not just in the doctor’s office.
  2. Expanding Quality Preventive Services in Both Clinical and Community Settings: when people receive preventive care, such as immunizations and cancer screenings, they have better health and lower health care costs.
  3. Empowering People to Make Healthy Choices: when people have access to actionable and easy-to-understand information and resources, they are empowered to make healthier choices.
  4. Eliminating Health Disparities: by eliminating disparities in achieving and maintaining health, we can help improve quality of life for all Americans.

GAO report: use of ARRA and ACA funding for comparative effectiveness research

Tuesday, the Government Accounting Office (GAO) issued a report reviewing the use of comparative effectiveness research (CER) grants funded by the American Recovery and Reinvestment Act (ARRA) of 2009 (the Stimulus bill) and ACA. ARRA appropriated $1.1 billion to the HHS Office of the Secretary for CER, including $400 million to HHS, $300 million to the Agency for Healthcare Research and Quality (AHRQ) and $400 million to the National Institutes of Health (NIH).

Background: ACA Section 6301 established the Patient-Centered Outcomes Research Institute (PCORI) and its trust fund (the Patient-Centered Outcomes Research Trust Fund, or PCORTF) to support CER. ACA also directs AHRQ to disseminate CER findings published by PCORI and other related government-funded research in consultation with NIH. AHRQ will receive $8 million in fiscal year (FY) 2011 and $24 million in FY 2012, representing 16 percent of the total amount appropriated to the trust fund in each FY. The HHS Office of the Secretary is to receive $2 million in FY 2011 and $6 million in FY 2012, representing four percent of the total amount appropriated to the trust fund in each FY. In future FYs, AHRQ and the HHS Office of the Secretary will receive the same proportions from the trust fund, based on the net revenues from fees on health insurance and self-insured plans, amounts transferred from the Medicare Trust Funds, and appropriations to the PCORI Trust Fund. ACA funding for CER from the PCORI Trust Funds had not been appropriated as of April 25, 2011.

Note: funding for CER is through payments from: (1) Medicare: for FY 2013, an amount equal to $1 per beneficiary per year, and in FY 2014-2019, $2 per beneficiary per year; (2) health insurance plans and self-insured plans: for each policy year ending after September 30, 2012, a fee equal to the product of $2 ($1 in the case of policy years ending during FY 2013) multiplied by the average number of lives covered under the policy. PCORI is governed by a 21-person board appointed to six-year terms, including at least four physicians, three consumer representatives, plus a 17-person methodology committee.

HHS announces $4 million in ACA funding to support Community Transformation Grants

Thursday, HHS announced more than $4 million in funding for Community Transformation Grants (CTGs), authorized under ACA Section 4201. Funds will help support, disseminate, and amplify the evidence-based strategies of CTGs in communities nationwide, including in rural, frontier, and areas with health disparities. CTGs support implementing evidence-based strategies in five priority areas: (1) tobacco-free living; (2) active living and healthy eating; (3) evidence-based quality clinical and other preventive services, specifically prevention and control of high blood pressure and high cholesterol; (4) social and emotional wellness, such as facilitating early identification of mental health needs and access to quality services, especially for people with chronic conditions; and (5) healthy and safe physical environments. Funds come from the Prevention and Public Health Fund established by ACA Section 4002. Last month, HHS announced more than $100 million in first-year funding for CTGs.

Legislative update

Imaging focus of federal utilization review effort

Last week, the Medicare Payment Advisory Commission (MedPAC) added pre-approval for medical imaging studies to curb Medicare costs. Under the proposed prior-authorization program, CMS initially would compare physicians’ use of imaging to identify “outliers,” whose use exceeded evidence-based clinical guidelines. If such physicians’ imaging use did not decline after a CMS effort to “educate” them, then Medicare would require those clinicians to obtain prior authorization from either CMS or a contractor. Alternatively, the panel supported the use of “clinical-decision support systems,” or programs that suggest course treatments based on each patient’s data, as long as the system used CMS guidelines and transmitted data to federal administrators.

Study: Medicare enrollee responsibility for home health copayments

Wednesday, a study by health consulting firm Avalere Health was released concluding that more than half of all Medicare beneficiaries who use home health services would pay a proposed copayment completely out of pocket. Per the study, if Congress passed a copayment for home health services as an offset for reducing Medicare costs, 55 percent of home health beneficiaries would have to pay the full copayment out of pocket, noting a high likelihood that sicker, older Medicare enrollees would be likely to pay the most.

Note: last March, MedPAC recommended instituting copayments for some home health beneficiaries, but did not specify an amount. A $150 copayment was discussed, as well as $8/visit for episodes not preceded by a hospitalization/post-acute admission.

Administration intensifies fraud reduction efforts

Last week, the White House updated reporters about its Accountable Government Initiative aimed at government fraud. Highlights:

  • HHS can save over $10 billion over ten years through the use of state-of-the-art predictive modeling tools, focusing on reducing the Medicare improper payment rate, and expanding program integrity.
  • In May 2009, U.S. Department of Justice (DOJ) and HHS created the Health Care Fraud Prevention and Enforcement Action Team (HEAT) to reduce Medicare fraud. In February 2011, HEAT’s Medicare Fraud Strike Force charged 111 individuals in nine cities (doctors, nurses, health care company owners and executives, and others) for Medicare fraud involving more than $225 million in false billing.

Under the Health Care Fraud and Abuse Control (HCFAC) program, DOJ and HHS, acting through the HHS Inspector General, recovered more than $4 billion in fraudulent and misspent funds in FY 2010 and has returned more than $18 billion to the Medicare Trust Fund since the program’s creation in 1997.

Friday, HHS Secretary Kathleen Sebelius and Attorney General Eric Holder participated in the sixth regional health care fraud prevention summit, where they highlighted joint efforts to combat health care fraud, including the HCFAC program, and efforts to facilitate interagency information sharing and collaboration to reduce fraudulent activities against insurance plans.

CMS rule permits mental health centers participation in Medicare

Thursday, CMS released a rule that establishes conditions of participation (CoPs) that community mental health centers (CMHCs) would have to meet to participate in the Medicare program. The new standards for CMHCs include:

  • Establishing qualifications for CMHC employees and contractors
  • Requiring CMHCs to notify clients of their rights and to investigate and report violations of client rights
  • Coordinating an interdisciplinary treatment team and implementation of evidence-based treatment plans
  • Creating a Quality Assessment and Performance Improvement (QAPI) program
  • Developing organizational, governance, and administrative processes

CMS proposed that the effective date of these provisions would be 12 months after the publication of the final rule. Previously, CMHCs had been precluded from Medicare participation but allowed in Medicaid coverage.

Democrats propose Part D legislation

Last week, Representatives Henry Waxman (D-CA) and Rob Andrews (D-NJ) introduced legislation that would restore rebates paid by brand-name pharmaceutical manufacturers for Medicare Part D drugs used by dual-eligibles. The rebates were eliminated in 2006. Democratic leaders estimate the bill could save Medicare more than $100 billion.

Legislation proposed to promote antibiotic development

Wednesday, Representative Phil Gingrey, MD (R-GA) introduced the Generating Antibiotic Incentives Now (GAIN) Act, a bill aimed to provide incentives for the development of new antibiotics needed to treat new and emerging resistant bugs. The legislation would double the five years of exclusivity for certain infectious disease products. The GAIN Act also allows the U.S. Food and Drug Administration (FDA) to “fast track” review of antibiotic applications.

State watch

Study: Medicaid prescription drug costs could be less with tight national formulary

State Medicaid programs could cut costs by making use of “essential medicines” when deciding which drugs to offer beneficiaries, per a study by researchers at the University of California, San Francisco, who compared the World Health Organization's (WHO) Essential Medicines List of 120 medicines from 2009 with the Medicaid Preferred Drug Lists from 40 states. Since 2002, biannual revisions of the WHO list have “adhered to rigorous standards of evidence and consider disease prevalence and the safety and efficacy of medicines.” Relative costs may be evaluated, but medications are not excluded from the list because of high costs. This study suggests that states might use the WHO list to improve the efficacy of drugs and reduce costs. (Source: American Journal of Public Health, June 16, 2011)

Managed Medicaid promoted

Tuesday, the American Action Forum, a lobbying group funded by managed care plans, released a report highlighting state Medicaid managed care programs that have improved health care quality and outcomes, while reducing costs. Examples include:

  • Arizona used a statewide Medicaid managed care model that resulted in seven percent savings over the traditional Medicaid delivery system (e.g., fee-for-service, or FFS) over a ten-year period.
  • California used managed care resulting in a 21 percent decrease in emergency department (ED) visits and a 35 percent decrease in hospital admissions among asthmatics.
  • In Kentucky, one managed care plan uses a care coordinator to facilitate communication between new mothers, neonatologists, pediatricians, intensive care staff, and discharge planning personnel leading to a decline in the readmission rate from ten to seven percent. Separately, under the Mommy and Me plan, women who received a prenatal visit within the first trimester or within the first 42 days of enrollment increased from 78 to 92 percent.
  • New Mexico’s Salud program includes three managed care options, which provide services to assist beneficiaries who do not speak English as their primary language. Plans provide an interpreter to accompany patients to clinician office visits.
  • Oklahoma’s SoonerCare used targeted beneficiary education to reduce overall emergency room (ER) use by five percent annually. ER visits decreased 50 percent for heavy ER users.
  • In South Carolina, from 2006 to 2008, children enrolled in the Healthy Connections voluntary managed care program were consistently more likely to have had a well-child visit than FFS enrollees.
  • Wisconsin Medicaid Actuary found a 37 percent difference in ER use between Medicaid managed care and Medicaid FFS, due to use of 24-hour nurse hotlines. In 2002, a managed care model resulted in 10.7 percent savings in program expenses.

OIG analysis of state 340B drug discount programs

HHS Office of Inspector General (OIG) released findings from a March 2010 survey of 50 states and Washington, DC Medicaid agencies’ regulatory activities related to the 340B Drug Discount Program. The 340B Program, administered by the Health Resources and Services Administration (HRSA), requires drug manufacturers to provide covered outpatient drugs to certain eligible health care entities (e.g., federally qualified health centers) at or below discount prices defined under law. Findings include:

  • 25 states have written policies that direct covered entities to bill at actual acquisition cost (AAC) for 340B-purchased drugs.
  • 30 states do not have necessary pricing information to create prepay edits for 340B-purchased drugs because of logistical and legal issues; 20 states conduct post-pay reviews to identify overpayments.
  • 30 states have developed alternatives to the Medicaid Exclusion File to identify 340B claims and prevent duplicate discounts. Fourteen states only use the Medicaid Exclusion File to identify 340B claims, and seven states reported that they do not use any method to identify 340B claims.

Commonwealth Fund study: Medicaid managed care plans administrative costs and quality of care

The Commonwealth Fund released a study Wednesday finding that publicly traded plans focused primarily on Medicaid enrollees (e.g., Medicaid managed care plans) paid out the lowest percentage of their Medicaid premium revenues in medical expenses and had higher administrative expenses compared to non-publicly traded plans. Publicly traded plans also received lower quality scores for preventive care, treatment of chronic conditions, members’ access to care, and customer service. Findings include:

  • State enrollment trends: publicly traded Medicaid plans had more than 50 percent of their Medicaid enrollees in managed care in 14 states: Delaware, Florida, Georgia, Illinois, Indiana, Maryland, Missouri, Nebraska, Nevada, Tennessee, Texas, Washington, West Virginia, and Wisconsin.
  • Administrative costs: publicly traded Medicaid plans whose primary focus is managing Medicaid enrollees had significantly lower medical loss ratio (MLR) than non-publicly traded plans (84 vs. 90 percent) and significantly higher administrative cost ratio than non-publicly traded plans (14 vs. 10 percent). Nonprofit plans had a significantly lower administrative cost ratio than for-profit health plans (10 vs. 12 percent). Both nonprofit and for-profit plans earned an operating profit margin of less than 1 percent (0.97 vs. 0.72 percent).
  • Quality: non-publicly traded plans performed significantly better than multiproduct, publicly traded plans in the delivery of preventive care (70 vs. 62 percent) and chronic illness care (63 vs. 52 percent). However, multiproduct, publicly traded plans and non-publicly traded plans performed the same on consumer experience measures. Nonprofit plans had higher preventive care scores than the for-profit plans (71 vs. 63 percent). For-profit and nonprofit ownership status did not differ significantly for three consumer experience measures.

(Source: “Assessing the Financial Health of Medicaid Managed Care Plans and the Quality of Patient Care They Provide,” The Commonwealth Fund, June 2011)

Industry news

AHA recommends delay in Stage 2 EHRs meaningful use program

June 6, the American Hospital Association (AHA) sent a comment letter to the Office of the National Coordinator for Health Information Technology (ONC) HIT [Health information technology] Policy Committee recommending delay in implementation in Stage 2 of the electronic health records (EHRs) meaningful use program. The letter states, “Given hospitals’ experience with Stage 1 and competing federal priorities, such as adoption of ICD-10 by October 1, 2013, we urge the committee to recommend that Stage 2 begin no sooner than fiscal year (FY) 2014, and only when at least 75 percent of all eligible hospitals and physicians/professionals have successfully reached Stage 1. We also urge you to be parsimonious in your recommendations for new requirements in Stage 2, maintain flexibility, avoid complexity, and ensure that the benefits of any new requirements outweigh the costs.”

SGR options: CBO

Wednesday, the Congressional Budget Office (CBO) provided budgetary impacts of alternatives to Medicare physician payments and the sustainable growth rates (SGR) used to set Part B payments:

  1. “Cliff” policies: has been used most by Congress and results in larger payment reductions in the year after a short-term payment fix, leading to a projected 29.4 percent in payment reductions starting January 1, 2012. Cliff policies have been used every year since 2007 and most recently in legislation which freezes 2011 payment rates at the December 2010 level.
  2. “Clawback” policies: limits future payment reductions to no more than seven percent in any given year and does not adjust the spending target. Policies resulted in larger increases in Medicare spending for physician services in the short run and larger gaps between cumulative spending and the cumulative target. By 2007 the Clawback mechanism could not recoup the cost of a one-year override within ten years. Clawback legislation was passed in 2004 which allowed 1.5 percent update in 2004 and 2005 and in 2006, which froze 2006 payment rates at 2005 levels.
  3. Specified updates: replaces SGR with a specified update—a freeze, the Medical Economic Index (MEI), one or two percent—in each year through 2021.
  4. Reset options: forgives all spending above the cumulative targets and sets the cumulative target and cumulative spending to zero as of December 31, 2010. Calendar year (CY) 2011 would be the base period for future application of the SGR and would specify an update in 2012 equal to the MEI. Other options would reset the SGR as described above, but increase the target by one or two percent; other factors in the target would remain the same.
  5. Fiscal commission: reflects the Fiscal Commission’s policy recommendations to freeze physician payment rates in 2013, increased by one percent in 2014, and then subject to an SGR that could be reset in 2015, using the 2014 spending level as the base. CBO assumes freezes in 2012.

Note: the SGR is intended to control Medicare payments by tying Medicare payments to the economy. Specifically, the formula adjusts payments for the difference between targeted spending and actual spending. Every year since 2002, Medicare physician spending has exceeded targeted spending, requiring reductions in Medicare physician payments. Under current law, CBO projects that Medicare payment for physician services will be reduced by 29.4 percent starting January 1, 2012. The cost of a permanent fix for the SGR is estimated at $300 billion.

White House releases framework for coordination, regulation of nanotechnology

The White House announced creation of the National Nanotechnology Initiative (NNI) to facilitate use of nanotechnology and improve federal agency collaboration. Since 2001, $14 billion has been invested in these efforts. The White House directive seeks to streamline federal agency oversight and collaboration with the international scientific community.

Senators ask for industry input on how to streamline regulations to promote innovation

In a letter to medical device and pharmaceutical associations, Senators Richard Burr (R-NC) and Tom Coburn (R-OK) asked for input on how to streamline regulations to promote innovation as negotiations for the next FDA user fee agreement begin.

Imaging over-utilization focus of MedPAC recommendation

Wednesday, MedPAC released its annual Medicare policy recommendations to Congress. Regarding imaging services, MedPAC noted “we find that physician investments in diagnostic testing equipment have contributed to rapid growth of these services under the physician fee schedule and resulted in levels of utilization that are likely to include unnecessary services.” It recommended that HHS integrate imaging into its bundled payments programs, apply a multiple procedure payment reduction to the professional component of diagnostic imaging services provided by the same physician in the same session, reduce the physician work component of imaging and other diagnostic tests ordered and performed by the same doctor, and establish a prior authorization program for practitioners who order substantially more advanced diagnostic imaging services than their peers.

NAIC report: MLR options for brokers

The Health Insurance and Managed Care Committee of the National Association of Insurance Commissioners (NAIC) approved a report on the impact of the MLR requirement on insurance agents and brokers recommending that certain types of compensation for brokers be excluded from the MLR calculation, such as bonuses or fees paid to health insurance exchanges. The report also suggested giving special treatment for different types of agents and brokers, depending on whether they are independent or are employed by a carrier, capping the percentage of the premium or the dollar amount paid per policy that could be excluded from the MLR calculation, and increasing the MLR to reflect the exclusion of commissions. At issue is the provision in ACA (Section 1001) limiting MLRs to 80 percent for individual plans and 85 percent for group plans. Health insurers prefer that broker commissions be excluded from the formula altogether.


“I don't think that all governors think that a block grant is a good solution for them….A block grant fundamentally, as I see it, takes away one of the key areas of flexibility that a state has, which is to be able to draw down federal dollars when its costs increase—whether its costs increase because of a downturn and there's more people enrolling in the program or whether its costs increase because there’s some new technology, some new costs of … providing services to people.”

 – Cindy Mann, Director of the Center for Medicaid and State Operations at CMS, 6th annual Medicaid Congress, June 13, 2011

“Honest public discourse requires a standard level of transparency—one McKinsey simply has not met…The conclusions McKinsey reached differ sharply from results of other reputable, transparent research on the subject. McKinsey's findings also counter what actually happened in Massachusetts when similar policies increased employer-sponsored health insurance. We all want the most accurate information and the ability to evaluate its integrity, which is why McKinsey should answer these basic questions.”

 – June 16, 2011 letter from Senate Finance Committee Chairman Max Baucus (D-Mont.) to McKinsey & Co. Global Managing Director Dominic Barton regarding disclosure of methodology used in study that determined that 30 percent of employers might drop health benefits as a result of ACA

“Expansions of Medicaid and the Children’s Health Insurance Program (CHIP) are designed to extend access to high-quality medical care to all U.S. children. However, evidence suggests that the 37 million children covered by Medicaid–CHIP are less likely to receive specialty care than children covered by commercial insurance. Children covered by Medicaid–CHIP may face greater barriers to specialist care as a result of fewer resources within their families, including lower levels of income, education, language proficiency, and health literacy. Another possible explanation for disparities is that specialists choose not to accept public insurance. In contrast to patient-related or family-related barriers, which are less malleable to change, provider-related barriers are potentially modifiable through health care policies. To date, research on children’s access to specialty care has not adequately distinguished between provider-related barriers and patient-related ones.”

 – Bisgaier and Rhodes, “Auditing Access to Specialty Care for Children with Public Insurance,” The New England Journal of Medicine, June 15, 2011

“The gap between the U.S. and the 10 countries in the world that have the best life expectancies—places like Australia, Canada, Sweden and Japan—is widening. There’s really no reason we can't keep pace with those other countries. We spend more on health care. We have the best health research in the world. That was a real shock.”

 – Dr. Christopher Murray, Population Health Metrics, June 15, 2011

“From New Jersey to California, state officials are bracing for the end to more than $90 billion in federal largess specifically designated for Medicaid. To hold down costs, states are cutting Medicaid payments to doctors and hospitals, limiting benefits for Medicaid recipients, reducing the scope of covered services, requiring beneficiaries to pay larger co-payments and expanding the use of managed care….The Congressional Budget Office estimates that federal Medicaid spending will decline in 2012 for only the second time in the 46-year history of the program. But states say they will have to have to spend more on Medicaid as they struggle to make up for the loss of federal money.”

 – “As Number of Medicaid Patients Goes Up, Their Benefits Are About to Drop,” The New York Times, June 15, 2011

Fact file

  • Health care costs covered by commercial insurers increased 7.13 percent over the year ending in April 2011, while Medicare costs increased by 2.48 percent. (Source: Standard & Poor's)

  • Health care price index increased 2.0 percent from April 2010 to April 2011. Health care spending grew 4.7 percent over that period, and health care utilization grew 2.8 percent. (Source: Altarum Institute)

  • Forty percent of physicians are dissatisfied with implementation of the new EHR system purchased, one-third think it improves patient safety, and two-thirds think their system contributes to delayed prescription orders and refills. (Source: Journal of General Internal Medicine)

  • Enrollment in HSA-eligible insurance plans increased by more than 14 percent to 11.4 million in January 2011, led by large group market (+26 percent) and individual market (+15 percent). 6.3 million of these are in the large group market, 2.4 in the individual market, and 2.8 million in the small group market. (Source: America’s Health Insurance Plans)

  • The federal government would save $7.6 billion if Medicare eligibility was increased from age 65 to 66. (Source: Kaiser Family Foundation)

  • Life expectancy in the U.S. is up 4.3 years for men to 75.6 (36th in world) and 2.4 years for women to 80.8 (33rd in world) between 1987 and 2007. Black men have the lowest life expectancy in the U.S. at 70 years; Asian-American women have the highest at 85.7 years; white women live an average of about 81 years. (Source: Center on Aging, University of Illinois at Chicago; June 15, 2011, Population Health Metrics)

  • In 2009, U.S. surgeons performed more than 200,000 obesity surgeries a year at an estimated cost of $3 to $5 billion. Post-operative outcomes (benefits) for older male Veterans were after seven years, if at all. (Source: Maciejewski, et al, Journal of the American Medical Association, June 15, 2011)

  • Results: in 2009, there were 10,739 malpractice claims paid on behalf of physicians. Of these paid claims, 4,910 (48.5 percent) were for events in the inpatient setting, 4,448 (43.1 percent) were for events in the outpatient setting, and 966 (9.4 percent) involved events in both settings. In the outpatient setting, the most common reason for a paid claim was diagnostic (45.9 percent) whereas in the inpatient setting the most common reason was surgical (34.1 percent). Mean payment amount for events in the inpatient setting was significantly higher than in the outpatient setting ($362,965 vs. $290,111). (Source: Bishop, et al, “Paid Malpractice Claims for Adverse Events in Inpatient and Outpatient Settings,” Journal of the American Medical Association June 15, 2011; based on retrospective analysis of malpractice claims paid on behalf of physicians in outpatient and inpatient settings using data from the National Practitioner Data Bank from 2005 through 2009)

  • Physician compensation changes, 2010 vs. 2009: Medical Group Management Association (MGMA)
    • Highest earners—Orthopedic surgeons, median $514,659; invasive cardiologists, $500,993; diagnostic radiologists, $471,254; gastroenterologists, $463,995; and dermatologists, $430,874.
    • Primary care—Internists, median $205,379 (+ 4.21 percent); family physicians (without obstetrics), $189,402 (+ 2.94 percent), pediatricians, $192,148 (+ 0.39 percent).
    • Specialists—Specialties with decreases: anesthesiologists, gastroenterologists, obstetricians/gynecologists, ophthalmologists, diagnostic radiologists, and urologists with largest decrease (- 4.66 percent) for urologists with 2010 median of $372,455. Specialists with increases: psychiatrists, dermatologists, neurologists, general surgeons, and emergency medicine physicians; biggest increase (+ 5.65 percent) was for emergency medicine to median of $277,297.
    • Regionality—Physicians practicing in the South reported the highest median earnings, at $216,170 in primary care and $404,000 in specialty care, followed by the Midwest and West. Physicians in the East earned the least, at $194,409 in primary care and $305,575 in specialty care.

(Source: Physician Compensation and Production Survey: 2011 report based on 2010 data, the MGMA collected information from some 60,000 physicians in 150 specialties)

  • Study: 24 states were reducing Medicaid payments to providers, while 20 were limiting benefits in some way. (Source: National Association of State Budget Officers)

  • Study: a $1.00 increase in the tobacco tax would result in $25.7 billion in tax revenue (54 percent increase over current revenue annually) and save more than $109 million annually in health treatment costs. (Source: American Cancer Society, June 16, 2011)

  • For every dollar spent on OIG’s fraud and abuse control program, $6.75 is returned to the government. (Source: OIG, June 17, 2011)

  • Study: in a survey of 200 hospitals, 30 percent administered double scans on their Medicare outpatients vs. 5.4 percent nationally. In 2008, about 75,000 patients received double scans, one using iodine contrast to check blood flow, and one that did not. “If you do both, you bill for both…Double scanning is common among privately insured patients who tend to be younger.” (Source: “Hospitals Performed Needless Double CT Scans, Records Show,” The New York Times, June 18, 2011)
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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