Health Care Reform Memo: April 11, 2011
Deloitte Center for Health Solutions publication
The health care reform memos are issued on a weekly basis, highlighting news from the previous week's activities in the administration and implications for the C-suite and various stakeholder groups.
From Paul Keckley, Executive Director, Deloitte Center for Health Solutions
I found myself reeling from the news cycle last week—the government shutdown, Libya, Yemen, Japan, and Tuesday’s much anticipated House Republican budget proposal by Representative Paul Ryan (R-WI).
I found time for a third read of the 429-page Centers for Medicare & Medicaid Services (CMS) “Medicare Shared Savings Program” about accountable care organizations (ACOs)—it’s complicated, comprehensive, and not for everyone. And I read Congressman Ryan’s 73-page “The Path to Prosperity: Restoring America’s Promise” proposal for the U.S. budget: ambitious, comprehensive, and provocative. As I reflect, a common thread runs through both.
Both the ACO and Representative Ryan’s budget require risk be shifted from the status quo to new models. For ACOs, doctors and hospitals risk financial penalties if they don’t achieve savings goals while hitting quality targets. In Representative Ryan’s budget, the next generation of Medicare enrollees will bear risk for their use of the system via its defined contribution feature. Risk is a BIG DEAL in both.
Historically, the health system has eschewed risk. It pays for volume, not outcomes. Individual risk for poor choices and unhealthy lifestyle exposes consumers to delayed risk (higher premiums), but in the end, the system provides safety nets and shifts costs elsewhere. Health insurers pass on risk aversion in premiums and co-payments, and drug and device companies pass through losses from failed tests for promising innovations in the pricing for its winners.
Is the U.S. system ready to tackle risk? Hard to say. Historically, the system’s risk aversion has been rationalized: physicians and hospitals can’t control outcomes. Consumers and employers insist on large open networks of physicians and hospitals in dealings with health insurers when smaller high performing networks might otherwise provide more value. And the patent system and regulatory hurdles facing life science organizations makes risk-shifting necessary for survival. The reform law seems a gradual step in the direction of shared risk: it challenges the system’s stakeholders to do more with less and be paid for results not volume. But it misses in one huge area where risk is not adequately shared: individual behavior.
Health costs have increased 2.8 percent above the gross domestic product (GDP) for 40 years as a result of our system’s addiction to volume-based incentives and the lack of risk born by consumers. With 75 percent of costs associated with lifestyle and chronic disease, it would seem risk should be shifted to individuals to eat less, take their medications, exercise more, choose treatment options and providers intelligently, and act responsibly or else.
Though the ACO model and Representative Ryan’s budget might have origins in different political arena, they share recognition that shifting risk is the key driver in the “new normal.” Defining it, codifying it in rules and legislation, and enforcing it will be the essence of the health reform debate going forward.
Accountable care organizations: Q and A
On March 31, CMS released its interim final rule for comment about its Medicare Shared Savings Program pursuant to Section 3022 of the Patient Protection and Affordable Care Act (PPACA). Known as “accountable care organizations,” it features two options for clinically integrated provider organizations that agree to manage at least 5,000 Medicare fee-for-service (FFS) enrollees for three years and share in savings if quality thresholds are also met:
- One-sided model: the ACO receives up to 50 percent of savings, and takes risk for losses in year three only
- Two-sided model: the ACO receives up to 60 percent, and takes risk for losses in years one, two, and three
Since release of the rule, a number of questions have been raised:
Which model makes the most sense?
If an organization has the clinical and financial infrastructure to manage risk, meets eligibility requirements for clinical integration and governance, and operates in a market where Medicare FFS is highly-variable and expensive, it is likely a two-sided model might be the best route to optimal savings. In most communities, the one-sided model will be the safest route.
How big a deal is this to Medicare and CMS?
It’s a big deal, not because it will be the dominant form for its contracting, but because it creates momentum for local alignment of physicians and hospitals to share risk in contracting with Medicare, Medicaid, employers, and commercial insurance plans.
The March 31 CMS rule indicated it anticipated modest participation in the ACOs: between 1.5 and 5 million Medicare enrollees, and between 75 and 150 ACOs. But that’s not the end game. Coupled with episode-based payments, value-based purchasing, the medical home, penalties for avoidable readmissions, increased quality reporting requirements for hospitals and physicians, and increased scrutiny of physician-owned ambulatory and acute facilities, it’s clear the fundamental design of the system is shifted by PPACA toward physician-hospital alignment wherein payments are based on value (quality, outcomes, user satisfaction, costs). So ACOs are a critical piece of a bigger puzzle.
What are the specifications for governance of ACOs?
ACO participants (providers) must have at least 75 percent control of the ACO’s governing body. Each ACO participant must choose an appropriate representative from within its organization to represent it in the governing body. This “ensures that ACOs remain provider-driven, but also leaves room for both non-providers and small provider groups to participate in the program.”
Note: ACOs comprised of a single entity (a single multi-specialty medical group/clinically integrated independent physician association [IPA]) that are financially and clinically integrated and have at least 75 percent control of the entity’s governing body comprised of representatives of the entity, may have an ACO governing body that is the same as the governing body of that entity (e.g., large hospital networks), provided it satisfies the other requirements of the regulations.
Source: CMS Medicare Shared Savings Program: Accountable Care Organizations, proposed rule, 42 CFR Part 425, p. 19541, 19643
If an ACO overspends above its baseline, how does it collect penalties from participating providers?
ACOs must establish a self-executing method for repaying losses annually. Funds may be repaid by obtaining reinsurance, placing funds in escrow, obtaining surety bonds, establishing a line of credit (evidenced by a letter of credit that the Medicare program can draw upon), or other alternatives. ACOs must demonstrate that they could repay losses equal to at least one percent of per capita expenditures for its assigned beneficiaries from the most recent year available.
CMS would determine the adequacy of an ACO’s repayment mechanism as part of its eligibility process prior to the start of each performance year in which it takes risk, to ensure that it is adequate to cover the anticipated number of assigned Medicare beneficiaries.
Source: CMS Medicare Shared Savings Program: Accountable Care Organizations, proposed rule, 42 CFR Part 425, p. 19622
What about start-up costs for the ACO? Are there provisions for reimbursement? And what’s the likelihood an ACO will see substantial savings?
No provision is made for reimbursement, so the assumption is start-up costs are an investment required of ACO participants. CMS estimates total cost for start-up investment and first year operating expenditures for ACOs will be approximately $1.75 million.
Note: a New England Journal of Medicine study (Haywood et al, April 7, 2011) predicts that physician groups making the $1.7 million mean initial investment will require a 20 percent margin to break even during the three-year performance period based on data from the Physician Group Practice (PGP) demonstration.
However, the PGP program and ACO are not directly comparable, so in all likelihood the breakeven for an ACO might be higher than the study authors suggest given the requisite quality threshold thresholds that must be met to achieve optimal savings participation. Therefore, the likelihood of achieving substantial savings is low unless an ACO is unusually effective in managing costs in a market where inefficiency and over-utilization is prevalent in treating Medicare FFS patients. A strong clinical integration model; optimal care coordination between primary care, first line specialists (cardiologists, pulmonologists, neurologists, others), and a hospital; and the availability of an integrated clinical and financial information system would be optimal features of an ACO that has the potential to see substantial savings in the program.
Source: CMS Medicare Shared Savings Program: Accountable Care Organizations, proposed rule, 42 CFR Part 425, p. 19633
How are payments to be distributed among ACO participants?
Not specified in the law. CMS stated it does not have the authority to specify how payments would be distributed. ACOs must inform CMS about its distribution plan and, at its discretion, also inform the public.
Source: CMS Medicare Shared Savings Program: Accountable Care Organizations, proposed rule, 42 CFR Part 425, p. 19544
How will the cost baseline be established? What Medicare data will be used to determine benchmarks?
Only Medicare Part A (hospital) and B (physician) costs are included, not Part D (prescription drugs). No adjustment is made for indirect medical education (IME) and Disproportionate Share Hospital (DSH) payments to hospitals and for geographic location.
Source: CMS Medicare Shared Savings Program: Accountable Care Organizations, proposed rule, 42 CFR Part 425, p. 19609-19610
Can ACO providers participate in other aligned health care delivery programs?
ACOs can participate in other demonstrations and pilot programs (e.g., the medical home, episode-based payments, others) BUT is cannot claim savings for Medicare enrollees in the ACO AND claim savings/achieve bonuses for the same enrollees in other programs. The intent is to avoid duplication of savings for the same Medicare enrollees. However, a clinically integrated group of providers (ACO) would be eligible to manage different Medicare/Medicaid populations through:
- Independence at Home Medical Practice Demonstration Program (PPACA, Section 3024)
- Medicare Health Care Quality Demonstration Programs (Medicare Modernization Act [MMA], Section 646)
- Medical home demonstration with a Medicare shared savings element (currently existing program is the multi-payer advanced primary care demonstration)
- Physician Group Practice Transition Demonstration
- State initiatives to provide health homes for Medicaid enrollees with chronic conditions (PPACA, Section 2703)
- Program to establish community health teams to support patient-centered medical homes (PPACA, Section 3502)
Source: CMS Medicare Shared Savings Program: Accountable Care Organizations, proposed rule, 42 CFR Part 425, p. 19631
Can ACOs change or add their participants? May participants be in more than one ACO at a time?
ACOs cannot add physicians to the ACO for the three-year contracting period. However, physicians and hospitals can be in several ACOs simultaneously.
Source: CMS Medicare Shared Savings Program: Accountable Care Organizations, proposed rule, 42 CFR Part 425, p. 18561
Do ACO participants have to be “meaningful users” of electronic health records?
Yes, 50 percent of ACO participants must be “meaningful users” by the start of year two of the contract, or be removed from the program. Participants may have to meet Stage 2 meaningful use milestones (in 2013) if final guidance on Stage 2 milestones is completed prior to Year Two (January 2013) of the ACO contracting year.
Source: CMS Medicare Shared Savings Program: Accountable Care Organizations, proposed rule, 42 CFR Part 425, p. 19593-19599
How do the regulations treat clinical integration in context of anti-trust? If an ACO contracts with a commercial plan or Medicaid, would the ACO’s anti-trust provisions apply?
The rule states that special anti-trust provisions are somewhat relaxed for the ACO IF it has less than 30 percent market share and is appropriately clinically integrated. If an ACO’s market share is between 30 and 50 percent, it is subject to review by the U.S. Department of Justice (DOJ), and if above 50 percent, automatic review.
Note: additional guidance about anti-trust provisions of the rule is expected in the 60-day comment period. The rule suggests an ACO could contract with other payers (commercial/government) and follow the same guidance per anti-trust violation as the Medicare Shared Savings Program.
Source: Federal Trade Commission (FTC)-DOJ Guidance
Can rural care providers, federally qualified health centers, and critical access hospitals be ACOs?
Rural health clinics (RHCs) and federally qualified health centers (FQHCs) providers cannot form their own ACOs because CMS does not have sufficient data from them to determine beneficiary assignment and expenditures during the three-year benchmark. They can, however, join an ACO which contains at least one eligible ACO participant defined in the law. Additionally opportunities for RHCs are in the Center for Medicare and Medicaid Innovation (CMMI).
Source: CMS Medicare Shared Savings Program: Accountable Care Organizations, proposed rule, 42 CFR Part 425, p. 19538
Critical access hospitals (CAHs) paid under Method II can form their own ACO. CAHs paid under Method II receive 101 percent of the reasonable cost payment for its facility costs and 115 percent of the amount otherwise paid under the Medicare Physician Fee Schedule (MPFS) for professional services under Medicare.
Source: CMS Medicare Shared Savings Program: Accountable Care Organizations, proposed rule, 42 CFR Part 425, p. 19539
Update: health insurance exchanges
Health insurance exchanges are to be fully operational in every state by January 1, 2014 pursuant to Section 2201 of PPACA. Consumers are able to compare health insurance policies (costs, coverage) sold by private companies featuring standardized benefits at four levels (bronze, silver, gold, and platinum). “Essential health benefits” are required in each plan covering hospital, emergency, maternity, pediatric, drug, lab services, and other care. If a state chooses, it may start a not-for-profit plan to compete with local plans if the insurance market is deemed non-competitive.
Health insurance exchanges will be open to individuals buying their own coverage and employees of firms with 100 or fewer workers (50 or fewer in some states) starting 2014. People who earn less than 133 percent of the federal poverty level (FPL) ($14,484 in 2011) qualify for Medicaid; individuals earning between 133 and 400 percent of the FPL ($43,560 in 2011) are eligible to purchase through the exchanges. The Congressional Budget Office (CBO) estimates eight million people will use the exchanges starting in 2014, increasing to 24 million by 2018. The majority will be eligible for subsidies averaging $5,700 per enrollee. Undocumented immigrants are barred from the exchanges, and eligible Medicaid enrollees will be directed to Medicaid rather than the exchange. Members of Congress and their staffs are required to buy through exchanges if they continue coverage through the federal government but other federal employees are not required.
States may set up their own exchanges, form interstate coalitions (regional exchanges), or opt for the federal government to set up and operate the exchange. In some states, the Medicaid program will be integrated into the exchange. Governance of the exchanges is left to states to define. To date, the federal government has provided almost $300 million to states to assess exchange preparedness.
FDA releases rules on menu labeling and chain restaurants
April 1, the U.S. Food and Drug Administration (FDA) proposed new regulations for food labeling in vending machines and chain restaurants, per PPACA, Section 4025. It is accepting comments and plans to issue final rules before the end of 2011.
Nutrition labeling for chain restaurants (effective October 6, 2011):
- Applicable to: restaurants and chain retail food establishments with 20 or more locations with the same business name and primarily the same menu items, including:
- Fast food establishments
- Coffee shops
- Certain grocery and convenience stores
- Excludes: businesses whose primary purpose is not to sell food. Examples include:
- Movie theaters
- Bowling alleys
- Proposed requirements:
- List calorie information in context of daily calorie intake: “A 2,000 calorie diet is used as the basis for general nutrition advice; however, individual calorie needs may vary.”
- Indicate the availability of additional nutrition information upon request
Calorie labeling for vending machines (effective April 6, 2012):
- Applicable to: operators with 20 or more vending machines
- Proposed requirements: machines would post calorie information for food sold, unless certain nutrition information is already visible on individual packages of food inside the machine
Note: under the FDA regulations, state and local governments could not impose any other nutrition labeling requirements for these establishments.
GAO finds state Medicaid and CHIP monitoring efforts lacking
Tuesday, the Government Accountability Office (GAO) announced findings of its investigation of care coordination in Medicaid and Children’s Health Insurance Programs (CHIP) overseen by states. It found one-quarter of families with Medicaid and CHIP children reported problems accessing specialty care when needed.
CMS delays DME competitive bidding round two until summer 2013
Tuesday, CMS announced it will delay round two of the competitive bidding program for Durable Medical Equipment (DME) for six months, until the summer of 2013. In March, Representatives Jason Altmire (D-PA) and Glenn Thompson (R-PA) introduced the Fairness in Medicare Bidding Act (H.R. 1041), with over 60 cosponsors, to fully repeal the competitive bidding program. Altmire and Thompson were concerned the program would “push small businesses out of the marketplace and diminish seniors’ quality of care.”
Note: PPACA, Section 6410 requires the Secretary of the Department of Health and Human Services (HHS) to expand the number of areas in round two of the DME competitive bidding program from 79 to 100 of the largest metropolitan statistical areas (MSAs), and to use competitively bid prices in all areas by 2016. Currently, CMS’ Durable Medical Equipment, Prosthetic and Orthotic Suppliers (DMEPOS) competitive bidding program is effective in nine MSAs, and will be expanded to 91 in round two.
- Arizona Governor Jan Brewer (R) signed into law an $8.3 billion spending plan for FY 2012 that will reduce state Medicaid funding by $510 million. The plan freezes enrollment for new childless adults and restores coverage for certain medical transplants eliminated in October 2010.
- New Mexico Governor Susana Martinez (R) approved legislation that requires more transparency and a stricter review process for insurance companies seeking to increase premium rates.
- Exchange update: West Virginia Governor Joe Manchin (D) approved a bill that will establish the state’s insurance exchange. Rhode Island’s Senate approved a similar bill.
- Minnesota’s House approved legislation that would stop the expansion of Medicaid to an additional 100,000 residents and eliminate coverage for 7,200 adults enrolled in the state’s subsidized health program.
GOP FY 2012 budget plan includes changes to structure of Medicare, Medicaid
Tuesday, the House Republican FY 2012 budget passed the House Budget Committee by a vote of 22-16. Overall budgetary features covering 2012-2021:
- Deficit cuts of $1.649 trillion (2012-2021), spending cuts of $5.812 trillion, and an assumed reduction of $4.162 trillion in federal revenues
- “Enforceable spending caps” to constrain federal outlays
- Extension of the 2001 and 2003 tax cuts
- Repeal of PPACA
For Medicare, current beneficiaries would not be affected, but younger workers under age 55 would be able “to choose from a list of guaranteed coverage options, enjoying the same kind of choices in their plans that members of Congress enjoy today. Medicare would then provide a payment to subsidize the cost of the plan. In addition, Medicare will provide increased assistance for lower-income beneficiaries and those with greater health risks.” Beginning in 2022, Medicare would become a “premium support system,” wherein the federal government would provide $15,000 in premiums toward the purchase of insurance thus changing Medicare into a defined contribution plan. Additional support would be provided to individuals with lower incomes or severe health problems.
For Medicaid, the central feature of the budget proposal is changes to the funding formula by allowing block grants to states. The proposal converts the federal share of Medicaid spending (currently 57 to 75 percent of each state’s total expenditure) into a block grant to meet each state’s needs, indexed for inflation and population growth.
Collective bargaining for physicians
Friday, House Judiciary Committee Ranking Member John Conyers, Jr. (D-MI) and Representative Ron Paul (R-TX) introduced the “Quality Health Care Coalition Act of 2011,” H.R. 1409, allowing providers to collectively bargain contractual terms with insurers, including terms affecting quality of patient care. According to Representative Paul, “This bill removes a government-imposed barrier to a true free market in health care.”
Hospital associations challenge repeal of self-referral limits in PPACA
Wednesday, the American Hospital Association (AHA), Federation of American Hospitals (FAH), and Coalition of Full Service Community Hospitals sent letters to freshmen Republicans opposing legislation to repeal PPACA’s limits on self-referrals to physician-owned hospitals. The letter states, “Current law represents a compromise which protects current physician ownership of hospital arrangements and allows these arrangements to grow where needed.”
CMS releases payment rule for Medicare Advantage and Part D Plans
Tuesday, CMS released its final payment regulations for Medicare Advantage (MA) and prescription drug (Part D) plans. For FY 2011 through 2016, CMS estimates $76 billion in savings from payment changes at cost of $5.35 billion for PPACA implementation. PPACA provisions addressed in the rule include:
- Limiting cost-sharing under MA for specified services (administration of chemotherapy services, renal dialysis services, skilled nursing care) to original Medicare levels.
- Prohibiting MA and Section 1876 cost plans from charging cost-sharing for in-network preventive services for which there is no cost sharing under original Medicare.
- Clarifying that CMS is not required to accept all Part C and D bids and has authority to deny bids that propose significant increases in cost-sharing or decreases in benefits.
- Codifying the new beneficiary election periods, including the new annual election period that begins on October 15, 2011.
- Codifying the voluntary de minimis policy for subsidy-eligible individuals enrolled in Medicare Advantage Prescription Drug (MA-PD) Plans and stand-alone prescription drug plans.
- Codifying the new requirement that higher income Part D beneficiaries pay an Income Related Monthly Adjustment Amount (Part D-IRMAA).
- Eliminating Part D cost-sharing for Medicare beneficiaries who are eligible for full Medicaid benefits and who are receiving home- and community-based waiver services instead of being institutionalized.
- Codifying statutory changes to close the Part D coverage gap.
- Codifying changes to the MA benchmark calculation and rebate amounts.
- Describing the methodology for using quality ratings to determine MA bonus payments provided for in Section 1102 of the Reconciliation Act.
- Reducing waste of Part D drugs in long-term care facilities by requiring dispensing of brand-name prescription drugs in increments of 14 days or less, effective January 1, 2013.
- Establishing policies to implement PPACA’s requirement for a more uniform Part D exceptions and appeals process.
Monday, CMS announced that MA plans will receive an average payment increase of 0.4 percent in 2012, down from its earlier estimate of 1.6 percent. The estimate was revised based on economic conditions, not policy changes. Rates will vary depending on geographic location and quality star ratings.
Note: PPACA, Section 1102 implements mechanisms to bring MA rates down to align with traditional Medicare FFS spending. Analysts project that this could lead to more plan consolidation.
CMS increases dialysis provider payments 3.1 percent
April 1, CMS released regulations eliminating the transition payment adjustor which reduces payments to end-stage renal disease (ESRD) by 3.1 percent. The revised adjustment will apply to renal dialysis services from April 1 through December 31.
Note: transition adjuster was part of the new dialysis bundled payment effective January 2011. The single bundled case-mix adjusted payment includes payments for ESRD-related treatments, supplies, certain drugs, and clinical laboratory tests. The adjuster rate was based on CMS estimates that 43 percent of dialysis facilities would opt for the full bundled payment, but 87 percent opted for the ESRD payment system in CY 2011.
Doc fix: update
Last Monday, the House Energy and Commerce committee sent letters to 51 provider professional organizations seeking input in its pending considering of the physician pay formula.
The letter stated the committee “is determined to pass a permanent solution this year,” and seeks specific proposals from providers. The FY 2012 proposed budget from the White House includes a two-year fix, with 10 years of spending cuts in Medicare and Medicaid to offset its cost ($369.8 billion).
CER influence focus of new legislation
Last Tuesday, Senate Republicans introduced legislation that would ban the use of federal comparative effectiveness research (CER) funding to deny patient care decisions based on its studies. The measure—sponsored by Senate Minority Whip Jon Kyl (R-AZ), Minority Leader Mitch McConnell (R-KY), and Senators John Barrasso (R-WY), Tom Coburn (R-OK), Mike Crapo (R-ID), and Pat Roberts (R-KS) would ensure that CER generates “advancements in personalize medicine and differences in patient treatment response” as opposed to denying coverage of products or services to people participating in Medicare or Medicaid.
Note: per PPACA, Section 6301, the Patient-Centered Outcomes Research Institute’s (PCORI’s) findings cannot be used to mandate coverage or reimbursement, or deny coverage based solely on its findings. PCORI is forbidden from using a “dollars-per-quality adjusted life year (or similar measure that discounts the value of a life because of an individual's disability) as a threshold to establish what type of health care is cost effective or recommended.”
CMS reports hospital acquired conditions
Wednesday, CMS began publicly reporting data on eight hospital acquired conditions (HACs) on its CMS Hospital Compare website:
- Foreign object retained after surgery
- Air embolism
- Blood incompatibility
- Pressure ulcer stages III and IV
- Falls and trauma
- Vascular catheter-associated infection
- Catheter-associated urinary tract infection
- Manifestations of poor glycemic control
The most common HAC (one per 2,000 patients discharged) was injury from a fall or other type of trauma, reported in over 70 percent of hospitals.
“America’s health-care entitlements are currently set up as open-ended, blank-check commitments to reimburse health-care providers for services – and this very structure raises costs and reduces efficiency. Blank-check commitments create perverse incentives for everyone in the health-care system to maximize his or her share of this apparently limitless government subsidy. This leads to waste and fraud on a massive scale.
Last year’s health-care law – with its maze of mandates, dictates, controls, tax hikes and subsidies – exacerbates the ﬂaws in this model and will push costs further in the wrong direction. Already, health insurance companies have announced big premium hikes related to the law’s new mandates. Its so-called cost controls amount to the same kind of fee-for-service reductions that have failed to control costs in Medicare for decades. (Providers predictably increase the number of services provided for each condition as the government lowers fees.) And it will dramatically expand a Medicaid program that is already breaking state budgets and adding to a growing ﬂood of red ink at the federal level.
Real reform – especially with respect to Medicare – must eliminate this unsustainable waste and reduce inefficiencies and costs by giving beneﬁciaries themselves more control over their own health-care beneﬁts and decisions”
– “The Path to Prosperity: Restoring America’s Promise,” The House Committee on the Budget, April 5, 2011, p. 15.
“….accountable care organizations (ACOs),” represent a step “…away from the outdated fee-for-service system to one that incentivizes quality, value, and better health outcomes…ACOs could accelerate the trend of provider consolidation that drives up medical prices...”
– Karen Ignagni, President and CEO, America’s Health Insurance Plans, March 31, 2011.
- 129 new mini-med waivers were issued in March, bringing the total to 1,168. (Source: Center for Consumer Information and Insurance Oversight [CCIIO])
- More than seven of ten adults believe the U.S. health system needs fundamental change or complete rebuilding. (Source: The Commonwealth Fund)
- Teen birth rates in the U.S. are up to nine times higher than in most other developed countries. (Source: Centers for Disease Control and Prevention [CDC])
- Based on telephone interviews between January 2 and March 31 of a random sample of 52,144 U.S. adults in all 50 states, 25.7 percent of all Americans said they have government health insurance (e.g., Medicare, Medicaid, and/or military/veterans' benefits). (Source: Gallup-Healthways Well-Being Index)
- 28 percent of workers with Health Savings Accounts (HSAs) or Health Reimbursement Accounts (HRAs) reported employer contributions of $1,000 or more, down from 37 percent in 2008. Sixty-four percent reported some employer contribution, not significantly different from 2008 or prior years. (Source: Employee Benefits Research Institute [EBRI])
- High-deductible health plans (HDHPs) are associated with a 14 percent drop in health spending compared to traditional plans, but also with reduced vaccination and screening rates, though HDHPs waive the deductible for preventive care. (Source: RAND)
- Merger and acquisition (M&A) activity in health services industries increased 24 percent from 2009 to 2010, up to 458 deals. M&A spending grew 425 percent, to $64.9 billion. (Source: Irving Levin Associates)
- Low-income diabetic adults age 40 and over who received recommended treatment dropped to 23 percent in 2007, from 39 percent in 2002. Among whites, the drop was four percent; among Hispanics, seven percent; among African Americans, 11 percent. (Source: Agency for Healthcare Research and Quality [AHRQ])
- Adverse events occur in one-third of hospital admissions, and current methods of detecting adverse events miss up to 90 percent of occurrences. (Source: HealthAffairs)
- Drug spending grew 3.6 percent in 2010, almost half of the 6.4 percent rate in 2009. (Source: Express Scripts)
- Employer health costs increased 14 percent in the last five years: employee out-of-pocket costs (premiums, co-payments, deductibles) increased 47 percent while wages increased 18 percent percent. (Source: Bureau of Labor Statistics [BLS])
- “Raising Medicare’s eligibility age from 65 to 67 in 2014 would generate an estimated $7.6 billion in net savings to the federal government, but also result in an estimated net increase of $5.6 billion in out-of-pocket costs for 65- and 66-year-olds, and $4.5 billion in employer retiree health-care costs.” (Source: Kaiser Family Foundation)
National health reform: What now?
National health reform is here. The health reform bills (HR3590 and HR4872) are now law and will trigger sweeping changes and disruptions – some rather quickly and some over many years. The industry is asking, “What now?” At Deloitte, we continue to explore and debate the key questions facing the industry, and we look forward to helping our clients find and implement the right answers for their organizations. To learn more, visit www.deloitte.com/us/healthreform/whatnow today.
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