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Health Care Reform Memo:
April 16, 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: comparing health reforms: Massachusetts versus the ACA

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

Thursday marked the sixth anniversary since the signing of Chapter 58 of the Acts of 2006 of the Massachusetts General Court, “An Act Providing Access to Affordable, Quality, Accountable Health Care.” The legislation, three years in the making, will no doubt be the focus of discussion as Campaign 2012 features an interesting comparison of Chapter 58 and the 2010 Patient Protection and Affordable Care Act (ACA).

In essence, the Massachusetts law mandates that nearly every resident of the state obtain a state-government-regulated minimum level of health care insurance. It provides free health care insurance for residents earning less than 150 percent of the federal poverty level (FPL) and subsidies for individuals up to 300 percent of the FPL based on a sliding scale. The law remains today the most important state-led health reform pilot in U.S. history.

Likewise, ACA features an individual mandate and penalties to employers with more than 50 employees who do not purchase insurance. It also includes major changes to the delivery system. But, comparing and contrasting the two should be done with caution for two reasons:

The starting point for each was quite unique:

Massachusetts is a densely populated urban state with a surplus of acute beds and specialty physicians and higher than average health costs. Its insurance market is dominated by four major plans, and its uninsured rate in 2006 before the law was signed was almost 11 percent (reduced to less than 6 percent in 2007). In 2006, its economy was strong, and politics seemingly “purple,” at least in terms of health legislation.

By contrast, the U.S. supply of beds and physicians is highly variable, with primary care shortages in most states and rural areas and an uninsured rate of 18 percent. And ACA was signed in March 2010 in the midst of the second longest economic downturn in the nation’s history.

Comparing the two starting points is necessary: Massachusetts market conditions at the time of its passage are not replicated in any other of the 49 states, and the conditions of the U.S. economy when ACA passed are arguably the most complex at any point in our recent history.
The starting points:

  U.S.
Affordable Care Act
2010
Massachusetts
Chapter 58
2006
Demographics Age1 Under 65: 87.0% Under 65: 86.5%

Over 65
: 13.0%
Over 65: 13.5%
Ethnicity
White
: 72.4%
White: 84.5%
Black: 12.6% Black: 5.4%

American Indian and Alaska Native
: 0.9%
American Indian and Alaska Native: 0.2%

Asian
: 4.8%
Asian: 3.8%

Native Hawaiian and other Pacific Islander
: 0.2%
Native Hawaiian and other Pacific Islander: 0.0%

Reporting two or more races
: 2.9%
Reporting two or more races: 2.6%

Median Income (2011 adjusted)

 

$50,022 $60,923
Costs

Costs per hospital day2 

(2009)

$1,853 $2,351

Individual Insurance Plan3

(2010)


$1,021
$1,207

Family Insurance Plan3

(2010)


$3,721
$4,465
Insurance9 Medicare 2.9% 2.4%
Medicaid
16.9%
13.9%
Military Health Care
3.6%
>1%
Employer
58.6%
70.8%
Direct purchase
7.1%
5.6%
Uninsured
18.4%
10.9%
Capacity Physicians 258.7 per 100,0004 405.7 per 100,0004
Hospital beds 2.6 per 1,0005 2.6 per 1,0007
Utilization Admissions 118 per 1,0005 130 per 1,0007
Voting Democrat (2012)
31%6
36.9%8
Republican (2012
27%6
 12.5%8
Independent (2012)
40%6
52.8%8

1 U.S. Census Bureau
2 Kaiser Family Foundation, State Health Facts
4 American Association of Medical Colleges
3
National Council of State Legislatures
5American Hospitals Association Chartbook Utilization and Volume
6Gallup, “Record-High 40 percent of Americans Identify as Independents in '11,” January 9, 2012
7Boston University School of Public Health, “Hospital Resources, Use, and Costs, Mass. versus U.S. and Other States,” 2007
8 Massachusetts Election Division, February 24, 2012.
9 U.S. Census Bureau, Health Insurance Coverage Status and Type of  Coverage by State--Persons Under 65: 1999 to 2010

Likewise, the intent of each seems quite different:

Governor Romney sought to reduce the growing annual costs in the state’s $700 million Uncompensated Care Pool (or "free care pool"), used to partially reimburse hospitals and health centers for health costs for the uninsured. Leading economists advising the legislature and state executives calculated Chapter 58 would curtail growing subsidies to the pool by taxpayers, predicting the amount of money in the "free care pool" would be sufficient to pay for reform legislation without requiring additional funding or taxes. The intent of Chapter 58 was to increase coverage for the uninsured using the Massachusetts Health Connector to manage participating plans and subsidies for eligible individuals. Cost containment was not its focus.

President Barack Obama sought to “reduce costs and cover everyone” (February 24, 2009 address to Congress), seeking legislation that would stimulate competition for affordable health insurance for individuals and employers and reorganize the delivery system by encouraging clinical integration and performance-based payments in lieu of fee-for-service (FFS) reimbursement. The President’s goal was ambitious. Reducing costs and increasing access were its dual aims.
Current status:

  Affordable Care Act Massachusetts Chapter 58
Improved access
  • The U.S. uninsured rate for adults ages 18-25 years is 24%, prior to extending dependent coverage to 26 years old in ACA Section 2714, the uninsured rate was 28% in this age group2
  • Section 2711 ended lifetime limits for over 105 million Americans—70 million on large employer plans, 25 million on small employer plans, and 10 million individual purchasers3
  • Today, 98% of residents have health care coverage including 99.8% of children5
  • Since 2006, more nonelderly adults have a usual place to go for care and have visits to preventive and dental care1
Improved quality
  • ACA established the Patient Centered Outcomes Research Institute (PCORI)—19 members were selected and will conduct research that compares clinical effectiveness of medical treatments7
  • Quality metrics’ capture and reporting is central to accountable care organizations (ACOs), bundled payments, value-based purchasing, and most major delivery system pilots/demonstrations in ACA
  • U.S. Department of Health and Human Services (HHS) Secretary is required to develop a National Quality Strategy annually
  • Essential health benefits (EHBs), waivers of co-payments for preventive are health key
  • Three million Medicare beneficiaries received prescription drug cost relief from the one-time $250 rebate check3
  • Nonelderly adults reported more often good or excellent health—rising from 59.7% in 2006 to 64.9% in 20101
  • Since 2006, the state has seen a drop in overall emergency department (ED) visits, nonemergency ED visits, three or more ED visits, and hospital stays1
  • Wait time to visit decreased for cardiology and dermatology appointments from 2004 to 20099

 

Reduced costs
  • 3.6 million on Medicare saved $2.1 billion on prescription drugs in 2011—an average of $4,200 per person3
  • Those reporting high levels of out-of-pocket spending (more than 10% of income) dropped from 9.8% in 2006 to 6.1% in 20101
  • Residents reported less often that they did not get needed care because of cost from 2006 to 20101
Costs
  • As of April 2012, over $12 billion has been awarded to states through ACA programs—$8.1 million went to private entities and funding per resident ranges from $108 (RI) to $257 (DC)4
  • Fraud detection efforts captured $4 billion in 201110
  • Most of the cost savings in ACA are linked to insurance reforms and delivery system consolidation slated to come online between 2013 and 2016
  • In 2011, the state spent over $12 billion on health care—including $842 million to the Massachusetts Commonwealth Care Trust6r
Deficit/savings
  • Implementation is estimated to cost $930 billion 2012–2021 (per the February 2011 CBO baseline), reducing the federal deficit by approximately $210 billion over the decade
  • CBO’s March 2012 projections estimate that ACA coverage provisions will have a net cost of $1.3 trillion
  • Incremental additional state cost/year is $91 million (1.4% of the state budget)
  • Spending directly attributable to the health reform law grew from $1.04 to $1.95 billion from FY2006–20118

Sources:
1
Health Affairs, “Massachusetts Health Reforms: Uninsurance Remains Low, Self-Reported Health Status Improves As State Prepares To Tackle Costs,” February 2012
2
Gallup, “In U.S., Uninsured Rate for 18- to 25-Year-Olds Plateaus,” April 2012
3
Department of Health and Human Services
4
Kaiser Family Foundation, “Federal Funding Under the Affordable Care Act,” April 2012
5
Kaiser Health News, “Massachusetts On Track To 'Crack The Code' For Health Care Cost Control,” April 2012
6 Massachusetts Medicaid Policy Institute, “The Fiscal Year 2012 Budget: General Appropriations Act
(GAA) After the Governor’s Vetoes,” August 2011
7 Kaiser Family Foundation, “Implementation Update,” 2012
8
Massachusetts Taxpayer Foundation, Massachusetts Health Reform Spending, 2006-2011: An Update on the “Budget Buster” Myth April 2012
9 Merritt Hawkins & Associates, “2009 Survey of Physician Appointment Wait Times,” 2009
10
U.S. Department of Health and Human Services & U.S. Department of Justice, “Health Care Fraud and Abuse Control Program Annual Report for Fiscal Year 2011,” February 2012

Here’s my take: comparing the two is worthwhile, but the intent of the two and their starting points make comparisons an academic exercise. Some valuable insight can be harvested in both experiences:

  1. Increasingly, the linkage between economic reality and the health system is a focus for legislators at the federal and state levels. With the Congressional Budget Office (CBO) forecasting health costs will increase at 6 percent annually for the next decade, far surpassing wage increases, gross domestic product (GDP), and productivity gains, and with health costs at 23 percent of the federal budget and 21 percent of state budgets, something’s got to give. And the fix is now an agenda item every legislative body must grapple with.
  2. Timing is everything and things change. Strategic flexibility is essential. Might Chapter 58 have passed in a downturn? No one knows for sure. And might the events leading to the passage of ACA—its 60-39 passage in the Senate and 219-212 win in the House be different today—perhaps. But stepping back, given the complexity of health care and our economy and the dramatic volatility of market conditions, lawmaking needs grounding in strategic flexibility—an ongoing process of revising and adapting to “the new normal” that’s not paralyzed by archaic legislative constraints. As Michael Raynor puts it, “breaking constraints” is the essence of innovation—constraints in lawmaking about health care need breaking. (Source: Michael E. Raynor, Crown Business, “The Innovator’s Manifesto: Deliberate Disruption for Transformational Growth,” 2011)
  3. The results of each effort are unknown. It’s too soon to know how the ACA will play out, and too soon to gauge how the long-term impact on health status in Massachusetts is impacted by increased access to insurance for almost 500,000 newly covered. The conundrum is politics: lawmakers try to match results to elections in two and four year cycles; by contrast, population health improvements, innovations in diagnostics and therapeutics, system-wide implementation of electronic health records and personal health records, and retraining and proper deployment of the 16 million in the health care workforce don’t easily fit their cycles.

It is my view that each of these efforts teaches a valuable lesson—not so much in their intent or results to date, but in the disconnect between legislative and political processes when applied to complex problems.

Parties on all sides of health care want a better performing system that costs less and delivers more value regardless of insurance, health status, or political disposition. But legislating the solutions through the legislative process is akin to using an abacus in a smart phone world.

Regardless of the U.S. Supreme Court’s decisions about the constitutionality of ACA, the U.S. system must be fixed. In the world of business, taking risk and “breaking constraints” is rewarded, even when a result is disappointing. In the legislative process about health care at the state and national levels, there’s risk, but to do nothing is to guarantee higher costs and lower value. Kudos to President Obama and Governor Romney for taking risk. It would have been easier to do nothing.

Paul Keckely

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

Implementation update

HHS announces administrative simplification rule, delay of ICD-10 deadline

Monday, HHS released the third in a series of proposed rules implementing administrative simplification provisions per ACA Section 1104, creating a new health plan identifier procedure under the Health Insurance Portability and Accountability Act of 1996 (HIPAA). The rule proposes standardizing health plans’ unique identifiers length and format simplifying processes used by providers (hospitals, physicians, etc.) and commercial health insurers. Estimated savings are $4.6 billion over ten years.

Notably, the rule also delays by one year implementation of the International Classification of Diseases, Tenth Revision (ICD-10) codes for procedures and diagnoses from October 1, 2013 to October 1, 2014.

Background: health plans and unities currently use a range of identifiers that can vary in length and form which can cause transactions to be misrouted and rejected, and increase the difficulty to determine the patient’s eligibility. The American Medical Association (AMA) supports the delay of ICD-10 implementation. The Medical Group Management Association-American College of Medical Practice Executives (MGMA-ACMPE) supports the ICD-10 delay, but requested changes in the certification of the information technology (IT) systems to be “more aggressive,” even though the certification process is voluntary. American Health Information Management Association (AHIMA) has spoken against the delay of ICD-10.

Our take: implementation of ICD-10 is a serious investment of time and resources. The delay allows for appropriate planning and implementation but should not be seen as an excuse to deploy management attention and resources elsewhere. Efforts to implement ICD-10 should begin if not already underway. (For more information about ICD-10 preparedness, contact Deloitte principals, David Biel at dbiel@deloitte.com or Christine Armstrong at cmarmstrong@deloitte.com)

White paper: Medicare costs exceed original estimate by $340 billion

In a 52-page white paper published by the Mercatus Center at George Mason University released last week, Medicare Trustee Charles Blahous claims ACA will add $340-530 billion to federal deficits over the next ten years as a result of the law’s new spending, challenging the methodology used by CBO in its original scoring of the fiscal impact of the law.

“These adverse fiscal effects are not everywhere understood because of widely circulated analyses referencing scoring conventions of the Congressional Budget Office and the Medicare Trustees, which compare the health care reform legislation to a baseline scenario that differs from actual law. Moreover, there is substantial risk that the ACA’s cost-saving provisions will not be enforced as currently specified. To avoid worsening the federal fiscal outlook, legislative corrections are required before the ACA’s provisions become fully effective in 2014. Roughly two-thirds of the law’s subsidies for health insurance exchanges must be eliminated to avoid worsening federal deficits and the entirety of their costs eliminated to avoid further increasing federal health care financing commitments.” –Chuck Blahous, George Mason University Mercatus Center, “The Fiscal Consequences of the Affordable Care Act,” 2012

Background: Medicare is financed in part through a trust fund that receives revenue from payroll taxes. Pre-ACA, the fund was forecasted to be insolvent by 2017 (later updated to 2016). In ACA, $575 billion/ten year savings for Medicare were included, extending the trust fund’s solvency through 2029. In CBO analysis, those savings also offset expansion of Medicaid under the law, as well as new subsidies for uninsured people to purchase coverage through health insurance exchanges.

In 2010, CBO wrote that, absent the Medicare savings, the law would increase deficits by $226 billion through 2019 versus a decrease of $132 billion originally forecast.

The Blahous paper updates the calculation through 2021 subtracting savings that would have come from other provisions of the law: the Community Living Assistance Services and Support (CLASS) Act, a long-term care program that was supposed to have generated as much as $86 billion in new revenue through 2021, and Medicare savings that are subsequently spent for subsidizations of newly insured.

White House Deputy Assistant for Health Policy to President Obama, Jeanne Lambrew challenged the paper calling it “new math” and denied that ACA is double counting any savings. The Office of Management and Budget (OMB) and CBO projected lower federal deficits with ACA than without it.

CMS Innovation Center announces markets for primary care management pilot targeting Medicare, Medicaid enrollee health improvement

Wednesday, the Center for Medicare and Medicaid Innovation (Innovation Center) announced seven markets where it will implement its Comprehensive Primary Care (CPC) Initiative: AR (statewide), CO (statewide), NJ (statewide), NY (Capital District-Hudson Valley Region), OH (Cincinnati-Dayton Region), OK (greater Tulsa Region), and OR (statewide).

In each market, 75 primary care practices will be involved in a multi-payer effort to manage health and reduce costs. These practices will have additional enhanced services: increased care coordination, improved patient access to care, increased interaction with patients and caregivers, and enhanced clinical services for patients with multiple chronic diseases. Practices will be paid a per-member per-month management fee and, in years two through four of the four-year initiative, will be able to share in savings in the Medicare program.

Background: the Centers for Medicare and Medicaid Services (CMS) announced the Comprehensive Primary Care Initiative in late 2011. The goals of the program are to have payers align strategies for supporting comprehensive primary care services, and to test whether these services, coupled with payment reform, meaningful use of health information technology, and data analytics to guide improvement will bring better care and health status while reducing costs.

House Committee requests accounting for ACA implementation funds to IRS

Last week, Congressman Dave Camp (R-MI), Chairman of the House Ways and Means Committee, asked Internal Revenue Service (IRS) Commissioner David Shulman to document the use of funds from the HHS Health Insurance Reform Implementation Fund (HIRIF) and its future plans to use HHS funds for ACA implementation in FY2013. The committee chairman gave the IRS until April 27, 2012 to respond to the request.

Note: in ACA, the IRS is appropriated $1 billion to implement elements of ACA including collecting penalties from the individual mandate. Other agencies to receive money include the U.S. Department of the Treasury (DOT), the Office of Personal Management (OPM), and the U.S. Department of Labor (DOL). The DOL reported receiving $13,157,000 to implement ACA.

Twenty-seven new ACOs announced

Monday, CMS announced, starting this month, 27 new ACOs will participate in the Medicare Shared Savings Program per ACA Section 3022. The selected ACOs include more than 10,000 physicians, ten hospitals, and 13 smaller individual practice associations (IPAs) or medical groups in 18 states—nine in the Northeast, eight in the Southeast, four in western states, three in the Midwest, and three in the South.

Five will be participating in the Advance Payment ACO Model, which provides advanced payment of the expected shared savings to physician-based ACOs serving in a rural population. Two chose the two-sided risk model that penalizes ACOs for not meeting cost and quality measures and has larger bonuses. CMS is currently reviewing over 150 ACO applications for second and third rounds of selection, to be announced July 1, 2012 and January 1, 2013. It is unclear how many ACOs will be accepted in the second round. CMS’s proposed rule originally predicted between 50 and 270 ACOs would participate.

Note: the program allows ACOs to receive monetary rewards when they are able to reduce costs of patients while maintaining the quality of care. ACOs can be made up of all health care providers including physician groups, nurse practitioners, physician assistants, hospitals, and more. A majority are in high-cost regions which are believed to have greater bonus earning capacity as more savings are needed.

Entity Location Medicare population served

Primary sponsor

 

Accountable Care Coalition of Caldwell County, LLC Lenoir, NC  5,000  Hospital
Accountable Care Coalition of Coastal Georgia Ormond, FL (beneficiaries in GA and SC)  8,000 

Physician

 

Accountable Care Coalition of Eastern North Carolina, LLC New Bern, NC 10,000  Physician
Accountable Care Coalition of Greater Athens Georgia Athens, GA 8,500  Physician
Accountable Care Coalition of Mount Kisco, LLC
Mount Kisco, NY
N/A Physician
Accountable Care Coalition of the Mississippi Gulf Coast, LLC Clearwater, FL (beneficiaries in MS) 7,000 Physician
Accountable Care Coalition of the North Country, LLC Canton, NY 5,300 Hospital & Physician
Accountable Care Coalition of Southeast Wisconsin, LLC Milwaukee, WI 10,000
Physician
Accountable Care Coalition of Texas, Inc. Houston, TX 70,000 Hospital & Physician
AHS ACO, LLC Morristown, NJ (beneficiaries in NJ and PA) 50,000  Hospital
AppleCare Medical ACO, LLC Buena Park, CA 8,000 Physician
Arizona Connected Care, LLC Tucson, AZ  7,500 Hospital & Physician
Chinese Community Accountable Care Organization New York, NY 12,000  Physician
CIPA Western New York IPA, doing business as Catholic Medical Partners Buffalo, NY   31,000 Hospital & Physician
Coastal Carolina Quality Care, Inc. New Bern, NC 11,000 Physician
Crystal Run Healthcare ACO, LLC Middletown, NY (beneficiaries in NY and PA)
10,000 Physician
Florida Physicians Trust, LLC Winter Park, FL 16,500 Physician
Hackensack Physician-Hospital Alliance ACO, LLC Hackensack, NJ (beneficiaries in NJ and NY) 11,000 Hospital
Jackson Purchase Medical Associates, PSC
Paducah, KY
6,000 Physician
Jordan Community ACO
Plymouth, MA
6,000 Physician
North Country ACO Littleton, NH (beneficiaries in NH and VT) 6,000 Physician
Optimus Healthcare Partners, LLC Summit, NJ 29,000 Physician
Physicians of Cape Cod ACO Description of Organization Hyannis, MA 5,000 Managed Care
Premier ACO Physician Network Lakewood, CA 12,500 Managed Care
Primary Partners, LLC Clermont, FL 7,500 Physician
RGV ACO Health Providers, LLC Donna, TX 6,000  Physician
West Florida ACO, LLC Trinity, FL 10,000 Physician

 

AHIP seeks flexibility in calculating actuarial values for qualified health plans

On March 30, America’s Health Insurance Plans (AHIP) submitted comments on the HHS actuarial value (AV) bulletin seeking greater flexibility in the defined actuarial values in the four tiers of coverage in ACA. AHIP proposes “de minimis” variation standards of +/- two percentage points. This flexibility would allow the 2 percent standards to be phased in over time: +/- four percentage points in 2014, +/- three percentage points in 2015, and +/- two percentage points in 2016. The flexibility would allow insurers the ability to use cost-sharing metrics and ensure compatibility with the plan levels.

Note: ACA Section 1302 defines the AV for the qualified health care plans. AVs are determined as the percentage of medical expenses paid by the health plan for a standard population. State health plans sold in individual and small group markets can be classified into four tiers of coverage determined by their actuarial value: bronze (60 percent AV), silver (70 percent AV), gold (80 percent AV), and platinum (90 percent AV). With a bronze plan, the health insurance plan pays for 60 percent of the costs, and the enrollee pays for 40 percent of the covered expenses. The HHS Secretary has the authority to determine a reasonable de minimis variation standard for the actuarial values.

Legislative update

CMS releases new health care quality measures for stage of two meaningful use

Monday, CMS released proposed clinical quality measures hospitals and individual eligible providers will select from to earn Stage 2 meaningful use bonus payments, scheduled to begin in 2014. Physicians and other providers must report performance on 12 clinical quality measures out of 125 and must meet one measure from each of the following six areas: patient safety, patient and family engagement, care coordination, population and public health, clinical effectiveness, and the effective use of health care resources.

Hospitals must meet 24 of the 49 measures with one in each of the domains previously listed. Hospital quality measures will be submitted through the Hospital Inpatient Quality Reporting System and physicians will submit through the Physician Quality Report System.

These measures are still being developed and waiting for final endorsement from the National Quality Forum (NQF). Comments will be accepted until May 7, 2012.

Note: NQF is a nonprofit under contract with HHS helping to create the benchmarks towards improving the quality of health care.

IOM report calls for additional tax on medical care to transform sick care system to preventive health

Tuesday, the Institute of Medicine (IOM) released a report recommending federal spending on public health should double from $11.6 billion each year to approximately $24 billion. The report proposes additional funds could be raised through the implementation of a 2 percent transaction tax with the potential to raise $50 billion. Other tax options included taxes on sugary drinks, estates, or life insurance proceeds.

It asks HHS to create new goals for life expectancy and health spending per person and recommends basic public health services be established such as anti-smoking program, testing and vaccinating against communicable diseases, injury prevention, chronic disease screening, and mental health and substance abuse treatments. (Source: Institute of Medicine, “For the Public's Health: Investing in a Healthier Future,” April 2012)

Note: IOM is an independent organization that comprises panels of scientists and other experts to give advice to the federal government and Congress through reports; recommendations are often used to influence federal and Congressional policies.

HHS asked to revise EHB prescription drug coverage standards

Wednesday, HHS Secretary Kathleen Sebelius received a letter from over 100 patient advocacy groups seeking the revision of the EHB prescription drug coverage standards for 2014. Specific requests were made for patients with chronic disease and disabilities. The EHB drug standards mandate only one drug from each class be covered, which is lower than the current government’s existing minimum prescription drug standards and lower than the private insurance market. The groups expressed concern on how drastic variation could occur between states.

Note: EHB was released in December 2011. Approximately 133 million Americans live with chronic diseases and disabilities.

State update

State round-up

  • New York Governor Andrew Cuomo (D) signed a law Thursday to set up a health insurance exchange in the state health department, citing it as a central feature to help the 2.7 million uninsured across the state.
    Note: the state received $85 million in HHS grants to plan the exchange.
  • 20 states have legislation to limit out of pocket payments for specialty pharmaceuticals.
    Note: specialty drugs represent 1 percent of use and 17 percent of spending—an increase of 17.4 percent in 2011 vs. 1.1 percent overall in 2010. 14 percent of employer sponsored enrollees in health plans have four tiered plans vs. 7 percent in 2008 (ACA caps payments at $6,000 for individuals, $12,000 for families).
  • Florida scope of practice law for pharmacists: If signed into law by Governor Rick Scott (R)—which is likely given strong bipartisan support in the legislature—pharmacists will be granted the authority to administer both the shingles (zoster) vaccine and the pneumococcal vaccine. Currently, 46 states and DC permit pharmacists to administer the shingles vaccine, and 47 states and DC allow them to give the pneumococcal vaccine, according to the American Pharmacists Association (APA).
    On March 14, the APA and nine other pharmacy groups sent a letter to the American Academy of Family Physicians (AAFP) objecting to the "simplistic characterization of pharmacists [as] 'dispensing the prescription written by the physician'," wording included in a recent AAFP position paper on pharmacists. In response to such objections and assertions of greater authority, doctors worry that pharmacists are blurring the line between the two professions.
  • Tuesday, Arizona's state House of Representatives passed a bill that bans most abortions after 20 weeks of pregnancy. Six states in the past two years have enacted bans based on medical research suggesting a fetus feels pain starting at 20 weeks of gestation.
  • Maryland Governor Martin O’Malley (D) signed into law the Maryland Health Improvement and Disparities Reduction Act of 2012 that provides tax breaks and incentives for primary care practitioners, community-based organizations, and local health departments to expand and improve access to care in underserved communities designated as Health Enterprise Zones.
  • Massachusetts’ Senate is drafting a bill to transition its health care system from the traditional FFS approach towards one that focuses on preventive and coordinated care. The state has also proposed creation of a trust fund to provide training and job security to aid workers in transitioning from old health care jobs to new ones. The bill is expected to pass in early July. Massachusetts Governor Deval Patrick (D) proposed the state move toward a more global payment system and away from the FFS approach in February 2010.
  • The Minnesota House Majority Leader Matt Dean (R) introduced a bill proposing an amendment to the Minnesota Constitution if ACA is repealed to prohibit any federal, state, or local law from compelling or requiring the purchase of health care and health care coverage by penalty or fine.

Industry news

Study: health costs consume wage increases for most households

RAND Corporation calculated the effect of health care cost growth at the end of the decade on take-home pay for a middle-class family (median-income married couple with two children and employer-sponsored health insurance) concluding that, after health costs were included, the family had $95 more per month than ten years earlier. If health care costs had tracked the consumer price index, a family would have had $5,400 more per year to spend. (Source: Arthur Kellermann, New York Times, “The Real Cost of Healthcare,” March 29, 2012)

Study: avoidable readmission costs hospital 16 percent more per discharge

The Premier analysis was based on 5.8 million incidents in which a patient went back to a hospital to be re-treated costing an additional $8.7 billion a year, or 15.7 percent additional cost per discharge. Patients treated for heart attacks, respiratory problems like pneumonia, and major joint problems are the most likely to be readmitted.

Study: lung cancer screenings benefit high-risk patients

The actuarial analysis study examined lung cancer screenings for smokers between the ages of 50-64 concluding that if the screening had been in place for the past 15 years, 130,000 people under the age of 65 could still be alive today.

Note: lung cancer screenings cost $247 per high-risk member per year/$1 per member, per year. (Source: Bruce Pyenson et al, Health Affairs, “An Actuarial Analysis Shows That Offering Lung Cancer Screening As An Insurance Benefit Would Save Lives At Relatively Low Cost,” April 2012)

D.C. District Court hears oral arguments on graphic tobacco warning labels

Tuesday, the U.S. Court of Appeals for the District of Columbia Circuit heard oral argument on the case that challenges U.S. Food and Drug Administration’s (FDA) graphic tobacco warning labels. In February, D.C. District Judge Richard Leon ruled that the Tobacco Control Act of 2009 infringed on First Amendment rights concluding the FDA designed labels, including images such as disease-ravaged lungs and autopsied cadavers, were geared toward appealing to consumers’ emotions. During the hearings, questions were raised to how far the government could go to warn about the dangers of smoking and if warnings should be applied to other risks such as automobile doors describing car accidents from speeding. If the Tobacco Control Act of 2009 is upheld, the labels would be required on tobacco packs starting this September. The U.S. Justice Department defended the graphic labels as displaying the true risks of smoking.

Note: the law requires color warning labels that cover 50 percent of the cigarette pack front and back panels and the top 20 percent of print advertisements. Previously, the U.S. Appeals Court for the 6th Circuit found these warnings to be constitutional. The Centers for Disease Control and Prevention (CDC) estimate approximately 45 million U.S. adults smoke cigarettes. Cigarette smoking is the lead cause of preventable deaths in the U.S. Cigarette warning labels currently have text warnings by the U.S. Surgeon General, but have not been changed in 25 years in the U.S.

FDA approves end-stage kidney disease program

Last week, FDA announced three new devices used in end-stage renal disease (ESRD) have been approved to participate in the Innovation Pathway program that aims to leverage innovative effective technologies in a cost-effective manner. The following were selected from 32 companies: (1) an implantable Renal Assist Device (iRAD) from University of California, San Francisco; (2) a Wearable Artificial Kidney (WAK) from Blood Purification Technologies Inc., Beverly Hills, CA; and (3) a Hemoaccess Valve System (HVS) from CreatiVasc Medical, Greenville, SC.

Note: ERSD is the loss of kidney function over a period of months or years and more than half a million Americans suffer from ESRD. Medicare covers 75 percent of health care costs for these patients—costing the program $29 billion in 2009.

Quotable

“The “who’s right” of partisan politics gets in the way of what’s right. Our health care system is too important to be a political football. Stable leadership does not remove the input of elected officials. It just makes recruitment of health care leaders to government service and the implementation of sound policy more efficient if you are not playing musical chairs every 18 months.”

Joanne Conroy, MD, Wing of Zock, April 9, 2012

“Accurately measuring costs and outcomes is the single most powerful lever we have today for transforming the economics of health care.”

 —Robert Kaplan and Michael Porter, “How to Solve the Health Care Crisis” Harvard Business Review September 2011

“In fact, leaders of companies that go from good to great start not with ‘where’ but with ‘who.’ They start by getting the right people on the bus, the wrong people off the bus, and the right people in the right seats.”

 —Jim Collins, “Good to Great,” 2001

Fact file

  • Obesity cost studies: Mayo Clinic researchers found that people who are obese pay $1,850/year in health costs above costs for normal weight people and for the morbidly obese, $5,530 a year vs. normal weight. (Source: James Moriarty, Journal of Occupational and Environmental Medicine, “The Effects of Incremental Costs of Smoking and Obesity on Health Care Costs Among Adults: A 7-Year Longitudinal Study,” March 2012)
    A Cornell study found 21 percent of U.S. health costs are obesity-related concluding the differential in annual spending is $2,741. (Source: John Cawley & Chad Meyerhoefer, Journal of Health Economics, “The medical care costs of obesity: An instrumental variables approach,” January 2012)
    And a Gallup study estimates overweight and obese workers cost $153 billion each year to businesses due to lost productivity. Altogether, they miss an extra 450 million days of work each year, compared with people who are not obese or overweight. (Source: Dan Witters & Sangeeta Agrawal, Gallup “Unhealthy U.S. Workers' Absenteeism Costs $153 Billion,” October 2011)
  • Waste in U.S. system: $850 billion each year. (Source: Maggie Fox, Thomson Reuters, “Healthcare system wastes up to $800 billion a year,” October 2009)
  • Health industry job growth: predicted to grow twice as fast as the general economy with an estimated additional 4.2 million jobs by 2020. In 2020, one in nine U.S. jobs will be part of the health care sector.(Source: University of Albany’s Center for Health Workforce Studies, “Health Care Employment Projections: An Analysis of Bureau of Labor Statistics Occupational Projections 2010-2020,” March 2012)
  • Physician self-referral: doctors who self-refer do 72 percent more samples per biopsy testing, than those that send tests out. Doctors who self-refer detect 12 percent more cancers in their patients. (Source: Jean Mitchell, “Urologists’ Self-Referral For Pathology Of Biopsy Specimens Linked To Increased Use And Lower Prostate Cancer Detection,” Health Affairs, April 2012)
  • Nurse bullying: 18-31 percent of nurses report they have been targets of bullying behavior. (Source: American Nurses Association, “New ANA Publication Bullying in the Workplace Addresses a Growing Social, Workplace Problem for Nurses,” April 2012)
  • Child obesity: for the U.S. to reach federal goals for reducing obesity rates, children would need to decrease on average of 64 excess calories each day. (Source: Wang Y, Orleans C, and S. Gortmaker, “Reaching the Healthy People Goals for Reducing Childhood Obesity,” American Journal of Preventive Medicine, April 10, 2012)
    Note: the federal government’s goal is to decrease the obesity rate from 16.2 percent in 2005-2008, to 14.6 percent by 2020.
  • Health costs: price of health care increased 1.8 percent in February, which is the lowest inflation rate since 1998. (Source: Altarum Institute Center for Sustainable Health Spending, “April 2012 Health Sector Economic Indicators Briefs,” April 2012)
  • Physician opinion about ACA: three of five U.S. physicians under age 40 are pessimistic about the future of the U.S. health care system. Almost half (49 percent) cited the ACA as their biggest concern. Only 23 percent of physicians under age 40 viewed the ACA as having a positive impact. (Source: The Physicians Foundation, “Practice Arrangements among Young Physicians, and their Views Regarding the Future of the U.S. Healthcare System,” March 2012)
  • Average lab tests/admission: decreased 53 percent severity adjusted from seven in 1999 to four in 2004 with electronic medical record exchange. (Source: Archives of Internal Medicine, “Bridging the Chasm: Effect of Health Information Exchange on Volume of Laboratory Testing,” March 26, 2012)
    Note: a second study in Health Affairs has opposite findings, concluding that access to electronic records lead to increases the number of lab tests ordered. The difference in the two studies: inclusion of imaging studies Archives of Internal Medicine study did not. (Source: Danny McCormick, et al, Health Affairs, “Giving Office-Based Physicians Electronic Access to Patients’ Prior Imaging and Lab Results Did Not Deter Ordering Of Tests,” March 2012)
  • Labor and delivery: first stage of labor increased by 2.6 hours between the 1960s and 2000s for females giving birth for the first time and 2 hours for females who had previously given birth. C-section rates increased from 3 percent to 12 percent, use of epidural anesthesia (pain killers injected into the spinal fluid) increased from 4 percent to over half of deliveries. (Source: American Journal of Obstetrics and Gynecology, “Induction of Labor in a Contemporary Obstetric Cohort,” March 26, 2012)
National health reform: What now?

 

 

 

National health reform: What now?

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

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