This site uses cookies to provide you with a more responsive and personalized service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.

Global > United States > Insights > Browse by Content Type > Newsletters > Health Care Reform Memo

Global site selector

Health Care Reform Memo: August 2, 2010

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.

U.S. Department of Commerce, Conference Board, Moody’s Reports: Economic recovery is slow

Last week, Moody’s released its analysis of consumer credit card activity noting defaults (accounts delinquent more than six months) decreased from 11.2 percent in 2009 to 10.3 percent in 2010 YTD.

Wednesday, the Conference Board Index of Consumer Confidence showed a slight decline: 50.4 percent in July 2010 vs. 54.3 percent in June 2010. It noted that “only 15.9 percent of consumers expect the economy to improve in the last half of 2010.”

Friday, the U.S. Department of Commerce released its report for the second quarter of 2010, ending June 30. Highlights:

The gross domestic product (GDP) for 2Q10 was +2.4 percent compared to 3.7 percent in 1Q10 and 5.7 percent in 4Q09;
Positive signals from business: Capital purchases of office equipment and buildings was +17 percent 2Q10 vs. +7.8 percent 1Q10; technology and software purchases +21.9 percent, the biggest quarterly increase in 12 years;
Cautionary signals from consumers: Personal savings was 6.2 percent of discretionary income vs. 4 percent in 2009; consumer spending was +1.6 percent in 2Q10 vs. 1.9 percent in 1Q10;
And government spending increased: 4.4 percent in 2Q10 vs. -1.6 percent in 1Q10.

Note: Unemployment and the economic recovery are likely to be the focus of fall elections. Unemployment stands at 9.5 percent. A 2.5 percent GDP growth is necessary to maintain employment at current levels, and consumer spending drives 70 percent of the economy’s growth. Government spending on health care and its cost to businesses and consumers will be a major element of the election cycle as pundits relate the Patient Protection and Affordable Care Act (PPACA) to economic recovery and job creation. The economic impact of PPACA will be a major topic in Campaign 2010.

Stem cell-based therapy approval by FDA a precedent

The Phase 1 approval of Geron Corporation’s injection therapy for spinal injury patients announced by the U.S. Food and Drug Administration (FDA) Friday was a first. The science is based on embryonic stem cell research, recently expanded by the Obama administration. Next for the FDA: A review of a stem cell-based applicant for Stargardt’s disease, a retinal disease.

Healthcare.gov adds hospital quality data

Last month, the Department of Health & Human Services (HHS) introduced HealthCare.gov, a database to help consumers understand and compare health insurance plans. Wednesday it added “Compare Care Quality” linked to information about hospitals’ quality metrics for heart attacks, outpatient surgical infections and imaging. The data is from the Centers for Medicare & Medicaid Services’ (CMS) Hospital Compare data that profiles 4,700 hospitals.

Bureau of Labor Statistics report: Public employee health insurance access, benefits richer than private sector

The Bureau of Labor Statistics (BLS) report released Tuesday showed the gap between public health insurance benefits for state and local government employees is wide compared to private employer coverage:

88 percent of state and local employees have access to employer sponsored coverage vs. 71 percent in the private sector (among employees in the lowest income quartile, 69 percent have access in the public sector vs. 38 percent in the private sector).
Government pays 89 percent of individual premiums vs. 80 percent in the private employer market. For family coverage, public sector payment is 73 percent of coverage vs. 70 percent in the private sector.

Medical device industry in spotlight last week; FDA oversight role expanding

Perhaps a coincidence, perhaps not. Last week, news about the medical device industry seemed more than usual. Consider:

Tuesday, The Wall Street Journal profiled the emergent Chinese market for medical imaging devices (CAT, MRI, PET), predicting the $125 billion market opportunity over the next three years.
Thursday, ranking Iowa GOP Senator Charles Grassley (R-IA) announced his investigation into the safety of total joint implants noting that orthopedic devices face a lower safety threshold in the FDA approval process than devices for the heart, like defibrillators.
Yesterday, The New York Times featured results of its 15-month investigation into the overuse of imaging and possible side effects from excess radiation.

Note: The FDA has oversight of medical device safety and effectiveness in addition to drug and food safety. Its scope expanded dramatically in recent years: Oversight of tobacco, postmarket effectiveness of prescription drugs, market access to biosimilars, regulation of over-the-counter remedies, rules about direct-to-consumer advertising and stem cell research, among others. In the FY11 budget, the FDA received a $1 billion increase.

Q and A

Q: Is it possible states will receive additional help to pay for Medicaid expansion before PPACA funding starts in 2014?

A: Yes. In the stimulus bill (American Recovery and Reinvestment Act of 2009, ARRA), states got $87 billion for Medicaid expansion. The Senate is currently debating an additional $26.1 billion for FY11. In all likelihood, cuts in appropriations to other programs will be made to accommodate additional state funding for Medicaid. Forty-one states face deficits in their Medicaid programs this year before 16 million people are added via provisions of PPACA (Source: Congressional Budget Office Analysis, March 20, 2010).

Q: Will physicians get a “fix” in their payment formula this year?

A: No. The current band aid increase of 2.2 percent for June-November 2010 means doctors face a 23 percent cut in December unless a compromise is negotiated between the medical associations and lawmakers. The American Medical Association (AMA) is no longer the only voice being heard since its membership is fewer than one in three physicians. Specialists via the American College of Surgeons (ACS), American Congress of Obstetricians and Gynecologists (ACOG), et al. will argue technical, facility fees and practice expense elements should be increased or they will limit their practices’ Medicare access. Primary care specialties will argue professional components of the sustainable growth rate (SGR) that favor cognitive skills over procedural volume are an essential change if chronic and preventive health is to be managed. The intramural disputes among medical societies will likely result in a compromise deal—another temporary extension with a marginal increase of 1-2 percent—leaving the White House Deficit Reduction Commission to recommend a permanent fix in its report after the election.

Quotable

“As with all major social legislation, years of decisions and disputes over implementation lie ahead for the Patient Protection and Affordable Care Act. Opponents at the state and national levels may seek the law’s judicial overturn or repeal. However, a far more serious effort to undermine the law will come about through challenges to various administrative arrangements, taxes, and subsidies to fund expansions of coverage. The redistributive aspects of health reform will be especially at risk, as business interests and groups of more-privileged citizens press for lower taxes, looser regulations, and reduced subsidies for low-income people.”

– Source: Theda Skocpol, “The Political Challenges That May Undermine Health Reform,” Health Affairs, July 2010, 1288-1292

“Insured Americans are using fewer medical services, raising questions about whether patients are consuming less health care as they pick up a greater share of the costs.”

– Source: “Americans Cut Back on Visits to Doctor,” The Wall Street Journal, July 29, 2010, page one

Fact file

Suicides among active duty personnel in the military in 2009: 1,713 attempted, 160 deaths; calls to the Department of Veteran Affairs (VA) suicide prevention line: 9,380 in 2007 vs. 119,000 in 2009. (Source: National Suicide Prevention Lifeline)
Note: The VA unit has a full-time staff of 124 counselors and managers.
World population growth: 267 people born every minute vs. 108 deaths per minute. Developing and poor countries are experiencing major growth: 80 million per year vs. 20 million in developed countries. (Source: Population Reference Bureau)
A study of 1,450 patients with implanted defibrillators that transmit data to facilitate monitoring of the patient’s vital signs showed a 30 percent reduction in readmissions compared to those discharged without the monitoring device. (Source: American Heart Association study in Circulation, July 27, 2010)
Study of 10 developed and four developing economies: On average, it takes seven years to reduce total debt to 25 percent of GDP. (Source: McKinsey Global Institute in Milken Institute Review, July-August 2010)
Average length of stay in a U.S. emergency department in 2009—four hours and seven minutes. In 2008, 123 million emergency department visits. (Source: American College of Emergency Physicians, Press Ganey Pulse Report 2010)
175 companies in the S&P 500 2Q10 vs. 1Q10: Revenues +6.9 percent, profits +42.3 percent. (Source: Thomson Reuters)
Profit margins for business recover from 9/11: 4.7 percent in 2002, 5.9 percent in 2009, 8.9 percent YTD in 2010. (Source: Credit Suisse, New York)
Note: The analysis indicates companies cut costs and have been slow to add staff and overhead as the economy recovers.

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.