Health Care Reform Memo: December 12, 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.
From Paul Keckley, Executive Director, Deloitte Center for Health Solutions
When Congress adjourned for the weekend, it had unfinished business—determining whether to extend the payroll tax reduction set to expire at the end of the year, funding federal government operations set to expire December 16, and determining how to avoid the automatic 27.4 percent physician pay cut that kicks in January 1.
No doubt, last minute compromises will be reached to solve the first two; for the physician pay challenge, it’s likely the sustainable growth rate (SGR) formula will not be permanently fixed but a short-term patch approved instead to allay immediate fear of a physician revolt.
Since 2001, physician pay cuts per the SGR have been threatened 11 times, and each time Congress has set aside the SGR to relieve urgent anxiety. I suspect we’ll see a twelfth patch this week.
Why is physician pay such a delicate issue? The reasons are three:
Physicians in the U.S. enjoy considerable trust. Per Deloitte’s consumer surveys 2008-2011, physicians are the most trusted sources of information about medical treatments compared to hospitals, health insurance plans, government sources, and pharmaceutical companies.
The profession has clout. In national health policy debates, the American Medical Association (AMA) is routinely sought for opinion. At the state level, physicians define scope of practice for all other professions. In every hospital, physicians occupy board seats and set rules for credentialing their peers’ privileges.
The compensation of physicians and economics of medicine has been somewhat off limits to the curious. Most assume physicians are highly compensated and rightly so. Per the Bureau of Labor Statistics (BLS), median physician income last year was $170,633 (with median for surgeons at $450,008) versus medians for lawyers ($102,500), nurses ($61,526), police officers ($56,588), and elementary school teachers ($52,796). But these data do not include fringe benefits, earnings from investments in labs, surgical facilities, and imaging facilities to which patients are referred, or other special deals where physicians trade services with others.
But the “new normal” presents unparalled challenges to arguably the most revered of professions. Consider:
Growing tension between primary care clinicians and specialists: a Duke analysis concluded lifetime earnings of primary care physicians (PCPs) are $2.7 million less than specialists. Affordable Care Act (ACA) provisions encouraging medical homes and accountable care buttress the emergent role of PCPs as gatekeepers—a frustration to specialists. And MedPAC’s recommended pay formula fix suggested PCP fees paid by Medicare be frozen for ten years while specialists are cut 5.9 percent per year for three years followed by a seven-year freeze.
Increased pressure to practice in teams and be compensated for results: the shift from fee for service to performance-based payments of “clinically integrated” provider organizations is accelerating. The ACA punctuates the transition via accountable care organizations (ACOs), medical homes, value-based purchasing, avoidable readmissions, episode-based payments, and other efforts. Hanging a shingle in a single specialty or solo setting is no longer an option: indeed, the majority of medical residents see themselves in larger organizations employed as caregivers.
Growing requirements that performance to be transparent: in the ACA, the revised Physician Quality Reporting System (formerly the Physician Quality Reporting Initiative) requires additional reporting. Health insurance plans publish report cards about physicians comparing efficiency, patient satisfaction, and practice patterns. And social media accelerates word of mouth among disgruntled patients. The public’s appetite to know how its doctors perform is on par with its demand for accountability of its teachers and public servants.
Increased demand from consumers for improved service and value: 66 percent of consumers (including 80 percent of those under 40) say they will switch physicians to be able to interact with their physician via online tools for scheduling tests, visits, or obtaining treatment information. Gen Y’ers are less satisfied with the care they receive from the physicians they use than seniors (64 percent vs. 87 percent). 70 percent of visits to clinics in retail pharmacies have an existing PCP relationship. And employers are actively encouraging employees to become activists in dealings with clinicians, providing report cards to compare performance and incentives to choose wisely. Consumers expect to be treated with respect; they are demanding physicians reciprocate with better service, increased humility, and improved access to information via online tools.
The new normal for physicians is daunting. Thankfully, leaders in the profession are alert to these challenges. When the American Association of Medical Colleges (AAMC) makes its fifth revision to the Medical College Admission Test (MCAT) early next year, added emphasis on adaptive skills and reasoning will likely be a focus. The test will be used for the first time in 2015, with the ranks of newly trained entering the workforce in the next decade. And medical school deans have already modified curricula, blending traditional and problem-based learning with increased student exposure to diverse patient settings and circumstances, team-based care coordination, and use of electronic health records and robotics to improve accuracy and effectiveness.
Most physicians espouse that “all health care is local” and in the current era, they’re right. In New York City on Thursday, I was reminded that physicians with academic credentials enjoy considerable clout. In Phoenix on Saturday, I observed unique collaborations between private investors and physicians partners who have carved niches to protect income and autonomy. In Honolulu today, I see that physicians bring unique sensitivities to the art of medicine to accommodate diverse ethnic and socio-economic strata within a universal access system of care.
In the new normal, all health care delivery will be normal, but its rules of engagement for physicians will increasingly supersede local politics and rivalries. Standards of care based on evidence will be the basis for credentialing and performance-assessment; compensation will be based on team-based performance not volume; comparisons of team performance on safety, service, costs and outcomes will be widely and easily available; and concern for costs and shared decision-making with consumers will be standard operating procedures.
Medicine is a noble profession. That will not change. It attracts our best then and now per data from MCAT scores. But old habits fade slowly. “M Deity” is still aspirational for many clinicians. The biggest challenge facing health system reformers may be the necessary, difficult, painful process of transforming the medical profession. Respect for physicians is necessary and appropriate; idol worship and contentment to be ill-informed about one’s health is inappropriate and destructive to a modern health system.
Paul Keckley, Ph.D., Executive Director, Deloitte Center for Health Solutions
CO-OPs final rule published; flexible approach for states encouraged
Thursday, the U.S. Department of Health and Human Services (HHS) released its final rule implementing the Consumer Operated and Oriented Plan (CO-OP) program per ACA Section 1322 that provides loans to consumer-governed, private, nonprofit health insurance issuers to “offer qualified health plans in health insurance exchanges”. The rule specifies that entities must repay CO-OP loans with interest, and loans will only be made to private, nonprofit entities that “demonstrate a high probability of becoming financially viable.” The rule also clarifies that existing health insurers would not be allowed to apply for the federal funds or hold controlling interests in CO-OPs. HHS has received the first round of applications and is expected to award funding early next year. Highlights:
- Loans: entities may apply for Start-up loans to be paid back over five years and Solvency loans to be paid back over 15 years. The Centers for Medicare & Medicaid (CMS) can make loan modifications if it determines that the CO-OP cannot repay the loan due to state reserve requirements, solvency regulations, or requisite surplus note arrangements.
- Governance: CO-OPs must implement policies and procedures to ensure member control of the organization and be governed by a membership-elected board.
- Standards for health plan issuance: at least two-thirds of the policies or contracts for health insurance coverage issued by a CO-OP in each state must be CO-OP qualified health plans offered in the individual and small group markets. Loan recipients must offer a CO-OP qualified health plan at the silver and gold benefit levels per ACA Section 1302 in the geographic markets that they provide coverage.
- Payback and oversight: loan recipients are subject to strict monitoring, audits, and reporting requirements during the loan’s repayment period plus ten years. CO-OPs must meet a series of milestones before drawing down disbursements.
Note: The final rule mirrored closely the interim rule and offered no surprises. A notable feature is the provision that defining what “substantially all” means for purposes of coverage: a CO-OP may treat coverage for a family of four as a “small group” and for purposes of marketing, count three small groups “family policies” toward its quota, and then approach businesses or trade associations as the “fourth”. Only four states—Minnesota, Washington, Idaho and Wisconsin—have CO-OPs with 2.1 million members total; they comprise just over 1 percent of the private insurance market. ACA Section 1322 provided $6 billion for the CO-OP program, but funding has been reduced. The proposed rule estimated that 57 entities could be funded with $3.8 billion.
HHS releases final rule making physician performance data publically available
Monday, CMS released a final rule per ACA Section 10332 making Medicare Parts A, B, and D claims data available to employers, health insurance companies, and consumer groups to produce public reports on the performance of Medicare providers and suppliers. CMS estimates that 25 qualified entities will request data for an average of 2.5 million beneficiaries. CMS made several changes to the final rule in response to industry concerns about the proposed rule. Highlights:
- Eligibility: “Qualified entities” and their contractors must have experience calculating and reporting performance measures and must have access to claims data from other sources to combine with the Medicare data when evaluating performance.
- Measures and public reporting: allows qualified entities to use standard and alternative measures calculated in full or in part from claims data. CMS added measures endorsed by a CMS-approved consensus-based entity to the list of standard measures in addition to measures endorsed by the National Quality Forum (NQF), measures developed pursuant to the Public Health Service Act (per Section 931), and claims-based performance measures adopted through rulemaking used in a current CMS program.
- Data extraction and dissemination: estimates that the average cost for a qualified entity for the first year of the program is $40,000 down from $200,000 in the proposed rule. The rule allows qualified entities to purchase a 5 percent national sample of Medicare claims data to calculate national benchmarks.
- Privacy and security: requires qualified entities to have experience in establishing, maintaining, and monitoring a data privacy and security program, and must submit documentation of rigorous data privacy and security policies. Qualified entities must sign a Data Use Agreement (DUA) with CMS before receiving Medicare data.
- Opportunities to review, appeal, and correct data: requires qualified entities to share measures, measurement methodologies, and measure results confidentially with providers and suppliers at least 60 calendar days before publicly releasing the measures, versus 30 business days in the proposed rule.
PCORI received 856 applications for its Pilot Projects Grants Program
Monday, the Patient-Centered Outcomes Research Institute (PCORI) per ACA Section 6301 announced that it fund 40 projects from 856 applications for its Pilot Projects Grants Program.
HHS awards $14 million in ACA funding to school-based health centers
Thursday, HHS announced it awarded more than $14 million in ACA funding to 45 school-based health centers to expand capacity, modernize infrastructure, and treat an additional 53,000 children in 29 states. The grants are provided through the Health Resources and Services Administration (HRSA) School-Based Health Center Capital Program. ACA Section 4101 provides $200 million in funding from 2010 to 2013 for the School-Based Health Center Capital Program.
HHS to stop paying claims for the Early Retiree Reinsurance Program
Friday, HHS announced that it will deny payments for claims for the Early Retiree Reinsurance Program (ERRP) incurred after December 31, 2011, based on the projected amount of remaining funding. ACA Section 1102 appropriated $5 billion for the temporary program. CMS may announce approval of ERRP reimbursement request for claims occurred after December 31, 2011, if “circumstances related to the availability of ERRP funding change.”
Sequester default means 2 percent cut to Medicare; perhaps more
The failed effort of the Joint Select Committee on Deficit Reduction last month to identify $1.2 trillion in deficit reduction over ten years means the sequester (Plan B) is now operative. Per the Budget Control Act of 2011 (August 2011), cuts in spending of $1.2 trillion starting in 2013 will include a 2 percent cut to Medicare in addition to already budgeted market basket updates and cuts in the Affordable Care Act (see table below).
Note: During the negotiation of the super-committee, Medicare cuts of $300-450 billion over ten years were discussed. Earlier this fall, President Obama proposed $248 billion in Medicare cuts and $72 billion in Medicaid cuts. At 2 percent, the sequester represents a $123 billion cut. So the next round of budget negotiation is likely to include additional cuts to Medicare above 2 percent given previous deliberations on both sides of the aisle.
Status of key ACA provisions which impact Medicare provider payments
|3001||Medicare acute inpatient hospitals value-based purchasing||Links hospital performance on quality measures to Medicare payments. For Fiscal Year (FY) 2013 payment, CMS adopted 13 measures used in the Hospital Inpatient Quality Reporting (IQR) Program to capture clinical care (12 measures) and patient experience (one measure).||
|3002||Physician Quality Reporting System (formerly PQRI)||Establishes payment bonus (1% for 2011, 0.5% for 2012-2014) for physicians who successfully report measures under the PQRS. ACA authorizes payments through calendar year (CY) 2014, with negative payment updates for not reporting starting in 2015 (1.5% for 2015, 2% for 2016 and beyond)||
|3008||Hospital acquired conditions||
Institutes a 1% payment reduction for inpatient hospitals with hospital acquired conditions (HACs) in the top 25th percentile of rates of HACs for high-cost and common conditions.
Note: The Center for Medicare and Medicaid Innovation (Innovation Center) created under ACA Section 3023 will provide up to $500 million for the Partnership for Patients to test different models to reduce HACs.
|3021||Episode-based payments (bundled payments)||
Voluntary National pilot program on payment bundling that must be established by 1/1/2013.
Note: The Innovation Center will test bundled payments through The Bundled Payments for Care Improvement initiative.
|3022||ACO Medicare Shared Savings Program||Allows providers to collectively share risk for improved outcomes, enhanced patient experience and satisfaction, reduced costs, and reduced errors. All ACOs that start in 2012 will have agreement periods ending at the end of 2015. ACOs will report on 33 quality measures.||
|3025||Hospital avoidable readmissions||Reduces Medicare acute inpatient hospital payments for potentially unavoidable readmissions for discharges on or after 10/1/2012 (FY 2013). The three 30-day risk-standardized measures for the program’s first cover: acute myocardial infarction (AMI) or heart attack, heart failure, and pneumonia.||
|3401||Market basket reduction and productivity||Institutes a 0.25% market basket reduction for hospitals and a productivity adjustment into the market basket update for inpatient hospitals, post-acute care, and long-term care providers.||
|3502||Community health teams to support Patient Centered Medical Home||Funds community health teams to support medical homes by increasing access to comprehensive, coordinated, and community based care.||
House Republicans releases temporary physician pay bill; cuts to ACA funding, hospitals proposed to offset cost
Late Friday, the House of Representatives released the 369 page “Middle Class Tax Relief & Job Creation Act of 2011” that includes a two-year physician pay adjustment to avert SGR cuts of 27.4 percent January 1. Reduced payments to hospitals ($22.5 billion) and cuts in ACA funding obligations ($21.4 billion) were included to pay for the SGR and other provisions.
The bill also includes a provision that require wealthier seniors to pay more for their Medicare coverage, a 1 percent physician pay raise in 2012 and 2013 (plus expanded use of “extenders” for rural providers), and a requirement that Medicare study new payment models including those such as bundled payments and value-based purchasing.
Major health care elements of the bill:
|Policy||Background||Impact over 10 years|
|SGR fix||Averts 27.4% payment cut set to begin January 1 and replaces it with 1% payment increase for 2012 and 2013. Directs House Ways and Means, Energy and Commerce, and Finance Committees to study the SGR and solicit feedback from stakeholders.||Cost:
|Ambulance add on payments||Extends add-on payments through December 31, 2012 as follows: 2% for urban and 3% for rural ground ambulance services. Increases the base rate ambulance trips originating in a qualified “super rural” areas (currently calculated at 22.6%).||Cost:
|Outpatient therapy caps||Extend therapy caps exceptions process through December 31, 2013 with certain modifications. Spending caps ($1,880 in 2012) would be extended to hospital outpatient departments (HOPD). Requires HHS to collect data to help reform the therapy caps payment system.||Savings:
|Physician work geographic adjustment||Extends through December 31, 2012 the current floor used to calculate Medicare physician payments that account for the geographic area where a physician practices. The provision would increases physician payment rates in about 54 of the Medicare program’s 89 geographic areas.||Cost:
|Qualified individual program||Extends through December 31, 2012 the qualified individuals (QI) program, which provides federal reimbursement for states for Part B premiums for seniors between 120 and 135% of poverty. Would also reduce capped allotment to states to administer the program from $1 billion in 2011 to $730 million in 2012.||Cost:
|Transitional Medical Assistance||Provide for a one-year extension through December 31, 2012 of Transitional Medical Assistance (TMA) for low income families transitioning into employment. Only those below 185% of the federal poverty level (FPL) would quality for TMA.||Cost:
|Physician-owned hospitals||Allows physician-owned hospitals that were under construction, but did not have Medicare provider numbers as of December 31, 2012, to open and operate under the hospital exception to the Stark antitrust laws. Would relax new requirements that prevent existing-physician-owned hospitals from expanding.||Cost:
|Subsidies for Exchanges||Increases maximum amount of subsidy overpayments that must be paid. The Joint Committee on Taxation estimates that the provision would reduce the number of people receiving Exchanges coverage by about 170,000 in 2021.||Savings:
(Joint Committee on Taxation)
|Prevention and Public Health Fund||Reduces funding to the Prevention and Public Health Fund. ACA Section 4002 provided $17.75 billion for the fund from FY 2012 – FY 2021.||Savings:
|HOPDs E/M payments||Reduces hospital facility fee payment for HOPD evaluation and management (i.e. non-emergency) office visits so that it equals Medicare payments for identical services regardless of what setting it is provided in starting in 2012.||Savings:
|Bad debt payments||Phase down bad debt reimbursements to 55% over three-year period starting in 2013.||Savings:
|Medicaid DSH payments||Rebases Medicaid disproportionate share hospital (DSH) allotments for FY 2021 and determines future allotments for the rebased level using current law methodology.||Savings:
|Medicare Part B premiums||Extend current freeze of the income brackets beyond 2019 until 25% of beneficiaries are paying income-related premiums. Increases the premiums that high-income beneficiaries pay by 15% and reduces initial high-income threshold from $85,000 for singles and $170,000 for couples to $80,000 and $160,000.||Savings:
Bill to require prompt Medicaid payments introduced
Wednesday, Representative Anna G. Eshoo (D-CA) and Brian Bilbray (R-CA) introduced “The Fair Pay to Medicaid Providers Act” to require Medicaid to reimburse all providers, including nursing facilities, hospitals, and community health centers 90 percent of Medicaid claims within 30 days of the date of receipt of the claims, and 99 percent of claims within 90 days of the date of receipt.
Note: the current law only requires prompt Medicaid payment to physicians.
Health exchange update
- 18 states have not passed exchange legislation: Alabama, Alaska, Arizona, Arkansas, Georgia, Indiana, Iowa, Maine, Minnesota, Missouri, Montana, New Hampshire, New Mexico, North Dakota, Oklahoma, Rhode Island, South Carolina, and Texas
Note: Governors in several of these states have used Executive Branch Action (i.e., executive orders) to move forward with exchange planning. For instance, in Minnesota, the Department of Commerce Commissioner, with the support of the Governor, established the Health Insurance Exchange Advisory Task Force to advise on the development and operation of a state exchange.
- Seven states have pending legislation: D.C., Michigan, New Jersey, New York, North Carolina, Pennsylvania, and Wisconsin
- Two states returned early Innovator Grants for health IT for exchanges back to the government: Kansas ($31.5 million returned in August 2011), Oklahoma ($54 million)
- Two states already had health insurance exchanges before the ACA: Utah and Massachusetts
- 13 states have passed legislation establishing an exchange or have passed legislation with the intent to establish an exchange: California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, North Carolina, Oregon, Vermont, Virginia, Washington, West Virginia
Source: Jason Millman, Kate Nocera and Brett Norman, POLITICO Pro Health, Exchange Watch, National Conference of State Legislatures, “State Actions to Implement Health Insurance Exchanges,” Updated November 2011, and National Academy of State Health Policy/Robert Wood Johnson Foundation, “State Exchange enacted legislation and executive orders as of August 31, 2011”
For status of efforts in these states, contact Ellen Rice, Deloitte Center for Health Solutions.
FDA releases user fee program for biosimilars
Monday, the U.S. Food and Drug Administration (FDA) released proposed recommendations for the user fee program for biosimilar biological products for FYs 2013 - 2017 proposing four major fees:
- Biosimilar Product Development Fees (BPD): the BPD fee is for products in development. The initial BPD fee would be due on the date when the manufacturer submits an investigational new drug applications (IND), or within five days after FDA grants a request for a “biosimilar biological product development meeting”. If FDA determines that an IND supports a biosimilar biological product application for a product, each person that has submitted an IND before the date of enactment of the legislation authorizing the biosimilars user fee program would be subject to the initial BPD fee. The initial BDP fee would equal 10 percent of the Prescription Drug User Fee Act (PDUFA) application fee established for that FY. After paying the initial BDP fee, sponsors would pay an annual BPD fee on or before October 1 every year until the sponsor submits the marketing application for the product that is accepted for filing, or until the sponsor discontinues participation in the BPD program for the product.
- Marketing Application Fee: the marketing application fee would equal the application fee under PDUFA, minus the cumulative amount of any BPD fees (including any reactivation fees) paid for the product.
- Establishment Fee and Product Fee: proposes to set biosimilar biological product establishment and product fees equal to the establishment and product fees under PDUFA for any FY. For FY 2012, the PDUFA fees are $520,100 (Establishment) and $98,970 (Product).
Note: FDA states in the proposal that under program the FDA would be required to have available and allocate at least $20 million, adjusted for inflation, in non-user fee money for biosimilars review activities. The Pharmaceutical Research and Manufacturers of America (PhRMA) responded favorably to the proposals. FDA will hold a public meeting on December 16, 2011 to discuss the proposals; registration to attend is open until December 14, 2011. FDA will also accept comments on the proposal until January 6, 2012.
HIPAA privacy and security audits coming in 2012
Last month HHS updated its website with additional information regarding the Office for Civil Rights (OCR) HIPAA Privacy and Security Rule and Breach notification audits (see link below). HHS plans to audit 150 “covered entities” in 2012 per requirements of the American Recovery and Reinvestment Act of 2009 (Section 13411) requiring periodic audits of “covered entities and business associates” re: privacy and security compliance.
Note: This is likely to be “wake up” call to provider organizations since audits of this type are unprecedented since the inception of Health Insurance Portability and Accountability Act of 1996 (HIPAA). HHS has contracted an auditor to assist the Office of the National Coordinator for Health Information Technology (ONC) conduct these audits that began in November. The list of those who will be audited is not, and probably will never be published.
For more information, contact Mark Ford, Deloitte AERS partner.
Supreme Court hears case about patent protection for medical processes
Wednesday, the Supreme Court heard arguments in Mayo vs. Prometheus focused on access to a diagnostic test used to target immune disorders leading to promising bio-therapies. At issue is “patent protection for medical processes”—a construct used by the U.S. Office of Patents to protect the ownership of intellectual property for operational processes used to create medicines. A decision is expected early next year.
“The true rationers are those who impede improvement—who stand in the way of change, and who thereby force choices that we can avoid through better care. It boggles my mind that the same people who cry ‘foul’ about rationing an instant later argue to reduce health care benefits for the needy, to defund crucial programs of care and prevention, and to shift thousands of dollars of annual costs to people—elders, the poor, the disabled—who are least able to bear them. When the 17 million American children who live in poverty cannot get the immunizations and blood tests they need, that is rationing. When disabled Americans lack the help to keep them out of institutions and in their homes and living independently, that is rationing. When tens of thousands of Medicaid beneficiaries are thrown out of coverage, and when millions of seniors are threatened with the withdrawal of preventive care or cannot afford their medications, and when every single one of us lives under the sword of Damocles that, if we get sick, we lose health insurance, that is rationing… If you really want to talk about ‘death panels,’ let’s think about what happens if we cut back programs of needed, life-saving care for Medicaid beneficiaries and other poor people in America. Maybe a real death panel is a group of people who tell health care insurers that it is OK to take insurance away from people because they are sick or are at risk for becoming sick.”
— Don Berwick, former CMS Administrator, Wednesday, December 7 speech in Orlando to the Institute for Health Improvement
“The Secretary of the Department of Health and Human Services is responsible, acting through the FDA Commissioner, for executing the Federal Food, Drug, and Cosmetic Act. Today’s action reflects my conclusion that the data provided as part of the actual use study and the label comprehension study are not sufficient to support making Plan B One-Step available to all girls 16 and younger, without talking to a health care professional. Plan B One-Step will still be available over the counter to women ages 17 and older. Because I do not believe enough data were presented to support the application to make Plan B One-Step available over the counter for all girls of reproductive age, I have directed FDA to issue a complete response letter denying the supplemental new drug application (SNDA) by Teva Women’s Health, Inc.”
— Kathleen Sebelius, HHS Secretary announcing override of the FDA’s approval for Plan B One Step
“Over the next decade, we are likely to see a shift in health insurance in the U.S.: So-called defined-contribution plans will gradually take over the market, shifting the residual risk of incurring high health-care costs from employers to workers The market today is dominated by “defined-benefit” plans, under which companies determine a set of health-insurance benefits that are provided for employees. These will gradually be replaced by defined-contribution plans, under which companies pay a fixed amount, and employees use the money to buy or help pay for insurance they choose themselves. The fundamental driver of this shift is the effort by American businesses to reduce their exposure to health-care costs. But the recent health-care-reform law may accelerate the shift.”
— Peter Orszag, Bloomberg, “Defined Contributions Define Health-Care Future”, December 6, 2011
“The moral test of government is how that government treats those who are in the dawn of life, the children; those who are in the twilight of life, the elderly; and those who are in the shadows of life—the sick, the needy and the handicapped.”
— Hubert H. Humphrey
- Total number of U.S. population with health insurance: 256.2 million in 2010 vs. 255.3 million in 2009; 16.3 percent of U.S. population is uninsured (49.9 million in 2010—up from 49.0 in 2009). (Source: CMS)
- Health price inflation: 1.9 percent in October—a 13-year low. Health spending decreased to 5.2 percent, due to slower growth in hospital, physician services, and nursing home spending. The health spending share of the total economy (18.1 percent), appears to be stabilizing around 18 percent. (Source: Altarum Institute, Center for Sustainable Health Spending, “The Sector Economic Indicators”, December 2011)
- The U.S. health care industry added 17,200 jobs in November, up from the 11,600 jobs added in October. (Source: U.S. Department of Labor, Bureau of Labor Statistics)
- Medicaid spending increased 344 percent from 1990 to 2007 (Standards & Poor’s analysis of CMS National Health Expenditure data, December 2011)
- Profit margins in the skilled nursing facility industry: up 0.75 percent in 2009, net of the impact of an expected 2 percent Medicare sequestration, baseline overall margins would range from 0.64 percent of revenue in 2012 to 2.11 percent in 2021. (Source: The Moran Company, “Assessing the Financial Implications of Alternative Reimbursement Policies for Nursing Facilities”, December 2011 presented to The American Health Care Association)
- About 2.7 million Medicare Part D beneficiaries saved an average of $569 on prescriptions totaling $1.5 billion due to ACA Section 3301, which requires drug manufacturers to provide a 50 percent discount for brand-name drugs and biologics purchased when part D beneficiaries hit the overage gap. (Source: HHS data cited by Kelly Kennedy, USA Today, “Health care law changing behavior”, December 7, 2011)
- Sales for biologics are estimated to reach $100 billion by 2015. The U.S. Federal Trade Commission (FTC) projects that generic biosimilars will cost about 70 percent to 90 percent of the brand-name product. (Source: POLITICO Pro Health, Brett Norman, “Generic biologics on the horizon”, December 5, 2011)
- 15 percent of the global population has a disability; about 25 percent of the global population has a family member with, or works with, someone with a disability. (Source: HHS)
- Data losses and security breaches cost the U.S. healthcare industry about $6.5 billion. Patients’ data losses at health care organizations have increased 32 percent from last year, with about 49 percent of respondents citing lost or stolen computing devices (e.g., laptops, tablets, smartphones). 54 percent of organizations said they have an inadequate budget for security and privacy. (Source: Ponemon Institute, “2011 Benchmark Study on Patient Privacy and Data Security”, December 2011)
- One in three adult patients older (21 and over) does not visit a physician within 30 days after a discharge from a hospital. After 90 days from a discharge, 17.6 percent did not see a physician, nurse practitioner, or physician assistant. (Source: National Institute for Health Care Reform/Center for Studying Health System Change, “Physician Visits After Hospital Discharge: Implications for Reducing Readmissions”, December 2011)
- CMS provided about $920.3 million in Medicare electronic health records (EHR) incentive payments and $916 million in Medicaid EHR incentive payments during this past year. (Source: CMS)
- About three million individuals visit urgent care centers every week. To meet demand, the number of facilities has increased from 8,000 in 2008 to more than 9,200 this year. About 600 urgent centers opened in 2011. (Source: Urgent Care Association of America, cited by Phil Galewitz, Kaiser Health News in USA Today, “Crowded ERs help urgent care centers thrive”, December 8, 2011)
- Between 2010 and 2011, 55 percent of public health departments reduced or eliminated programs. (Source: Nat’l Association of County and City Health Officials)
- The number of young nurses (ages 23-26) entering the workforce increased 62 percent from 2002 to 2009. (Source: David I. Auerbach et al., “Registered Nurse Supply Grows Faster Than Projected Amid Surge In New Entrants Ages 23–26,” Health Affairs, December 2011 vol. 30 no. 12)
- Medical liability costs are $55.6 billion in 2008 dollars—2.4 percent of total health care spending; includes expenses attributed to the practice of defensive medicine, e.g., tests and other treatments to forestall liability problems. (Source: Health Affairs)
- Uninsured patients add $73billion/year to bad debt and pay 12 percent of their bill in full. (Source: HHS)
- 56 percent of health costs are attributable to compensation and benefits for the industry’s 16.4 million employees. (Source: Bipartisan Policy Center Workforce Study with the Deloitte Center for Health Solutions)
- Medicare, Medicaid and Social Security will consume 100 percent of all tax revenues by 2047. (Source: Government Accounting Office)
- $135 billion proposal to extend Medicaid drug rebates to Medicaid beneficiaries would mean a 2-7 percent cut to pharmaceutical company revenues. (Source: Moody's Investors Service)
- 29 percent of U.S. primary care practices offers after-hours care vs. 97 percent in Netherlands, 89 percent in UK; 38 percent of PCPs work with APNs/NPs. (Source: OECD)
- In 1999, pharmacists were able to administer flu shots in 22 states, in 2009, 100,000 pharmacists in all 50 states were authorized; the retail pharmacy market for over the counter diagnostics and vaccinations is $7 billion in 2010. (Source: Cambridge Consultants)
- Generic prescriptions as percent of scripts versus market potential: 63 percent vs. 70 percent in 2006; 67 percent vs. 74 percent in 2007, 72 percent vs. 79 percent in 2008, 74 percent vs. 81 percent in 2009; 78 percent vs. 84 percent in 2010. (Source: IMS Institute for Healthcare Informatics)
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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