Health Care Reform Memo: February 4, 2013
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
Last October, one year after his death, his biography by Walter Isaacson gained critical acclaim and sparked intense interest in the iconic life of Steve Jobs. The story will be a documentary soon and has all the elements—early childhood challenges, business successes and failures, family pressures, interpersonal intensity, and an insatiable passion for technology-enabled solutions.
I read the book and one theme jumped out: Steve Jobs knew the principle of simplicity—the power of building simple solutions to solve simple problems.
Some believe that the problems of health care are too complex to be solved. I disagree. They’re simple. At approximately $9,000 per capita, our health system is under-performing. No excuses. We spend more than any other country on the planet, but operate a system no one understands, and its costs are threatening our long-term economic survival. There’s plenty of money in the system. That’s not the problem.
Proposed solutions, regrettably, focus more on tweaking the status quo than fixing the problem. Understandably, each health care sector views its role as central to the solution, and all other sectors complicit to the problem. Though controversial, the Affordable Care Act (ACA) provokes cross-sector collaboration between providers and payers and increased transparency about the system’s performance at every level. It’s far from perfect, but in my view, there’s more in it that makes sense than not. But a simple solution is needed. Our surveys show employers1, physicians2, and consumers3 know little about the ACA, but have strong opinions about various elements where they’re attentive…
Employers worry about health care costs and think the ACA does little to contain them.1 The health insurance exchanges (HIXs) might offer an alternative to employer-sponsored coverage, but it’s too soon to know. Meanwhile, the issue is cost and the ACA is not understood to offer a simple solution!
According to our survey, physicians worry about their profession in areas such as clinical autonomy, compensation and prestige. Lacking a fix to the Sustainable Growth Rate (SGR) and medical liability, some physicians reason the ACA falls short of a simple solution.2
And consumers: the vast majority does not know what’s in the ACA or know much about the health system at all. They filter noise about health reform through the lens of personal experiences with the doctors, hospitals, and insurance plans they use, and the products and services they buy in retail and online services. Many consumers don’t understand the simple problems of the health system, much less a range of simple solutions.3
As we enter an important series of discussions about our long-term debt and the costs our kids and grandkids will face if deficits are left unaddressed, we should take advantage of this important moment in time and educate the nation about our health system—how it is structured, how it operates, how it’s regulated, how it generates income, how it impacts jobs, communities and global health, and how it creates value.
Only then can we move from sectarian rhetoric that contributes to confusion to systemic transformation of a system that’s 24 percent of the federal budget, 21 percent of the average state’s budget and 19 percent of discretionary spending in the average household.
We’re nowhere close to finding the simple solution because we have failed to educate our fellow Americans about our health system. It’s that simple.
Paul Keckley, Ph.D., Executive Director, Deloitte Center for Health Solutions
PS – Last week, we released a new piece that focuses on consolidation among health insurance plans—Unlocking value in health plan M&A: Sometimes the deals don’t deliver. This analysis looks at recent transactions among the investor-owned plans—the value created for shareholders and stakeholders from the time of the transaction through three years post deal.
CMS releases final rule on physician payments: increased restrictions, transparency required
Per ACA Section 6002, on February 1, 2013, Centers for Medicare & Medicaid Services (CMS) released a 287 page final rule “National Physician Payment Transparency Program: Open Payments,” requiring manufacturers of drugs, devices, and certain medical supplies to report payments to physicians or teaching hospitals.
The final rule also requires manufacturers and group purchasing organizations (GPOs) to disclose physician ownership or investment interests to CMS and creation of a publicly accessible database documenting all payments or gifts from drug and device companies to doctors and health care organizations.
- Applicable manufacturers: entities operating in the U.S. that either produce or prepare at least one drug, device, biological or medical supply that is covered by Medicare, Medicaid, or Children’s Health Insurance Program (CHIP) and entities under common ownership with applicable manufacturers.
- Applicable GPOs: entities operating in the U.S. that purchase, arrange for, or negotiate the purchase of covered drugs, devices, biologicals, or medical supplies for a group of individuals or entities.
- Teaching hospitals: Medicare law does not define the term “teaching hospital.” For purposes of determining whether a hospital is a “covered recipient” of reportable payments or transfers of value, CMS has defined a “teaching hospital” as any hospital that provides indirect medical education (IME), direct graduate medical education (GME), or psychiatric hospital IME.
Review period: the law requires CMS to provide covered recipients at least 45 days to review and dispute the information related to them that was submitted by applicable manufacturers and applicable GPOs. CMS will notify the covered recipients when the reported information is ready for review.
Penalties for failure to report required information accurately, completely, and timely: violators will be subject to civil monetary penalties (CMPs), capped annually at $150,000 for failure to report, and $1 million for knowing failure to report. In order to facilitate these inspections, applicable manufacturers and applicable GPOs must maintain all records and documents for at least five years from the date the payment or other transfer of value, or ownership or investment interest is published on the website.
Deadlines: data collection will begin August 1, 2013 and the reporting period will run through December 2013. Reported data are due to CMS by March 31, 2014, and CMS said it will release the data on a public website by September 30, 2014.
HHS, IRS issue proposed rules for minimum essential coverage, individual mandate exemptions
Last week, U.S. Health and Human Services (HHS) and the U.S. Internal Revenue Service (IRS) released proposed rules on the provisions in the ACA that require eligible individuals to purchase health insurance coverage (minimum essential coverage) or pay a fine (i.e. the shared responsibility payment aka “individual mandate”).
- IRS proposes that a non-exempt individual must either have minimum essential coverage or pay the shared responsibility payment. Hardship exemptions will be available on a case-by-case basis for individuals who face other unexpected personal or financial circumstances.
- HHS proposes that a HIX be responsible for issuing a certificate of exemption for a hardship (e.g. the cost of purchasing health insurance causes an individual serious deprivation of food, shelter, clothing or other necessities) and religious affiliation. A HIX may also issue a certificate of exemption for individuals who are members of health care sharing ministries, incarcerated individuals, or members of an Indian tribe. The remaining four categories of exemption must be determined by the IRS at the time of tax filing: household income, not being lawfully present, short coverage gaps, and inability to afford coverage.
- Expanded the definition of health insurance coverage that may meet “minimum essential coverage” requirement to include health plans offered by universities.
Note: the types of health insurance that meet “minimum essential coverage” per the ACA includes: coverage under a specified government sponsored program (e.g., Medicare, Medicaid, CHIP, TRICARE, health plans made available to Peace Corps volunteers, etc.), coverage under an eligible employer-sponsored plan, coverage under a health plan offered in the individual market within a State, coverage under a grandfathered health plan, and other health benefits coverage that the Secretary of Health and Human Services recognizes for purposes of section 5000A(f).
Comments will be accepted by the IRS thru April 1, 2013 and by HHS thru March 17, 2013.
HHS proposes expansion of contraception exemption for religious organizations
Friday, HHS released a proposed rule exempting “certain group health plans established or maintained by certain religious employers” from complying with the ACA requirement that contraceptive services be covered at no cost sharing (Section 2713 of the ACA).
- Religious employers: the definition of religious employer was broadened to follow the Internal Revenue Code, which includes churches, houses of worship, and affiliated organizations. Note: previous definition was narrower and included organizations that “had the inculcation of religious values as its purpose; primarily employed persons who share its religious tenets; and primarily served persons who share its religious tenets.”
- Religious organizations: Other non-profit religious organizations are exempt, but employees will still be able to access free contraceptive services through separate individual health insurance policies. To be exempt, a non-profit religious organization must: “oppose providing coverage for some or all of any contraceptive services required to be covered under Section 2713 of the Public Health Service Act, on account of religious objections; be organized as and operate as a nonprofit entity; holds itself out as a religious organization; and self-certifies that it meets these criteria and specifies the contraceptive services for which it objects to providing coverage.”
Note: the proposed rule does not address private employers who object to the contraception provision. It directs that the federal government will credit insurers for providing standalone coverage for contraception services by reducing a user fee that insurers start paying in 2014.
Related: last week, the D.C. District Court dismissed a case challenging the contraception coverage requirement. Reasoning: final regulations had not been released by HHS on this issue and the Court found that the plaintiffs (Catholic Archdiocese of Washington, et al.) did not have standing.
My Take: To date, over 40 cases have been filed in opposition to the ACA requirement to cover contraceptive services. In this proposed rule, it appears HHS is addressing a concern among some religiously affiliated schools and organizations that wished exemption while limiting exemptions otherwise. In so doing, HHS seems to have listened to an understandable concern as it did in extending the initial deadline for states to provide blueprints for their health insurance exchanges last fall and in modification of the Medicare Shared Savings Plan aka Accountable Care Organization rule in 2011. In these instances, two things are clear: HHS is intent on implementing the ACA while being responsive to stakeholders. Implementing the ACA is a difficult aim that may be achievable as a result of the unheralded hard work and long hours by HHS and other federal staff that sometimes goes unnoticed.
IRS clarifies eligibility for HIX subsidies for those whose employer-sponsored coverage is not affordable
Background: if an employer-sponsored plan does not meet the affordability standard for employer-sponsored health insurance coverage, an employee and dependents may be eligible for premium tax credits to purchase coverage on a HIX. “Affordability”, as defined by the ACA, means that an employee’s contribution to health insurance coverage cannot exceed 9.5 percent of the household annual income.
In the “Health Insurance Premium Tax Credit” final rule issued by the IRS last week, the agency clarified that affordable health insurance coverage will be based on what an employee pays for self-coverage only, not family-coverage. In other words, the affordability of coverage will not take into consideration the portion of the annual premium the employee must pay for family coverage. Per the Government Accountability Office (GAO), 460,000 uninsured children will be ineligible for the premium tax credit on a HIX. This rule is effective January 1, 2014.
GAO: ACA provides less generous tax credits for certain unemployed workers
About 70 percent of individuals who lost their jobs due to foreign import competition (approx. 460,000) will likely be ineligible for Medicaid or a health insurance premium tax credit to purchase coverage on a HIX, or will receive a tax credit less generous than the Health Coverage Tax Credit (HCTC) they currently qualify for.
- 23 percent of individuals receiving a HCTC will likely be eligible for health insurance premium tax credits under the ACA.
- 28 percent of all HCTC participants will likely be eligible for ACA cost-sharing subsidies (depending on whether their state participates in ACA Medicaid eligibility expansion).
Background: the Trade Adjustment Assistance Reform Act of 2002 established the HCTC for certain workers who lost their jobs due to foreign import competition, and certain retirees whose pensions from their former employers were terminated. The Trade Adjustment Assistance Extension Act of 2011 increased the HCTC from 65 percent to 72.5 percent of health plan premiums and also specified that the HCTC program will expire at the end of 2013. The program covered 43,864 participants and 469,168 non participants in 2010. Per section 1401 of the ACA individuals receive a premium tax credit if the cost of purchasing health insurance coverage from a qualified health plan selling coverage on a HIX exceeds a certain percentage of their annual income.
CMS announces bundled payment participants
Thursday, CMS announced that over 450 organizations will participate in the Bundled Payments for Care Improvement initiative.
Background: Per Section 3023 of the ACA, the Bundled Payments for Care Improvement program includes four bundling payment models, varied by the types of health care providers involved and the services included in the bundle. Provider organizations agree to provide CMS a discount from expected payments for the episode of care, and then the provider partners will work together to reduce readmissions, duplicative care, and complications to lower costs through improvement.
Thirty-two awardees were announced for Model 1, where awardees agree to provide a standard discount to Medicare from the typical Part A hospital inpatient payments and hospitals and providers are able to share savings from their care-redesign strategies. In coming weeks, CMS will announce a second opportunity for providers to participate in Model 1 starting in early 2014. Models 2 and 3 feature a retrospective bundled-payment arrangement where expenditures are settled against a target price for an episode of care, while Model 4 involves a prospective bundled-payment arrangement in which a provider receives a lump sum payment for the entire episode of care. In each of these models, participants can choose up to 48 clinical episodes of care to test.
Immigration reform takes center stage
On January 28, 2013 a bipartisan proposal for comprehensive immigration reform was introduced by eight Senators featuring increased background checks, border security and a pathway to citizenship for the estimated 11 million illegal immigrants in the U.S. The proposal seeks legislative action in four areas:
- Create a tough, but fair path to citizenship for illegal immigrants currently living in the U.S. that is contingent upon securing our borders.
- Reform our legal immigration system to better recognize the importance of characteristics that will help build the American economy, and strengthen American families.
- Create an effective employment verification system that will prevent identity theft, and end the hiring of future unauthorized workers.
- Establish an improved process for admitting future workers to serve our nation's workforce needs, while simultaneously protecting all workers.
On January 29, 2013 in a speech in Nevada, President Obama outlined his immigration reform policy, differing with the Senators’ proposal on one element: that the pathway to citizenship should not be contingent on other elements of a comprehensive immigration reform legislative package. And in a fact sheet released the day of his speech, the White House clarified that undocumented immigrants will be ineligible for federal benefits enacted by the ACA, stating: “consistent with current law, people with provisional legal status will not be eligible for welfare or other federal benefits, including subsidies or tax credits under the new health care law.”
Background: Per the U.S. Bureau of the Census, currently 37.6 million (12 percent of the U.S. population) foreign-born persons live in the U.S.; 16 million are naturalized U.S. citizens, 21.6 million are noncitizens (defined as anyone who is not a citizen or national of the U.S.—either temporarily or permanently, and either lawfully present or present without authorization). Per the Pew Hispanic Center and the Congressional Research Service (2011), 11.2 million are estimated to be unauthorized (illegal) noncitizens.
Costs: Though timeliness and methodologies vary, health costs are significantly lower for noncitizens compared to other groups in the U.S.
- Annual noncitizens costs: $1,904 vs. citizens, $3,723 (2006)
(Source: Stimpson, Jim P., Fernando A. Wilson, and Karl Eschbach. “Trends in Health Care Spending for Immigrants in the United States.” Health Affairs 2010; 29(3): 544–50)
- Recently arrived immigrants annual costs: $1,401 vs. U.S. born: $3,499 and are estimated to be responsible for 1 percent of the amount spent by federal, state, and local governments for health care, although they constitute 5 percent of the adult population. In 2006 and 2007, U.S. hospitals, emergency physicians, and ambulance companies documented providing an average of $221 million per year of uncompensated emergency care for undocumented aliens under a special federal reimbursement program called Section 1011, which equals about 0.03 percent of total American hospital expenditures.
(Sources: Leighton Ku, “Health Insurance Coverage and Medical Expenditures of Immigrants and Native-Born Citizens in the United States,” American Journal of Public Health, 9 No. 7 (2009): 1322–1328; US Department of Education; Alnso and Rothstein 2010) and CATO Institute, “Immigration and the Welfare State,” January 12, 2012)
- The up-front fiscal cost of the immigrants is not because they consume more government services than the native born but because they pay less taxes. The most striking difference between immigrants and natives is not in benefits received, but rather in taxes paid. Because immigrants on average have less education, at each age they earn less and pay substantially lower taxes, of all kinds and to all levels of government.
(Source: CATO Institute, “Immigration and the Welfare State,” January 12, 2012)
- Insurance status: from 2011 American Community Survey, analyzed by the Pew Hispanic Center: 47.4 percent of noncitizens lacked any type of health insurance vs. 12.7 percent native-born population and 16.6 percent of the naturalized population. Noncitizens have the lowest rate of private insurance coverage (35.3 percent) vs. native-born citizens (55.5 percent) and naturalized citizens (53.1 percent). Per the Congressional Research Service (March 2010): of noncitizens without insurance coverage, 60.7 percent have income at or below 133 percent of the federal poverty level.
My take: The health cost burden of illegal immigrants appears modest contrasted to costs for the education of their children in public schools. These costs are currently passed via cost-shifting by providers to employers and individuals and in state and federal funding for public health programs. A level of care is being provided and costs are being absorbed by the system. Immigration reform that allows illegal immigrants to access the system as part of a coordinated care model (a medical home) would seem an appropriate mechanism to control systemic long-term health costs while encouraging preventive health. Like many population groups, the expansion of coverage through a medical home model where an ongoing primary care relationship is central would seem an important part of the national immigration discussion.
Debt ceiling suspended until May
On January 31, 2013 by a 64-34 vote, the Senate passed H.R. 325, which raises the debt ceiling until May 2013, but requires that Congress pass a budget by April 15. The House passed a similar measure on January 23, 2013.
Senate Finance Committee compiles recommendations to reduce waste, fraud, and abuse
Last week, the Senate Finance Committee released a compilation of recommendations from 160 health care stakeholders on strategies to reduce waste, fraud, and abuse in Medicare and Medicaid programs.
- Increase federal funding of state Medicaid anti-fraud activities;
- Eliminate duplication and redundancy in Federal and state Medicare/Medicaid anti-fraud programs (both specific programs and generally);
- Change certain Medicare payment policies that, through disparate pricing issues, lead to fraud, waste and abuse;
- Ensure that provider enrollment policies are consistent and utilized effectively;
- Require CMS to use existing statutory authorities (e.g., moratorium, mandatory compliance programs) that they have yet to utilize;
- Clarify the circumstances in which use of care and the setting for care are appropriate such as when it is appropriate to use inpatient care versus outpatient;
- Make numerous process changes to how the various CMS audit contractors operate to ensure they are doing so efficiently and effectively;
- Balance the incentives for Medicare contractors to identify overpayments with penalties for contractors whose findings are overturned on appeal through the CMS administrative process; and
- Create an advisory panel to provide clinical input as a component of contractor oversight.
House Democrats seek protections against employer discrimination in wellness program due to pre-existing conditions
Last week, House Democrats sent a letter to HHS, U.S. Department of Treasury, and U.S. Department of Labor expressing concern about possible discrimination by employers as the November 2012 proposed rule about wellness programs is implemented. In ACA, two types of programs are referenced: “participatory wellness programs” (e.g., offering incentives to reward health behaviors) and “health contingent wellness programs” (e.g., programs that allow varying financial or other awards based on health status). The House Democrats believe the “health contingent wellness programs” might open the door for employers to discriminate on the basis of pre-existing conditions, which the ACA prohibits. The letter requests HHS make available all the research on effective and ineffective wellness programs on its website.
Background: per Section 4303 of the ACA, HHS must “provide employers with technical assistance, consultation, tools, and other resources in evaluating employer-based wellness programs and build evaluation capacity among workplace staff by training employers on how to evaluate these programs and ensure evaluation resources, technical assistance, and consultation are available to workplace staff as needed through such mechanisms as web portals, call centers, or other means.”
(Source: Letter to HHS Secretary Sebelius, Secretary of the Treasury Timothy Geithner, and Acting Secretary of Labor, Seth Harris, January 25, 2013)
Survey: most states need to take legislative action to comply with ACA health insurance market reforms
Per the Commonwealth Fund survey, 49 states and D.C. have not taken regulatory or legislative action on the majority of the ACA’s health insurance market reforms including guaranteed issue, waiting periods, rating requirements, pre-existing condition exclusions, essential health benefits, out-of-pocket costs, actuarial values and others.
- One state took legislative or regulatory action on all seven insurance market reforms examined (CT)
- Ten states and D.C. took regulatory or legislative action on at least one of the seven insurance market reforms examined (CA, OR, WA, UT, AR, MD, NY, VT, ME, RI)
- Eight states had the authority to implement the market reforms enacted by the ACA prior to 2010; 11 states have passed laws to allow state officials to issue regulations on the provisions enacted by the ACA, but four of the states have yet to take specific regulatory or legislative action on the market reforms examined (ND, IA, HI, NC, NH); 22 states said their authority could be limited; ten states did not participate in the survey. Note: D.C. is counted as a state.
(Source: Commonwealth Fund, “Implementing the Affordable Care Act: State Action on 2014 Market Reforms,” February 2013)
Health exchange update
States that do not plan to operate their own exchange must submit their plans to operate a state-partnership exchange by February 15, 2013 or default to a federally-facilitated exchange. To date, 18 states—12 led by Democratic Governors, five led by Republicans and one Independent—and the Democratic mayor of D.C. have announced plans to operate state-based exchanges:
|State-based exchange||State-partnership exchange||Undecided/Federally-facilitated exchange|
|CA, CO, CT, DC, HI, ID, KY, MA, MD, MN, MS, NM, NV, NY, OR, RI, UT, VT, WA||AR, DE, IA, IL, MI, NC, WV||AK, AL, AZ, FL, GA, IN, LA, KS, ME, MO, MT, ND, NE, NH, NJ, OH, OK, PA, SC, SD, TN, TX, VA, WI, WY|
Note: updated as of January 4, 2012.
My take: No one at this point knows how many will be covered through the HIX. Our analysis (below) running to 2021 suggest between 23 and 69 million might purchase through their state exchange IF circumstances around lower than expected Medicaid expansion, higher than anticipated health cost inflation, the impact of the individual mandate encourages purchasing of coverage and large numbers of employers drop coverage. But the fact is that it’s too soon to know. That’s why our actuaries build scenarios instead of offering a specific target: the fact is— no one knows for sure.
Health insurance coverage scenarios: 2012-2021
|A — “Intended results”: Baseline||D2 — Employer penalty tripled (from $2,000 to $6,000)|
|B1 — 5% of large and 10% of small employers drop coverage||D3 — Combination of D1 and D2 with exchanges and mandates delayed until 2016|
|B2 — 10% of large and 25% of small employers drop coverage||E1 — Six states (FL, LA, MS, SC, TX and WI) reject Medicaid expansion|
|B3 — 25% of large and 50% of small employers drop coverage||E2 — Twenty-nine states reject Medicaid expansion|
|C — Individual mandate repealed||F1 — National Health Expenditures growth averages 4.5% per year through 2021|
|D1 — Individual penalty tripled (from 1% to 3% of income) and faster phase-in (from 3 years to 2)||F2 — National Health Expenditures growth averages 8.5% per year through 2021|
|Health insurance market segment||Enrollment (in millions)|
|2021 projections under scenarios A – F|
|Employer-sponsored: Group excluding SHOP||138||127||115||86||136||139||146||147||138||140||139||134||86-147|
|Individual excluding HIX||6||7||9||13||5||6||5||5||6||6||6||6||5-13|
(Source: Deloitte Center for Health Solutions, “Impact of Health Care Reform on Insurance Coverage: Projection Scenarios Over 10 Years – Update 2012”)
Medicaid expansion update
19 states and D.C. have said they will expand their Medicaid programs; 14 states have indicated they are highly unlikely to expand their program:
|Announced expansion||Not participating or highly unlikely to participate||Undecided or undeclared|
|AR, AZ, CA, CO, CT, DE, DC, HI, IL, MD, MA, MN, MO, NM, ND, NV, OR, RI, VT, WA||AL, GA, ID, IA, LA, ME, MS, NE, OK, SC, SD, TX, UT, VA||AK, IN, KS, KY, MI, MT, OH, PA, NC, NH, NJ, NY, TN, WI, WV, FL, WY|
(Source: Politico Pro, Medicaid Watch, January 18, 2013; Advisory Board, “Where the states stand,” January 15, 2013.)
Note: states do not have a deadline to make a decision on Medicaid expansion and may opt in or out of participation at any time. This chart was compiled using publically available information (as of January 10, 2013) and is subject to change.
- In his first State-of-the-State address on Wednesday, Montana Gov. Steve Bullock (D) encouraged lawmakers to pass legislation allowing for the expansion of the state’s Medicaid program—expected to cover an additional 70,000 low-income Montanans.
- Tennessee Governor Bill Haslam, in his State of the State address last week, indicated he is undecided about Medicaid expansion—requires further study about the long-term economic impact on the state.
- Georgia legislators are evaluating a bill that would charge a task force with the development of a plan to address the state’s Alzheimer’s population, estimated at 120,000 patients.
- Kansas lawmakers introduced a bill that would license mid-level dental technicians. At least 57,000 Kansans live in “dental deserts”— areas where dental care is not available within a 30-minute drive.
- 950 of the pharmacies licensed in Florida partake in “sterile compounding,” according to a new report. The state’s Board of Pharmacy will hear recommendations this week on how to promote and enforce safe practices.
HHS launches new web site for employers
Last week, the U.S. Small Business Administration (SBA) unveiled a new website to help small business owners understand ACA provisions, employer’s shared responsibility requirements, and prepare owners for implementation timelines.
The Deloitte 2012 U.S. Survey of Employers found that four in ten mid-sized and larger firms feel “well-prepared” to implement the provisions of the ACA whereas only one fourth of the smallest firms feel this way. Employer familiarity with the individual mandate was the highest (72 percent) among ACA provisions, followed by employer penalties for not offering benefits (66 percent), essential health benefits (53 percent), and health insurance exchanges (45 percent) were also familiar to many employers.
AMGA membership increases
The American Medical Group Association (AMGA) reported that its membership grew 12 percent in 2012 adding 51 new groups representing 13,600 physicians. Its total membership is now 430 medical groups, each averaging 302 full-time physicians (median 140), and representing 130,000 physicians who treat 120 million patients, according to its 2012 Report to Members.
CMS: meaningful use payments $10.7 billion
Last Friday, CMS provided updated data about its meaningful use funding as of December 2012:
- Hospital payments: $10.7 billion to 190,000 hospitals, office-based physicians and other “eligible professionals” vs. $9.3 billion, and 176,561 in November.
- 4,224 hospitals are registered for the incentive programs offered under Medicare, Medicaid or both, up nearly 1 percent from 4,193 in November; and 350,844 physicians and other eligible professionals are registered under either Medicare or Medicaid, up 4.5 percent from 335,879 in November.
Applications for multi-state HIX plans being accepted
Last week, the Office of Personnel Management (OPM) released the final application for health insurance issuers to participate in the Multi-State Plan Program (MSPP). Health plans that intend to be an MSPP issuer on HIXs are required to submit a Notice of Intent to Apply to the OPM, prior to submitting an application through OPM web-based MSPP The Application Portal started accepting applications last Friday.
Background: per Section 1334 of the ACA, OPM is required to enter into contracts with private health insurance issuers to provide at least two multi-State plans to be offered on HIXs beginning in 2014. An MSPP issuer may phase in the States in which it offers coverage over four years, but it must offer plans in all states and D.C. by its fourth year of MSPP participation.
CareerBuilder: health care to hire more but skilled talent a challenge
The CareerBuilder annual survey found that 22 percent of health care companies plan to add full-time, permanent health care employees in 2013—a 3 percent increase form 2012, and 23 percent say they have open positions for which they have not found qualified talent. Last week, CareerBuilder announced a new health care division to help organizations recruit the proper staff to fill the future demand for highly qualified employees.
Note: according to the U.S. Bureau of Labor Statistics 13 percent of all U.S. jobs are in the health care industry, and the industry will add 5.6 million jobs from 2010 to 2020, the biggest increase of any industry.
Compounding oversight records sought
On January 1, 2013, the House Energy and Commerce Committee Republicans sent a letter to Food and Drug Administration (FDA) Commissioner Margaret Hamburg requesting agency records related to the meningitis outbreak linked to the New England Compounding Center (NECC) by February 25, 2013. The legislators are concerned the FDA has not turned over any records from 2002 to 2006, when the agency conducted three inspections of the NECC facility and documented concerns, but did not pursue further enforcement.
New industry and peer-reviewed studies of note to health system transformers…
Unlocking value in health plan M&A Sometimes the deals don’t deliver
Objective: to analyze the financial performance aka “value” created in publicly traded health insurance companies before and after acquisition/merger.
Methodology: 44 transactions involving asset merger/acquisition from 2008-2010 were examined to determine pre and post deal financial impact. Publicly reported financial metrics were compiled for each transaction in three time frames: one year prior, on the date of the announcement, and three years post transaction.
Key findings: Health plan consolidation leads to value created at the time of the transaction and shortly thereafter, but long term results vary widely depending on post-deal integration of operations and execution of the company’s strategy.
Unlocking financial value from such deals can be a 50-50 proposition at best.
- Fewer than half of studied transactions actually led to sustained improvements in comparative market value three years after the deal closed.
- After three years the range of outcomes had shifted downward compared to year one, ranging from a 42 percent gain to a 93 percent loss.
Change in price per share vs. health plan index at one and three years following merger announcement
(Source: Deloitte Center for Health Solutions, Unlocking value in health plan M&A: Sometimes the deals don’t deliver—January 29, 2013
My take: The key to sustainability in this industry is scalability. As a result of its cost pressures, consolidation will accelerate within sectors and across sectors. But the success of these is not guaranteed unless a long-range plan is designed and executed that maximizes innovation, growth and efficiency gains. Accelerated consolidation is inevitable but long term success is not assured. Doing a deal is not the end game: creating value is the goal.
Comparing ACA and state level reporting requirements for charitable hospitals
Objective: to determine how ACA Schedule H reporting requirements compare to existing state laws related to measuring and reporting community benefit of non-profit hospitals.
Methodology: according to the report, the authors examined laws and regulations in states categorized by the Catholic Health Association and The Hilltop Institute as having “mandatory” reporting requirements. The authors looked only at states with mandatory reporting systems since they would readily compare in purpose and structure to Schedule H. They collected statutory language through legal database searches, and reporting forms and instructions from state agency websites and focused on three questions that arise from the basic attributes of Schedule H: 1) whether public reporting is required; 2) whether terminology is clear and consistent with the definitions found in Schedule H; and 3) whether state reporting requirements capture information about community health improvement and community building, two types of activities that transcend the narrower class of community benefit activities focusing on financial assistance and reflect the broader role for hospitals in improving community health that is anticipated in the ACA’s CHNA provisions.
Key findings: state laws lack the clarity of the IRS approach in terms of how community benefit is defined, categorized and reported. In contrast to Schedule H, state laws tend to be broadly drawn, with considerable variability in terms, less delineation among bad debt and financial assistance, and variability in treatment of community health improvement and community building. Discounted care for community residents lies at the heart of the concept of community benefit. However, it is clear that compared to state law, Schedule H more precisely distinguishes between the types of discounted care that can be considered true community benefits – financial assistance and Medicaid participation – and those activities that simply are business losses to a hospital, such as Medicare shortfalls or bad debt. The findings raise the question of whether states should retain their own reporting systems or more explicitly rely on Schedule H. A state may wish to maintain separate reporting obligations as an essential element of state tax policy. If so, it might consider a Schedule H filing as deemed compliance with its own reporting requirements. A state might also retain its own reporting laws to assure that the data are analyzed, aggregated, and reported to policymakers and the public. Such reports will be particularly valuable as CHNA and implementation strategy activities move forward. Whatever states decide, Schedule H is an essential and invaluable tool for federal and state governments to measure hospital performance in relation to their obligations as tax-exempt institutions, as well as to benchmark hospitals on a state, regional and nationwide basis.
(Source: Rosenbaum, Sara; Byrnes, Maureen; and Rieke, Amber M. (2013) "Hospital Tax-Exempt Policy: A Comparison of Schedule H and State Community Benefit Reporting Systems, “Frontiers in Public Health Services and Systems Research: Vol. 2: No. 1, Article 3)
My take: ACA places enormous responsibility on states and on the federal government to provide support especially in concert with existing federal laws. In this case, Schedule H may provide states an easier way to assess community benefits and reduce variation in how it is defined and measured. And the topic of community benefit will be increasingly relevant as efforts to reduce health costs intensify.
Cost-conscious behavior may not result in a larger savings for HSAs and HRAs
Objective: to determine if the average account balance of individuals with health reimbursement arrangements (HRA) and health savings account (HSA) accounts increases over time.
Methodology: examines HSA and HRA assets, account balances, and rollover amounts, using data from the 2012 EBRI/MGA Consumer Engagement in Health Care Survey (CEHCS). It then examines differences and trends in account balances by demographics, income, contribution levels, and engagement in an individual’s own health care using a regression equation.
- Accounts and asset growth: in 2012 11.6 million HSAs and HRA contained $17.8 billion —up from 1.3 million accounts containing $873.4 million in assets in 2006, and 8.5 million accounts with $12.4 billion in assets in 2011.
- Account balances: increased 4 percent in 2012—a slower growth than the 9 percent increase from 2010 to 2011.
- Healthy behaviors: individuals who smoke have more money in their accounts than those who do not smoke. In contrast, obese individuals have less money in their account than the non-obese. Almost no relationship was found between either account balance or rollover amounts and various cost-conscious behaviors.
(Source: Health Savings Accounts and Health Reimbursement Arrangements: Assets, Account Balances, and Rollovers, 2006–2012, January 2013 EBRI Issue Brief #382)
My take: increased use of HRAs and HSAs in managing household health costs is an important trend, especially since private health exchanges might be an important channel fueling their growth.
“Today, the administration is taking the next step in providing women across the nation with coverage of recommended preventive care at no cost, while respecting religious concerns.”
— HHS Secretary Kathleen Sebelius in a press statement, released February 1, 2013
“Because they tend to arrive at the beginning of their working years, immigrants have a modestly positive effect on federal retirement programs such as Social Security. Immigrants slow the decline in the ratio of workers per retiree and prolong the actuarial solvency of Social Security and Medicaid.”
— CATO Institute, “Immigration and the Welfare State,” January 12, 2012
- Veteran suicide rates: 22 veterans commit suicide daily—a 22 percent increase from 2007 (Source: U.S. Department of Veterans Affairs)
- State revenues: sales taxes account for 31 percent of state funding, personal and corporate taxes 42 percent (Source: National Conference of State Legislatures)
- Retirement savings: 67 percent of workers say they’re behind their savings plan for retirement; 66 percent say they are saving for retirement; 80 percent have less than $100,000 in retirement funds; 71 percent say they would prefer delaying the age of Social Security eligibility to get higher payments (Source: Fidelity Investments, Employee Benefit Research Institute)
- Poll—Impact of Health reform: 54 percent expect the health care law to raise costs — up from 48 percent in December; just over seven in 10 expect the law to cost more than the official estimates. Overall 51 percent view the ACA unfavorably vs. 45 percent favorable. (Source: Rasmussen Reports)
- Retail pharmacy networks: narrow pharmacy networks will save $115 billion (5-10 percent) over 10 years in prescription drug spending if tailored to avoid Medicare pharmacy access standards that require “any willing provider” for the approximately 61,000 retail pharmacies. (Source: Pharmaceutical Care Management Association conducted by Visante)
- Health technology companies: Of 2,100 health technology companies, 500 offer self-help applications—a 20 percent increase in venture capital funding with $539 million invested in direct-to-consumer applications January to September, 2012. (Source: Milt Freudenheim, More Using Electronics to Track Their Health, New York Times, January 27, 2013)
- Health savings accounts and health reimbursement funding: the average account balance of health reimbursement accounts (HRAs) and health savings accounts (HSAs) flattened in 2008 and 2009, dropped in 2010 and increased in 2011 and 2012: In 2011, the average account balance was $1,470 — a 9 percentincrease vs. 2010, and in 2012, the average balance was $1,534 up 4 percent vs. 2011; in 2012, the money in HSAs and HRAs totaled about $17.8 billion across 11.6 million accounts. (Source: Employee Benefit Research Institute)
- Employment: 157,000 new jobs in January; health care (+23,000): ambulatory health care services (+28,000) – this gain was partially offset by a loss of 8,000 jobs in nursing and residential care facilities. 2012-2013 total health care employment growth: 320,000. For 2012, healthcare employment totaled 17.2 million, third behind only to professional and business services at 18.1 million jobs and government employment at 21.9 million. (Source: Bureau of Labor Statistics)
- Medicare Recovery Audit Contractor (RACs): $744.8 million in Medicare overpayments recovered in first quarter of fiscal year 2013. (Source: FierceHealthFinance, “RACs recoup $745M in overpayments,” January 28, 2013)
- H1N1 influenza: minimum of 20 percent people globally and 46 percent of children infected with H1N1 influenza (swine flu) during 2009; mortality was 0.02 percent. (Source: Van Kerkhove, et. al, “Estimating age-specific cumulative incidence for the 2009 influenza pandemic: a meta-analysis of A(H1N1)pdm09 serological studies from 19 countries,” Influenza and Other Respiratory Viruses, January 2013)
- Senior-living center occupancy: 89.1 percent occupancy for 2012 fourth quarter, up 1 percent from 2011. (Source: National Investment Center for the Seniors Housing & Care Industry)
- Health indicators: 69 percent of U.S. adults track at least one health indicator such as weight, diet, exercise, routine, or symptom. (Source: Pew Research Center, 7 in 10 adults track health indicators, January 29, 2013)
- Employer-sponsored health care (ESHC): 12.8 percent of Americans with ESHC switched plans in 2010; less than 3 percent switched citing reasons such as lower cost or better care. (Source: PoliticoPro, “Study: few switch health plans to save money,” January 31, 2013)
- Economic growth: 0.1 percent decrease in U.S. real GDP in fourth quarter of 2012. (Source: U.S. Bureau of Economic Analysis)
- Stock performance: in January, S&P 500 gained 5.1 percent, Dow 5.8 percent, NASDAQ 4.1 percent. (Source: Reuters, “S&P 500 posts biggest monthly gain since October 2011,” January 31, 2013)
- Health IT venture capital: $1.2 billion and 160+ deals in 2012; $480 million and 49 deals in 2011. (Source: Healthcare IT News, “2012 was biggest year yet for HIT VC funding, says Mercom Capital Group,” January 29, 2013)
- Poll—wellness program effectiveness: 62 percent of workers believe workplace wellness activities are successful in improving health and reducing health risks, up from 55 percent in 2011; 51 percent feel wellness benefits encourage them to work harder and perform better, and 59 percent of program participants say they have more energy to be productive at work as a result of their participation in employer-sponsored wellness programs. (Source: Principal Financial "Well-Being Index: American Workers survey conducted online by Harris Interactive, between Oct. 30 and Nov. 7, 2012, among 1,103 employees).
National health reform: What now?
At Deloitte, we continue to explore and debate the key questions facing
Subscribe to the health care reform memo
- Step 1, confirm your sector(s) of interest.
- Step 2, select the health care reform memo as one of your subscriptions.