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Health Care Reform Memo:
June 4, 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: transforming health care: health reform will continue despite the pending Supreme Court decision

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

In most meetings, the number one question I get is whether the U.S. Supreme Court will repeal the Affordable Care Act (ACA). I answer that ‘no one knows for sure,’ and then carefully caution that health reform will continue regardless of the law’s fate in the Court.

On or before June 28, the Supreme Court will rule on four issues:

  • Is the individual mandate a tax, and therefore the Anti-Injunction Act applicable to ACA? If yes, then the lawsuit against the government is moot until the tax is imposed and individuals harmed.
  • Is the individual mandate a violation of the Commerce Clause of the Constitution representing an over-reach of personal liberty by the Federal government? Is the mandate necessary to an orderly health insurance market, or not?
  • Is the individual mandate separable from the rest of the entire law (ACA) or might the rest of the law stand regardless of the mandate’s fate?
  • Is the law’s requirement that Medicaid eligibility for states be uniform at 133 percent of the federal poverty level a breach of federal authority over states?

Many think the individual mandate might be thrown out, leaving the rest of the law standing—one of five possible scenarios resulting from these rulings. Its rationale: the mandate violates Article I Section 8 of the Constitution that gives the federal government the “power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common [defense] and general welfare of the United States,” and requires that “all duties, imposts and excises…be uniform throughout the United States.” In this scenario, the Court would side with the plaintiffs who affirmed that the mandate represents a breach of individual liberty, representing a slippery slope that could result in federal laws requiring everyone to purchase broccoli.

So here’s my take on the law, and why I think the Court’s rulings are perhaps not the real story:

  1. The ACA is far from perfect. It has “hanging chads” that might have been fixed under normal circumstances, but the politics of health reform from September 2009 to March 2010 were far from normal, so an imperfect law was the result. It’s not the first nor last.
  2. The ACA includes many popular elements that are not new or unique to ACA: most were borrowed from programs already implemented (e.g., bundled payments, medical homes, accountable care, increased transparency, and performance-based payments are predicated on their prior use as federal pilot and demonstration programs). And many of the new elements—requirements that individuals under 19 years of age be insured without consideration of pre-existing conditions, extension of parental insurance coverage to eligible dependents under 26 years of age, reduced paperwork via “administrative simplification,” subsidies to help individuals purchase insurance who otherwise can’t afford coverage, health insurance exchanges, medical loss ratio minimums, special provisions in states for “high risk” pools to care coordination—were borrowed from states. Ironically, the root cause of ACA’s opposition seems more the oversight role of the federal government in implementing/coordinating these efforts than the value associated with the programs themselves. If perhaps approached on an a la carte basis, the debate might not have been intense.
  3. The ACA’s fate is uncertain, but health system transformation is not. The ACA’s proponents say the law seeks to “reduce costs and increase access” by changing the financing and delivery of care. Its opponents believe it does neither appropriately nor effectively. And the harsh rhetoric of partisan politics punctuates both stances. Lost is recognition that the U.S. health system must be transformed. Every American taxpayer and employer is paying directly and indirectly for the health costs associated with 50 million Americans without health insurance coverage. Every American benefits from the research and development efforts in our clinical labs, subsidizing the innovations enjoyed by the rest of the world. Every doctor does tests to avoid being sued, every hospital treats people in the emergency room because they have no other place to go, and every health plan sees an opportunity to reduce cost and improve outcomes if only employers and consumers would limit their use of providers to tighter high-performance networks.

The real debate about health reform, perhaps sparked by the ACA, is how to transform the health system in the U.S. to address its underlying problems: it’s expensive, fragmented, confusing, and cascading out of control. It is highly regulated, capital-intense, and labor-intense (of 69,000 new private sector jobs last month, 33,000 were in health care). And as 7,600 Americans become eligible for Medicare every day and economic recovery looms as our biggest domestic and foreign challenge, fixing the health system and reducing per capita health costs without compromising safety and quality is our domestic tsunami.

So ACA may survive the Court’s rulings intact, or it might be thrown out. It doesn’t matter. Health reform will result, perhaps at a faster pace or in a completely different trajectory if the ACA is not the guiding framework for federal health policy.

So while many will watch DC for the Court’s rulings, some hoping ACA will be thrown out and others hoping for its survival, the real story is the ways and means to fix the broken system. It’s not sustainable. Going back to the status quo is not an option. And the fate of the ACA may or may not be the key.

Paul Keckely

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

P.S. The five scenarios that might result from the court’s rulings are covered in a new Issue Brief available later today: “Watchful preparation: Strategic considerations in anticipation of the Supreme Court’s rulings on the Affordable Care Act”

Implementation update

HHS releases proposed rule on essential health benefits, requires reporting from three largest plans in each state

Friday, the U.S. Department of Health and Human Services (HHS) released a proposed rule to establish data collection standards for essential health benefits (EHBs) of health plans and the process for accrediting entities to certify qualified health plans (QHPs). The rule proposes that issuers of the three largest small group market products in each state be required to report information on covered benefits. HHS also proposes that implementation of accreditation standards occur in two phases—in phase one, the National Committee for Quality Assurance (NCQA) and URAC, an independent nonprofit organization, would be recognized as accrediting entities on an interim basis. In phase two, a criteria-based review process would be adopted through future rulemaking. HHS will accept comments on the proposed rule until July 5, 2012.

Note: Section 1302 of ACA requires the establishment of EHBs to be included in QHPs offered through an exchange. In addition, Section 1201 of ACA requires that after January 1, 2014, health insurance issuers offering non-grandfathered plans in the individual or small group market include EHBs in coverage.

CCIIO releases reinsurance bulletin

The Center for Medicare & Medicaid Services’ (CMS) Center for Consumer Information and Insurance Oversight (CCIIO) issued a bulletin detailing reinsurance payments for individual market issuers operating in states that choose not to operate their own transitional reinsurance program. Notably, the proposal includes:

  • Identifying claims eligible for reinsurance payments:
    • Issuers map their data into a common data format and place it on a server that is owned by the issuer
    • HHS verifies specific claims elements such as Current Procedural Terminology (CPT) codes, place of service, and bill type to ensure valid values exist
  • Reinsurance payment processes:
    • HHS will determine on a quarterly basis issuers’ claims costs that may be eligible for reinsurance payments
    • HHS will pay the remaining portion of reinsurance payment via the annual payment reconciliation at the close of the benefit year
  • Proposed key dates and timeframes:
    • Fall 2012: draft annual HHS Notice of Benefit and Payment Parameters, which includes federal reinsurance parameters.
    • November 16, 2012: deadline for states to submit Exchange Declaration Letter for states that intend to administer their own reinsurance program

Note: CCIIO acknowledges the bulletin is not comprehensive and does not include specific reinsurance fund collection, adjustments, or calculation parameters that will be proposed in the draft annual HHS Notice of Benefit and Payment Parameters. Section 1341 of ACA requires a transitional reinsurance program be established in each state to help stabilize premiums for coverage in the individual market during the years 2014-2016.

HHS, VA announce funding for aging and disability programs in states

Thursday, HHS Secretary Kathleen Sebelius announced the availability of $25 million funding over three years to carry out Aging and Disability Resource Centers (ADRCs) initiatives per ACA Section 2405. The centers will help state agencies coordinate state and federal long-term service and support programs that encourage care in the home or nearby community. The U.S. Department of Veterans Affairs’ (VA) Veterans Health Administration (VHA) will make an additional $27 million available over three years in states with ADRCs through the VHA medical centers.

Medical device excise tax repeal passes in House Ways & Means Committee; committee considers changes to flex and health savings accounts

Thursday, the House Ways and Means Committee voted 23-11 to approve legislation that would repeal the 2.3 percent excise tax on the sale of medical devices under Section 9009 of ACA. Without congressional intervention, the tax would be effective for sales after December 31, 2012. The full House could vote on the measure as early as this week.

The Protect Medical Innovation Act of 2011 (H.R. 436), sponsored by Representative Erik Paulsen (R- MN), carries a ten-year cost of $29 billion per estimates from the Joint Committee on Taxation. The bill as approved in committee is not paid for, but it is anticipated that offsets will be added before it is considered on the House floor. It is likely to win approval in the House with its 230 GOP co-sponsors but might not pass in the Senate where the GOP has 47 members. Ranking member of the Senate Finance Committee Orrin Hatch (R-UT) recently offered a similar proposal as an amendment to the Food and Drug Administration Safety and Innovation Act (S.3187), but the amendment was tabled without receiving a vote. Senate leaders so far have not expressed an interest in taking up Senator Hatch’s proposal as a stand-alone bill.

Note: per ACA Section 9009, a medical device excise tax was imposed on the sale of certain medical devices under Section 4191 of the Internal Revenue Service (IRS) Code. On February 3, 2012, the IRS issued proposed regulations addressing the tax. This provision adds a 2.3 percent tax on medical devices beginning January 1, 2013, intended to raise up to $20 billion in revenues over ten years. Exempt products include exports, components for further manufacture, eyeglasses, contact lenses, hearing aids, and other medical devices generally purchased by the general public at retail for individual use (the “retail exemption”) as prescribed by the Secretary of the U.S. Department of the Treasury.

Thursday, the committee also approved three other health care-related bills that would:

  • Permit distributions of unused amounts (up to $500) remaining at the end of the plan year (or applicable grace period) in a health care flexible spending account (FSA);
  • Repeal the limitation on reimbursement for over-the-counter medications from health care FSAs, health reimbursement arrangements, health savings accounts (HSAs), and Archer medical savings accounts; and
  • Expand HSAs by making targeted changes to the rules governing contributions, distributions, and qualified medical expenses.

These bills are likely to be brought to the House floor separately. None of these proposals cleared the committee with an offset and it is unclear how—or whether—the House will pay for them.

Legislative update

Senator urges indefinite delay of ICD-10 implementation

Tuesday, Senator Tom Coburn, M.D. (R-OK) released a white paper urging CMS to indefinitely delay International Classification of Diseases Tenth Revision (ICD-10) implementation suggesting the current ICD-9 is more efficient than ICD-10 and that the increase in the number of codes will “cause redundancies and unnecessary intricacies.” The report concluded, “The costs of this changeover for hospitals already operating under narrow financial margins will be substantial. The adoption of the codes will, by default, force physicians to devote more time and energy toward coding, which may detract from patient care.”

Note: in April, HHS released a proposed administrative simplification rule (see Monday Memo for April 16, 2012) that would delay by one year implementation of the ICD-10 codes for procedures and diagnoses from October 1, 2013 to October 1, 2014.

Taskforce releases national plan to reduce childhood asthma disparities

Thursday, the President’s Task Force on Environmental Health Risks and Safety Risks to Children released the federal action plan to reduce racial and ethnic asthma disparities. The U.S. Departments of Agriculture, Justice, Transportation, and Housing and Urban Development and the Environmental Protection Agency will collaborate in the effort to:

  • Reduce barriers to the implementation of guidelines-based asthma management
  • Enhance capacity to deliver integrated, comprehensive asthma care to children in communities with racial and ethnic asthma disparities
  • Improve capacity to identify the children most impacted by asthma disparities
  • Accelerate efforts to identify and test interventions that may prevent the onset of asthma among ethnic and racial minority children

Note: minority children are twice as likely to be hospitalized and four times as likely to die from asthma. Per the Centers for Disease Control and Prevention (CDC), the total cost of asthma to the public, in medical costs and lost school and work days, is $56 billion a year.

GOP leaders recommend funding for extension of student loan program—cuts to Prevention fund no longer part of funding

Thursday House Speaker John Boehner (R-OH), Majority Leader Eric Cantor (R-VA), Senate Minority Leader Mitch McConnell (R-KY), and WHIP leader Jon Kyl (R-AZ) wrote a letter to the White House to offer alternatives to cutting the Prevention and Public Health Fund to pay for the student loan bill. The letter proposes the following options to fund a one-year extension of the 3.4 percent interest rate on new Stafford loans:

  • Option 1:
    • Increase employee contributions to the civil service retirement system and federal employee retirement system by 0.4 percent over the next three calendar years—2013, 2014, 2015
  • Option 2:
    • Limit the duration of a borrowers in-school interest subsidy for subsidized Stafford loans to 150 percent of the normal time to complete their program
    • Revise Medicaid provider tax threshold to 3.5 percent of fiscal years (FY) 2015-2017
    • Prevent Social Security overpayments by improving coordination with states

Physician organizations respond to Ways and Means inquiry about meaningful use

Last week, the American Medical Association (AMA), the American Academy of Family Physicians (AAFP), and the American Osteopathic Association (AOA) wrote letters in response to Republican House Ways and Means Committee members’ request for information about the usefulness of “meaningful use” of electronic medical records in the delivery of care. Collectively, the physician groups share concern about the timeliness of Stage Two requirements, interoperability, and retroactive penalties for noncompliance. Excerpts:

AMA response: “Innovative payment models can give physicians the resources and flexibility to re-design care to keep patients healthier, better manage chronic conditions, improve care coordination, reduce duplication of services, and prevent avoidable admissions, and do so in ways that will control costs for the Medicare program.”

AAFP response: “Over time, the percent of fee-for-service payments should be decreased as the case management fee and pay-for-per-performance are increased, thus moving away from a dependence on a system that encourages volume. This blended payment system for medical home teams should facilitate the transformation of practices so that all of the team's participants perform their own unique tasks in a coordinated way."

AOA response: “The AOA does not believe we should entertain legislative proposals that simply ‘fix’ or ‘extend’ the use of the sustainable growth rate (SGR) in the Medicare program. We agree with the Committee’s point of view that this approach is poor policy and further hinders improvements in the program. Furthermore, we believe continuation of short-term and temporary solutions further advances fragmentation in our health care system and escalates the costs of long-term reform. The AOA believes that we should transition to new payment models that advance and support proven delivery models and provide a more consistent and equitable alternative payment structure for physicians.”

State update

Medicaid directors concerned about infrastructure, costs for program overhaul

Last week, the National Medicaid Congress met to discuss the key policy issues surrounding Medicaid and the Children’s Health Insurance Program (CHIP). Highlights:

  • Managed care, specifically dual eligible, is a focus for new medical management models and requires intense attention. Other key programmatic initiatives: integrated care delivery in communities, use of information technology (IT), streamlined eligibility and enrollment systems, expanded use of health homes and medical homes, and accountable care organizations (ACOs).
  • The Supreme Court decision over whether Medicaid expansion is “coercive” and whether the individual mandate and ACA are constitutional will have direct impact on Medicaid and CHIP—states are anxiously awaiting the Court’s ruling.

State round-up

  • Some California hospitals are offering discounts to patients who pay cash for services. One hospital listed on a state website that it charges $4,423 for a CT scan of the abdomen. An insurance carrier in the state negotiated that price down to $2,400, but when asked about the cash price of the service, the hospital charges $250. Although typically the cost through a health insurance provider is the least expensive, consumers are finding loopholes.
  • The Massachusetts House Ways and Means Committee approved an amended bill to control the growth of health care costs creating a new independent entity (non-government organization [NGO]) to set guidelines and monitor compliance with required changes relative to total and per capita costs. The Massachusetts Hospital Association responded to the revised bill with concerns that the “creation of an enlarged state agency funded by providers and the separate imposition of millions of dollars in new taxes on providers—both seemingly in contradiction to the goal of reducing costs on the healthcare system.”
  • The Illinois state Senate passed a bill increasing by $1-per-pack the cigarette tax in order to fund the state’s Medicaid program. The bill also redefines eligibility of not-for-profit hospital tax-exempt status. The state House recently approved the bill and it will now wait signing from the governor.
  • The Florida Nurses Association and American Federation of State, County and Municipal Employees (AFSCME) unions filed a lawsuit against Governor Rick Scott’s (R) plan to privatize health care for correctional facility prisoners, claiming the plan is unconstitutional. The state has hired two out-of-state firms to run the health care system at a total cost of $359 million in the first year, with a minimum cost savings of 7 percent per year.
  • Minnesota Human Services Commissioner Lucinda Jesson defended the state’s Medicaid reforms in a letter to the House Oversight and Government Reform Committee, denying claims of overbilling taxpayers for Medicaid services in order to cover losses in other state-run public health programs. The state received a $30 million payment in 2011 from one of its four Medicaid contractors, which the committee referenced in its claims that the state “overpaid insurance companies, wasting taxpayer dollars.” Federal probes of the state program are currently underway in the House, Senate, and Department of Justice.
  • A Superior Court judge in Washington state sided with Attorney General Rob McKenna deciding not to issue a preliminary injunction that would have required him to file a new motion in his challenge of ACA. McKenna, along with attorneys general from more than two dozen states filed a motion to strike down the entire law. However, he has previously stated that he only wants to see the individual mandate and Medicaid expansion provisions struck down. In her ruling, Superior Court Judge Sharon S. Armstrong stated, “the attorney general has maintained a consistent legal position throughout the health reform litigation…The Court finds that Rob McKenna’s statements in press releases and on the Office of Attorney General website are political statements by an elected official. Whether the statements that he supports severability in the ACA litigation are accurate, correctly reflect Mr. McKenna’s personal beliefs, or are made for reasons of political expediency, are issues to be addressed in the political realm.”

Industry news

House passes prescription drug user fee bill

Wednesday night, the House passed (387-5) its version of the Prescription Drug User Fee Act (PDUFA). The bill will move to a bipartisan conference committee to be merged with the similar Senate version of the bill (passed last week 96-1) and is expected to be put to vote before July 4, 2012. The Congressional Budget Office (CBO) released new projections that the House user fee bill will reduce federal deficits by $370 million over ten years, after an earlier version of the House bill was estimated to increase deficits by $247 million. The CBO score for the Senate version passed last week remained the same, estimated to reduce the deficit by $363 million over ten years. Both bills focus on efforts to streamline and improve the U.S. Food & Drug Administration’s (FDA) pathway to commercialization efficiency—how it oversees its product reviews for safety, efficacy, and effectiveness.

Note: industry fees cover 60 percent of the FDA costs. CBO estimates total spending from 2013-2017: prescription drugs ($4.1 billion), generic drugs ($1.6 billion), medical device manufacturers ($609 million), and biosimilar biological products ($128 million). The Congressional Research Service has posted a side-by-side comparison of the House and Senate versions of the FDA user fee bills.

GOP report: PhRMA support for ACA based on deal to prevent drug importation

Last week, the House Republican Energy and Commerce Committee Oversight and Investigations Subcommittee released results of its two-year investigation concluding that the White House administration negotiated aggressively with the Pharmaceutical Research and Manufacturers of America (PhRMA) for an agreement between pharmaceutical industry executives to disallow congressional action supporting drug importation in exchange for support of ACA. (Source: The Committee on Energy and Commerce, “Memorandum: Investigation Update: Closed-Door Obamacare Negotiations,” May 31, 2012)

Reaction: PhRMA Senior Vice President Matthew Bennett: “PhRMA has a long history of advocating for policies that ensure patient access to innovative medicines and foster medical progress. Before, during and since the health care reform debate, PhRMA engaged with Congress and the administration to advance these priorities…We look forward to ongoing work with Congress and the administration on bipartisan policy solutions that improve patient health.”

Reaction: White House spokesman Eric Schultz: “This is the same House Committee that has spent, according to one report, over $1 million in taxpayer dollars for the past 15 months looking into baseless allegations on Solyndra—but has done almost nothing to move legislation that would create jobs or grow the economy.”

AHIP: HSA enrollment increased 18 percent last year

13.5 million Americans are now covered by HSA eligible health plans per America’s Health Insurance Plans (AHIP) analysis released last week. Enrollment in HSA plans increased 18 percent last year and has tripled in the past five years. The fastest growing market for HSA plans was in large-group coverage—up 26 percent vs. small-group coverage—up 9 percent. (Source: AHIP, “January 2012 Census Shows 13.5 Million People Covered by Health Savings Account/High-Deductible Health Plans (HSA/HDHPs),” May 2012)

Note: Friday, the House Ways and Means Committee voted 24-9 to repeal Section 9003 of ACA, which prevents individuals from using their HSA to pay for over-the-counter drugs.

CMS announces Partnership to Improve Dementia Care, cites over-use of antipsychotic drugs in nursing homes

Thursday, CMS announced the Partnership to Improve Dementia Care program to achieve a 15 percent reduction in the use of antipsychotic medications for nursing home patients by year end. CMS data suggests that 17 percent of nursing home patients have daily doses of these medications exceeding recommended levels. CMS, industry, and other partners will reach this goal through the following steps:

  • Enhanced training: the new Hand in Hand program developed through CMS will train nursing home staff on person-centered care, prevention of abuse, and high quality care for residents.
  • Increased transparency: Nursing Home Compare, the online tool through CMS’s website, will make data from each nursing home’s use of antipsychotic drug use available to consumers beginning in July 2012.
  • Alternatives to antipsychotic medication: CMS is working to advance the use of non-pharmacological alternatives on nursing home residents such as consistent staff assignments, increased exercise, monitoring and managing acute and chronic pain, and planning individualized activities.

VA-DOD facility planning urged as prototype for other federal agencies per GAO recommendation

The Government Accountability Office (GAO) issued a report last week identifying questions federal agencies should consider when evaluating whether to consolidate physical infrastructure or management to increase their efficiency and effectiveness:

  • What are the goals and opportunities that will be addressed?
  • What problems will be solved or created?
  • What will be the likely costs and benefits of the consolidation?
  • How can the up-front costs be funded?
  • Who are the consolidation stakeholders, and how will they be affected?
  • To what extent do plans show that change management practices will be used to implement the consolidation?

The report highlighted the consolidation initiative between the VA and Department of Defense (DOD) Federal Health Care Center (FHCC). The FHCC is an ongoing five-year demonstration project to integrate VA and DOD medical care into a joint facility to provide health care services for approximately 118,000 VA and DOD patients per year. Government estimates projected that the first two phases of the initiative saved $11.2 million. (Source: The Government Accountability Office, “Streamlining Government: Questions to Consider When Evaluating Proposals to Consolidate Physical Infrastructure and Management Functions,” May 2012)

HHS expects to recover $1.2 billion from Medicaid, Medicare fraud investigations

In its semi-annual report to Congress, HHS Office of Inspector General (OIG) noted it expects to recover $1.2 billion after investigations of abuses in Medicare and Medicaid programs this year. For the first half of FY2012, it identified $483 million in audits and $748 million to be recovered through investigations. The office took a total of 388 legal actions for crimes against HHS and 164 civil actions for instances including false claims and inaccurate self-disclosure. The report also highlighted HHS projects that seek to correct Medicaid drug pricing and reimbursement, address overpayments in Medicare, and review problems with CMS contractor management. (Source: Office of the Inspector General, “Semiannual report to Congress, October 1, 2011 – March 31, 2012,” 2012)

Specialist physicians want to delay dual eligible demonstration programs

The Alliance for Specialty Medicine wrote a letter to CMS urging a one-year delay in the dual eligibles demonstration implementation, which would align payment between Medicare and Medicaid for state residents enrolled in both programs. The letter noted concerns that the demo would “lead to unsustainable cuts in provider payment rates which will consequently reduce access to care.” The Alliance also urged CMS to reject state plans that automatically enroll beneficiaries in the demonstration, calling it “offensive.”

Note: the Center for Medicare Advocacy officials also believe that the demonstration implementation process may need to be slowed down, while the National Association of Medicaid Directors feels there is no need for all states to delay the program if a state and CMS are prepared to move forward. Oregon and Vermont—two of the 28 states expected to participate—have requested delayed start dates.

Study: consumer-directed health plans could save $57 billion annually

Thirteen percent of employer-sponsored insurance enrollment is in consumer-directed plans. If increased to 50 percent, a new study estimates annual health savings of $57 billion. The report concluded that “enrollment in consumer-directed health plans probably will grow in the coming years, motivating enrollees to cut back on spending and producing savings for employees, employers, and the nation as a whole.” (Source: Amelia M. Haviland, M. Susan Marquis, Roland D. McDevitt, and Neeraj Sood, Health Affairs, “Growth Of Consumer-Directed Health Plans To One-Half Of All Employer-Sponsored Insurance Could Save $57 Billion Annually,” May 2012)

Note: consumer-directed health insurance plans have high deductibles and an HSA. Generally, these plans include comprehensive coverage with actuarial values above that required through Section 1302 of ACA.


“Not less arduous must have been the task of marking the proper line of partition between the authority of the general and that of the State governments…Questions daily occur in the course of practice, which prove the obscurity which reins in these subjects, and which puzzle the greatest adepts in political science.”

— James Madison, Federalist # 37, January 11, 1788

“It frustrates people because there's no correlation between what things cost and what is charged. It changes the game when health care's secrets aren't so secret.”

— Paul Keckley, Executive Director, Deloitte Center for Health Solutions, Los Angeles Times, “Many hospitals, doctors offer cash discount for medical bills,” May 27, 2012

“I’m a businessman, and in no sense a health-care expert. But the persistence of bad industry practices—from long lines at the doctor’s office to ever-rising prices to astonishing numbers of preventable deaths—seems beyond all normal logic, and must have an underlying cause. There needs to be a business reason why an industry, year in and year out, would be able to get away with poor customer service, unaffordable prices, and uneven results—a reason my father and so many others are unnecessarily killed.”

— David Codhill, The Atlantic, “How American Health Care Killed My Father,” September 2009

Fact file

  • Employment: the U.S. economy added 69,000 jobs in May, keeping unemployment at 8.2 percent. 33,000 were health care related: 23,000 of these in ambulatory care settings (physicians’ offices, clinics, imaging, etc.). Total employment in health care has increased 340,000 in 2012. (Source: Bureau of Labor Statistics, “The Employment Situation,” May 2012)
  • Literacy: 24 million in the U.S. have limited proficiency in English (LEP). Consequences of LEP: patient issues with engagement and involvement in health care, lack of crucial information that is essential to health care quality including cultural information, safety risks related to the misunderstanding of physician instructions, and lack of informed consent creating legal and ethical issues. (Source: Joel Teitelbaum, Lara Cartwright-Smith, Sara Rosenbaum, American Journal of Law & Medicine, “Translating Rights into Access: Language Access and the Affordable Care Act,” 38(2&3))
  • Physician compensation: U.S. physicians are compensated less than other Western nations if the basis is the percentage of physician income to a country’s total health spending. Total U.S. physicians’ salaries comprised 8.6 percent of the national health care costs—Germany (15 percent), France (11 percent), Austria (11.6 percent), and UK (9.7 percent) all devote more to physician salaries. (Source: Kate Spies, Healthcare Finance News, “Physician compensation in U.S. among lowest for western nations,” May 29, 2012)
    Note: most studies compare ratios of physician compensation to the average household compensation concluding U.S. physician income exceeds compensation in other countries)
  • Physician resistance to change: a survey of Hospital Chief Information Officers (CIOs) found that 52 percent identify independent physicians as the most resistant to change followed by staff physicians (22 percent) and 17 percent nurses (17 percent). (Source:, “Survey Finds Independent Docs Most Resistant to Change,” May 2012)
  • Defensive medicine costs: a poll found 75 percent of voters believe lawsuits and legal fees are a major cause of high medical insurance rates and 66 percent favor taking medical claims out of the legal system and establishing new health courts with expert judges. The survey sampled 1,000 self-identified registered voters and conducted interviews through live telephone calls. (Source: Common Good, “Nationwide Clarus Poll Reveals That A Large Majority Of U.S. Voters Think Legal System Increases Cost Of Health Care”, May 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 today.

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