Health Care Reform Memo: January 24, 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

My head is spinning. Even when I try, health care is everywhere.

It’s about politics and policy. The House voted 245 to 189 to repeal the Patient Protection and Affordable Care Act (PPACA), voting on party lines. Then, the House GOP leadership announced its committee agenda through which replacement measures will be pursued. And in the Senate, Sen. Harkin’s (D-IA) Health, Education, Labor, and Pensions (HELP) Committee announced plans to investigate the costs and implications of the law.

It’s about jobs and the economy. The President ended the week by naming GE CEO Jeff Immelt to lead the new Council on Jobs and Competitiveness. He’ll likely emphasize economic recovery and job growth in Tuesday’s State of the Union address. Health care is central to both: while the overall economy slipped 1.1 percent last year, the health care industry grew four percent. And during the downturn, while 8.4 million jobs were lost, health care employment grew 800,000. Ironically, Immelt’s path to the GE C-suite included leadership of the company’s medical device unit.

And it’s about people. This week, 13 days after the attempted assassination, Arizona Rep. Gabrielle Giffords (D) was transported from Tucson Medical Center’s Trauma unit to rehab in the Institute for Rehabilitation and Research (TIRR) at Memorial Hermann in Houston. Amazing. And we learned Steve Jobs would take his third leave of absence from Apple since an initial diagnosis in 2003 of islet pancreatic cancer.

Staying abreast of the changes in this industry frustrates me. I devour studies, trade journals, and articles early, grab stories from broadcast, online, and print through the day, and crash late evening reflecting on what changed in a mere 24 hours. And invariably, I feel I should learn more, dig deeper, understand better.

This is not an industry for the change-averse. It feeds on innovation—nanotechnology, personalized medicine, technology-enabled self-care, non-allopathic treatment alternatives, expanded roles of nurses and pharmacists, pay for performance, outcomes-based payments, episode-based care, retail medicine, non/minimally invasive surgical techniques, intracellular diagnostics, consumer directed health plans, and so on.

To the general public, innovation in the health system is a strength—we expect the latest and greatest. But the prospect of fundamental change to the system is threatening. Polls indicate two of three consumers are fearful about health reform—highest among seniors. Our Pulse Surveys show support for private sector solutions that reduce costs, increase transparency, shift incentives for doctors and hospitals from volume to outcomes, employer mandates, and insurance reforms. The public wants “universal coverage” and access to the newest and best treatments but it does not want to pay more. And regrettably perhaps, our surveys indicate the public tuned out the political debate about health reform in late 2009 and opinions have not changed since.

It’s hard for consumers to understand the connection between the economy and health care; perhaps even more challenging to stay attuned to innovations in diagnostics and therapeutics. But they pay attention stories about people like Gabby Giffords and Steve Jobs—the people side of health care.

So as the curtain to health reform 2.0 opens with lively debate about the health system reform guaranteed, let’s hope all parties pause and consider its impact on people, the economy, and jobs. And equally important, it’s essential that its stakeholders understand each other and that all endeavor to educate consumers more effectively.

Paul Keckley, Ph.D.

U.S. House of Representatives passes “Repealing the Job-Killing Health Care Law Act”

Wednesday, the repeal vote passed the House 245-189. Three Democrats joined the unanimous Republican vote: Dan Boren (D-OK), Mike McIntyre (D-NC), and Mike Ross (D-AK). According to the Centers for Medicare & Medicaid Services (CMS) Office of the Actuary report last week, PPACA postpones the exhaustion of the Medicare Hospital trust fund by 12 years, from 2017 to 2029. A repeal of the law would advance the estimated exhaustion date by 12 years.

AHRQ seeks comments on barriers to meaningful use for Medicaid providers

The Agency for Healthcare Research and Quality (AHRQ) seeks comments on the “Barriers to Meaningful Use in Medicaid” project, funded under the Health Information Technology for Economic and Clinical Health (HITECH) Act. The two-year project will provide recommendations to Medicaid health providers on achieving meaningful use, taking advantage of incentive payments, and using health information technology (HIT) to improve health care in the Medicaid population.

FDA releases 2011 plan for medical device approval process

Wednesday, the Food and Drug Administration (FDA) released its 25-step action plan to improve the 510(k) drug approval process. Key actions include:

• Streamlining the “de novo” review process for certain innovative, lower-risk medical devices
• Clarifying when clinical data should be submitted in a premarket submission, guidance that will increase the efficiency and transparency of the review process
• Establishing a new Center Science Council of senior FDA experts to ensure timely and consistent science-based decision making

CMS extends the comment period for Self-Referral Disclosure Protocol (SRDP)

CMS extended the comment period through March 15, 2011 on the CMS Survey Tool and the Self-Referral Disclosure Protocol (SRDP). Note: PPACA (Sec. 6409) requires the Secretary to establish a self-referral disclosure protocol for health care providers and suppliers to disclose actual or potential violations of the physician self-referral law.

HHS seeks nominations for 2011 Healthy Living Innovation Awards

The Department of Health and Human Services (HHS) is seeking nominations of organizations who have addressed healthy weight, physical activity, and nutrition in a novel way for Healthy Living Innovation Awards. Nominations will be collected through March 1, 2011.

White House Executive Order: streamline regulatory processes

Tuesday, President Obama signed an Executive Order (EO) to make upcoming regulations less burdensome and to eliminate or modify costly and outdated regulations. President Obama also encouraged agencies to allow flexibility with respect to regulations affecting small businesses and to consider how to make public information about regulatory compliance.

CRS report: upcoming PPACA regulations

Congressional Research Service published a report of upcoming PPACA regulations for 2011.

PPACA authorizations set to expire in fiscal year 2011: Congressional Budget Office

Update: health insurance exchange implementation

Thursday, HHS announced the availability of health insurance exchange establishment grants to be used for conducting background research, consulting with stakeholders, making legislative and regulatory changes, exchange governance, information technology systems, financial management, and program integrity requirements. States may initially apply for either Level One or Level Two Establishment Grants, based on their progress. Level One Establishment Grants provide up to one year of funding to states that have made some progress under their exchange planning grant. Level Two Establishment Grants are designed to provide funding through December 31, 2014 to applicants that are further along in the establishment of an exchange.

Note: Last July, HHS awarded $49 million in exchange planning grants. Several states have taken initial steps toward 2014 implementation including:

• Wisconsin: the state completed development of a prototype model and expects the cost of the exchange, through implementation, to total about $49.6 million.
• Texas: lawmakers have filed legislation that would create the Texas Health Insurance Connector for its individual and small group markets.
• Indiana: Governor Daniels (R) signed an EO directing the state’s Family and Social Services Administration to work with other state agencies to establish and operate the state’s exchange.

Vermont seeks reform waiver, proposes single-payer system

Vermont lawmakers are preparing to introduce legislation that would permit the state to establish a single-payer system in 2014, three years earlier than PPACA stipulates. Under Section 1332, states may apply for a waiver from specified PPACA requirements beginning in 2017 so long as they demonstrate that they will cover at least as many residents with coverage that is at least as comprehensive and affordable as prescribed under federal law.

High-risk pool update: enrollment increasing as result of premium reduction

Last month, HHS cut insurance premiums for enrollees in the federal high-risk pool program, known as the Pre-Existing Condition Insurance Plan (PCIP), by 20 percent. Since the cut, enrollment into PCIPs has doubled. HHS officials will start a series of regional outreach events in the coming weeks. Previously, state and federal officials were concerned about the lower-than-expected enrollment rates.

State watch

Texas Governor Perry (R) released his $156.4 billion, two-year state budget plan, a 16.6 percent reduction from the current $187.5 billion budget. The proposal includes cuts to the state’s HHS Department totaling to $16.1 billion, cuts to Medicaid provider payments by 10 percent, and implementation of a payment bundling initiative to help reduce costs.

California Governor Brown (D) declared a fiscal emergency Thursday to press lawmakers to address the state’s $25.4 billion deficit.

Thursday, a New Jersey court ruled that changes to public employee pensions introduced in April 2010 were constitutional. The laws required active and new employees to pay 1.5 percent of their salaries and 1.5 percent of pensions after retirement toward health insurance, and also limited pensions to full-time employees. The state Policeman’s and Fireman’s unions claimed that the law was an unconstitutional constraint on collective bargaining rights and violated the Equal Protection clause and Fifth Amendment.

Update: legal challenges to PPACA; DOJ preparing for next round

Tuesday, six states joined the Florida lawsuit against PPACA, bringing the total to 26. The new additions were Iowa, Ohio, Kansas, Wyoming, Maine, and Wisconsin.

Friday, the Department of Justice (DOJ) filed an appeal to Virginia’s court decision (Judge Hudson, Commonwealth of Virginia v. Sebelius) that PPACA’s individual mandate was unconstitutional. The week prior, DOJ filed a brief requesting oral arguments for an appeals case in Michigan challenging PPACA’s individual mandate. The lower court’s decision found the individual mandate constitutional.

Note: to date, four district courts have heard arguments about the constitutionality of the individual mandate and, in Florida, the constitutionality of the Medicaid mandate requiring states to establish eligibility at 133 percent of the federal poverty level (FPL) and “maintenance of effort” requirements around coverage, et al. It is likely arguments will next be heard in Circuit Courts and possibly end in the Supreme Court.

Appointments announced to PCORI’s Methodology Committee

Friday, the Government Accounting Office (GAO) announced the appointment of 15 members to the Methodology Committee of the Patient-Centered Outcomes Research Institute (PCORI) created under PPACA. The Methodology Committee will help PCORI develop and update methodological standards and guidance for clinical comparative effectiveness research.

Focus on states: Daschle, Frist, Strickland

Tuesday, Tom Daschle (D) and Bill Frist (R), former Senate Majority Leaders, joined former Ohio Governor Ted Strickland (D) in a Bipartisan Policy Center-sponsored project to identify and report on state-based best practices focused on improved care and reduced cost.

High Court to hear arguments on state collection of physician prescription data

The U.S. Supreme Court will hear a case this spring on a Vermont state law which prohibits use of physician prescribing data for marketing of branded drugs. A U.S. Court of Appeals ruled the Vermont law unconstitutional under the First Amendment, while lower courts upheld similar laws in Maine and New Hampshire. All states allow pharmacies to collect data about physician prescription-writing habits, with three states—Maine, New Hampshire, and Vermont—enacting laws to ban use or publication of the information for marketing purposes.

Medicare Advantage HMO performance improvement noted: MedPAC report

A Medicare Payment Advisory Commission (MedPAC) report released last week concluded that nine of the 46 “Effectiveness of Care” measures under the Healthcare Effectiveness Data and Information Set (HEDIS) used to assess Medicare Advantage (MA) health maintenance organizations (HMOs) improved over the past year, up from seven in the previous year. The other measures remained stable. Thirteen large regional preferred provider organizations (PPOs) had poorer results, although similar in quality.

MedPAC critical of CMS MA bonus recommendation

January 14, MedPAC commissioners issued their opinion about CMS’ plan to give bonuses to three-star MA plans which would mean 80 percent of all MA plans would be eligible. Other MedPAC recommendations from its meeting January 13-14:

• Initiation of a $150 co-payment for Medicare home care services
• 1 percent increase in Medicare payments for physicians
• 0.5 percent increase for ambulatory surgery centers
• 1 percent increase in outpatient dialysis
• No change in skilled nursing payments

Note: MedPAC makes recommendations to CMS. CMS has no obligation to implement its recommendations.

AHA: hospitals should step up activity in health and wellness for employees

Last week, the American Hospital Association (AHA) released a survey on health and wellness programs for hospital employees encouraging “a bold call to action for hospitals to be leaders in creating a culture of health.” AHA recommends that getting better return of investment (ROI) data is the most important opportunity for hospitals to improve health and wellness programs. Key findings include:

• 86 percent of hospitals had an employee health and wellness program; 80 percent of these programs are directly administered by the hospital or health system.
• Top reason for offering a program is to reduce health care costs. Other top reasons are to improve health of employees and reduce absenteeism/presenteeism, improve employee morale and productivity, and provide an example to the community.
• Percentage of employees varied widely; 42 percent of hospitals reported that at least half of their employees participate in one or more programs.

Most serious challenges to program effectiveness: motivating employees over extended time periods, financial restrictions or limitations, measuring program effectiveness (return of investment), and creating a culture of health. Urban hospitals and hospitals with more than 200 beds also had a harder time communicating to employees about health and wellness activities.

Quotable

“Thanks to the Affordable Care Act, Americans are finally getting the freedom and security they deserve in their health care…
If the law were repealed, these protections would be taken away, and America’s seniors would lose important new Medicare benefits, including savings on their prescription drugs and new health and wellness benefits.
A recent analysis by our Department shows that the Affordable Care Act will sharply reduce the cost of health insurance for millions of Americans. A family of four making $55,000 is projected to save $6,000 a year in 2014. For a working family with a $33,000 income, the savings could be up to $10,000 – the difference between being able to afford health insurance and going without it.
Repealing the Affordable Care Act would raise health insurance costs for families, add to our federal deficit, put control back in the hands of insurance companies, and take away the freedom and health security being realized by millions of Americans. That would be the wrong direction for our country, and would be disastrous for the health and well-being of American families.”

 – Statement by HHS Secretary Kathleen Sebelius on vote by U.S. House of Representatives to repeal the Affordable Care Act Thursday, January 20, 2011

“While some responsibilities of doctors can be absorbed through other trained medical professionals, including nurses and physician assistants, they don’t have the same unique expertise. If we don’t make changes, long waits and limited access will become much more common for all patients.”

 – Herbert Pardes, M.D., President and CEO, New York Presbyterian Hospital editorial “The Coming Doctor Shortage,” The Wall Street Journal, January 19, 2011

“We welcome, in a certain sense, their attempt to repeal it because it gives us a second chance to make a first impression.”

 – Sen. Charles Schumer (D-NY), Sunday, January 16, 2011 on NBC's "Meet the Press”

Fact file

• 38.4 million U.S. citizens live 30 miles or more away from a trauma center—this is proportionately higher among lower income populations. (Source: Archives of Surgery, January 2011)
• Up to 129 million non-elderly Americans have some type of pre-existing condition that could be used to deny them coverage or charge a higher rate in 2014 if PPACA is repealed. (Source: HHS)
• 81 percent of hospitals and 41 percent of office-based physicians plan to achieve meaningful use requirements and plan to take advantage of federal incentive payments. (Source: ONC)
• Health disparities: lower-income residents have fewer healthy days and have higher rates of preventable hospitalizations. Areas with larger health disparities tend to be less healthy overall. Blacks experience higher rates of infant mortality and hypertension. (Source: CDC)
• 45 percent of 3,000 surveyed physicians in a Thomson Reuters study reported not knowing what an ACO is. (Source: Thomson Reuters)

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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